James Pethokoukis

Political Risk

Suddenly down some 30 points to a hypothetical 2012 challenger, Ben “60th vote” Nelson — a guy who won his 2006 race with 64 percent — is taking to the airwaves to explain his decision to vote for ObamaCare.

But in a TV spot, Nelson failed to tell his fellow Nebraskans that while the Senate bill supposedly improves the U. S. fiscal picture, it employs some Enron-esque bookkeeping tricks to get there.

The Patient Protection and Affordable Care Act promises to cut the federal budget deficit by $132 billion over the next decade, according to the Congressional Budget Office. That’s not a huge amount given that healthcare spending drives the government’s long-term fiscal woes, but it’s something. Indeed, at first glance the tab for expanded health insurance coverage appears more than met through a mix of Medicare spending cuts and payroll tax increases.

Yet this minor bit of fiscal prudence is a mirage. The act would reduce Medicare spending on hospital stays by $245 billion from 2010-2019, while increasing tax revenue by $113 billion. So on paper, Medicare’s hospital insurance trust fund would be some $358 billion to the better, boosting its long-term solvency. But the government then takes that $358 billion and uses it to pay for increased, non-Medicare healthcare spending — leaving $358 billion worth of IOUs in the Medicare trust fund. If not for that $358 billion shift, the act would worsen the deficit by $226 billion over the next ten years.

It’s a clever trick that takes advantage of the CBO’s treatment of both the Medicare and Social Security trust funds as essentially off-balance sheet vehicles. Money owned to them is not treated by the CBO as the same as money owed to Treasury bondholders. The former is treated as a mere obligation, the latter a concrete liability. Yet both are future claims on taxpayer resources.

And that’s not the only bit of chicanery: 1) There’s a similar $50 billion double-counting trick with the Social Security trust fund. 2) CBO healthcare scoring assumes a huge reduction in government payments to doctors even though a separate bill moving through Congress would restore the $250 billion cut.3) The payroll tax hike isn’t indexed for inflation, generating unrealistically high revenue forecasts. 4) And as Andrew Biggs of the American Enteprise Institute notes, the cost-cutting Medicare advisory commission would merely limit spending growth to pretty much the current baseline forecast (GDP plus 1 percent) which translates into $62 trillion of additional deficits over the next 75 years.

(Then again, budget scoring overall is dodgy. John Williams of Shadow Government Statistics calculates that using Generally Accepted Accounting Principles as public corporations do, the total 2009 budget deficit would be roughly $8.8 trillion, not the $1.4 trillion reported on a cash basis.)

Nope, Ben Nelson didn’t tell deficit-fearing Nebraska voters any of that.

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