I have asked, and the Congressional Budget Office (CBO) has answered.
I have been urging CBO to do a comprehensive estimate of all the effects of the Affordable Care Act, effectively for the first time since 2012. It did so in June. The main takeaway from CBO is “repealing the ACA would increase Gross Domestic Product (GDP) by about 0.7 percent in the 2021–2025 period, mostly because provisions of the law that are expected to reduce the supply of labor would be repealed.”
CBO concludes repeal would increase federal budget deficits. This effect is much smaller than previous estimates, because this is the first time CBO has used so-called “dynamic scoring,” taking macroeconomic effects of repeal into account, instead of just a simple static bookkeeping type of estimate.
If we exclude the effects of macroeconomic feedback—as has been done for previous estimates related to ACA—and most other CBO cost estimates, CBO and the Joint Committee on Taxation (JCT) estimate federal deficits would increase by $353 billion over the 2016–25 period if ACA is repealed.
Repeal of ACA would raise economic output mainly by boosting the supply of labor, and the resulting increase in GDP is projected to average about 0.7 percent 2021 to 2025. Those effects alone would reduce federal deficits by $216 billion over the 2016–25 period, CBO and JCT estimate, mostly because of increased federal revenues.
Repeal Would Shrink Deficits
Charles Blahousof the Mercatus Center says CBO’s conclusion is incorrect, because what it is using as “current law” to measure the effects of repeal is not actually the current law. Blahousof says federal budget deficits will actually shrink.
CBO also misreports the number of people who would become uninsured as 24 million. Actually, it would be 10 million, because CBO includes 14 million who are on Medicaid as a result of Obamacare as losing health insurance. In fact, they would lose access to a welfare program. It is wrong to count them as currently having health insurance.
CBO is not entirely to blame for these two errors. It measures things as the Congress tells it to. Nevertheless, there is one paragraph in the new estimate that is remarkable for a different reason: “Implementing a repeal of the ACA would present major challenges. In the five years since its enactment, nearly every key provision of the law has taken effect and has been incorporated into final rules and other administrative actions. Undoing the ACA would thus be quite complicated.”
Why would undoing ACA be complicated? The law and its regulations are harmful and frustrating. Suppose the government passed a law requiring us to wear cardboard tricorn hats, speak Latin on odd-numbered days of the month, and hop on one leg on even-numbered days. If that law were repealed, we would simply stop doing those things, no matter what regulations had been emitted to enforce them.
John R. Graham ([email protected]) is a senior fellow at The National Center for Policy Analysis and The Independent Institute. An earlier version of this commentary originally appeared at the websites of the National Center for Policy Analysis and the Independent Institute. Reprinted with permission.
“Budgetary and Economic Effects of Repealing the Affordable Care Act,” Congressional Budget Office and the staff of the Joint Committee on Taxation, June 2015: https://www.heartland.org/policy-documents/budgetary-and-economic-effects-repealing-affordable-care-act
Charles Blahous, “Repealing the Affordable Care Act Would Lower Federal Deficits,” Mercatus Center, George Mason University, June 22, 2015: http://mercatus.org/expert_commentary/repealing-affordable-care-act-would-lower-federal-deficits