The Logic-Defying CBO Obamacare Replacement Score Breaks Its Own Rules, among Other Problems

Brief Analyses | Health

No. 842
Thursday, March 23, 2017
by John R. Graham

Dr. Tom Price, the U.S. Secretary of Health & Human Services, has said the Congressional Budget Office’s recent “score” of the Republican Obamacare replacement bill defies logic. Even worse, it defies the very
rules which govern the CBO.

The CBO’s Analysis Is Static. The 2016 Budget Resolution agreed to by both the House and Senate in May 2015 directed the CBO to do so-called dynamic scoring of major legislation. Dynamic scoring includes proposed laws’ macroeconomic effects. It is especially important when new laws cut taxes, as the American Health Care Act would do. Old fashioned, static analysis does not result in accurate estimates.

For example, say a 10 percent tax on a base of $100 million raises $10 million. Cutting that tax to five percent would cut revenue by $5 million, under static analysis. This ignores the economic growth that would occur as a result of the tax cut.

The AHCA eliminates almost all of Obamacare’s taxes. Even according to the CBO’s static analysis, the bill will reduce the federal deficit by $337 billion over 10 years. This combines a spending cut of $1.2 trillion and a cut in tax revenue of $0.9 trillion.

This effect on the federal government disguises the reform’s benefits to real people. The CBO claims it did not have enough time to prepare a dynamic analysis. Fortunately, the National Center for Policy Analysis has just done so. The NCPA’s analysis concludes the AHCA would increase real Gross Domestic Product by $426 billion, or 1.5 percent; increase private sector employment by 940,000, or 0.49 percent; and increase personal income by $185 billion, or 0.76 percent.

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