Former Bush economic advisor Greg Mankiw writes:
I have a plan to reduce the budget deficit. The essence of the plan is the federal government writing me a check for $1 billion. The plan will be financed by $3 billion of tax increases. According to my back-of-the envelope calculations, giving me that $1 billion will reduce the budget deficit by $2 billion.
Now, you may be tempted to say that giving me that $1 billion will not really reduce the budget deficit. Rather, you might say, it is the tax increases, which have nothing to do with my handout, that are reducing the budget deficit. But if you are tempted by that kind of sloppy thinking, you have not been following the debate over healthcare reform.
Ezra Klein takes him apart with unusual acidity.
Puzzling over the conservative objections to the notion that the Affordable Care Act reduces the deficit, it seems to me there is a common thread. Conservatives think the notion that a piece of legislation can spend some money to cover the uninsured, while simultaneously cutting spending and raising taxes by some greater sum, so that the overall bill reduces the deficit, is conceptually absurd. Now, they wouldn't put it like that. Often times their objections take the form of specific, though demonstrably wrongheaded, critiques of the CBO's methodology. But the root of the issue is that they think the idea that you can create a new entitlement while reducing the deficit is inherently ridiculous.