Saturday, March 20, 2010

"Deficit Reduction"

Drudge splashes a three-paragraph brief from the AP that confirms what I and others who oppose the health bill have been shrilly telling anyone who will listen: the "$138 billion in savings over 10 years" is fiction (it's a CBO number, to be sure, but Garbage In, Garbage Out). Today's story has the overworked CBO confirming that if the annual Doc Fix is passed, as it has been every year since 1997, that will consume all the alleged savings from the bill, and put us $62 billion in the red.

That might not sound too bad, given the scope of Obama's trillion dollar baby. But if just one typical political compromise can cost $200 billion, imagine how much this could cost over ten whole years! The revenue in the plan mainly relies on raising taxes in the future. Some of the taxes are on nice health care plans, such as those enjoyed by union members. They were supposed to start in 2013. Now it's 2018 - two presidential terms from now. Do we really believe that if Obama didn't have the courage to uphold a tax starting after his next election that the next presidents will have the courage not to push it back further and further?

The other source of tax revenue is raising taxes on "unearned income" - mostly from investments. That will raise some revenue, but it will, like any tax on capital, slow GDP growth, slow consumption growth, and slow revenue growth from all sources of taxation. As Arthur Laffer showed, it's possible to institute a tax that actually lowers total government revenue. This may or may not do that, but it will certainly have a negative spillover into other sources of government revenue and into the pocketbooks of Americans.

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