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The health-care bill's spending in context

I've been a bit annoyed by the convention of referring to the health-care bill's 10-year cost rather than its annual cost. We don't talk about very much in terms of 10-year costs, and so people don't have much context for it. So I asked crack intern Dylan Matthews to build a crude comparison of what various government programs are projected to cost in 2015 (chosen because health-care reform doesn't kick off until 2014, and I wanted to give it a year to get up and running). Projections are always iffy, but this is just to get an idea of the relative size of different programs. Ready for it?

projected_spending_in_2015_on_.png

What you're seeing is health-care reform clocks in around $100 billion. Which is pretty small compared to the $600 billion going to defense, or the $700 billion going to Medicare, or the $900 billion going to Social Security. It's even small in comparison to the to the $250 billion going to subsidize employer-based health care and the $150 billion for the mortgage interest deduction -- both of which are massive tax breaks for people who are a lot better off than the beneficiaries of the health-care bill. That's the health-care proposal in context: Real money, but not the biggest bill on the planet.

By Ezra Klein  |  March 12, 2010; 7:00 AM ET
Categories:  Charts and Graphs  
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Next: Tom Toles is worth a thousand words

Comments

beautiful...

Posted by: amritpalsidhu | March 12, 2010 7:45 AM | Report abuse

this is all fine and good but its not the spending in 2015 I'm worried about. Remember at one time Medicare was "cheap" And I'm fine with ratcheting down ALL the spending on the graph including defense and getting rid of the employer tax exclusion. Everything should be on the table.

Where's a good post on Erskine Bowles and Alan Simpson when you need it??

Posted by: visionbrkr | March 12, 2010 7:48 AM | Report abuse

Ezra,
Thank you for trying to put this in perspective. I talk often with folks in my class about how much we loose in tax revenue from the mortgage deduction and how it is highly regressive. People need to see how little the cost of health care reform is compared to everything else.

Posted by: scudderw | March 12, 2010 7:51 AM | Report abuse

I'm no accountant but if we got rid of the mortgage tax deduction wouldn't it make it even harder for lower income people to afford home ownership? Is that really what liberals want to do???

Posted by: visionbrkr | March 12, 2010 7:56 AM | Report abuse

Only $100 billion. Well, alright then, no problem. If there's anything else you want to spend $100 billion on, go right ahead. It's not as though the national debt is anything we need to worry about.

Btw, did your calculation take into account your "this is just the beginning, once we get our camel's nose under the tent we can add on lots of other big and little reforms we weren't able to get in this year" philosophy you keep repeating?

Posted by: ostap666 | March 12, 2010 8:31 AM | Report abuse

Obviously HCR is an endless process. Every reform dollar spent now saves more American lives than every five DOD dollars. Passage of a bill now is just a first step toward fiscal/medical sanity in this country. At some point, the GOP will have to stop sabotaging gvmt and catering to greed and profit, and instead start governing in good faith. If they don't, we're doomed whether or not we pass the current bill. My prediction is that the GOP, if they return to power anytime soon, will sabotage the economy and try to pin the blame on HCR.

Posted by: Lomillialor | March 12, 2010 8:45 AM | Report abuse

So finally, after all these months of holding out, right when HCR is close to the finish line, Ezra admits that true CBO scoring would put HCR over $1 trillion over ten years. We all knew this was true, but it's good to see you finally admit it with the help of a handy graph.

Of course, that just means that all of the CBO's scoring projections were bogus and based upon 10 years of revenue and 7 years of expenses. Gee, I wonder why "people don't trust official projections" like was quoted in your post of . . . yesterday.

Posted by: philly211 | March 12, 2010 8:50 AM | Report abuse

@visionbrkr,
If you do some basic research you'll find that most economist agree that the mortgage tax deduction does nothing to increase home affordability, especially for lower income households. Quick summary: when buying, most folks factor in that they will save money with the deduction, thus they will buy a larger or more expensive home. The net effect is to actually raise home prices which has a negative effect on affordability. Furthermore, the value of the deduction is less for cheaper homes and often low income households who do own their own homes do not have enough mortgage interest to actually claim the deduction (since their standard deduction would be more valuable). Thus again, no positive affect on affordability there.

Posted by: scudderw | March 12, 2010 8:55 AM | Report abuse

philly

Don't get so upset about the 2015 HCR costs.

We'll be bankrupt long before that if the GOP doesn't stop obstructing comprehensive health, financial, economic and political reform.

Posted by: Lomillialor | March 12, 2010 9:04 AM | Report abuse

If any of your readers were really serious about dealing with the root causes of USA's EXPENSIVE Healthcare System, they may want to consider the grotesque wealth of scuzzball lawyers like John Edwards and their mistresses/mansions while reading this article:

http://news.yahoo.com/s/ap/20100312/ap_on_he_me/us_med_unnecessary_tests

Posted by: FastEddieO007 | March 12, 2010 9:08 AM | Report abuse

Adding 30 million new consumers of healthcare will lead to a surge in lawsuit factories, where Ambulance-chasing firms can quickly earn profit margins in the range of 200-500%!

Posted by: FastEddieO007 | March 12, 2010 9:10 AM | Report abuse

Liberals and progressives need to follow the cue of Atrios (eg economics professor Dr. Duncan Black) who questions whether promoting home ownership even needs to be a goal of government at all. Renting is perfectly appropriate for many people.

There are far more socially productive ways to give the poor a hand up. It's not that every dollar spent on making home ownership cheaper for the poor is bad per se, but the opportunity costs of better and more effective things the money could have gone to - like making university cheaper, or improving public transit (supertrains!).

Conservative strategists like promoting home ownership because it builds the "ownership class" of people who wrongly confuse their interests with those of the plutocrats that the Republican party actually supports. Being able to put "Esq." behind your name because you own a bungalow doesn't make you Richard Mellon Scaife.

Posted by: Scientician | March 12, 2010 9:12 AM | Report abuse

@vb: visionbr 'm no accountant but if we got rid of the mortgage tax deduction wouldn't it make it even harder for lower income people to afford home ownership?

Well vb, we could certainly save a bunch of money phase out the mortgage deduction and say capping the amount of the benefit so that there is no additional benefit above say 500K, no benefit for second houses, etc. that would protect lower and middle class people,[snark] who I know are the folks that you really care about.[ /snark]

Posted by: srw3 | March 12, 2010 9:53 AM | Report abuse

Isn't defense much more than 600B? The base DoD budget is more than that even in 2010. And under a reasonable analysis (wikipedia) the total military spending will be between $880 billion and $1.03 trillion in fiscal year 2010. Is somebody saying it will drop by 2015? Your intern should look again.

Posted by: chase-truth | March 12, 2010 9:59 AM | Report abuse

Isn't defense much more than 600B? The base DoD budget is more than that even in 2010. And under a reasonable analysis (wikipedia) the total military spending will be between $880 billion and $1.03 trillion in fiscal year 2010. Is somebody saying it will drop by 2015? Your intern should look again.

Posted by: chase-truth | March 12, 2010 10:01 AM | Report abuse

Ezra -- it's always wonderful to see you attempt to split hairs fine enough to justify abominations like the health care bill.

The more wonkish and technocratic your arguments become, the less credible they are.

Posted by: jkilmer | March 12, 2010 10:01 AM | Report abuse

@ezra please don't conflate "spending" with "money that is not taken from people". Makes the graph less meaningful. For the record, getting rid of both of those tax breaks would be much better for the economy than increasing rates. Add in a gas tax and you have a reasonable approach to dealing with the deficit on the

@visionbrkr the mortgage tax deduction increases the costs of homes. removing it will cause a further price collapse, but that's a necessary adjustment.

@srw3 the lower class does not own property and does not benefit from the mortgage tax deduction at any limit.

Putting limits on any tax increases just insulates the median voter from the cost of their decisions so they only feel the pain indirectly through things like higher unemployment.

Posted by: staticvars | March 12, 2010 10:02 AM | Report abuse

Lets be real, we don't care about the poor. We like to say we do, but we really don't. Considering under these dumbers we'd be spending over ten years over 6 trillion dollars on defense, a large portion of which simply lines the pockets of defense contractors, we don't really care about the poor.

Posted by: EricS2 | March 12, 2010 10:03 AM | Report abuse

@ staticvars. I think that a progressive cap that ends at say 150-200% of the median income (I am not sure what the phase out amount should be, but it wouldn't be hard to figure out) would benefit the vast majority of homeowners who actually need some relief. It is true that lower class people usually rent, so having a rent rebate similar to the mortgage deduction would be helpful to them, if you actually want to help the poor people.

Posted by: srw3 | March 12, 2010 10:18 AM | Report abuse

correction: median mortgage oops

Posted by: srw3 | March 12, 2010 10:19 AM | Report abuse

srw3,

you really don't need to add "snark" in there. I've sadly come to expect it from you.

Is there some rule of law out there that says that if you're "conservative" on one issue you MUST be conservative on all or liberal on one, liberal on all?

As I've said I'm pro choice and for ending the war (was against the war in Iraq) and for equal rights for gays.

I'll wait while you pick yourself up off the floor.


I'm also for blaming both lenders and borrowers for the mortgage mess. Its both their faults obviously depending on a case by case basis.

Posted by: visionbrkr | March 12, 2010 10:34 AM | Report abuse

@staticvars, srw3, visionbrkr,

Don't forget that deductions in general do very little to help lower income individuals, since they don't have much taxable income anyway. As far as "tax increases" go, eliminating deductions like those for mortgage interest is one of the most progressive (if income inequality is a worry) and efficient (if you're an economist) policies.

Posted by: etdean1 | March 12, 2010 10:35 AM | Report abuse

@srw3,

Instead of giving middle income howeowners a tax deduction, why not cut the 15% marginal rate to 10%?

A married couple with $50,000 of taxable income sees its tax liability fall from $6,665 to $5,000 by my calculations - since that household was in the 15% bracket, that's equivalent to being able to deduct $11,100 worth of mortgage interest.

Since the 15% bracket covers $8,351-$33,950 of taxable income for singles and $16,701-$67,900 for married couples filing jointly, this is truly a middle class tax cut.

The return to work increases from 85 cents on the dollar to 90 cents, a (admittedly modest) 5.9% increase (a more important effect is that this partially offsets the ~20% implicit marginal tax rate of subsidy withdrawal under healthcare reform if it passes).

Posted by: justin84 | March 12, 2010 10:47 AM | Report abuse

First, " too big to fail". Now" too small to worry". Never thought "trickle down economics" would get down to this. But 100 billion here and 600 billion there does add up. It's a crying shame that the richest country in the world cannot have universal healthcare for its citizens but if we've gotten this far without it, can't we wait until we can afford it? The idea is great but the timing is all wrong. Of course, that all could be fixed if instead of having to increase taxes to pay for it all we could socialize healthcare; the entire country, however, is so dead set against anything that could bring on bigger government that we'd have to wait for hell to freeze over, and then some. The Bill soon before the Senate will be a monstruous hybrid of Greed, Pride and Prejudice put together with the best of intentions but with as yet unimagined consequences.

Posted by: eliseom | March 12, 2010 11:08 AM | Report abuse

visionbrkr writes: "I'm no accountant but if we got rid of the mortgage tax deduction wouldn't it make it even harder for lower income people to afford home ownership? Is that really what liberals want to do???"

Sounds to me like you think home ownership should be an entitlement. I don't believe that and I am about as liberal as they come.

As others have pointed out, most of the benefit here goes to those who have big loans on expensive houses and lots of deductions.

Not sure that's the type of living arrangement we should be encouraging.

Posted by: luko | March 12, 2010 11:19 AM | Report abuse

EK

You are a poet! Thank you for your continuing insight and support for HCR.

Posted by: stsimons | March 12, 2010 11:21 AM | Report abuse

All of the ideas to promote competition need to be rolled out this is not a problem with a one way solution. It is a multifaceted problem that requires a myriad of approaches.

I would now add three things one - that there should be no restrictions - if you are 55 and want medicare - you got it - with a pay in scaled to your income.

Two - that insurers should be allowed to sell across state lines so they can’t set up State wide duopolies.

And three as an ardent proponent of the public option I would “kill” to be able to join the Federal Health Care program -

Federal workers and retirees can select plans at a cost range from $100 dollars a month for the cheapest individual coverage to $500 dollars for the most expensive family plan. But it has to be open to all - and available if your companies insurance is too high - it needs to be a real “option” for people.

I’m voting “MY” pocket book - I want lower premiums and less money taken out of my paycheck - if they want to help spur on the economy they will make sure this happens for all - not just a select group. Now is everybody happy

Paul Burke
Author-Journey Home

Posted by: JourneyHomeBurke | March 12, 2010 12:20 PM | Report abuse

And is this measurement with or without the savings in Medicare that are projected if the health care bill is enacted? If it's included, then that should be pointed out, because we seem to be spending a large portion of money one way or another. If it's not included, perhaps you should show another graph that compares the two. Obviously 2015 might be too soon to see major differences, but the fact that Medicare's life is extended another ten years is worth making clear.

Posted by: elt28 | March 12, 2010 2:06 PM | Report abuse

"Federal workers and retirees can select plans at a cost range from $100 dollars a month for the cheapest individual coverage to $500 dollars for the most expensive family plan."

Just as with many other employer-provided plans, the employer (the Federal Government in this case) is picking up the tab for about 75% of the total health insurance premium. So the numbers you have quoted are only the employees' (or retirees') share of the premium costs. Should you want to buy into these plans as a non-government employed individual, your costs would range from roughly $400-$2000/mo. Not inexpensive by my book. (I've ignored potential subsidies since I don't know what they would be).

Posted by: Beagle1 | March 12, 2010 2:18 PM | Report abuse

"It's a crying shame that the richest country in the world cannot have universal healthcare for its citizens but if we've gotten this far without it, can't we wait until we can afford it?"

No need to wait--we can afford it now.

Sure, the federal government is running a deficit, but that doesn't mean we can't afford to pass health care reform, which is projected to slightly reduce the deficit. When one of the two major political parties believes that, "Ronald Reagan proved that deficits don't matter," you are going to have deficits. This is unfortunate, but it shouldn't prevent us from spending money on things that we think are important.

Posted by: KennethAlmquist | March 12, 2010 11:06 PM | Report abuse


Ezra and some of the people commenting still think it is a bottomless pit.

Health Care is being jammed down our throats

Posted by: masssgt | March 13, 2010 4:24 AM | Report abuse

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