After stalling for nearly a month, late Friday afternoon, the Obama administration leaked that their periodic budget/deficit update was going to show…..well, let’s just call it a deviation from expectations. Rather than “cut the deficit in half as he promised, President Obama will reportedly tell us that he will increase the deficit by $2 trillion dollars to $9 trillion dollars over the next ten years.
While this new forecast is in line with what the CBO estimated back when Obama proposed his budget, it still seriously underestimates what the deficit will be if Obama gets his policies enacted. Obama’s two largest endeavors, cap and trade and health care reform were not considered in the CBO’s June estimate.
While it’s hard to tell what effect cap and trade will have on the deficit, we do have numbers from the CBO on the effect of health care reform. The CBO estimates that the $9 trillion deficit will increase at least another $1 trillion if the House bill is passed. I say “at least” because we now know that the Obama administration doesn’t have an accountant or an economist who either is honest or any good at their job. Doubt me? Just go back and look at the assumptions they made for the stimulus, the budget, cap and trade or health care reform and then look at what the CBO said. Who has appeared to be accurate?
I also say “at least” because there is historical evidence that the first year of all major government health programs have been significantly underestimated. Take a look at this graph from John Goodman’s Health Policy Blog:
It turns out that regardless of the administration, government run health care plans always cost more than they are expected to. Why, you might ask? Well, if you’re selling something, are you more likely to tell the “buyers” what the best or worst case scenario might be?
Taking a simple average of the plans on the graph, it suggests that the government health programs cost 538% of what the original estimate was. OK, let’s not be the Russian judge. Let’s throw out the high and the low misses. Doing that still has costs coming in at 414% of the original estimate.
If history is any indicator, the $1 health care reform plan will cost significantly more. How do you like the sound of $4 trillion for health care and a 10 year deficit of “at least $12 trillion?
Whether $2 trillion or $5 trillion more, I think this video pretty well sums up the public response: