• Double counting

    Like so many before me, I’ve gone to my whiteboard to sketch the chart below.

    The bars represent two states of the federal budget of the fictional and dystopic nation of Fraktopia,* which has a social health insurance program for the elderly called “Medicare.” Fraktistan also has many uninsured citizens and runs budget deficits.

    The stacked bars on the left depict the state of the Fraktistan federal before passage of a law that reduces Medicare spending, increases revenue, and increases spending for coverage of the uninsured. The law is titled “Political Posturing and Argument Continuation Act” or PPACA for short.

    The stacked bars on the right represent the budget after passage and implementation of the law. It turns out that the combined effect of the provisions of the law are to reduce the federal deficit (the difference between revenue and total federal expenditures) and reduce Medicare spending. The non-partisan budget accounting organization, the Credible Budget Outfit (CBO) has confirmed this accounting and is the source for all my figures (chart not to scale).

    Questions:

    • Does this chart depict double counting? Why or why not?
    • How does Fraktistan’s CBO differ from the US’ CBO?
    • How does Fraktistan’s PPACA differ from the US’ PPACA?
    • What else do you like and dislike about this presentation?
    * Citizens called “Fraktals,” children “Fraktions,” national sport “Fraktal Brownian motion.”

    @afrakt

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    • It’s an issue of semantics.

      On the one hand, the chart makes clear that PPACA 1) reduced the unified budget deficit by $X, and 2) reduced Medicare spending by $Y.

      But let’s say a politician comes out to defend PPACA and says, “PPACA accomplished so much! We saved Medicare $X and cut the deficit by $Y!”. Now, her statement is strictly true, but only because one is a subset of the other.

      The broader issue here is that comparing a Trust Fund number to a unified budget number is an apples-to-oranges comparison, and it’s understandable if the general public, mercifully ignorant of the intricacies of CBO budget conventions, might think her numbers are meant to be additive rather than hierarchical.

    • Bottom line:
      Taxes HAVE to increase.
      So, there’s less spending in the private sector.
      So, taxes have to increase again.

    • One quibble with the scale of the illustration:

      PPACA (the real PPACA) increased gross federal spending over 10-years. Since CBO found that it raised more gross revenues over that period, it was scored as deficit-reducing on net.

      Point being, your “Covering Uninsured” bar should be taller, tall enough that it makes post-PPACA total spending exceed pre-PPACA total spending. You would still show smaller Medicare spending and smaller deficits, as you correctly do now.

    • If there is a problem with the presentation, it’s that the value labelled “deficit” is the deficit is the “unified budget.” That is the measure of the deficit used in rules such a Gramm-Rudman and Pay-go, because it is harder to game than the on-budget deficit, but the on-budget deficit is (in my view) more meaningful in most cases. In this particular case, which is most meaningful depends on how you intend to react if the Medicare trust fund runs out of money.

      Suppose you believe that when the Medicare trust fund runs out of money, we should institute death panels to reduce Medicare spending to match the income. Naturally, I’m not talking about panels staffed by government bureaucrats. No, deciding who should live or die is too great a decision for the government to make by itself. Instead, it should delegate the decisions to corporations who have proved their own worth to society by making large campaign contributions to Republicans. In that case, you could correctly point out that if you have your way, the changes to the Medicare won’t impact the on-budget deficit.

      Now suppose you don’t approve of death panels. Based on what other countries with comparable or better health outcomes pay for healthcare, you hope that health care system in the United States can be made more efficient, possibly sufficiently efficient that the projected depletion of the Medicare trust fund won’t happen. But if politicians who oppose efficiency improvements win and the trust fund runs out of money, you would continue to pay Medicare benefits, supplementing Medicare revenues with money from the general fund. If you have your way, the general fund is backstopping Medicare, which means that a deficit measure that includes Medicare is a better measure of the health of the general fund than the on-budget deficit.

      In short, the accusation of “double counting” is basically nonsense, but if we are charitable we can interpret it as an assertion that the unified budget deficit is the wrong measure of the deficit. If we interpret it that way, conservatives have a point, but only if you agree with them on the future of Medicare.