Meganosity

Since Megan McArdle is stuck in Tallahassee wrasslin' gators and listening with rapt attention while Jeb Bush's cronies tell her that there's never been a better time to Buy Florida, let's take a look at Paul Krugman's op-ed in the New York Times. His description of the dishonest GOP arguments against reforming health care insurance have a certain....Meganosity to them.

We are, I believe, witnessing something new in American politics. Last year, looking at claims that we can cut taxes, avoid cuts to any popular program and still balance the budget, I observed that Republicans seemed to have lost interest in the war on terror and shifted focus to the war on arithmetic. But now the G.O.P. has moved on to an even bigger project: the war on logic.

Why, that's Megan McArdle to a tee. She loved the rockets' red glare as they were busting in the bedrooms of Iraqi families, but became bored when the explosions stopped. She went on to her War on Arithmetic and sustained heavy damage at the Battle of the Calculator. And now she is engaged in the War on Logic, in which nobody can know anything ever.

So, about that nonsense: this week the House is expected to pass H.R. 2, the Repealing the Job-Killing Health Care Law Act — its actual name. But Republicans have a small problem: they claim to care about budget deficits, yet the Congressional Budget Office says that repealing last year’s health reform would increase the deficit. So what, other than dismissing the nonpartisan budget office’s verdict as “their opinion” — as Mr. Boehner has — can the G.O.P. do?

Hey, don't knock dismissing a fact as "their opinion." McArdle does it all the time.

The answer is contained in an analysis — or maybe that should be “analysis” — released by the speaker’s office, which purports to show that health care reform actually increases the deficit. Why? That’s where the war on logic comes in.

McArdle also dismissed the CBO's numbers, saying that "the CBO process has now been so thoroughly gamed that it's useless."

Krugman:

First of all, says the analysis, the true cost of reform includes the cost of the “doc fix.” What’s that?

Well, in 1997 Congress enacted a formula to determine Medicare payments to physicians. The formula was, however, flawed; it would lead to payments so low that doctors would stop accepting Medicare patients. Instead of changing the formula, however, Congress has consistently enacted one-year fixes. And Republicans claim that the estimated cost of future fixes, $208 billion over the next 10 years, should be considered a cost of health care reform.

But the same spending would still be necessary if we were to undo reform. So the G.O.P. argument here is exactly like claiming that my mortgage payments, which I’ll have to make no matter what we do tonight, are a cost of going out for dinner.

Well, what do you know--McArdle did that too. She is too slick to say that the doc fix was part of health care reform so she just said that it should have been part of the bill so it actually is. And no, it doesn't make any more sense in the original.

During the run-up to health care reform, a number of conservatives argued that the Democrats were dishonestly excluding from the cost of legislation the "doc fix" (altering Medicare payment rates for doctors, who were otherwise scheduled to get their rates cut by about 20% under a mechanism known as the "Sustainable Growth Rate" or SGR). The SGR is sort of like the Alternative Minimum Tax--it was established a while ago, and since then cost inflation has made the original targets unreasonable, so it has to be altered by Congress. But since doing so permanently would have a really eye-popping price tag, Congress alters it piecemeal every year. Perhaps not coincidentally, these is also an excellent opportunity for fundraising from interest groups who would otherwise take a big hit if the law were allowed to go into effect as written.

The back and forth over whether this should be included in the cost of health care has now ended; in the waning hours of the current congress, they've finally struck a deal on the "doc fix", and it is indeed part of the cost of health care reform. Literally, as my husband points out over on the Reason blog:

Democrats argued that the doc fix was a separate issue, unrelated to the new law and therefore unnecessary to include in the bill or the cost estimates. But that was pretty hard to believe: Reports indicated that Harry Reid had used the doc fix to buy support for the health care overhaul from the American Medical Association, and an early draft had included a fix. The cost proved to be too much.


And as of this week, it's even harder to buy the line that the doc fix is somehow unrelated to the new health care law: Senate leadership has reportedly reached a deal to delay the called-for cuts and pay for a one year extension of Medicare's payment rates. And they're paying for it by taking money out of the health insurance subsidies included in the health care overhaul....

He tactfully neglects to mention that his wife was one of the people arguing that the "doc fix" had nothing to do with health care reform. And I suppose you could still argue that it doesn't--after all, as I understand it, the doctors got played. They were expecting a permanent fix in exchange for their support (or at least their silence), not the same one-year fix they always get.

But as Peter notes, the health care bill used up all the normal pay-fors, which is why we've got this bizarre time-shifting deal. In order to pay more for doctor's visits next year, we're revising the subsidies that health-insurance buyers will receive in 2014. I'd argue that if you're balancing the cost of the doc fix with changes to the exchange subsidies three years hence, the doc fix should have been part of the bill.

All other issues aside, this strikes me as a pretty bad precedent. The doc fix will need to be paid for in 2012, too--shall we start siphoning funds out of the 2020 budget to pay for it?

Back to Krugman:

There’s more like that: the G.O.P. also claims that $115 billion of other health care spending should be charged to health reform, even though the budget office has tried to explain that most of this spending would have taken place even without reform.

How odd. McArdle did that as well.

Meanwhile, the CBO just came out and said that the health care reform was slated to cost $115 billion more than they said it would. Why? Because they didn't have time to calculate the effects on discretionary spending such as new administrative capacity, demonstration projects, and continuation of successful short-term initiatives. As my fiance notes, Olympia Snowe's demands to slow down the process suddenly seem a lot more reasonable.

The progressive response on this, as I understand it, is threefold:


1. We don't have to fund this stuff
2. Maybe we'll cut something else to fund this stuff
3. C'mon, who cares?

Predictably, I find none of these convincing. Some of the stuff we do have to fund, because the agencies are going to have to have staff to deal with the new requirements; and the stuff we don't have to fund is the demonstration projects that I was assured were going to bend the cost curve. So if we save this money in the first ten years, we lose the possibility of lower cost growth after the first decade.

What's really worrisome, however, is that I'm unaware of any happy surprises where it turns out this thing is going to cost less than expected. It's early days, yet, of course--but it's a little too early to take rapidly mounting cost projections in stride. We haven't done anything yet, and we're somehow already at least $100 billion in the hole.

Ezra Klein corrected her.

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.

He added a graph, evidently not realizing that using math would be a waste of time.

McArdle's response was a work of art and therefore is reproduced below. She decides--or pretends to decide--that the doc fix is a bribe, not a yearly correction of an earlier legislative error and then states that if we include the doc fix in the price of the bill we also have to include other items. To compound the error, we suppose.

Ezra, among others, points to the CBO blog follow up which says that $86 billion of the new spending consists of continuing existing levels of spending in the Bureau of Indian Affairs and assorted other agencies. In other words, just because they happened to stick this stuff in the health care reform bill, rather than somewhere else, doesn't mean we should attribute the cost to the health care bill. A number of readers have mentioned this, so I think this is worth writing more about.


It's a fair enough argument, in one way, but it seems to me that we're getting entirely too cute with what "really" constitutes a cost of the health care bill. The "doc fix", we're told, "has to happen anyway", so it shouldn't be counted--even though the permanent changes to the SGR, which are going to cost hundreds of billions, are very clearly being offered as a quid-pro quo in exchange for the American Medical Association's rather unenthusiastic support. I've defended progressives on this, on the grounds that if it's in a separate bill, well, the CBO has to score it as a separate bill.

But the corollary to this is that it's in the bill, it's a cost of the bill--even if you think the government would have gone and done this anyway at some other time. I mean, I'm happy to use the argument that we should think about previous appropriations levels, rather than what is or isn't in the bill itself . . . but then I think we have to include the doc fix as a cost of health care reform, because making it permanent is very clearly necessary to its passage, and furthermore (IMHO), would not likely be happening without PPACA--if they didn't have to buy off the doctors, they'd be doing it on a temporary basis, rather than scrambling to find the money for a permanent fix. So I don't think this logic actually improves my opinion of the bill's costs.

And even if we did throw both out, we've still got another $30 billion of unexpected spending, not two months after the bill was passed. We've got companies doing exactly what we were promised they wouldn't: exploring the option of throwing their workers into the individual markets, at great cost to the rest of us. We've got state insurance commissioners essentially commanding insurance companies to sell at a loss.

It's not that one expects the projections to be perfect. But imperfect projections are supposed to have random error--you get surprises to the upside, and surprises to the downside. All these errors run one way. Though it's too early to tell, it makes me worry that the estimates might be biased--not in the way that we commonly use the word, which implies some sort of volitional, usually explicitly political thumb on the scale, but simply in the statistical sense that the method used to do the estimates may systematically produce projections that are lower than the true value.

That wouldn't necessarily make it a bad method, either--there are reasons that we often use police counts for crimes, even though we know that many crimes go unreported; it's hard to estimate the incidence of unreported crimes, and so we use the easy-to-measure number in many contexts, even though we know it's too low. So I want to make it clear that I don't think there's anything obviously wrong with the way the CBO is doing things. It's just that the steady trickle of bad news makes me worried that there's worse to come.

Krugman:

To be sure, the Republican analysis doesn’t rely entirely on spurious attributions of cost — it also relies on using three-card monte tricks to make money disappear. Health reform, says the budget office, will increase Social Security revenues and reduce Medicare costs. But the G.O.P. analysis says that these sums don’t count, because some people have said that these savings would also extend the life of these programs’ trust funds, so counting these savings as deficit reduction would be “double-counting,” because — well, actually it doesn’t make any sense, but it sounds impressive.

Yes, McArdle did that as well.

Unfortunately, the CBO finally got around to ruling on this question, and no, this is not actually going to fix the Medicare budget problem; it's an artifact of the way the government accounting is done.

The explanation is a little complicated, and I'm not sure how many of you want to go through it, but I'll try my hand at a reasonably succinct explanation. Basically, Medicare, like Social Security, has a "trust fund" (actually, more than one), which is supposed to fund it until the trust fund is exhausted in 2019. The "trust fund" does not exist in any meaningful sense, because its "assets" consist of claims on the general fund, i.e. all the rest of the tax money. As Medicare goes into deficit, it trades in those assets to cover its funding gap, which means the general fund has to find the money to pay off the special bonds by either raising taxes, cutting other spending, or borrowing more money. After the trust fund is exhausted, the general fund has to find the money to pay for the Medicare deficit by either . . . raising taxes, cutting other spending, or borrowing more money. The difference to taxpayers is nil.

Technically, when you cut Medicare spending, that money shows up as an increase in the Medicare trust fund, rather than some other possible accounting entry. But the effect on the unified budget is the same: the money saved by cutting Medicare is spent on other stuff. Whether Medicare is "calling bonds" or "demanding money to cover its deficit", we still have to find exactly as much money to pay for Medicare as we did before. Which is a lot of money. One of the reasons the projected deficits for the rest of the decade are so big is that the cost of Medicare is outstripping the revenue raised by its payroll tax, and so we have to shovel in more and more money from the general fund.

You can dedicate that money to paying for Medicare--but then you have to introduce a corresponding future liability on the general fund, in the amount of the Medicare savings. That would mean that this bill would increase the deficit by hundreds of billions of dollars, rather than reducing it.

Whenever McArdle says "technically" or "it's a fair enough argument" you know that she realizes she doesn't have much ground to stand on.

So, is the Republican leadership unable to see through childish logical fallacies? No.

That's McArdle.

The key to understanding the G.O.P. analysis of health reform is that the party’s leaders are not, in fact, opposed to reform because they believe it will increase the deficit. Nor are they opposed because they seriously believe that it will be “job-killing” (which it won’t be). They’re against reform because it would cover the uninsured — and that’s something they just don’t want to do.

And that's McArdle.

And it’s not about the money. As I tried to explain in my last column, the modern G.O.P. has been taken over by an ideology in which the suffering of the unfortunate isn’t a proper concern of government, and alleviating that suffering at taxpayer expense is immoral, never mind how little it costs.

That's tattooed over McArdle's heart.

Given that their minds were made up from the beginning, top Republicans weren’t interested in and didn’t need any real policy analysis — in fact, they’re basically contemptuous of such analysis, something that shines through in their health care report. All they ever needed or wanted were some numbers and charts to wave at the press, fooling some people into believing that we’re having some kind of rational discussion. We aren’t.

That's McArdle in spades. Her fake libertarianism is a nothing but a trendy veneer over her conservative core. Her job is to wave around fake numbers and deliberately misinterpret charts. She is a shill for the rich. Why try to hide it? Nobody cares. The right will believe whatever they want to believe and admire McArdle all the more for getting away with lying to everyone. The left can do nothing but complain.