There was no way that they would fail. Their bonds were rated AAA, they were managed by the chairman of the stock market, they were America’s seventh largest company, and expert accountants confirmed their long-term fiscal viability. But still, AIG, Madoff Investment Securities, Enron, Fannie Mae and Freddie Mac all went bankrupt.
When you cook the books, a tottering house of cards can appear to be a solid investment. There were plenty of signs that each of these infamous organizations was on shaky ground, but ultimately many people bought the company line and then watched in horror as their investments crumbled.
Over the next week, you’re going to hear time and time again that Obamacare will reduce the deficit by hundreds of billions of dollars. You’ll hear liberal commentators and House Democrats ask, “How can Republicans be against deficit reduction?”
And it’s there, right on Congressional Budget Office stationary: the new healthcare law will reduce the deficit by $230 billion in the first ten years after enactment.
The Congressional Budget Office does good work, but they have to work within strict rules. These rules were set down decades ago, and, since that time, legislators have learned how to game the rules to get the desired outcome. When you break down the costs outside of the strict CBO rules, you discover that the decreases evaporate and turn into hundreds of billions of dollars in new debt.
First of all, most of the Obamacare programs that pay out benefits will start up in 2014. However, the taxes start right away. Ten years of revenue coming in, and only six years of benefits being paid out. In the first ten years of the program, $1.4 trillion will be spent, but in the next ten years, $2.6 trillion will be paid out.
This is perhaps the easiest accounting gimmick to understand. If you only had to pay your bills in the last eight months of the year, you would certainly have a lot more to spend on luxuries. Unfortunately for you, the power company and mortgage company expect to be paid year round.
Madoff Investment Securities was one of the most infamous Ponzi schemes of all time, but Democratic Senator Kent Conrad directly compared Obamacare’s new CLASS Act to Madoff’s fraud. The CLASS Act brings in $70 billion of revenue starting right away. These funds are used to pay for the new entitlement programs.
But those who pay into the CLASS Act program will eventually start drawing benefits. Unfortunately for them, there will be nothing in these accounts. The CBO score only accounts for the revenue from the CLASS Act, not the benefits that will be drawn from it.
Obamacare is a massive new law, spanning thousands of pages. The bill itself authorizes hundreds of billions of dollars to run new programs. What the bill doesn’t do is provide the Department of Health and Human Services with any money to implement these programs. It’s like founding a new company and expecting it to run without employees or facilities.
CBO’s cost estimate does not include the $115 billion it will require to actually run these new programs. If Congress does not appropriate this money in the coming years, the promised benefits will never be paid out.
When you add in gimmicks like double-counting Medicare savings and ignoring the cost of the Medicare doc fix, Obamacare actually increases the deficit by $701 billion in just the first ten years. That’s some pretty powerful book cooking.
Republicans want real health care reform. In the same week that the House moves to repeal Obamacare, we will discuss some of our alternatives, which will increase access to care without bankrupting the U.S. Treasury. As Chairman of the Energy and Commerce Subcommittee on Health, I’m going to show that there are better solutions to our health care problems.
President Obama and Congressional Democrats are telling the American people that after ten years of Obamacare, there will be $230 billion left over. In reality, we will be left with a big bill and no way to pay it.
Rep. Joe Pitts represents Pennsylvania’s 16th Congressional District.
