Obama Math

by Pejman Yousefzadeh on August 10, 2009

Really, why aren’t more people making the points made by Jagadeesh Gokhale and Kent Smetters?

The Congressional Budget Office’s mid-July “score” of the main House health-care bill puts the price tag at about $1 trillion over the next decade; the Blue Dog Democrats managed to shave off only about $100 billion. But ten-year budgets, as even the CBO has warned in the past, are not reliable for assessing entitlement programs. Most of the spending in the House plan is phased in over several years, making the ten-year cost look deceptively small. Extending the budget window by just three years doubles the program’s cost to over $2 trillion.

And that’s just a start. The most comprehensive view of a program’s projected shortfall comes from calculating the present value of all of its future outlays and subtracting any new revenue sources. The House plan has a present-value shortfall of $13.6 trillion. That’s the amount of additional money that must be set aside, in today’s dollars, to put this program on a sustainable course. This estimate optimistically assumes that health-care costs will eventually grow with the general inflation rate (they’re currently growing much faster).

This enormous shortfall is equal to about 1.6 percent of all future projected GDP, or 3.5 percent of all future payrolls subject to Social Security taxes. From those numbers, this additional burden might actually seem manageable. But President Obama promised that he would raise taxes only on those in “rich” households.

That’s where the arithmetic gets especially interesting. Funding the new health-care plan on the backs of households making $200,000 or more per year would require permanently increasing their annual total tax payments by about 50 percent. So, for example, a household that currently pays $50,000 in federal income taxes would need to pay another $25,000. Remember, however, that Social Security and Medicare already face enormous shortfalls. Shoring up these programs — another Obama campaign promise — would require collecting 328 percent more tax revenue from the rich. No, we didn’t forget a decimal point: That is three hundred and twenty-eight percent.

Most households making between $200,000 and $500,000 per year would not have enough money to pay their federal, state, and local tax bills, much less eat. Rich households in California or New York would not be able to pay their tax bills regardless of their incomes. And a family of four living in a low-tax state (South Dakota) would need to gross almost $900,000 per year to have enough income left over to reach the poverty line. In fact, there is no mathematical configuration of taxes on the current rich alone — including additional levies on the “super-rich” making more than $1 million per year — that is compatible with putting the nation’s entitlement programs and the new health-care plan on a sustainable course.

While I am asking questions, why are people who put forth the kinds of arguments the Obama Administration puts forth–arguments that are bereft of any mathematical support–considered “reality-based”?

  • robspe

    Oh, Mr. Y, you know the answer to your question: because they Won! And because math is for – conservatives! Haven't you ever heard of the New Math?

  • robspe

    Oh, Mr. Y, you know the answer to your question: because they Won! And because math is for – conservatives! Haven't you ever heard of the New Math?

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