The ACA’s insurance coverage provisions do indeed add to the budget deficit. It then attempts to “pay for” these through a combination of new taxes, fees, spending cuts and cost-reductions. (Related: Ryan Wants to Save Medicare for His Mom)
I think it is fair enough to argue that increased expenditures paid for by new taxes and fees are the equivalent of deficit increases. But to understand why that is the case, you have to understand the reason people worry about the deficit in the first place.
The primary critique of budget deficits is that they create debt obligations that will have to be paid for by tax increases on future generations. But the ACA creates new government obligations and pays for them (in part) with tax increases immediately. That is just debt in fast-forward. It inflicts immediately the very harm—higher taxes—that deficit-spending supposedly inflicts in the future.
In other words, the problem with deficit spending is not the “deficit” part but the “spending” part. When the government pays for its spending through taxes, the private sector’s loss is immediate. Government reduces the financial resources available to the private sector and directs them toward its goals. The goals of the private sector are left unmet so that the goals of the politicians can be accomplished. When the government pays for its programs through debt, the private sector’s loss is deferred until the government decides to collect higher taxes in the future to repay the debt (which, to be frank, may never, ever happen). (Related: Why Caution on Foreclosures May Cost Obama the Election)
When Obama promised that the ACA would not add to the deficit, many Americans likely thought this meant that future generations would not labor under a greater burden to pay for government programs under his plan. They believed that the “savings” in the plan—cost reductions through greater efficiencies in the delivery of health care—would “pay for” added expenditures. In short, they thought being “deficit neutral” meant not creating additional burdens on present and future generations. (Related: 5 Reasons Ayn Rand Is Bad for Business.)
Ferguson was pointing out that this isn’t true. Thanks to the ACA, the American people will pay substantially more in taxes to the government. It inflicts exactly what people fear about deficit spending—only it does it right away.
- by CNBC.com senior editor John Carney
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