For almost two years now, the left and right have been engaged in the same basic battle over the fiscal impact of health care legislation. Supporters of the law tout Congressional Budget Office estimates showing the legislation will reduce the deficit, while opponents counter that the agency's estimates are based on a law that was filled with accounting gimmicks that obscured its true price tag. But one thing that is sometimes lost in this debate is the significant opportunity costs involved in passing ObamaCare. That is, the money that Democrats raised through tax hikes and Medicare cuts is slated to be used to pay for a new entitlement program instead of to fix problems with existing entitlements.
According to the most recent CBO estimates (PDF), the health care law would raise taxes by $813 billion and reduce spending (mostly on Medicare) by $732 billion in the 10-year period between 2012 and 2021. That $1.5 trillion-plus could have been used to extend the solvency of Medicare and Social Security, but instead, under current law, will be used to finance subsidies for individuals to buy insurance on the new insurance exchanges, add 17 million people to the Medicaid rolls, and finance the other ObamaCare initiatives. The gross cost of the coverage expansions is now projected to be $1.4 trillion, which doesn't even take into account full implementation.
This isn't a theoretical argument. Back during the campaign, Obama proposed raising the payroll tax on higher income earners to help extend the solvency of Social Security. Yet he passed a similar tax to help raise money for the health care legislation. As passed, the law will hike the payroll tax by .9 percent on income over $200,000 and impose an additional 3.8 percent capital gains tax on top of it. Now Obama has no plan to stabilize the program's finances as Baby Boomer's are starting to retire.
Today, Reason's Peter Suderman notes another example of the opportunity costs of ObamaCare -- the so-called "doc fix." Read Suderman for more details, but in short, it will cost $380 billion over ten-years to avoid scheduled cuts to physicians payments under Medicare, and it isn't easy to figure out a way to pay for this spending. I wonder why.