The first major piece of legislation passed by the new Republican House of Representatives was the repeal of Obamacare.  H.R. 2, appropriately titled Repealing the Job-Killing Health Care Law Act, passed the House overwhelmingly last month only to be delayed over and over again by Harry Reid, before finally failing to get past the 60 votes necessary to overcome a filibuster earlier this month.


Senator Reid, in a brazen act to avoid having his compatriots take a stand and vote up or down, on the record, as to how they stand on Obamacare, utlizied a procedural method to squash the Republican’s opportunity to vote on the House’s actions.  I can’t for the life of me understand how any politician can hide from the American people rather than to stand up and be counted.  If you believe in something you should be willing to sign your name to it.  It seems like the epitome of cowardice to skip out on their responsibilities so they can go home and say they didn’t vote against repeal, they only voted against voting on the repeal.  This is one reason I have very little respect for career politicians.


But that’s not the subject of this posting.


While the Senate was playing their games, the House law was submitted to the non-partisan Congressional Budget Office (CBO) to be scored.  That’s Washington speak for how much this is going to cost or save us.  Here’s a paragraph from the letter the CBO sent back to Speaker of the House Boehner:


The enacted legislation contained a set of provisions designed to
expand health insurance coverage that was estimated to increase
federal deficits. The costs of those coverage expansions—which
include the cost of the subsidies to be provided through the
exchanges, increased outlays for Medicaid and the Children’s Health
Insurance Program (CHIP), and tax credits for certain small
employers—will be partially offset by revenues from the excise tax
on high-premium insurance plans and net savings from other
coverage-related effects. By repealing those coverage provisions of
PPACA and the Reconciliation Act, over the 2012-2021 period
H.R. 2 would yield gross savings of $1,390 billion and net savings
(after accounting for the offsets just mentioned) of $1,042 billion.


What they’re telling us, is that repeal of Obamacare means the federal government would spend more than a trillion fewer dollars over the next 10 years.  But how can that be?  We’re we just being told that Obamacare would result in a net savings of $124 billion dollars when CBO scored the bill last March?  Yes and no.  It’s the difference between the deficit and the debt.  If you don’t understand the difference, I’ll explain it, if you do you can skip the next paragraph.


The deficit is a measure of the shortfall between what revenue comes in and what revenue goes out.   The debt, on the other hand, is a measure of what we owe.  When the deficit grows, usually the debt grows.  For example: say I have 1 trillion dollars in tax revenue, but I spend 1.3 trillion.  Where does the .3 trillion, or 300 billion, dollars come from?  Well, it can come from a number of sources.  You can borrow it from another source, say the Chinese, in the form of bonds, also known as t-bills.  Kind of like the old savings bonds you might have been given as a child.  You buy them for less than face value, they increase in value the longer you hold them, and eventually they mature to face value.  Or you can trade them.  Virtually every country’s currency is traded, included bonds, which effects the value of both the currency and the country’s debt.  So if I sell $600 billion in T-bills, you might immediately receive 300 billion dollars, but you’ve effectively increased the debt, over time, by $600 billion.  The ins and outs of currency and debt trading can get very complicated.  Suffice it to say, if you’re in government, you find someone else to pay for your excesses.  Measured over the course of 10 years, as budgeters in Washington will do, your shortfall in revenues each year add up, but the true cost to the debt has to do with a lot of other issues that can take years to measure.  A shortfall, or deficit of $3 trillion over 10 years, could result in an increase in the debt of $3.6 trillion, or more.  And then there’s the interest load, which, in itself, adds to the deficit and debt.  Head hurt yet?  The simple answer is deficit is shortfall and debt is what you owe.


So what the CBO was telling us last March, was they were projecting that if every part of Obamacare were implemented, at the quoted cost (and you have a better chance of hitting the lottery 3 weeks in a row,) that the debt would be reduced by $124 billion.  Today the CBO told us that repeal would reduce the deficit by $1.042 trillion.  It didn’t say it would reduce the debt.  In fact they stated it would increase the debt.  Why?  When you state you’re repealing a law they scored, not changing nor amending, they operate with all the same projections handed to them by Congress last March.  You know, the ones we all know were false.


Instead I’ll offer up a little common sense.  I’ll ignore debt projections in favor of a clear explanation.  I was planning on making car payments of $100 every month for the next 10 years.  I only can afford to pay $50 each month.  Over the course of the next 10 years or 120 months, I’m going to run a $6,000 deficit.  Being a responsible person, I sell the car, go out and buy a car that costs $50 per month.  I’ve just erased the shortfall, effectively reducing my personal deficit by $6,000.  Did I actually save any money?  No.  I didn’t have it to save.  But had I had to borrow that $6,000 from a family member, at the end of 10 years I’d have a $6,000 debt.  That should be clear enough.  Don’t spend what you don’t have.  And what the CBO told us today was that repealing Obamacare stops the government from spending a trillion dollars it doesn’t have.