AEI Scholar Demands Apology for Non-Wonk McCarthyite

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Can we do this one more time? Okay. Photo: Win McNamee/2009 Getty Images

I’ve been waiting for somebody to defend Jeff Sessions and his ordered-up Government Accountability study showing that Obamacare will increase the deficit. Christopher J. Conover of the American Enterprise Institute has stepped up to the plate with a blog post defending the study and is now subsequently demanding my apology to the good Senator Sessions for having impugned his intellectual integrity.

I will happily revisit. Spoiler: I don't apologize.

Let’s recap. Sessions requested a study from the GAO and waved it around as proof that the Obama administration engaged in a vast conspiracy to mislead America:

“The report reveals the dramatic falsehoods that were used to push [the bill] to passage," Sessions said …

"The big taxes increases in the bill come nowhere close to covering the bill's spending. … The big-government crowd in Washington manipulated the numbers to get the financial score they wanted, to get their bill passed and to increase their power and influence."

This is false. The GAO study does not purport to show that the taxes are not enough to cover the spending. It shows that if future Congresses pass new laws eliminating the cost controls, and also eliminating all the taxes after 2020, then Obamacare will increase the deficit. It’s obviously true that if you keep all the costs and eliminate the savings, any law will increase the deficit. If you keep the tax rate cuts and military spending hikes in the Paul Ryan budget and phased out the parts that shrink the non-retirement functions of the government to 1938 size, you’d have a huge deficit-increasing law. Conover spends a lot of time defending the arithmetic of those assumptions, which nobody is challenging. Add up the net costs, assume away the savings, and you have a deficit-increaser.

The real argument lies in the assumptions. Conover asserts rather briefly that of course Congress will phase out its cost controls and tax increases. Why? Well, the spending controls, he argues, will be phased out because that’s what happened when Congress cut Medicare in 1997: “Ever since 2003, Congress has elected to postpone the required cuts in Medicare physician fees that are legally required by the Balanced Budget Act of 1997 (BBA), so the alternative fiscal scenario assumes this pattern would continue. ”

This is a widely circulated Republican talking point — Congress passed these huge Medicare cuts in 1997 that saved money on paper, but they couldn’t make them stick, ergo, all Medicare spending cuts are phony. It’s wrong in all kinds of ways, as Paul Van de Water has comprehensively explained. First, Congress has passed Medicare cuts many, many times, and they have stuck. Second, the 1997 law enacted all kinds of other cuts that also weren’t repealed. Third, the cuts that were repealed happened for a reason — they ended up cutting way, way deeper than Congress ever expected. The actual law cut spending as much as expected. It was the extra, unanticipated savings that have been repealed.

Conover also claims that of course the tax increases in Obamacare will be repealed. Why? Because carrying out the law would require revenue to consume 20.2 percent of the economy, and, he insists, “since 1946, federal revenues have exceeded this level exactly once (in 2000, when they were 20.6 percent of GDP.” Well, yeah. In other words, we had revenue at that level, and then George W. Bush got in office and enacted a huge debt-financed tax cut, and revenue plunged. If you assume the regular recurrence of Bush-style fiscal policy, we’re going to have deficits.

Conservative blogger (and huge fan of the Malaysian government) Ben Domenech has chimed in on this point, claiming a historical “law” that keeps revenue from rising above 18 percent of GDP. Of course, there’s no law. Basically, we had Ronald Reagan pass a gigantic deficit-financed tax cut and create a huge structural deficit. Then George H.W. Bush and Bill Clinton cleaned up the fiscal damage, infuriating conservatives in the process, to the point that the budget picture was fine again just in time for George W. Bush to pass another huge debt-financed tax cut that created another massive structural deficit. Obama has begun to clean up the damage, with the Affordable Care Act trying to control health-care inflation, and that and the partial expiration of the Bush tax cuts bringing revenue back up. This has also infuriated conservatives. They may get into office and pass another huge debt-financed tax cut, but that isn’t some kind of historical inevitability, let alone a prospect that needs to be accounted for in the scoring of Obamacare’s budget impact.

Obamacare was of course a two-pronged law designed to simultaneously cover the uninsured and restrain the long-term growth of health-care costs. Sessions’s GAO study measures the first half and assumes away the second half. You could just as easily assume that future Congresses will do the opposite: keep all the taxes and cost-control measures in place and repeal the coverage expansion. If you assumed that, and measured the saving part while ignoring the cost part, Obamacare would be a massive deficit-cutting bill.

That’s a crazy assumption, right? So crazy there’s no point in even thinking about it? That’s exactly what Paul Ryan’s budget proposes. Which is pretty outlandish, to be sure. But it goes to show that measuring just the deficit-increasing parts of the bill is no more realistic than measuring only the deficit-cutting parts.