Deficit Falls To Lowest Level Since 2008, Discrediting Argument For More Cuts

BY ALAN PYKE/Think Progress

New Treasury Department figures confirm what the Congressional Budget Office (CBO) projected in the spring: the budget deficit for fiscal year 2013 will bedramatically lower than it was the past four years. The government recorded a $148 billion deficit in August, 22.5 percent smaller than in the same month of 2012, and is on track to total a $642 billion annual deficit when the fiscal year ends on September 30.

Days before the Treasury Department release on August revenue and spending, the CBO updated its statistics on the ratio of debt to gross domestic product. A spring report had projected debt-to-GDP ratios of 76 percent in 2014, 71 percent in 2018, and 74 percent in 2023, but the CBO now says the ratio will fall below 70 percent in 2017 and stay there for four years. Debt-to-GDP is now expected to be 71 percent in 2023 – a difference of about $500 billion in a nearly $17 trillion economy.

These figures reinforce a key point in the argument for resetting the fiscal policy debate: Congress can afford to invest in job creation right now. While Republicans remain committed to the idea of austerity (without being able to pass specific appropriations bills that adhere to the abstract cuts imposed by sequestration), falling deficits and debt levels undercut their argument.

Meanwhile, Congress has already enacted $2.4 trillion worth of austerity measures in the past two years, nearly all of it in the form of spending cuts. Those policies have helped push deficits to their current lows. The fiscal austerity that has helped drive the deficit down has also undermined economic growth, not just in 2013 but for years to come. Cuts to education programs,safety nets, infrastructure investments, and research programs will actually cost the country far more down the road than they save today. The falling deficits and lowered debt-to-GDP projections give the country room to enact targeted spending measures that would kick the economy into the sort of higher gear it needs to bring unemployment back down to pre-recession levels.

The looming end of the fiscal year also signals a renewed fight over spending levels for the coming year. The CBO confirmed yesterday that the spending levels Republicans have proposed violate the terms of sequestration by giving the Department of Defense $20 billion more than is allowed by the law mandating the arbitrary, damaging cuts.

Unethical Commentary, Newsweek Edition

Paul Krugman/New York Times

There are multiple errors and misrepresentations in Niall Ferguson’s cover story in Newsweek — I guess they don’t do fact-checking — but this is the one that jumped out at me. Ferguson says:

The president pledged that health-care reform would not add a cent to the deficit. But the CBO and the Joint Committee on Taxation now estimate that the insurance-coverage provisions of the ACA will have a net cost of close to $1.2 trillion over the 2012–22 period.

Readers are no doubt meant to interpret this as saying that CBO found that the Act will increase the deficit. But anyone who actually read, or even skimmed, the CBO report (pdf) knows that it found that the ACA would reduce, not increase, the deficit — because the insurance subsidies were fully paid for.

Now, people on the right like to argue that the CBO was wrong. But that’s not the argument Ferguson is making — he is deliberately misleading readers, conveying the impression that the CBO had actually rejected Obama’s claim that health reform is deficit-neutral, when in fact the opposite is true.

More than that: by its very nature, health reform that expands coverage requires that lower-income families receive subsidies to make coverage affordable. So of course reform comes with a positive number for subsidies — finding that this number is indeed positive says nothing at all about the impact on the deficit unless you ask whether and how the subsidies are paid for. Ferguson has to know this (unless he’s completely ignorant about the whole subject, which I guess has to be considered as a possibility). But he goes for the cheap shot anyway.

We’re not talking about ideology or even economic analysis here — just a plain misrepresentation of the facts, with an august publication letting itself be used to misinform readers. The Times would require an abject correction if something like that slipped through. Will Newsweek?

CBO: Repealing Obamacare would increase deficit by $109 billion

By Eric W. Dolan/Raw Story

Repealing all of President Barack Obama’s health care law would increase the federal budget deficit by about $109 billion from 2013 to 2022, according to the Congressional Budget Office.

House Republicans have voted more than 30 times to repeal the Affordable Care Act, claiming the law will increase the deficit, hurt job growth, and make health care more expensive. But in a letterto House Speaker John Boehner (R-OH) the CBO explained that the latest repeal bill, H.R. 6079, would reduce spending by $890 billion but slash revenues by $1 trillion.

“Deficits would be increased under H.R. 6079 because the net savings from eliminating the insurance coverage provisions would be more than offset by the combination of other spending increases and revenue reductions,” CBO director Douglas W. Elmendorf explained.

H.R. 6079 was passed in the House on July 11, but like the many repeal bills before it, has no chance of surviving the Democratic-led Senate.

Previously, the CBO had estimated that repealing the Affordable Care Act would increase the national budget deficit by $940 billion. But it revised its estimate in the wake of the Supreme Court’s ruling in June, which allowed states to opt out of the law’s Medicaid expansion.

“What we know from today’s CBO report, as well as from similar reports from CBO and the Medicare actuary, is that the new health care law is dramatically increasing health care spending and costs – costs to our economy, costs to taxpayers, and costs to states,” Senate Republican Leader Mitch McConnell (R-KY) said in a statement. “In addition, today’s report also shows that taxes will increase by more than $1 trillion under Obamacare. The House has already acted to repeal this deeply flawed law and the Senate should do the same.”

GOP’s Distortion Of New CBO Estimate Exposes The Weakness Of Their Arguments Against Health Reform

By Zachary Bernstein 

As the Supreme Court prepares to consider the constitutionality of the Affordable Care Act, opponents of the law continue to lie about its consequences.

Just last week, Republicans misrepresented a Congressional Budget Office (CBO) reportwhich said that the Affordable Care Act was expected to cost $50 billion less than they anticipated a year ago while extending coverage to 30 million Americans. In spite of what the report actually found, many Republicanshave claimed that the cost of the bill would double. As FactCheck.org points out, Republicans appear to have reached their conclusion by distorting the math:

So, where did Republicans get their $1.76 trillion cost figure? That’s the gross cost for 11 years ending in 2022. Republicans inappropriately compare that figure to the original estimate of $938 billion for the 10-year period ending in 2019.

The 11-year figure is much higher because it includes three additional years of full implementation of the coverage provisions of the law. The federal subsidies and expansion of Medicaid, which are by far the most costly elements of the coverage provisions, don’t go into effect until 2014. So, that 2010-2019 estimate includes four years of very low coverage costs (relatively speaking), and the 11-year estimate only includes two years of very low costs, plus three extra years of full implementation costs.

It is worth noting that Republican attempts to repeal either the whole bill or parts of it are projected to increase the budget deficit, suggesting that Republicans are more interested in delivering a blow to President Obama than lowering the national debt. At least one conservative justice has also noted the potential for “economic chaos” if the law was struck down and health care costs rose as a result.

More to the point, however, this is not the first time that a CBO report on the health care law has been misrepresented by its opponents to make it seem like they reached a different conclusion. Nor is it the first time that claims about the law have turned out to be inaccurate. Even the suggestion that millions of Americans will lose workplace health insurance ignores the reality: While employer coverage will vacillate — as it has before the ACA was enacted — the vast majority of businesses say they will continue to offer coverage to employees when the law’s insurance exchanges start up. In fact, if Massachusetts’ health reform is any indication, employers are highly unlikely to dump employees into the exchanges.

With most legal observers believing the Court will ultimately uphold the Affordable Care Act, and few compelling legal arguments available for its opponents, it appears the only way they see fit to attack the law is to lie about it.

Paul Ryan’s Multiple Unicorns

By Paul Krugman

Gosh. For a plan that supposedly sets a new standard of seriousness, Paul Ryan’s vision (pdf) depends an awful lot on unicorn sightings — belief in the impossible. Let me review the top three unicorns.

First, the plan assumes that tax cuts will set off a literally unprecedented boom. Here’s again, is what is assumed about unemployment:

House budget proposal

So Ryan is claiming that unemployment will plunge right away; that by 2015 it will be down to the levels at the peak of the 1990s boom (and far below anything achieved under the sainted Ronald Reagan); and that by 2021 it will be below 3 percent, a level we haven’t seen in more than half a century. Right.

Then there’s the Medicare business. According to the CBO analysis, a typical senior would end up spending more than twice as much of his or her own income on health care as under current law. As Dean Baker points out, this means that seniors would end up paying most of their income for health care. Again, right.

But in a way, the worst part isn’t the Medicare plan: it’s the fact — which so far has not penetrated the debate — that the biggest source of supposed savings in the plan isn’t actually health care, it’s an assumption that federal spending on everything except health and Social Security can somehow be squeezed, as a percent of GDP, to a small fraction of current levels. Here’s the table, from Ryan’s own report:

Notice the marked area at the bottom: Ryan is assuming that everything aside from health and SS can be squeezed from 12 percent of GDP now to 3 1/2 percent of GDP. That’s bigger than the assumed cut in health care spending relative to baseline; it accounts for all of the projected deficit reduction, since the alleged health savings are all used to finance tax cuts. And how is this supposed to be accomplished? Not explained.

This isn’t a serious proposal; it’s a strange combination of cruelty and insanely wishful thinking.

New CBO Analysis: GOP’s Push For Health Law Repeal Would Increase Deficit By $230 Billion Over 10 Years

By Igor Volsky Moments ago, the Congressional Budget Office released its cost estimate for the GOP’s health care repeal bill — H.R. 2, the Repealing the Job-Killing Health Care Law Act, introduced yesterday in the House by the new Republican majority:

– 32 million Americans will lose coverage compared to current law: “Under H.R. 2, about 32 million fewer nonelderly people would have health insurance in 2019, leaving a total of about 54 million nonelderly people uninsured. The share of legal nonelderly residents with insurance coverage in 2019 would be about 83 percent, compared with a projected share of 94 percent under current law (and 83 percent currently).” (p. 8-9)

– Increases deficit by $230 billion over 10 years: “Consequently, over the 2012–2021 period, the effect of H.R. 2 on federal deficits as a result of changes in direct spending and revenues is likely to be an increase in the vicinity of $230 billion, plus or minus the effects of technical and economic changes to CBO’s and JCT’s projections for that period.” (p. 5)

– Huge deficit increases over next decade: “Correspondingly, CBO estimates that enacting H.R. 2 would increase federal deficits in the decade after 2019 by an amount that is in a broad range around one-half percent of GDP, plus or minus the effects of technical and economic changes that CBO and JCT will include in the forthcoming estimate. For the decade beginning after 2021, the effect of H.R. 2 on federal deficits as a share of the economy would probably be somewhat larger.” (p. 7)

– Individuals would pay more for health insurance: “Although premiums in the individual market would be lower, on average, under H.R. 2 than under current law, many people would end up paying more for health insurance— because under current law, the majority of enrollees purchasing coverage in that market would receive subsidies via the insurance exchanges, and H.R. 2 would eliminate those subsidies.” (p. 9-10)

– Average health care benefits would be worse: “In particular, if H.R. 2 was enacted… the average insurance policy in this market would cover a smaller share of enrollees’ costs for health care and a slightly narrower range of benefits.” (p.9)

– Premiums for employer-sponsored insurance would increase: “Premiums for employment-based coverage obtained through large employers would be slightly higher under H.R. 2 than under current law, reflecting the net impact of many relatively small changes.” (p. 10)

The GOP is excluding the vote from its new cut-go rule — under which increases in mandatory spending would have to be paid for but tax cuts would not — and dismissing the CBO’s estimates of savings in the health law by claiming that the initial savings from reform are largely imaginary. But this now places the new majority at odds with the ‘gods’ at the CBO — who they’ve routinely cited to bolster their own proposals — and its repeated pledges to lower spending in the new Congress.

Beck invents facts to attack food safety bill

From Media Matters:

Glenn Beck distorted a Congressional Budget Office cost estimate to claim that food-safety legislation would mean "higher taxes for you," baselessly claimed the bill would drive up food costs, and underplayed concerns about food safety. Beck demonized the legislation as a George Soros-backed effort to "control you."

Beck distorts CBO report to claim legislation means "higher taxes for you"

Beck: Food Safety Modernization Act "will mean higher taxes for you." During the November 29 edition of his Fox News show, Glenn Beck claimed that the Food Safety Modernization Act is "going to mean higher taxes for you as well. Congressional Budget Office estimates between $1.4 billion and up, between 2011 and 2015." Beck said the bill represented a George Soros-backed effort to "control your food" and "control you." [Glenn Beck, 11/29/10]

FACT: CBO said the bill would "increase spending subject to appropriation" -- not taxes. In its cost estimate of the Food Safety Modernization Act, the CBO wrote, "CBO estimates that implementing the bill with the manager's amendment would increase spending subject to appropriation, on net, by about $1.4 billion over the 2011-2015 period, assuming annual appropriation action consistent with the bill." [Congressional Budget Office, 8/12/10]

FACT: CBO said the bill would authorize collection of fees from food manufacturers -- not "higher taxes for you." In its cost estimate, CBO reported:

S. 510 would amend and modify the Federal Food, Drug, and Cosmetic Act to authorize the FDA to collect fees to help defray some of the FDA's costs of performing food safety activities. The bill would create new fee programs including: a facility reinspection and recall fee program for mandatory recalls, an importer fee program for voluntary qualified entities, and a fee program to support accreditation of third-party auditors.

The legislation also would authorize the FDA to collect fees for food (including animal feed) export certificates under the current export certification program. Fees are currently collected for drugs and devices that are issued export certifications.

Fees authorized by the bill would be collected and made available for obligation only to the extent and in the amounts provided in advance in appropriation acts. As a result, those collections would be credited as an offset to discretionary spending.[Congressional Budget Office, 8/12/10]

Beck baselessly claims bill will result in higher grocery prices

Beck: The cost to "you at the grocery story" is "expected to be hundreds of millions of dollars every year." From the November 29 edition of Fox News' Glenn Beck:

BECK: Cost to the private sector -- you know, you at the grocery store? Now, they haven't calculated that yet, but it is expected to be hundreds of millions of dollars every year.

FACT: Michigan State University professor says bill "isn't likely to make a huge dent" in food prices. As Media Matters documented, Craig Harris of the Food Safety Policy Center at Michigan State University reportedly said that the bill is unlikely to raise consumers' food costs:

Although costs of food production may rise as a result of the bill, the amount isn't likely to make a huge dent in most large food companies' profits, Harris said, so the added costs shouldn't trickle down to the consumers. For small companies and local farmers, the bill includes exemptions and special accommodations, recognizing that some companies may not be able to keep up with the costs of adopting new safety practices.

Beck underplays food-safety problem

Beck: "Is there a big problem" with food safety "that I don't know of?" From the November 29 edition of Fox News' Glenn Beck:

BECK: Congress is working hard to make sure that the food that you eat is completely safe. Now, you might be thinking to yourself, "Glenn, I think my food is already safe." But that's just how stupid you are. They know better in Washington.

Apparently, our food is very unsafe. That's why tonight, the Senate is scheduled to start voting on S510, the FDA Food Safety Modernization Act. It is fanta-- it's gonna be so modern, what they're doing. May I ask you, who on the planet has a safer food supply than we do while feeding 300 million people? Is it China? Is it India? Is it -- oh, is it Great Britain? Ooh, Sweden? Oh, no.

Is there a big problem that I don't know of? I mean, I know that, you know, we could always make things better here. There was a problem with spinach a couple of years ago, and then guacamole or avocados, or something. I think that was quickly resolved -- minimal to no interruption of our normal food supply.

[...]

BECK: We could always improve, but there will be never be a perfect system with zero problems, will there?

FACT: GAO declared federal oversight of food safety a "high-risk" problem. From a 2007 Government Accountability Office report that was part of its series on "high-risk problems":

Each year, about 76 million people contract a food-borne illness in the United States; about 325,000 require hospitalization; and about 5,000 die, according to the Centers for Disease Control and Prevention. In addition, agriculture, as the largest industry and employer in the United States, generates more than $1 trillion in economic activity annually, or about 13 percent of the gross domestic product. The value of U.S. agricultural exports exceeded $68 billion in fiscal year 2006. An introduction of a highly infectious foreign animal disease, such as avian influenza or foot-and-mouth disease, would cause severe economic disruption, including substantial losses from halted exports. Similarly, food contamination, such as the recent E. coli outbreaks, can have a detrimental impact on local economies. For example, industry representatives estimate losses from the recent California spinach E. coli outbreak to range from $37 million to $74 million.

A challenge for the 21st century is how several federal agencies can integrate the myriad food safety programs and strategically manage their portfolios to promote the safety and integrity of the nation's food supply. In numerous previous reports, we have described the fragmented federal food safety system in which 15 agencies collectively administer at least 30 laws related to food safety. The two primary agencies are the U.S. Department of Agriculture (USDA), which is responsible for the safety of meat, poultry, and processed egg products and the Food and Drug Administration (FDA), which is responsible for virtually all other foods. Among other agencies with responsibilities related to food safety, the National Marine Fisheries Service in the Department of Commerce conducts voluntary, fee-for-service inspections of seafood safety and quality; the Environmental Protection Agency (EPA) regulates the use of pesticides and maximum allowable residue levels on food commodities and animal feed; and the Department of Homeland Security (DHS) is responsible for coordinating agencies' food security activities.

The food safety system is further complicated by the subtle differences in food products that dictate which agency regulates a product as well as the frequency with which inspections occur. For example, how a packaged ham-and-cheese sandwich is regulated depends on how the sandwich is presented. USDA inspects manufacturers of packaged open-face meat or poultry sandwiches (e.g., those with one slice of bread), but FDA inspects manufacturers of packaged closed-face meat or poultry sandwiches (e.g., those with two slices of bread). Although there are no differences in the risks posed by these products, USDA inspects wholesale manufacturers of open-face sandwiches sold in interstate commerce daily, while FDA inspects closed-face sandwiches an average of once every 5 years.

This federal regulatory system for food safety evolved piecemeal, typically in response to particular health threats or economic crises. During the past 30 years, we have detailed problems with the fragmented federal food safety system and reported that the system has caused inconsistent oversight, ineffective coordination, and inefficient use of resources. [Government Accountability Office, January 2007]

Rep. Shadegg Scoffs At The Fact That Jobless Benefits Are A Benefit To The Economy: ‘No, They’re Not!’

By Pat Garofalo

Unless Congress acts today, unemployment benefits will expire for 2.5 million Americans, with unemployment above nine percent and five unemployed workers competing for every available job opening. If Congress, as expected, does nothing, this will be first time in the last forty years that benefits have expired with unemployment so high.

According to calculations by the Congressional Budget Office, Moody’s Economy, andmyriad other economists, unemployment benefits are the single best way to pump money into the economy and generate economic activity, as the unemployed are very likely to spend all of the benefits they receive (thus moving money into local businesses). But during an interview with MSNBC’s Mike Barnicle today, Rep. John Shadegg (R-AZ) scoffed at the notion that unemployment benefits help the economy. “Unemployed people hire people? Really? I didn’t know that,” Shadegg jeered:

BARNICLE: What about the fact that unemployment benefits pumped into the economy are an immediate benefit to the economy? Immediate…

SHADEGG: No, they’re not! Unemployed people hire people? Really? I didn’t know that.

BARNICLE: Unemployed people spend money Congressman, ’cause they have no money.

SHADEGG: Aha! So your answer is it’s the spending of money that drives the economy and I don’t think that’s right. It’s the creation of jobs that drives the economy…Actually, the truth is the unemployed will spend as little of that money as they possibly can. Job creators create jobs.

BARNICLE: Have you ever been unemployed? Have you ever been unemployed?

SHADEGG: Yes, I have.

BARNICLE: What did you do with the money? Save it?

Watch it:

At the same time that he was dumping on the unemployed, Shadegg called for extending all of the Bush tax cuts without paying for them, joining a slew of Republicanlawmakers who care more about tax cuts for the very wealthy than unemployed Americans about to lose the last strand of safety net that they have available.

Shadegg never managed to explain why all of the job creators he cites would create any jobs if households aren’t spending money. In that vein, MarketPlace noted today that “when unemployment checks stop, it’s felt right away by businesses like gas stations, apartment operators, and grocery stores.” And as the Center for American Progress’ Heather Boushey and Jordan Eizenga found, “the workers losing benefits have an average weekly benefit of a little over $290 per week, which translates into a total loss of about $2.5 billion dollars in benefits over December. This is equal to about one in seven dollars of the gain in retail sales seen between December 2008 and December 2009.”

As The Wonk Room noted, some economists estimate that allowing benefits to expire could cause economic growth to “fall by one half to nearly 1 percentage point,” as well as throw hundreds of thousands of people into poverty. And while Shadegg joked that he will be unemployed come January since he is retiring from Congress, next year he will be eligible for a federal pension (if he opted for one), as he is turning 62 and served on Capitol Hill for more than five years.

Michael Steele Delivers Joe Wilson-Like Policy Analysis Of CBO Report: ‘That’s A Lie’

By Matt Corley

Earlier today, the Congressional Budget Office released a preliminary analysis of the health care reform reconciliation package, concluding that it would cost $940 billion over 10 years, reduce the deficit by $138 billion over 10 years and by $1.2 trillion over 20 years. Republicans, however, are either dismissing the numbers or asserting that the report shows that health care reform is not “gonna save the taxpayers’ money.”

On CNN today, RNC Chairman Michael Steele — who has previously said he doesn’t “do policy” — took a page out of Rep. Joe Wilson’s (R-SC) book and directly accused the CBO of lying:

STEELE: Can you just give me an honest number, Rick? How much do you really, legitimately think, adding, using the president’s number, 30 million people to a health care system that you just said doesn’t work is going to cost the American taxpayer? How much you think it’s really gonna? $940 billion dollars over ten years. So, you telling me an additional $940 billion dollars a year is going to make all of our problems go away?

SANCHEZ: According to the calculations that we did and according to the calculations the Democrats are announcing today, it’s going to save in the deficit for the United States citizens $1.2 trillion. Do you believe that’s not true?

STEELE: Ok, can I, I got two words for you — three words, three words.

SANCHEZ: Go, go.

STEELE: That’s a lie.

When Sanchez pointed out that Steele is “arguing with the CBO,” Steele responded by saying, “let me tell you about the CBO.” “Since they’ve been taken down to the woodshed at the White House last year, you can’t believe the numbers,” said Steele. “CBO is only as good as what you put into it.” “You’re saying the president of the United States is corrupted the CBO with a personal phone call or visit?” asked Sanchez. Steele then backtracked a bit, claiming that he was “just saying that, look, this whole process has not worked on behalf of the American people.” Watch it:

This isn’t the first time Steele has accused President Obama of intimidating the CBO into changing its numbers. In December, cited a July 2009 meeting at the White House with CBO head Douglas Elmendorf and other economists — which he said was the Obama taking Elemendorf “to the woodshed” — to dismiss a positive CBO score for health care legislation. “All of a sudden they’re getting these numbers that fall right within the framework of what they’re trying to do,” said Steele. White House Press Secretary Robert Gibbs called Steele’s claim “delusional.”

Additionally, it’s odd that Steele says “you can’t believe the numbers” ever since that July 2009 meeting because Steele and the RNC have cited CBO numbers since then to support their arguments. In fact, as recently as March 5, the RNC invoked the CBO to criticize Obama’s proposed bank fee.

Republicans wouldn’t find coverage under their own health plan

By Think Progress The Congressional Budget Office has concluded that the overwhelming majority of Americans would remain uninsured and continue paying higher premiums under the Republicans’ health care alternative. In fact, it’s unlikely that any of the members of the Republican House Leadership would be able to find affordable insurance under their own proposal, should they chose to give up their government-sponsored plans. The six men and one woman in the Republican House leadership have an average age of 52 and, as a group, are more susceptible to cardiovascular disease, different cancers, high blood pressure, and a host of other chronic diseases. The Republican health alternative would allow insurers to discriminate against these conditions and price the Republican leaders out of the market. Igor Volsky explains why Republicans wouldn’t find coverage under their own health plan.