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This Is What Fiscal Responsibility Looks Like

Just now at the White House press briefing, a reporter (I couldn't tell who) pressed spokesman Robert Gibbs about how the administration could be confident of cost savings, given that the Congressional Budget Office itself admits projections deep into the future contain enormous uncertainty. I'm sure reform critics will be making the same argument in the next few days, and that it will reinforce doubts many Americans already harbor.

So let's be clear about why this is wrong.

No, these projections are not a precise science. Yes, the CBO itself notes that projections for the second decade of implementation--that is, 2020 through 2029--have an unusually high margin of error. But the CBO's final judgment takes that uncertainty into account.

Remember, when the CBO makes a projection for how much a program will cost over time, it isn't just spitting out a single number. It's giving a range of numbers. It's typically the midpoint that you hear about, but there's always a chance that the number will be higher or lower, by a certain interval. And, in order to play it safe, CBO decided it would judge health care reform based on the worst possible estimate within that interval.

So suppose, just to use some hypothetical numbers, the CBO ran the numbers and determined that the Democrats' bill would probably save $1 trillion over ten years, but that the range of possible estimates was between saving $2.25 trillion and losing $250 billion. I'd say that's pretty good odds: It's far more likely you'll save money and the possible savings are far bigger than the possible increase in the deficit. 

CBO would have disagreed. If there's a statistically significant chance that the bill would cost $250 billion, they would have said they can't declare that the bill won't inflate the deficit. The only way to get CBO approval would have been to modify the bill, so that the CBO determined it was likely to save $1.25 trillion but determined even the worst-case, most pessimistic scenario wouldn't drive up the deficit.

I know quite a few economists who think that standard was simply too tough. The Democrats could have argued they didn't need to meet that requirement and they would have had a pretty legitimate case. It would created room to provide more generous subsidies or more financial assistance for people buying insurance--which I, for one, would have appreciated. Or it would have allowed Democrats to ease up on the benefits tax that is generally unpopular, particularly with unions.

But the Democrats didn't do that. Instead, they constructed a bill that, even in the worst-case scenario, CBO thinks would not raise the defict. It's not an ironclad guarantee, but it's as close as you can come.

And if that's not fiscal responsibility, I don't know what is.

Update: I read over the first draft of this posting, decided I had written something utterly incomprehensible, and revised it. Hopefully it's more clear now.