Tuesday, March 30, 2010

Logic 101

Menzie Chinn comments on Robert Samuelson's concerns about the true budget impact of PPACA:
Here is where Mr. Samuelson dismisses the entire budgeting process in Washington:
But the CBO estimate is misleading, because it must embody the law's many unrealistic assumptions and gimmicks. Benefits are phased in "so that the first 10 years of [higher] revenue would be used to pay for only six years of spending" increases, a former CBO director, Douglas Holtz-Eakin, wrote in the New York Times on March 20. Holtz-Eakin also noted the $70 billion of premiums for a new program of long-term care that reduce present deficits but will be paid out in benefits later. Then there's the "doc fix" -- higher Medicare reimbursements under separate legislation that would cost about $200 billion over a decade.
The logical implication based upon this argument: Might as well close up CBO.
Actually the logical implication is that the CBO scoring for the health care bill is nonsense and you shouldn't make graphs like this one (JGTRRA is the second Bush tax cut and EGTRRA is the first).

The bottom line is that the CBO scoring system, like most systems, can be gamed.

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