CBO: Health Reform Deficit Reduction Not Due to CLASS Accounting Gimmicks

Tyler Cowen, looking for reasons to oppose a health care overhaul that will take a bite out of our long-term deficit problem, chooses to speculate that the “ok CBO rating” is due to an account trick related to the implementation of a new long-term care insurance program. The obvious way to resolve this worry would be see what the CBO’s report (PDF) has to say about it:

As noted earlier, the CLASS program included in the bill would generate net receipts for the government in the initial years when total premiums would exceed total benefit payments, but it would eventually lead to net outlays when benefits exceed premiums. As a result, the program would reduce deficits by $72 billion during the 10-year budget window and would reduce them by a smaller amount in the ensuing decade (an amount that is included in the calculations described in the preceding paragraphs). In the decade following 2029, the CLASS program would begin to increase budget deficits. However, the magnitude of the increase would be fairly small compared with the effects of the bill’s other provisions, so the CLASS program does not substantially alter CBO’s assessment of the longer-term effects of the legislation.

The bill contains provisions that have front-loaded positive impacts on the deficit and also have provisions that have back-loaded positive impacts on the deficit. The bill, rather intelligently, seems to balance this out well leading to net deficit reductions in the short-, medium-, and long-terms. The bill by no means solves the considerable long-term fiscal challenges to the United States, but it does improve the situation. If people want to say that on balance they think the bill is a bad idea, that’s fine, but to do so is to oppose what’s far-and-away the most politically realistic way to enact non-trivial long- and medium-term deficit reduction in the 111th Congress.