Obamacare to cost at least $1 trillion over next 10 years

Rick Moran
That $1 trillion is a number the Congressional Budget Office is looking at right now. Estimates by others have used $1 trillion as a starting point and go up to $1.5 trillion.

Please recall that our president "budgeted" only $637 billion for health insurance. But that number presupposes that almost everyone who is not now insured will buy the subsidized package. The only way to realize the $2 trillion in savings Obama needs to make the plan work is for nearly everyone to be on board.

But the CBO says that's a crock as The New Republic' s Jonathan Cohn points out in his exclusive look at the early CBO estimates:

So what does CBO think this time around? Late last month, after weeks of working overtime to keep up with the huge domestic agenda, CBO began delivering some prelimiary estimates on health reform. According to several sources familiar with the estimates, it's something of a good news/bad news story: 

The good news for reformers is the CBO's determination that expanding health-insurance coverage would cost a lot less than many outside experts had predicted. Instead of a politically daunting $1.5 trillion, the CBO figures the price tag will be closer to $1 trillion, at least under certain parameters. But the reason for the lower estimate is a bit unsettling. Even with a requirement that everybody obtain insurance--a so-called individual mandate--the CBO assumes a that between a quarter and a third of the uninsured still wouldn't have coverage. That would leave the country short of universal coverage, the goal Obama and his allies have repeatedly cited.

What Cohn doesn't mention is that the reason Obama needs almost everyone on board his health insurance boondoggle is that the uninsured are one of the major reasons for skyrocketing health care costs. No one knows the true number of uninsured in the country. The Democrats like to throw around the number 40 million but that is too high by almost a factor of 4. Many of those 40 million are between jobs and will get health insurance when they are employed again. A more cautious estimate of the uninsured is perhaps 17 million - most of them young and single.

The more uninsured, the higher the cost of health care. The higher health care costs will mean a larger subsidy for health insurance. This is exactly what they are finding in Massachusetts where the state subsidy has gone up to the point even Deval Patrick says the increases are "unsustainable."

The estimate of $9.3 trillion in deficits the budget will run over the next decade has to be increased - perhaps by as much as $800 billion. Here's Robert Samuelson writing in Investor's Business Daily:

It's true that since 1961 the federal budget has run deficits in all but five years. But the resulting government debt has consistently remained below 50% of GDP; that's the equivalent of a household with $100,000 of income having a $50,000 debt. Adverse economic effects, if any, were modest.

(Note: Deficits are the annual gap between government's spending and its tax revenues. The debt is the total borrowing caused by past deficits.)

But Obama's massive, future deficits would break this pattern and become more threatening. At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending - or create bigger, unsustainable deficits.

By CBO's estimates, interest on the debt as a share of federal spending will double between 2008 and 2019, from 8% of the total to 16%. Huge budget deficits could also weaken economic growth by "crowding out" private investment.

At worst, the burgeoning debt could trigger a future financial crisis. The danger is that "we won't be able to sell it (Treasury debt) at reasonable interest rates," says economist Rudy Penner, head of the CBO from 1983 to 1987. In today's anxious climate, this hasn't happened.

At risk in this fiscal crisis is spending on national defense. At a time when our military must reassess its priorities due to the changing nature of enemy threats, it is likely we will be hamstrung by the massive deficits. Since most experts believe we have to increase the size of the army, Marines, and Special Forces, it is difficult to see where the money will come from - especially since cutting entitlements is off the table with Democrats in charge.

More likely, Obama will take a meat cleaver to our defense budget, cutting modernization and perhaps even cutting benefits to defense personnel. There are several vital programs that will likely see the ax, including the F-22 fighter and a drastic cutback in the number of next generation destroyers for the navy.

Samuelson guesses that the reason that few are speaking out about these catastrophic deficits and piling up of a massive amount of debt is the severity of the recession. But given the stratospheric budget deficits being run by Obama, any recovery will be stillborn as interest rates will have to be raised significantly to entice people to purchase Treasuries in order to fund the debt while inflation is likely to take hold as the trillions in bail out monies dumped into the economy by the Fed means too many dollars will be chasing too few goods and services.

Even a Keynesian can understand those basic economic principles.

We are in for a very rough ride for the next several years. It will take someone with courage and leadership ability to call for making tough choices. Obama has said time and time again that such choices are "false," that we can have it all by only raising taxes on the rich.

When that chicken comes home to roost, it will probably be too late to stop the disaster from occurring.

Hat Tip: Ed Lasky



That $1 trillion is a number the Congressional Budget Office is looking at right now. Estimates by others have used $1 trillion as a starting point and go up to $1.5 trillion.

Please recall that our president "budgeted" only $637 billion for health insurance. But that number presupposes that almost everyone who is not now insured will buy the subsidized package. The only way to realize the $2 trillion in savings Obama needs to make the plan work is for nearly everyone to be on board.

But the CBO says that's a crock as The New Republic' s Jonathan Cohn points out in his exclusive look at the early CBO estimates:

So what does CBO think this time around? Late last month, after weeks of working overtime to keep up with the huge domestic agenda, CBO began delivering some prelimiary estimates on health reform. According to several sources familiar with the estimates, it's something of a good news/bad news story: 

The good news for reformers is the CBO's determination that expanding health-insurance coverage would cost a lot less than many outside experts had predicted. Instead of a politically daunting $1.5 trillion, the CBO figures the price tag will be closer to $1 trillion, at least under certain parameters. But the reason for the lower estimate is a bit unsettling. Even with a requirement that everybody obtain insurance--a so-called individual mandate--the CBO assumes a that between a quarter and a third of the uninsured still wouldn't have coverage. That would leave the country short of universal coverage, the goal Obama and his allies have repeatedly cited.

What Cohn doesn't mention is that the reason Obama needs almost everyone on board his health insurance boondoggle is that the uninsured are one of the major reasons for skyrocketing health care costs. No one knows the true number of uninsured in the country. The Democrats like to throw around the number 40 million but that is too high by almost a factor of 4. Many of those 40 million are between jobs and will get health insurance when they are employed again. A more cautious estimate of the uninsured is perhaps 17 million - most of them young and single.

The more uninsured, the higher the cost of health care. The higher health care costs will mean a larger subsidy for health insurance. This is exactly what they are finding in Massachusetts where the state subsidy has gone up to the point even Deval Patrick says the increases are "unsustainable."

The estimate of $9.3 trillion in deficits the budget will run over the next decade has to be increased - perhaps by as much as $800 billion. Here's Robert Samuelson writing in Investor's Business Daily:

It's true that since 1961 the federal budget has run deficits in all but five years. But the resulting government debt has consistently remained below 50% of GDP; that's the equivalent of a household with $100,000 of income having a $50,000 debt. Adverse economic effects, if any, were modest.

(Note: Deficits are the annual gap between government's spending and its tax revenues. The debt is the total borrowing caused by past deficits.)

But Obama's massive, future deficits would break this pattern and become more threatening. At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending - or create bigger, unsustainable deficits.

By CBO's estimates, interest on the debt as a share of federal spending will double between 2008 and 2019, from 8% of the total to 16%. Huge budget deficits could also weaken economic growth by "crowding out" private investment.

At worst, the burgeoning debt could trigger a future financial crisis. The danger is that "we won't be able to sell it (Treasury debt) at reasonable interest rates," says economist Rudy Penner, head of the CBO from 1983 to 1987. In today's anxious climate, this hasn't happened.

At risk in this fiscal crisis is spending on national defense. At a time when our military must reassess its priorities due to the changing nature of enemy threats, it is likely we will be hamstrung by the massive deficits. Since most experts believe we have to increase the size of the army, Marines, and Special Forces, it is difficult to see where the money will come from - especially since cutting entitlements is off the table with Democrats in charge.

More likely, Obama will take a meat cleaver to our defense budget, cutting modernization and perhaps even cutting benefits to defense personnel. There are several vital programs that will likely see the ax, including the F-22 fighter and a drastic cutback in the number of next generation destroyers for the navy.

Samuelson guesses that the reason that few are speaking out about these catastrophic deficits and piling up of a massive amount of debt is the severity of the recession. But given the stratospheric budget deficits being run by Obama, any recovery will be stillborn as interest rates will have to be raised significantly to entice people to purchase Treasuries in order to fund the debt while inflation is likely to take hold as the trillions in bail out monies dumped into the economy by the Fed means too many dollars will be chasing too few goods and services.

Even a Keynesian can understand those basic economic principles.

We are in for a very rough ride for the next several years. It will take someone with courage and leadership ability to call for making tough choices. Obama has said time and time again that such choices are "false," that we can have it all by only raising taxes on the rich.

When that chicken comes home to roost, it will probably be too late to stop the disaster from occurring.

Hat Tip: Ed Lasky