Congressional Budget Office Final Score: Settlement Act Increases Deficit by 3.4 trillion; Causes 10 million Loss of Health Insurance
This week, the Congressional Budget Office (CBO) released the latest cost estimates for a recently enacted large Beauty Act (OBBBA) to reflect the final clause. The score found that the law will add $3.4 trillion to the deficit from now until 2034 and result in more than 10 million people losing health insurance.
Although not reflected in the CBO report, it is expected that the Affordable Care Act’s enhanced tax credit ends later this year, with five million people not insured. Unlike other tax reliefs due, the bill does not extend credit.
(rather than) what are the scores?
The CBO and Joint Tax Committee (JCT) are official scorers in Washington. They are accused of splitting the legislation’s expected spending, income, deficit and debt impact into fractions.
Scores are the best estimates for modelers, i.e. how a particular legislation will affect expenditures and revenues for a specified period of time
The score is not a crystal ball, and they cannot predict all the impact the law will have on government spending and revenue with complete accuracy. Importantly, they do not attempt to predict or consider future legal or legislative changes. Instead, they are modelers’ best estimates of how a particular legislation will affect spending and income over a specified period of time (usually 10 years).
Comparator is key
To determine how the law will affect expenditure or revenue, it is crucial to measure the changes and costs of the comparison point (called the “baseline”) relative to legislation. In the Reconciliation Act, Republican lawmakers hope to extend many policies from the 2017 Creation of Tax and Employment Act (TCJA), which are scheduled to expire on December 31, 2025, including $3.8 trillion in tax cuts. To do this, they used accounting skills. They believe that when evaluating OBBBA, they can use the “current policy” baseline: comparing the existence of the law to a world where the status quo in 2025 lasts for 10 years. The problem with this approach is that without legislative action, the status quo will not actually continue in 2025. Therefore, the “current policy benchmark” is an exaggerated number, which makes Obbba's price seem to be lower.
“Current Policy Baseline” is an exaggerated number that makes OBBBA prices seem to be lower.
While the baseline based on this novel is attractive to Republican lawmakers because it allows them to continue to cut taxes without paying taxes, ignoring reality does not change reality. Despite the fiscal responsibilities that policymakers have raised, the extended tax relief does come at a cost, blowing up the deficit. As the expert in charge of the Federal Budget Commission said: “Many supporters of this law have spent months or years adapting to situations where our fiscal situation is unsustainable. But when they actually have the opportunity to address the property, they make $4 trillion worse.”
As shown in the figure below created by the Bipartisan Policy Center, the two baseline accounting methods lead to very different estimates of the impact of the bill on the deficit.
The latest estimates from the CBO confirm that OBBBA will have serious and lasting consequences. In addition to cutting plans and covering losses, Bill summoned state debt. Doing so would harm Medicare's prospects by setting up a massive automatic cut campaign and creating a funding loophole that lawmakers can use as an excuse to pursue deeper cuts in the future. The new laws and the dynamics they create are unacceptable. Medicare rights remain committed to minimizing and reversing these hazards.
Read the CBO report.
