New Projections on Budget Gap Heighten Concerns on Reform
On Tuesday, the White House Office of Management and Budget projected that the U.S. budget deficit will reach more than $9 trillion over the next decade, giving critics of health care reform efforts new fuel to attack Democrats' large-scale proposals to expand coverage, the Washington Post reports (Montgomery, Washington Post, 8/26).
A $9 trillion deficit would represent 5.1% of the U.S. economy's estimated gross domestic product for the next 10 years, a level that is higher than what generally is considered healthy, according to the New York Times (Calmes, New York Times, 8/26).
In March, the administration projected that the deficit would reach $7.1 trillion over the coming decade. According to administration officials, the new budget outlook reflects a more realistic assessment of the severity of the recession and the prospects of a slower recovery (Washington Post, 8/26).
The Congressional Budget Office on Tuesday also released a 10-year budget projection, but unlike the OMB report, the CBO estimate is based solely on current law and does not include President Obama's policy proposals.
If current law does not change, the CBO report projects that the deficit would increase to $7.1 trillion over the next decade, up from the $4.4 trillion forecasted in March (New York Times, 8/26).
In announcing the report, CBO Director Douglas Elmendorf called the current situation "unsustainable," adding that tax revenues likely will continue to decrease while spending on government programs such as Medicare and Medicaid will continue to increase. "That fundamental disconnect will continue to widen past the 10-year window as the population ages and health care cost will continue to rise," he said (Brush/Bogardus, The Hill, 8/25).
Both CBO and OMB project that this year's budget deficit will reach $1.6 trillion, about $260 billion lower than originally forecasted (Strohm, CongressDaily, 8/25).
Projections Could Hurt Health Reform Prospects
The deficit projections could complicate efforts to pass health reform legislation, as many U.S. residents already are concerned about rising government spending (Washington Post, 8/26).
House Ways and Means Committee ranking member Dave Camp (R-Mich.) said in a statement, "If the House Democrats' unaffordable $1 trillion health care bill wasn't dead before, it should be now" (Clarke, CQ Today, 8/25).
Senate Budget Committee ranking member Judd Gregg (R-N.H.) said, "While the U.S health care system does need to be reformed, we cannot ignore the fiscal realities of our situation," adding, "We must proceed with extreme caution before putting in place a huge and costly new program that will threaten our economy and the future of our children" (New York Times, 8/26).
Supporters Say Projections Show Need for Reform
OMB Director Peter Orszag said, "I know there are going to be some who say that this report proves that we can't afford health reform. I think that has it backwards."
Orszag said, "The fiscal gap is precisely why we must enact well-designed and fiscally responsible health reform now. ... Given the long-term nature of that problem, we simply can't afford to wait" (Washington Post, 8/26).
He called Medicare and Medicaid the "key driver[s] of our long-term deficits" (New York Times, 8/26).
Responding to the estimates, Senate Finance Committee Chair Max Baucus (D-Mont.) said, "Today's budget reports serve as a clear illustration that health care spending is out of control and threatens the health care programs families rely on," adding that the "bipartisan health care legislation [members of his committee] are drafting ... will slow these growing health care costs by improving quality and making our system more efficient" (Drucker, Roll Call, 8/25).
In addition, Senate Budget Committee Chair Kent Conrad (D-N.D.) said that the deficit estimates "send a clear signal that the time for putting off tough choices is over and the time to act is now" (Bull/Sullivan, Reuters, 8/25).
Budget analyst Stan Collender of the consulting group Qorvis Communications, said, "It's fairly clear that responsibility for these numbers doesn't lie with Barack Obama but with the policies that were in place before him," yet "regardless of who's to blame, it's undeniably Barack Obama's problem now" (New York Times, 8/26).
Now is not the time "to slam fiscal policy into reverse," but "it is time to stop crying 'we inherited it,'" a Post editorial states, adding that the "Obama administration needs its own clear, credible plan for restoring fiscal sustainability once the worst of the recession has run its course."
The new deficit projections "make it even more urgent that any health care reform not only be fully paid for and certifiably budget neutral in the eyes of independent analysts such as the CBO but also promise meaningful reductions in the cost growth of health care," the editorial continues. The Post concludes, "So far, none of the plans under discussion measure up," and the "time is fast approaching for the president and Congress to face that reality, too" (Washington Post, 8/26).
American Public Media's "Marketplace" on Tuesday reported on the CBO and OMB projections. The segment included former CBO projection unit Director James Horney and former OMB Director Alice Rivlin (Dimsdale, "Marketplace," American Public Media, 8/25).Also on Tuesday, "Marketplace" host Tess Vigeland interviewed UC-Berkeley economics and law professor Alan Auerbach about the deficit projections (Vigeland, "Marketplace," American Public Media, 8/25). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.