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This is what the Congressional Budget office really said about the budgetary and economic effects of repealing the Affordable Care Act: It has no idea.
That, of course, it not what the political partisans are saying in the wake of CBO’s Friday release of a report on this exceedingly controversial topic.
Backers of the law gleefully embraced CBO’s projection that repealing the ACA would increase the federal debt by $137 billion from 2016-2025 including macroeconomic effects, or by $353 billion under traditional scoring. ACA critics, by contrast, highlighted CBO’s projection that repealing the health law would increase economic output over the period. This is proof, they said, that the ACA is a millstone around the economy’s neck.
But in reality, as CBO candidly admitted, it doesn’t really know whether repealing the ACA would increase the deficit or cut it, or boost the economy or hurt it. This is how CBO put it:
“Although CBO and JCT’s best estimate is that repealing the ACA would increase federal budget deficits by $137 billion over the 2016–2025 period…the effects…could differ, in either direction, from the central estimates…by a sum that exceeds that amount. Thus, the uncertainty is sufficiently great that repealing the ACA could in fact reduce deficits over that period—or could increase deficits by a substantially larger margin than the agencies have estimated.”
CBO’s computer may have spit out a precise forecast—models do that. But never confuse precision with accuracy. And when the modelers are not even confident in the sign of the change, they are in pretty deep water.
I’m not suggesting that the CBO forecast is useless. Despite its uncertainties, it still provides important guidance for policymakers and analysts. But when you hear a lawmaker tout a precise estimate to make a political point, caveat emptor. Especially with a complex law like the ACA.
Let’s be fair: CBO did the best it could to respond to an unanswerable question put by Senate Budget Committee Chair Mike Enzi (R-WY). Imagine your boss demanding you predict the winner of the 2020 World Series and, btw, the final score of the final game.
Projecting ACA repeal isn’t much easier. The ACA is a sprawling, complicated law that directly affects one-sixth of the economy. Some provisions are fairly easy to model. For instance, without the law the government will spend less on insurance subsidies and Medicaid payments. And it will no longer receive revenue from the ACA’s tax increases, such as the additional tax on investment income or the Cadillac tax on costly employer insurance policies.
But after that, matters get mind-numbingly complicated. To take just one critical variable: Since the ACA passed, health care cost growth has slowed. Does the ACA get credit? How much? And will the trend continue, with or without the law?
Another one: What is the impact of the ACA on labor markets? CBO assumed that easily available and cheaper insurance will discourage some people from working, or at least encourage them to work fewer hours. That assumption is a key driver in its prediction that repealing the law would encourage work, and in turn, economic growth. But has the ACA actually discouraged work? By how much?
For all its uncertainty, CBO makes three key points that are worth remembering:
Repealing the ACA is not the mirror image of creating the ACA. It is not possible to pile into the way-back machine and return to the world prior to 2010.
Repealing the law is unlikely to boost economic growth for at least five years, making those predictions even more speculative.
Whatever else it does, repealing the ACA (without a credible replacement) would increase the number of uninsured by about 28 million, thus reducing the share of non-elderly with insurance from 90 percent to 82 percent.
New CBO director Keith Hall is in a box. When the Budget Committee chair asks you for a score, you give it to him with the precision Congress demands. Then you explain why your projection is so uncertain, fully confident that lawmakers will entirely ignore the warning.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.