Gossamer CBO Report Incites Irrational Exuberance

The political-media establishment’s hype machine kicked into overdrive this morning, after release of a sketchy report  from the Congressional Budget Office, purporting to determine the cost of the Senate Finance Committee version of ObamaCare, otherwise known as the Baucus bill, after the Chairman of the committee.  The preposterous headline:  this bill would reduce the federal deficit.

ObamaCare

The New York Times hailed:

The much-anticipated cost analysis showed the bill meeting President Obama’s  main requirements, including his demand that health legislation not add “one dime to the deficit.” Indeed, the budget office said, the bill would reduce deficits by a total of $81 billion in the decade starting next year.

Hosannas from the Washington Post:

…the CBO report lends a huge political boost to the Finance Committee’s work.

Looking beyond the headlines at the actual report one finds several devilish details beginning with “Caveats Regarding This Preliminary Analysis:”

There are a number of key reasons why the preliminary analysis that is provided in this letter and the enclosures does not constitute a final cost estimate for the proposal.

Those reasons include:

  • There is no legislative language yet.  CBO analyzed a so-called “conceptual paper” called The Chairman’s mark.   When the actual legislation is written CBO estimates will change substantially.
  • CBO has not yet estimated all the “major cash flows” that would affect the budget as a result of implementing the various policies in the conceptual paper.  CBO hasn’t even even determined which “cash flows” would be spending and which would be revenue.
  • Not all Federal spending that would be funded by future appropriations was reflected in these estimates. “For example, implementation costs for operations of the Internal Revenue Service and the Centers for Medicare and Medicaid Services are not included”

Besides the reasons above, this is just an exercise in guesswork.  The Baucus bill includes several new taxes that contribute to CBO’s net deficit reduction conclusion.  But CBO has proven, for decades, that it’s not really possible to project with any accuracy the amount of additional revenue that would be generated by a new tax.

In reality this report is meaningless.  It’s only purpose is to generate headlines to provide cover for Senate committee members who vote in favor of the Bill.  This bill will be merged with another Senate bill by a Majority Leader Harry and a few Senate staffers.  The bill that emerges will be the one that goes to the Senate floor.  After an extended period of debate and amendments, the CBO will again do its analysis and will produce yet another report.

In our next article we’ll look at cuts in government health programs that contributed to CBO’s conclusions.

3 Comments so far

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  3. Drew on October 9th, 2009

    Those reasons include:

    There is no legislative language yet. CBO analyzed a so-called “conceptual paper” called The Chairman’s mark. When the actual legislation is written CBO estimates will change substantially.

    CBO has not yet estimated all the “major cash flows” that would affect the budget as a result of implementing the various policies in the conceptual paper. CBO hasn’t even even determined which “cash flows” would be spending and which would be revenue.

    Not all Federal spending that would be funded by future appropriations was reflected in these estimates. “For example, implementation costs for operations of the Internal Revenue Service and the Centers for Medicare and Medicaid Services are not included”

    From time to time we have managers who come and make similarly flimsy presentations to the Boards of our companies. We have a name for those who do it more than once: “ex-managers.”