Monthly Archives: June 2013

What is the Bottom Line on Obamacare?

Isn’t it strange that the Affordable Care Act was advertised as “shrinking the deficit” back in 2010 because its fiscal outlays were so efficient, but now proponents are complaining that it’s not their fault the bill doesn’t have enough funds for implementation? How can you launch a project under the banner of cost efficiency and neglect an entire component of its cost structure?  Imagine an ad touting a sports car with the world’s cheapest, most powerful engine, neglecting to mention that it’s a gas guzzler.

Here’s an excellent summary of the status of Obamacare in the latest Commentary magazine by my Hudson colleague, Tevi Troy:

Meanwhile, the cost of the bill, initially estimated to be around $898 billion, has doubled, to about $1.85 trillion. A minority report from the Senate Budget Committee has the figure at $2.7 trillion. All kinds of regulatory deadlines in the bill have been missed. Confusion reigns among plans, patients, and administrators alike.

… As the Affordable Care Act continues to come apart at nearly every seam, Republicans will probably hold firm on their principles and refuse to bail Democrats out of the fix they have put themselves into, until and unless the Democrats are willing to make real and substantive reforms. These reforms should include, at a minimum, reducing insurance subsidies, empowering Health Savings Accounts, repealing the anti-innovation medical-device tax, loosening up the rules regarding insurer participation in exchanges, and giving states more flexibility in the design of their exchanges.

The CBO still says the ACA will create a net surplus, for the record.  But Troy and others such as Philip Klein note that the 10-year sticker price has indeed doubled per CBO itself. Stay tuned.

QOTD: Broken American Politics

Says Bob Samuelson:

At the end of the Eisenhower administration in the late 1950s, nearly three-quarters of Americans said they trusted the government to “do what is right” all or most of the time. Now that’s only 26 percent, finds a Pew survey done in January.

… Something more pervasive has occurred. Our political system has changed. Rather than admit this, many Americans blame the actors. In the Pew poll, 56 percent of respondents agreed with this statement: “The political system can work fine, it’s the members [of Congress] that are the problem.”

On the contrary, it’s not the people; it is the system.

When Math is Equated to Conservative Extremism

California is still in trouble, despite naive reports (CNN: “California’s finances are golden again”) of its surprising fiscal health. When the San Diego Union Tribune, the biggest paper in the city, ran a very short, insightful, mathematically simple editorial, one commenter said the facts presented were “conservative extremist talking points.”

That attitude is sad, and I hope it doesn’t reflect what Democrats in the state (and also across the nation) think. Here is the core of the editorial, which puts the $3 billion surplus in daunting context:

• $87 billion in unfunded liabilities for the California Public Employees’ Retirement System. The $87 billion would be far higher if not for the rosy investment assumptions used by CalPERS.

• $73 billion in unfunded liabilities for the California State Teachers’ Retirement System, a sum that increases a staggering $6 billion a year. The $73 billion would be far higher if not for the rosy investment assumptions by CalSTRS.

• $64 billion in unfunded liabilities for health insurance coverage guaranteed to retired employees.

• $8.2 billion in money borrowed from the federal government to replenish the state’s broke unemployment compensation fund. California only pays the interest on the debt.

Nobody wins if math becomes a public enemy, so it is worth considering WHO sees math as the enemy?  Who is really threatening the economic balance of the states?  In our book, we ask “Who are the Praetorians?” because it was the Praetorian Guard in Rome that destabilized imperial finances by demanding higher and higher bonuses once they had captured the power to control the Emperor as de facto kingmakers. As this NY Times article makes clear (HT David Henderson), public pensions due to public sector workers and teachers are the main beneficiaries of fantasy budgeting.

And California, which faced a $26 billion deficit two years ago, expects a surplus of between $1.2 billion and $4.4 billion this year, thanks to a combination of tax increases, budget cuts and an improving economy. But it could be erased if the state were to adequately finance its teachers’ pension fund, which says it will need an additional $4.5 billion a year, much of it from the state, to pay the benefits it promised.

“The problems are still there,” said Richard Ravitch, a former lieutenant governor of New York who formed a State Budget Crisis Task Force last year to focus attention on the long-term problems facing states. “It’s retirement expenses, generally, and health care expenses — and they’re crowding out other things.”