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Discretionary spending is not the same as 'new spending'

disretionarychart.jpg

Megan McArdle has a post up saying that health-care reform is "already at least a hundred billion dollars in the hole." That's really not right, though it's certainly true that the CBO's estimate suggesting $115 billion in discretionary costs confused a lot of people. But let me just quote CBO Director Doug Elmendorf, who's doing his best to clear up the confusion.

The potential discretionary costs identified two days ago include many items whose funding would be a continuation of recent funding levels for health-related programs or that were previously authorized and that PPACA would authorize for future years. (For example, those potential costs include $39 billion authorized for Indian health services that already receive appropriations every year.) CBO estimates that the amounts authorized for those items exceed $86 billion over the 10-year period (out of the roughly $105 billion total shown in the table provided yesterday). Thus, CBO’s discretionary baseline, which assumes that 2010 appropriations are extended with adjustments for anticipated inflation, already accounts for much of the potential discretionary spending under PPACA. That is one of the reasons that potential discretionary effects are shown separately from effects on revenues and mandatory spending in CBO’s cost estimates.

So that knocks out more than $86 billion of the $115 billion. What's leftover is about $15 billion for administration and $10 billion in possible new discretionary spending. That spending may or may not happen, and if it does, it will need another vote in Congress, and it will have to be offset elsewhere in the budget.

As Elmendorf writes at the bottom of his post, this is why the CBO doesn't include discretionary spending numbers in their normal estimates. Discretionary spending is not "new spending that the bill has passed into law." Most of it's old spending that may or may not continue, and a bit of it is new spending that may or may not happen, but would need another vote and an offset.

By Ezra Klein  |  May 14, 2010; 2:46 PM ET
Categories:  Health Reform  
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Comments

I think one of the key lines is "continuation of recent funding levels for health-related programs" - it seems this is not about increases caused by ACA.

Posted by: jduptonma | May 14, 2010 2:54 PM | Report abuse

just out of curiousity can anyone explain to me what could the Indian Health Services possibly spend $39 Billion on? Is that a 10 year figure or an annual one? I'm praying its 10 year. If we're going to start being "cheap" with the defense budget as Secretary Gates suggested recently (as we should) shouldn't we make sure we're not overspending everywhere? I'm not saying this is overspending because I have no clue as to what its for but $39 billion?

Its amazing that these numbers just get thrown out without a care in the world but if we were talking profits of a company there's practically a perp walk for it.


what's the over/under on "friends don't let friends blah blah blah McCardle?

Posted by: visionbrkr | May 14, 2010 3:00 PM | Report abuse

"Megan McArdle has a post up saying "_________." That's really not right."

That right there is about as close to a universal truth as one can get. It doesn't matter what fills in the blank.

Posted by: nylund | May 14, 2010 3:06 PM | Report abuse

I think that the common theme amongst the large majority of Washington's policies are to spend money we don't have by raising debt levels. And in recent years I think the consequences of this have begun to show up in droves. I read an interesting article about this theme here:

http://www.goldalert.com/stories/Gold-Price-Up-Dollar-Down-Does-it-Really-Matter

Posted by: ftyler | May 14, 2010 3:13 PM | Report abuse

In other words, we should assess the cost of the bill not by what's actually in the bill, but rather by comparing the bill to what we would have spent in a theoretical world in which no health care bill was passed. Kind of like how Enron shifted losses out to "special purpose entities."

Posted by: ath17 | May 14, 2010 4:17 PM | Report abuse

ath17,


well sure. How do you think they "save money" in this. If you project a worst case scenario of something (not necessarily healthcare) costing 10 trillion dollars and then it ends up only costing 9 trillion you just saved yourself 1 trillion dollars!!

Posted by: visionbrkr | May 14, 2010 5:00 PM | Report abuse

Speaking of health care reform, there looks to be a sizable risk to that old 'if you like it you can keep it' line...

http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/

Posted by: justin84 | May 14, 2010 5:26 PM | Report abuse

So is it in the hole because you're counting this money, or is it in the hole because you're not counting the student loan money? Can't have it both ways.

Posted by: Careless | May 15, 2010 2:20 PM | Report abuse

EZRA is very good at misrepresenting facts in an effort to bias the news with his liberal commentary.
This article is totally inaccurate. "Discretionary spending is not the same as 'new spending'." But Ezra fails to report the facts. The information that Pelosi submitted to the CBO to score prior to passage of this reform bill did not request an estimate of discretionary spending. The CBO's score that lead to passage of the Bill did not include the "necessary spending" that would be necessary to implement and administer the Bill, including payments to Providers, the cost of new administrative offices and employees, the cost of IRS oversight and other costs that the House and Senate must approve. If they fail to approve these expenses the Health Reform Legislation cannot be implemented, administered or paid for. Had Ezra and other liberal media done their homework they would have reported to the public the true cost of the Health Care Reform Bill before it was passed. They did not report the information and facts available to them. Now the President has instructed Congress to implement taxes or cut costs elsewhere to pay for the Bill as it will cost more than he told the Public it would.

And, here we go! Anyone who believes this is not going to cause our premiums to go up between 2010-2014, far more then they would have had this Bill not been passed, is not well informed on the specifics. The White House was already informed that the money allocated to "insurance premium subsidy, for those that can't afford coverage" is not going to be enough! As I previously have posted, this Legislation once fully implemented will increase the Federal Debt, increase the Deficit(unless they increase EVERYONES taxes) and will fail to reduce premiums and the cost of care.

Ezra is not qualified to write a blog on this subject and clearly fails to fully research the information he provides in his blog/articles.

Do your own research if you want the facts. We can't rely on the media to be unbiased and report the true facts on any given subject.

Posted by: fedupwithgovernment | May 15, 2010 11:48 PM | Report abuse

@fedupwithgovernment

Actually, Elmendorf directly contradicts your fantasy rant. Epistemic closure is awesome!

@justin84

In other words, those companies (and their right-wing CEOs) were considering dropping their employees' coverage anyway and the new law may actually provide a safety net when our benevolent multinational overlods decide to finally cut the cord on the American public.

Posted by: eleander | May 16, 2010 3:46 PM | Report abuse

To those that replied/commented on my post, you obviously don't want to face the facts. The medicare administration has stated more than once that the cost will be much more than thought.

Even if you don't believe anything else, you can't discredit this:

The fact that Providers payments were not decreased but keep at previous years level, has already negated the savings the Bill was to provide. Since Provider payments were never included when the CBO scored Pelosi's bill, that expense must be subtracted from the "misrepresented savings" each and every year over the next 10 year period.

CBO score is only for a ten year period. Even that is way to long of a time to base costs on. Too much, including who holds the Majority and the Presidency can change over 10 years and at most the expense is an educated guess based on current costs.

The CBO's comment on the additional costs only refers to the additional expenses considered in this article and certainly did not include all the discretionary spending this Bill requires. Only those that know how the Health Care delivery system, Medicare and Medicaid and Health Insurance both group and individual coverage operatives and is currently administered can understand that the cost estimates are much lower than the actual cost will be.

I am warning you that the actual costs will be much much more. But I know you will not believe it no matter what anyone says. Time will tell. Just be prepared to pay more for your current coverage.

Posted by: fedupwithgovernment | May 16, 2010 8:42 PM | Report abuse

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