Obamacare Does No Favors for the Nation’s Fiscal Outlook
Last week served up another dose of reality for Obamacare supporters.
In additional to House committee hearings that exposed the negative effects of the new law, the Congressional Budget Office (CBO) released its new 10-year baseline, which unveils the “daunting economic and budgetary challenges” facing the United States. In 2011, the federal deficit will hit $1.5 trillion. Heritage budget expert Brian Riedl writes, “Historic increases in federal spending are set to create permanent trillion-dollar deficits, eventually pushing the national debt past 100 percent of the GDP. Without change, the nation could potentially face a Greece-like economic crisis.”
Deficits will decrease later in the decade as the economy recovers, but the CBO warns that this assumes “that tax and spending policies unfold as specified in current law. Consequently, they understate the budget deficits that would occur if many policies currently in place were continued, rather than allowed to expire as scheduled under current law.”
One such policy is the “doc fix.” Every year, physicians are scheduled to receive severe pay cuts under Medicare, which threaten seniors’ access to care. So instead, Congress continually passes a fix to delay the cuts. Obamacare creates savings in other parts of Medicare but left in place the policy of adding the extension to the deficit. Even so, the CBO must assume in its baseline that the cuts will occur, ignoring approximately $300 billion in spending over the next decade. The CBO warns that if the cuts are prolonged indefinitely, “then deficits from 2012 through 2021 would average about 6 percent of GDP, compared with 3.6 percent in the baseline.”