Last Friday, the Congressional Budget Office (CBO) released its analysis of the president’s 2011 budget submission to Congress. This report hasn’t gotten nearly the attention it deserves.
When the administration released its budget in early February, the news seemed bad enough. By its own reckoning, the Obama administration’s budget plan would result in massive deficits and borrowing if adopted in full. According to the administration’s estimates, the president’s budget plan would produce deficits totaling $10.1 trillion over the period 2010 to 2020, and by 2020 federal debt would reach $18.6 trillion.
But now we learn that that was the rosy scenario.
According to CBO, the Obama budget plan would run up much larger budget deficits and pile up even more debt than the administration reported in February.
Over the period 2010 to 2020, CBO expects the Obama budget would run a cumulative deficit of $11.3 trillion — $1.2 trillion more than the administration predicted. By 2020, total federal debt would reach an astonishing $20.3 trillion — up from $5.8 trillion at the end of 2008.
The president likes to say he inherited a mess. He did in fact enter office during a deep recession that sent deficits soaring on a temporary basis. But his policies have unquestionably made an already difficult medium- and long-term budget outlook much, much worse. The problem is that President Obama is a world-class spender. He wants to pile massive new commitments on top of a bloated and unreformed government. He is willing to raise taxes to pay for some of his wish list, but far from all of it. For the rest, he plans to run up the nation’s debt with reckless abandon.
CBO’s numbers tell the story.
Over the next ten years, CBO says the Obama budget would increase federal spending by $2.3 trillion, including $0.8 trillion in net interest costs on the additional borrowing that would be required.
Bad as that is, it’s a lowball estimate. The president’s budget assumes that war-fighting funds will plummet from $130 billion in 2010 to just $50 billion in 2012 and every year thereafter. No one believes this will happen. More realistic assumptions would add $500 billion or more to the president’s defense funding request over a ten-year period.
The biggest problem in the federal budget is runaway entitlement spending. And so what would the Obama budget do? Increase entitlement spending, of course. By $1.9 trillion over ten years, according to CBO. In 2020, federal entitlement spending would reach $3.3 trillion, up from $2.1 trillion in 2009.
The administration has been touting a supposed three-year spending “freeze” as evidence of its determination to cut the budget back. But only a very small portion of the budget would be frozen, and only after the administration had spent two years stuffing in more funding. CBO expects that discretionary spending under the Obama budget, excluding war funds and Pell Grants (which would become an entitlement), will increase by $0.5 trillion over ten years.
Two years ago, CBO expected total federal spending to reach $4.3 trillion in 2018. Now, if the president’s budget plan were adopted, CBO projects spending would exceed $5.0 trillion in 2018.
Between 2010 and 2030, the population age 65 and older is expected to rise from 41 million to 71 million people. CBO projects spending on Social Security, Medicare, and Medicaid in 2030 will reach 14.4 percent of GDP, up from 9.8 percent today. That will be like adding a whole new Social Security program to the budget without any additional revenue to pay for it.
The federal government is drowning in unaffordable entitlement commitments. President Obama’s response is to spend, entitle, and borrow even more, while he can. And then, with an even bigger government locked into the “baseline,” he plans to pivot and use the prospect of a debt crisis he made much more probable to push for a massive tax increase.
Unfortunately for the president, the public is already onto this game. And they want no part of it.
Most everyone agrees that decreasing the number of the uninsured is an important goal of health care legislation. What is not agreed upon is the best way to achieve that goal. Obama’s health care plan depends on expanding the number of Americans enrolled in Medicaid – the government-run program for the poor and disabled. The Congressional Budget Office (CBO) estimates the Senate bill would account for about 50 percent of the reduction in the uninsured population at a cost of $395 billion over 10 years.
New research by Heritage’s health fellow Brian Blase presents evidence suggesting that Medicaid expansion would be both costly and do little to improve the health of the uninsured. Blase examines the “TennCare” program, a Tennessee public program enacted in 1994 that dramatically increased the expansion of Medicaid to Tennessee’s uninsured population. The TennCare program quickly added over half a million individuals to Medicaid, enrolling one-fourth of the entire state. And costs also skyrocketed. Per-capita Medicaid spending from 1994-2004 increased by 146 percent in Tennessee, which was over double the national average increase of 71 percent.
The most shocking result of Blase’s analysis was not just the increase in costs. It was the apparent lack of improvement in health outcomes in Tennessee in the years following TennCare’s enactment. Blase concluded that, relative to eight surrounding states, the quality of health care in Tennessee actually declined after the expansion of Medicaid. The decline in Tennessee’s mortality rate for 15-64 year olds – those most likely to be impacted by TennCare – compared less favorably after TennCare to the states surrounding Tennessee that before its enactment. On average, the mortality rates of the eight surrounding states to Tennessee declined by 5.2 percent from 1994-1998. Tennessee’s mortality rate declined by only 2.1 percent.
The lessons learned from TennCare should serve as a warning of what we should expect from a national program of Medicaid expansion. In short, it will be costly and will do little to improve health care quality in the United States. The notion of expanding coverage is meaningless if it does not improve the health of the uninsured. There are seemingly dozens of ways to increase insurance coverage with better results than a vast and costly expansion of Medicaid. Congress should strongly consider the weaknesses of the Tennessee’s experience before they prescribe the nation similar medicine to TennCare.
Rick Sherwood currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm