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An Unfolding Fiscal Disaster

The calamitous finances of Obamacare.

Jul 14, 2014, Vol. 19, No. 41 • By CHARLES BLAHOUS
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The ACA’s partisan origins have left lawmakers with vastly reduced incentives to achieve the budgetary savings required to make its finances work. Republicans, who saw the law enacted over their strenuous opposition, are unmotivated to support implementation of the ACA’s controversial tax increases, penalties, and Medicare cuts. This leaves Democrats, at both ends of Pennsylvania Avenue, with sole political ownership of these aspects of the law. 

After shaking a favorable score out of CBO in 2010 based on the assumption that the law would be enforced as written, Democrats now exhibit little motivation to follow through with its most politically radioactive savings measures. There is little reason to suppose that provisions looming on the horizon, such as the tax on so-called Cadillac health insurance plans and the decisions of the Independ-ent Payment Advisory Board, will be enforced any more diligently than others have been to date.

Much of this was predictable—indeed predicted—from the outset. After 1983’s Social Security solvency rescue, the two major parties were both invested in upholding politically painful measures such as delaying cost-of-living adjustments, imposing income taxes on benefits, and raising the retirement age. In 2010, on the other hand, a major federal spending expansion—as well as the controversial measures required to pay for it—was muscled through Congress by one party over the impassioned opposition of the other. That the finances of such a program are already proving politically untenable should surprise no one.

Charles Blahous is a senior research fellow at the Mercatus Center and a research fellow
at the Hoover Institution.

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