Tuesday, September 22, 2009

Can we deal with this problem first? - As Obama tries to create a whole new entitlement for America, he's yet to deal with the old one. From Hot Air: "CBO predicts Social Security cash deficits in 2010-2011."

Extra - Ace: "What a perfect time to expand goverment spending to levels hitherto undreamed by man."

1 comment:

Anonymous said...

http://www.nytimes.com/2009/08/26/opinion/26gabel.html?_r=1&pagewanted=all

FOR competence and integrity, few organizations command more respect in Washington than the nonpartisan Congressional Budget Office... But when it comes to forecasting the costs of reform, the budget office’s record is suspect. In each of the past three decades, when assessing major changes in Medicare, it has substantially underestimated the savings the changes would bring...

The Congressional Budget Office predicted that, from 1983 to 1986, this change would slow Medicare hospital spending (which had been rising much faster than the rate of inflation) by $10 billion, and that by 1986 total spending would be $60 billion. Actual spending in 1986 was $49 billion. The savings in 1986 alone were as much as three years of estimated savings...

the Congressional Budget Office forecast that, from 1998 to 2002, the act would reduce Medicare spending by $112 billion — a 9.1 percent reduction... The actual savings turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast. Overall spending increased just 1.2 percent from 1998 to 2000, rather than 5.6 percent, as was projected...

In the current decade, the major legislative change to the system was the Medicare Modernization Act of 2003, which added a prescription drug benefit. In assessing how much this new program would cost, the Congressional Budget Office assumed that prices would rise as patients demanded more drugs, and estimated that spending on the drug benefit would be $206 billion.

Actual spending was nearly 40 percent less than that. Spending on drugs declined from fiscal year 2007 to 2008. Seniors proved more willing to buy lower-cost generic drugs than expected, fewer people participated in the program than expected, and competition held premiums down. Few new blockbuster drugs came on the market, so overall drug prices remained relatively constant, rather than accelerating as predicted.

The Congressional Budget Office’s consistent forecasting errors arose not from any partisan bias, but from its methods of projection. In analyzing initiatives meant to save money, it helps to be able to refer to similar initiatives in the past that saved money. When there aren’t enough good historical examples to go by, the estimated savings based on past experience is essentially considered to be unknown. Too often, “unknown” becomes zero — even though zero is not a logical estimate.

The budget office has particular difficulty estimating savings when it considers more than one change at once...

The Congressional Budget Office’s integrity is beyond questioning. But the record shows that it has substantially overestimated the cost of health care reform three times out of three.