The Baucus Bill, as it has become known, is being touted by the Obama Administration as "deficit neutral," and even more aggressively as reducing the overall deficit. This is a bald-faced lie.
Peter Orszag, current Office of Management & Budget (OMB) Director, has put his stamp of approval (unsurprisingly) on the Baucus Senate proposal, going as far as calling it "fiscally responsible," in response to a CBO finding last week that would supposedly reduce $81 billion from the deficit over 10 years.
It isn’t, and it won't, and he knows it. Mr. Orszag's previous job was head of CBO (Congressional Budget Office), where he stated in 2008 that "The federal budget is on an unsustainable path." This was before the financial meltdown, and largest post-WWII incremental deficit spending stimulus, much less a multi-trillion dollar additional entitlement.
Devilish detail: CBO is forced to score legislation given static projections, which are almost universally false, and refrain from ruling on the overall economic veracity of those projections. As Gene Epstein notes in last Monday's Barron's,
The problem, [Douglas] Holtz-Eakin [also ex-CBO director] explained, is that when it comes to "scoring" a specific piece of proposed legislation, the CBO's hands are tied. It cannot use its discretion to question the plausibility of a proposed bill. It must, therefore, "accurately assess the legislative fantasy presented to it."
Basically, the projections are a joke.
Further, in 2008 Mr. Orszag (see above) apparently thought that Medicare physician reimbursement would increase, but now mysteriously believes the opposite, which drives the "deficit reduction" numbers conclusion:
But a big component of the new bill was that physician payment rates under Medicare continue to be cut, one of the very things CBO director Orszag had specifically dismissed as unlikely. So OMB director Orszag might have explained, in the interests of fiscal responsibility, why he had changed his mind.
Taxes must and will go up as a result of Baucus, and there will still be major dislocations and deficits as a result of the "revised" proposal. The representation of this proposed legislation to date has been excessively economically dishonest.
It would be most helpful if the media would actually do their jobs and report this.
Kudos to Gene Epstein - CBO to OMB: A Tangled Tale (Barron's, subscription required)
See also: The Baucus Bill Is a Tax Bill (Douglas Holtz-Eakin, WSJ)