By Dan Calabrese ——Bio and Archives--May 25, 2017
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It sounds bad. In fact, it sounds terrible. People lose health insurance en masse, markets are destabilized and it hardly touches the deficit. If the Congressional Budget Office was ever right about anything, this would be a disaster:
A bill passed by U.S. House Republicans would cause 23 million people to lose healthcare coverage by 2026 while de-stabilizing health insurance markets in some states and making it hard for sick people to buy insurance, a budget watchdog agency said on Wednesday. The Congressional Budget Office, a non-partisan group of experts who analyze U.S. legislation, said the bill would reduce federal deficits by $119 billion between 2017 and 2026.
The report could give added ammunition to Democrats who have accused President Donald Trump and congressional Republicans of putting sick and low-income people at risk with their effort to roll back former President Barack Obama's signature 2010 healthcare law, formally known as the Affordable Care Act but often called Obamacare.So, ouch, right? Until you remember: The CBO is staffed by Keynesians who refuse to acknowledge that markets react to things government does. It's the same way with tax policy, which the CBO always scores using static analysis, as if nothing will happen in the market in response to a tax cut. The Wall Street Journal points out that the CBO's record of accuracy is not exactly impressive:
Nonetheless CBO says 14 million fewer people on net would be insured in 2018 relative to the ObamaCare status quo, rising to 23 million in 2026. The political left has defined this as “losing coverage.” But 14 million would roll off Medicaid as the program shifted to block grants, which is a mere 17% drop in enrollment after the ObamaCare expansion. The safety net would work better if it prioritized the poor and disabled with a somewhat lower number of able-bodied, working-age adults.
The balance of beneficiaries “losing coverage” would not enroll in insurance, CBO says, “because the penalty for not having insurance would be eliminated.” In other words, without the threat of government to buy insurance or else pay a penalty, some people will conclude that ObamaCare coverage isn’t worth the price even with subsidies. CBO adds that “a few million” people would use the new tax credits to buy insurance that the CBO doesn’t consider adequate. The problem with this educated guess about enrollment is that CBO’s models put too much confidence in the effectiveness of central planning. The nearby table shows CBO’s projections about ObamaCare enrollment, which were consistently too high and discredited by reality year after year. CBO is also generally wrong in the opposite direction about market-based reforms, such as the 2003 Medicare drug benefit whose costs the CBO badly overestimated.Unlike CBO, most economic forecasters publish their assumptions and a range of possible outcomes for different variables. This transparency reveals the uncertainty built into any predictive model, rather than homing in on one number like 23 million, as if it is omniscient. The complication for CBO is that the more it defines its uncertainty, the less authority the political class will invest in its estimates. To summarize, the CBO completely ignores the fact that any number of variables could affect things play out, and simply assumes that federal central planning always produces the result intended by the central planners. Thus, when there is a retreat in central planning, the result must be that this very same goal can no longer be achieved.
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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
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