Projections

I was reading about President-elect Barack Obama's healthcare reform proposal tonight in a book called "Obamanomics." Found a very interesting passage about his plans to pay for universal coverage that sheds light on the idea of predicting the fiscal impact of most policy changes. I've marked portions of the paragraph and provided my thoughts below. All the numbers in parentheses and the italics were added by me:

"Obama expects that the (1)premiums paid by most Americans will decline and subsidies will be offered to more moderate-income people to allow them to buy into the plan. Of course, this is not all free. Obama's team estimates it should cost approximately (2)$100 billion a year. Obama does not intend to raise average Americans' taxes to pay for the plan, but rather intends to fund the plan from the government savings he expects we will get by pulling our troops out of Iraq and (3)ending the war, from the tax increase he proposes for (4)Americans earning over $250,000 per year, and from the money he raises by instituting a (5)carbon tax on carbon dioxide emissions. In addition, Obama will mandate that employers who are not currently paying for quality healthcare coverage for their employees will (6)have to contribute a percentage of their payroll costs to the plan."

(1) Really? With his plan to mandate no exclusions for pre-existing conditions, this claim is false by definition.

(2) Totally made up number. Like every other new government program, this probably understates the true cost dramatically.

(3) Ending which war? When? How? Might be interesting to see what the terrorists say about this one.

(4) This one already bit the dust.

(5) Significantly dumber and larger than Kentucky's cigarette tax increase but analogous in the sense that the stated purpose of the tax is for it to go to zero, but the dependence on the revenue will only grow.

(6) Swing-district Democrats probably will have to oppose this as it will be clearly seen as a heavy, new, widespread tax increase.

Making precise projections for the cost of starting a new program is a sure way to be proven wildly inaccurate by things that can't be predicted. Same goes for cutting programs. Might make for interesting conversation at cocktail parties, but the best you can really hope to do is get the direction of revenues and expenditures right.

And the bottom line is that the federal government and our state government are buying more government than they can afford. The only answer is to start deciding which programs we can live without and make plans to eliminate -- or at least shrink -- them.