The US Budget Watch Blog

Yesterday Majority Leader Harry Reid introduced the Patient Protection and Affordable Care Act. The bill reduces the deficit by $130 billion over ten years, and spends $848 billion in coverage expansion.

We have broken down the costs and savings of the bill, compared to other versions, below.

The bill spends a bit more than the Senate Finance Committee bill last month, but significantly less than the planned costs of the Senate HELP Committee bill. On tax policy, the new bill reduces the excise tax on high cost plans, relative to the Finance bill, so that it raises around $50 billion less than it did in the Finance Committee version. This revenue loss is replaced with an increase on the Medicare payroll tax for high earners.

CRFB has updated its health care chart, comparing the ten-year costs of the most recent legislation passed by the House and the bill introduced by Senator Reid in the Senate yesterday. To compare the most recent Senate bills with the previous HELP and Finance Committee bills, click here.

Information about the Senate health care bill is trickling in -- word is that coverage provisions will cost $849 billion over ten years and the bill will reduce the deficit by $127 billion. The Joint Committee on taxation has also released its analysis of the bill's $370 billion in taxes.

Compared to the Senate Finance bill, this bill would reduce the tax on high-cost insurance plans so it raises around $150 billion instead of $200 billion, and make up the difference with an increase in the Medicare payroll tax for high earners. At least from a fiscal perspective, this is a big mistake.

We've discussed, before, all of the advantages of an excise tax on high cost plans. For one, since the tax is on health insurance, it grows as fast or faster than health care costs, and therefore makes it a sustainable revenue source.

Breaking news: Senate Majority Leader Harry Reid is finally in the midst of unveiling the health care reform plan that will be brought to the Senate Floor (if he can overcome a filibuster). Preliminary reports show that this this bill will have a greater budgetary impact than the House bill, reducing the deficit by $127 billion over ten years as opposed to $109 billion. The total cost of expanding coverage in this bill is reported to cost $849 billion over ten years.

The bill is also expected to reduce the uninsured by 31 million, and will reduce the deficit by around $650 billion, which we estimate to be around 0.25% of GDP in the second ten years.

CRFB will be reporting more information at The Bottom Line as it comes in, and updating all of our charts with new numbers.

Today, a Wall Street Journal editorial discussed Senator John Thune’s introduction yesterday of a bill that would prevent Treasury Secretary Timothy Geithner from extending TARP. The bill would prevent the Treasury from making any new loans, equity purchases, or transfers to financial institutions, but would not affect the $386 billion in outstanding investments.

TARP is scheduled to expire on December, 31, 2009, although it can be renewed by the Treasury Secretary through October 3, 2010 upon submission of a written request to Congress.

According to the editorial, Secretary Geithner refuses to rule out renewing TARP, just as Senator Thune has been slowly picking up Democratic support. A Financial Times article has even reported that the Treasury is eager to extend TARP.

Government agencies misspent over $98 billion last year, $26 billion more than was wasted the previous year, the Associated Press reports. MedicThe White House attributes the increase in wasted money to a stricter interpretation of “improper payments” as well as greater levels of spending during the economic downturn. Yesterday, White House OMB Director Peter Orszag said:

“We need to protect taxpayer dollars because every dollar that goes to the wrong recipient or in the wrong amount is a dollar that is not available to help an unemployed worker or invest in education or other key priorities the administration has.”

Medicare and tax credits were the main sources of waste. Here is a list of the agencies and programs that misspent the most money, according to a breakdown posted by The Hill.

This week, the gross national debt hit a record $12.031 trillion. Gross debt is a broad measure which includes both debt held by the public (currently at $7.6 trillion), and intergovernmental holdings which the government owes to itself through various trust funds -- chiefly Social Security. Although similar, this measure is slighlty different from debt subject to the limit, which currently stands at $11.975 trillion. Some time next month, that number is likely to exceed the current statutory debt limit of $12.104 trillion, requiring it to be raised in order to avoid a debt crisis.

The debt has risen precipitously over the last year, as lower revenue due to the recession has combined with significant new spending on stimulus and financial rescue efforts.

Early this week, General Motors stated that while it is still experiencing losses, it has stabilized itself enough so that the company can begin returning some of the $50 billion in assistance the federal government has provided since late December 2008. Even though GM reported a $1.2 billion loss in the third quarter, its balance sheet, cash reserves, and production levels have improved.

A New York Times article reported today that GM’s CEO Fritz Henderson said the company is in a position to begin paying back government loans next month, and could potentially return $6.7 billion to the federal government by June. However, Henderson declined to predict when the company would become profitable again. Some industry observers have stated that paying back government loans does not mean a full return to health for GM, noting that paybacks will include government-provided rainy day funds that were not be needed.

At the moment, GM has $42.6 billion in cash and securities, including $17.4 billion in assistance from the U.S. and Canadian governments.

Several executives from General Electric and Bank of America Merrill Lynch said early this week in a BofA Merrill Lynch webcast that they see Congress approving a second stimulus bill sometime next year. They argued that governments and emerging markets will lead a global economic recovery.

One BofA Merrill Lynch executive predicted a second stimulus based on the need of both political parties to show some improvements in employment when heading into the 2010 midterm elections. GE CEO Jeffrey Immelt said that a second stimulus should address U.S. excess industrial capacity and job loss.

Because of our country's already large and growing debt, CRFB urges that any consideration of a second stimulus should rely solely on careful economic analysis and not on political considerations.

On Friday, the Centers for Medicare & Medicaid Services (CMS) released a report estimating the effects of the House health care reform bill. Looking only at the spending side of the ledger, they estimate both greater costs and greater savings than does CBO -- netting to roughly $60 billion less overall. We have compiled the differences here, but it is important to note that CBO and CMS work off of different Medicare baselines, meaning that greater savings need not mean lower overall federal spending.