The Hill newspaper reported today that Speaker of the House Nancy Pelosi is already spending "leftover" money from a proposed new tax surcharge:
House Speaker Nancy Pelosi said Thursday that Democrats could use a proposed new tax on the wealthy to pay down the deficit, if there’s money left over after funding healthcare reform.
Pelosi (D-Calif.) said if more savings are found than the initial amount estimated to help offset the $1 trillion-plus healthcare plan, the tax revenues carved out to offset the bill’s cost could be funneled toward deficit reduction.
That "if" is so big that it renders the whole statement nonsensical. Far from having extra money, proponents of the health care bill have not yet shown that they can fully pay for the changes they propose. Democrats are counting on financing much of their expansion of health coverage with "savings" in existing programs such as Medicare and Medicaid. Pelosi is even more optimistic. She told reporters July 16: ""I believe all the costs of the health care reform bill can come out of squeezing costs out of the health care system." If all the cost could somehow come from "savings" then no tax increase would be required at all.
But on the same day, Congressional Budget Office director Douglas Elmendorf said in a hearing with the Senate Budget Committee that, so far, ""We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount." In other words, no "significant" savings at all.
The Congressional Budget Office calculates that, without new taxes or savings, the preliminary proposals it evaluated would add more than $1 trillion to the federal deficit over 10 years, and that’s at the low end of the cost estimates. That net cost takes into account revenues from penalties and fees that House Democrats propose as part of their program, but not from their proposed new surtax, which would fall on family incomes over $350,000 and individual incomes over $280,000. The New York Times reports that the surtax would bring in about $550 billion, barely more than half of what the CBO estimates the total cost to be. That leaves at least $450 billion to be made up, even assuming that such savings materialize. Congress members are still working on plans to further contain costs, and CBO is still working on more refined estimates based on the changing legislative language of the House proposal as it works its way through committees. But at this point, planning to spend the "excess" from the surtax amounts to selling drumsticks from your chickens before they hatch.