According to Douglas Holtz-Eakin, director of the Congressional Budget Office from 2003 to 2005, ” By 2020, the federal deficit — the amount the government must borrow to meet its expenses — is projected to be $1.2 trillion, $900 billion of which represents interest on previous debt.  The health care legislation would only increase this crushing debt.  It is a clear indication that Congress does not realize the urgency of putting America’s fiscal house in order.”

The Real Arithmetic of Health Care Reform

On Thursday, the Congressional Budget Office reported that, if enacted, the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but because it would raise some revenues and lower some costs, it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line.

Could this really be true? How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years?

The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out.

In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.

Gimmick No. 1 is the way the bill front-loads revenues and backloads spending. That is, the taxes and fees it calls for are set to begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending.

Even worse, some costs are left out entirely. To operate the new programs over the first 10 years, future Congresses would need to vote for $114 billion in additional annual spending. But this so-called discretionary spending is excluded from the Congressional Budget Office’s tabulation.

Consider, too, the fate of the $70 billion in premiums expected to be raised in the first 10 years for the legislation’s new long-term health care insurance program. This money is counted as deficit reduction, but the benefits it is intended to finance are assumed not to materialize in the first 10 years, so they appear nowhere in the cost of the legislation.

Another vivid example of how the legislation manipulates revenues is the provision to have corporations deposit $8 billion in higher estimated tax payments in 2014, thereby meeting fiscal targets for the first five years. But since the corporations’ actual taxes would be unchanged, the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

In addition to this accounting sleight of hand, the legislation would blithely rob Peter to pay Paul. For example, it would use $53 billion in anticipated higher Social Security taxes to offset health care spending. Social Security revenues are expected to rise as employers shift from paying for health insurance to paying higher wages. But if workers have higher wages, they will also qualify for increased Social Security benefits when they retire. So the extra money raised from payroll taxes is already spoken for. (Indeed, it is unlikely to be enough to keep Social Security solvent.) It cannot be used for lowering the deficit.

A government takeover of all federally financed student loans — which obviously has nothing to do with health care — is rolled into the bill because it is expected to generate $19 billion in deficit reduction.

Finally, in perhaps the most amazing bit of unrealistic accounting, the legislation proposes to trim $463 billion from Medicare spending and use it to finance insurance subsidies. But Medicare is already bleeding red ink, and the health care bill has no reforms that would enable the program to operate more cheaply in the future. Instead, Congress is likely to continue to regularly override scheduled cuts in payments to Medicare doctors and other providers.

Removing the unrealistic annual Medicare savings ($463 billion) and the stolen annual revenues from Social Security and long-term care insurance ($123 billion), and adding in the annual spending that so far is not accounted for ($114 billion) quickly generates additional deficits of $562 billion in the first 10 years. And the nation would be on the hook for two more entitlement programs rapidly expanding as far as the eye can see.

The bottom line is that Congress would spend a lot more; steal funds from education, Social Security and long-term care to cover the gap; and promise that future Congresses will make up for it by taxing more and spending less.

The stakes could not be higher. As documented in another recent budget office analysis, the federal deficit is already expected to exceed at least $700 billion every year over the next decade, doubling the national debt to more than $20 trillion. By 2020, the federal deficit — the amount the government must borrow to meet its expenses — is projected to be $1.2 trillion, $900 billion of which represents interest on previous debt.

The health care legislation would only increase this crushing debt. It is a clear indication that Congress does not realize the urgency of putting America’s fiscal house in order.

Chairman John Raber began the discussion saying, “Regardless of what comes out, you have been professional.”  He continued relating that during visitation at the funeral home someone had yelled out at him, “Y’all had better not allow that dog park!”

After allowing dog park supporters to state what they  wanted, Raber offered dog park opponent, Clinton Crane, an opportunity to question dog park supporters.  Crane asked, “Y’all gonna build a fence if we give you a piece of property?  Y’all gonna take care of all the upkeep, so forth?  No extra work for the Park & Rec?  Who has liability?  My thing is, right now the county has not given a piece of land to a non-profit.”

This public display during a Regular Commission Meeting was unprecedented since Raber became chairman.  During all previous Regular Monthly Commission meetings, Raber has been very careful to allow only commissioners to ask questions during meetings.

Every issue mentioned by Crane had been thoroughly addressed during numerous work sessions.  Specific alternate locations within Yahoola Creek Park had been discussed during a Public Hearing and a Work Session.  The location highlighted on a map brought to the meeting by county representatives had been recommended by Commissioner Clarence Stowers.

Dog park supporter, Civil Engineer Glenn Melvin, had met with commissioners at that location to see what they thought of it.  Commissioners who actually looked at the location seemed to agree that it was too small a space for other uses.  Commissioners Scott and Raber could not find time in their busy schedules to visit any location for a dog park.

Commissioner Bill Scott admits that he just plain opposes a dog park in Yahoola Creek Park.  He accomplished a real “bait and switch” with a motion to deny the originally proposed location that he alleged was the only location before the commission.  He volunteered that alternate locations brought up at the February Work Session had been a surprise to him and he had not found time to consider any other location.

The facts are:

• Other locations had been discussed in more than one public meeting.
• The county’s own map indicated the alternate location.
• Scott refused to consider the site that actually was before the commission.

Raber appears fearful of all those folks who oppose this gift to the county, but only Clinton Crane and Bill Scott have come forth.

The gist of it is, after two work sessions and one public hearing spread out over nearly six months, Bill Scott was able to make a motion that successfully prevented any kind of positive vote for a dog park even though it would create no obligation to the county and cost the taxpayers nothing.

People love their dogs.  As Clarence Stowers said recently, “People only have children living with them for about twenty years.  The rest of their lives, they have a dog.”

The issue has awakened a lot more voters to problems within county government.  They are not going away and they won’t give up.

Gov. Sonny Perdue’s aides are taking a back-door approach to getting legislative approval of his proposal to raise cash for the budget by selling off loans made by the Georgia Environmental Facilities Authority (GEFA).

Language that would authorize GEFA to turn over its loan proceeds to the state treasury was quietly added to a House bill (HB 244) that was originally introduced last year to make a routine change to the authority’s name.

The amended bill was brought before the Senate Special Judiciary Committee on Monday, where members voted unanimously to pass the measure.

GEFA Director Phil Foil, who presented the bill to the committee, did not tell the senators that the loan amendment had been added to the measure. Sen. John Wiles (R-Marietta), the committee chairman, also did not mention the new language that had been added to the bill.

In some cases, senators did not realize what they were voting on.

Sen. Earl “Buddy” Carter (R-Savannah) was asked by a reporter on Tuesday if he was aware that he had voted to pass out a bill that authorized the GEFA transactions.

“No, I thought it was just a name change,” Carter said. “I just wasn’t aware of it.”

“The bill was presented to the committee,” Wiles said. “Ample opportunity was given to the members to ask questions. I called for the vote and the bill was affirmatively voted out of committee.”

When asked why no one bothered to mention that the bill had been substantively amended so that GEFA funds would be turned over to the state treasury, Wiles said, “you’ll have to ask the presenter (Foil).”

Wiles added: “I believe in a full, open discussion.”

Foil said that after he talked about the bill’s provision to change the name of the agency, he was asked a question by Sen. Ron Ramsey (D-Decatur) about GEFA loans.

“The assumption was that they knew what was in the bill, so I didn’t go back to it,” Foil said.

The GEFA proposal is an important part of the budget discussion at a time when the governor and the Legislature are trying to make up for large revenue shortfalls.

GEFA makes low-interest loans to city and county governments for the construction of water and sewer facilities. Perdue is proposing that a large portion of GEFA’s loan portfolio be bundled as a security and sold on Wall Street to raise cash – an estimated $288 million – for the state budget.

Local government organizations like GMA and ACCG oppose the Perdue proposal to “monetize” GEFA’s loan proceeds because it would mean there would be less money available for future loans.

In a recent debate sponsored by GMA, several Republican and Democratic candidates for governor opposed the Perdue proposal to sell off the GEFA loan portfolio. GOP candidate Nathan Deal, for example, called it “a dangerous step to take.”

GEFA cannot legally turn over its funds to the state treasury without the passage of legislation authorizing the move. Shortly before HB 244 came up for a Senate committee vote, this sentence regarding GEFA’s powers was added to the bill text: “To transfer to the state any funds of the authority determined by the authority to be in excess of those needed for its corporate purposes.”

GMA and ACCG lobbyists who attended the committee meeting did not find out until after the vote was taken that the amendment had even been added to HB 244.

“We always suspected that any GEFA vehicle out there was susceptible (to being amended),” said Todd Edwards of ACCG. “Quite frankly, I expected a more transparent effort. I’m surprised at the lack of transparency in the process.”

When HB 244 was originally introduced last year by Rep. Jimmy Pruett (R-Eastman), the bill provided only that the name of the Georgia Environment Facilities Authority would be changed slightly to the Georgia Environmental Finance Authority.

Pruett, who is one of Perdue’s House floor leaders, was not at the Senate committee meeting on Monday and he said he did not put the amended language in the bill.

“That is something I am assuming was done on behalf of the governor,” Pruett said. “The governor didn’t ask me to do it but it was requested by Phil Foil. I knew it was going to be put on there, but that’s about the extent of it.”

There was no need for the Senate Special Judiciary Committee to even vote on HB 244. The Senate has already voted this session to adopt a separate piece of legislation that makes the GEFA name change.

This is not the first time that legislation involving Perdue and large amounts of money has been handled through a surreptitious amendment to a bill in a Senate committee.

Five years ago, the House passed a bill making technical changes to the state tax code. When the bill moved to the Senate Finance Committee, it was quietly amended to give Perdue a $100,000 tax exemption on a major property acquisition he had made the year before.

Rep. Larry O’Neal, who was Perdue’s real estate lawyer, brought the bill back to the House for final adoption but did not mention the amendment that gave Perdue the large tax exemption. Perdue later signed the bill into law; the tax exemption did not become generally known to the public until 2006, when Perdue was running for reelection as governor.

© 2010 by The Georgia Report