CBO

Insecurity Separates Middle Class from Romney, Ryan

Leo Gerard — Tue, 28 Aug 2012 11:28:09 -0400

The rich, those born sucking silver spoons like Mitt Romney and Paul Ryan, really are different from the middle class. The wealthy grow up and live their lives wrapped in security. That’s what gives them the arrogance to organize a posse to hold down a fellow prep school student and chop off his hair, mock NASCAR fans’ clothes and ridicule cookies offered by supporters. No matter what, Romney and Ryan will remain rich and secure.

By contrast, those born into poverty or the middle class live lives nagged by insecurity. They know their jobs could be off-shored at any moment. They know their employers may raid their pensions in bankruptcy. Their major asset in life, their home, may have lost a third of its value when the Wall Street-inflated housing bubble burst. Rich would be great, but those born without trust funds work hardest just to attain a little security.

Last week, the Pew Research Center issued a report detailing how insecurity has increased for the middle class since 2000. The non-partisan Congressional Budget Office (CBO) published a report predicting increased insecurity for the middle class if Congress takes no action on taxes and budget cuts within the next four months. A third report released last week, called Prosperity Economics, describes how to revive the economy and broaden security.

A true democratic republic, where the majority rules, would reverse the past decade’s trend against the middle class, forestall the CBO prediction, and increase security for the masses. The silver spooners seeking the Oval Office have given no indication, however, that they intend to ease the uncertainty of the plastic spooners.

The Pew Research Center looked at how the middle class fared since 2000. In a word, it’s badly. This is what Pew called its findings: “The Lost Decade of the Middle Class: Fewer, Poorer, Gloomier.” Here’s how the center sums it up:

“Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some – but by no means all – of its characteristic faith in the future.”

Over the past 40 years, the percentage of adults in the middle class shrank from 61 to 51. Also, the rich seized a greater portion of the nation’s household income. Their cut rose from 29 percent to 46. Almost all of that came from the middle class, whose share fell from 62 percent to 45.

Similarly, the middle class suffered a 28 percent drop in wealth over the past decade, much of that in housing value.

The losses intensified middle-class insecurity. Those interviewed by the Pew researchers expressed pessimism. For America, which sees itself as the land of opportunity, this survey result is dispiriting: 29 percent of the middle class said hard work and determination no longer guarantee success for most people. The American Dream is dying.

Middle-class insecurity and gloom will worsen if Congress allows the country to fall off the fiscal cliff – if it fails to renew at least some tax cuts set to expire at year’s end or temper scheduled budget cuts. The CBO, in its Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022, said if Congress does not change its current tax and spending plan, the United States will descend into recession again next year and unemployment will rise to 9 percent.

The budget cuts were demanded last year by House Republicans, led by Ryan, who refused to raise the nation’s debt ceiling until they got a deal guaranteeing the budget slashing. President Obama has repeatedly sought money for infrastructure improvement and other job-creating projects to relieve unemployment and prevent a double dip recession, but Republicans have rebuffed him. They also have rejected his plan to renew middle class tax breaks while terminating the massively larger breaks for the rich.

Republicans like Ryan have decided relieving the deficit is more important than relieving uncertainty for the middle class. The perfect symbol of that is Ryan’s plan to voucherize Medicare. Social Security and Medicare are beloved by the middle class because of the security they provide in retirement. Ryan’s vouchers would end that security because they would dramatically increase costs for senior citizens. Ryan and his followers demand austerity for the middle class and tax cuts for the rich.

Austerity is not necessary, according to two Yale researchers. They offer an alternative, Prosperity Economics.

Jacob Hacker, a Yale professor and director of the Institution for Social and Policy Studies, and Nate Loewentheil, a Yale law student, describe how to create a dynamic economy and foster a society “marked by greater health, broader security, increased equality of opportunity, and more broadly distributed growth.”

They believe in resurrecting the American Dream. While the middle class is losing faith, Hacker and Loewentheil say it doesn’t have to be that way.

In their plan, everyone benefits, not just the silver spooners. It’s not, however, a strategy likely to be adopted by austerity advocates Romney and Ryan, who have never experienced the pain of economic insecurity suffered by the plastic spoon class.

A Hidden Economic Ideology: Six Flaws in the CBO's New Report

Richard Eskow — Tue, 05 Jun 2012 15:31:25 -0400

The new CBO report is out, and it's a huge disappointment. Their report misrepresents both our nation's economic situation and the range of policy solutions available to the Federal government.

We'll review the report in greater detail in the days to come, but here are six glaring flaws that illustrate a hidden economic ideology - the same sort of anti-Keynesian, anti-spending, and anti-growth ideology that led so many economists to be so wrong in the last couple of decades.

Some flaws are analytical, some are errors of omission or bias, and some are merely misleadingly emphasized or presented facts. But, taken together, they illustrate the fact that our CBO - like so many economic institutions - has failed to absorb some real-life lessons of recent years.

The six most glaring flaws we found in the CBO report are:

1. It ignores job creation.

The words "employment" or "jobs" appear nowhere in the summary of its report, and the report itself says little about job creation. It accurately describes the role of unemployment in reducing government revenue. So why isn't the job creation part of the revenue equation included in this report?

Instead the CBO uses sleight-of-hand like this to ignore the stimulative effect of short-term job creation altogether:

"Policies that increased federal budget deficits would generally boost demand, thereby increasing output and employment relative to what would occur with smaller deficits or a balanced budget. However, the effects of that greater demand would be temporary because stabilizing forces in the economy ... tend to return output to its long-run potential level—that is, toward the amount of goods and services that the economy could produce if its capital and labor resources were fully employed. Because the analysis presented in this chapter focuses on the long-run effects of tax and spending policies on the economy, the estimates do not take those short-run effects on demand into account.

"In other words: Keynes be damned! In the long run, "I'm OK, you're OK." That's not how the world works. We learned that after the Great Depression, and have re-learned it many times since. But the CBO's determined to forget that short-term job creation leads to stronger long-term growth.

Near-term government revenues are being hurt by our continued high unemployment numbers, which is particularly acute among minorities, young people, and older workers, and especially by the record-high rates of long-term unemployment.

Long-term revenues are affected by today's youth unemployment figures, too. According to studies, young people who are underemployed or jobless in early employment will earn less money throughout their working lives. That means they'll pay less in taxes, too.

2. It amplifies misleading and fear-inducing statements about an "aging America."

The report says scary and misleading things like "The aging of the baby-boom generation portends a significant and sustained increase in the share of the population receiving benefits from Social Security and Medicare, as well as long-term care services financed by Medicaid." But we've known about this "age wave" for a long time and had planned for it. This wouldn't be a problem, if not for other factors the report chooses to ignore.

Those factors include politically inconvenient issues like wealth inequality, unemployment, and tax favoritism toward the wealthy.

Although it doesn't say so explicitly, the report repeatedly gives the impression that Social Security contributes to the Federal budget deficit, which it is forbidden by law from doing. (That's why benefits may have to be reduced in twenty years or so, if no further changes are made to the program.)

And it ignores the root cause of that long-term shortfall, which is not an aging population. (That was fixed by the Greenspan Commission in the 1980s, which reduced benefits and increased contributions for baby boomers - who have paid those increased contributions throughout their working lives.)

3. It misleads on Social Security.

As economist L. Josh Bivens and others have demonstrated, that long-term shortfall is primarily caused by the fact that income inequality has become so much worse since the 1980s. As the wealthy capture more and more of the national income, more of that income has been above the payroll tax cap limit.

Instead of taxing 90 percent of our national income ,as originally planned, a significantly smaller percentage is contributing to Social Security. That problem's compounded by the wage stagnation being experienced by the middle class. If their wages don't rise, their payroll tax contributions don't go up either.

And unemployment hurts here, too.

4. It presents a radically distorted picture of health spending - and ignores its real cost drivers.

The report's analysis of public health spending states that "health care spending per person has grown faster than the nation’s economic output per person by an average of 1.6 percentage points per year during the past 25 years (based on a calculation that gives more weight to more- recent years)."

But it makes an extraordinary omission by failing to compare our spending baseline with that of other industrialized nations, which spend far less of health care than we do (and which have lower inflation rates).

Why leave this out? One can only speculate, but that would bring up the issue of our unique - and uniquely expensive - dependence on private, for-profit health providers and insurers.

The increasing prevalence of for-profit corporations and chains in key health care areas like hospitals and diagnostic services is completely ignored. Instead the report says things like "Key factors contributing to that faster growth have been the emergence and increasing use of new medical technologies, rising personal income, and the expanding scope of health insurance coverage."

("Expanded scope of health insurance coverage"? In reality the trend's gone the other way, as employers shift more and more health costs back onto their insured workforce - hence the large number of health-related bankruptcies among Americans with employer-sponsored health insurance.)

The report says this:

"Such rates of growth (in health spending) cannot continue indefinitely, because if they did, total spending on health care would eventually account for all of the country’s economic output—an impossible outcome. Instead, over time, people will try to limit their spending for health care in order to maintain their consumption of other goods and services. Private insurers and employers will adjust the insurance coverage they offer, the benefits they provide, and the amounts and nature of their payments to health care providers."

This is a remarkable paragraph, if only for its matter-of-fact assumption that people can sacrifice medical services without negative health consequences. (This may be partially due to a now-controversial, decades-old RAND Corporation study that concluded such a thing was possible.) Or that if they did suffer health consequences (note the use of the word "may") that was not an issue the CBO needed to flag for policymakers.

The report continues: "In addition, state governments—which pay a large share of Medicaid’s costs and have considerable influence on those costs—will need to reduce spending growth in order to balance their budgets. Those reactions to cost pressures will increase the incentives for health care providers to invest in cost-reducing technologies and to increase efficiency. "

None of these steps will address our health care cost problem. They'll simply cause financial hardship and adverse health consequences for large portions of the population instead. The real solutions - limits on health care profit-making, or an "all payer" fee system like those used in some other industrialized countries, go unmentioned. And single-payer? Forget about it.

5. It doesn't clearly identify the drivers of our current deficit - wars, the financial collapse, and tax breaks for the wealthy.

The report ignores the need to prevent further bank-caused financial crises, despite the 2008 crisis' impact on the Federal budget. It does discuss tax revenues at length, as a matter of necessity, but elides over the most critical area of lost revenue: top tax rates for the wealthiest Americans, which are at historically low levels.

And it plays games with the military budget, where it says that "Over the past four decades, defense discretionary spending has declined significantly, on balance, as a share of the economy."

Then there's no problem there, right? Read on

:"After the end of the Cold War, defense spending fell again relative to GDP, to a low of 3.0 percent at the turn of the century. In 2002, however, such spending began to climb again; it reached 4.7 percent of GDP from 2009 through 2011, mainly as a result of operations in Iraq and Afghanistan. In 2012, the funding provided for defense activities declined both as a share of GDP and in dollar terms

."Read that sentence a couple of times, if necessary. It says that military spending has gone up over the last decade and has peaked in the three years - and while it says that funding will decline this year, it doesn't say by how much.

Intermission

We interrupt our list of flaws to sum up where we are so far: Our short-term budget problems can only be fixed by increasing taxes on the wealthy, a short-term plan to significantly reduce unemployment, beefed-up education programs, infrastructure investment, and cuts in military spending.

And our long-term budget problems can only be fixed if we attack the root cause of runaway health spending in the United States: for-profit healthcare.

Jobs? Education? Infrastructure? Won't it hurt our government financially to borrow all that money? That gets us to flaw #6:

6. It doesn't emphasize the benefits of borrowing.

Actually, the opposite is true: There's so much investor confidence in the US government right now that markets are actually paying the government to borrow. That's right: Markets are offering negative interest rates on US government debt.

The CBO report says frightening things about long-term debt - but doesn't mention the fact that the government can make money tomorrow by borrowing today.

That means it's fiscally irresponsible not to borrow money in the short term and use it to 1) create jobs, 2) rebuild our bridges, schools, railroad, and highways (we'll have to do it eventually, and now's the best time to do it economically), 3) invest in our future through increased education and youth employment programs, and 4) promote other growth strategies to encourage wage increases for the middle class.

The "non-partisan" CBO doesn't have to support these initiatives. But a truly non-partisan group wouldn't ignore them altogether. The CBO does - and the human implications of that omission are tragic.

The Fake Social Security Solvency Crisis Is Congress's Fault!

Joseph M. Firestone — Tue, 05 Apr 2011 12:30:18 -0400

Ah.... my fellow Americans, be very, very, afraid of the terrible Social Security crisis that will sink us as a nation. According to Government projections, we won't be able to pay full Social Security benefits, in 2037 and beyond, unless we cut benefits now, because the Social Security “Trust Fund” will be short of money.

So, say Paul Ryan, Peter Peterson and his minions, Mike Pence, Alice Rivlin, Erskine Bowles and Alan Simpson, and also many other deficit hawks. In reply, the most liberal of the deficit doves say that even though there will be a solvency crisis in 2037; it's really nothing to worry about because all we have to do to end it is to lift "the cap" on FICA contributions entirely, so that wealthier income earners are paying the same rate on their total earnings, as workers whose wages or salaries are below $106,800 per year.

So, both the hawks and the doves agree that there is “a solvency crisis;” they only disagree about what to do about it. However, the SS solvency crisis is a big fake, like so many of the issues that arise in Washington. It is a fake because the crisis is not due to powerful economic forces that no one can do anything about, and that no one has control over; but rather is due to a choice Congress made when they wrote the original Social Security Act; namely that it would be paid for by raising revenues to fund it through FICA contributions and placing those in a “trust fund,” rather than by paying for it from general revenues. All that Congress has to do to end the crisis is to decide sometime between now and 2037, to pay for SS benefits automatically, out of general revenues, in the same way it pays for that part of the Social Security program called Supplementary Medical Insurance (SMI). End of problem. End of story.

Here's a link to a post by selise featuring a youtube clip of Stephanie Kelton at last year's Fiscal Sustainability Tech-In Counter-Conference explaining why this simple move by Congress solves the problem. Audios, Videos, presentations, and transcripts from the Conference which provides the definitive counter-narrative to the deficit hysteria currently rending our nation is here. Professor Kelton summarizes her argument here.

"Funding Social Security is always and everywhere a political choice. The strongest evidence of this comes directly from the 2009 Annual Report of the Trustees. In that report, they predict gloom and doom for Social Security because “there is no provision in current law that would enable full payment of benefits, once the Trust Funds are exhausted”.

In contrast, the Supplementary Medical Insurance (SMI) Trust Funds are “both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet next year’s expected costs.”

It is that simple. The former is in ‘trouble’ because the government isn’t committed to making the payments, and the latter gets a clean bill of health because the government will always make the payments."

I think this really underlines how arbitrary the projections of financial doom from the Peterson crowd, CBO, and other Government agencies are. Apart from the silly and unreliable projections as far out as 25-65 years from now, the predictions of doom are really based on provisions in law that Congress can change at any time. Which means that just like the fake national debt crisis, the fake Social Security solvency crisis is Congress's fault.

It is more Washington kabuki politics at its finest.

Selise has this to say in her post on why this is kabuki:

Q: Why is there even a debate about “fixing” Social Security when it’s not broken?

A: Because the focus of the debate is on problems that are unreal.

Focusing on unreal problems makes no sense. Unreal problems are NOT REAL!

Let me explain what I mean here by real as opposed to unreal problems with an example of each:

Unreal = “We can’t afford to Social Security because the Trustee’s report says that costs will exceed payroll tax receipts”

Real = “We can’t produce the goods and services needed by our nation’s seniors to keep them fed and housed.”

The unreal problem is about the availability of dollars. Our federal government is the monopoly issuer of the nation’s currency. We’ve been off the gold standard for almost 40 years and we have floating exchange rates. Therefore, the availability of dollars is a political issue. Tax revenue is not required, borrowing is not required — unless Congress chooses to impose those constraints.

A main reason why this particular instance of kabuki politics still exists is because so-called “progressives,” are unwilling to give up the idea that to keep Social Security safe it is essential that people “pay into it,” so that the opponents of Social Security won't dare say that it's a welfare program paying benefits to people that they are not entitled to. Guess what? The problem with this theory is that the opponents do dare say it, and have been saying it for many years through “propaganda” that has made “entitlement” a dirty word.

They don't care whether people have made FICA contributions or not. For them the only issue is whether the Government “can afford” to pay for SS retirement benefits, not whether people have earned and paid for them, and so “deserve their benefits.” And they say the Government can't afford it because they're both busily cutting away at Government tax revenues and also falsely claiming that Government money is limited by a non-existent solvency risk.

Giving up the argument that people have paid into Social Security and so are entitled to it, is what progressives fear. But, nevertheless, since that argument is clearly not working, and also because that argument is bought only at the price of maintaining a very regressive tax on working people, they badly need to give it up in favor of an argument that all Americans, whatever their station, contribute something to the development of American society over time, often in ways that can't easily by measured by the money they've made, or the visible things they've accomplished; and that because of these contributions and their American citizenship, each is owed a decent and dignified old age by the nation in the form of Social Security and affordable health insurance (now provided by Medicare).

This is especially true, since the money needed to pay them isn't directly funded by taxes but only needs to be issued by the Government according to its constitutional authority. It is not money that is taken from anyone, or that is re-distributed. It is not some quantity from a limited supply of gold that is coming out of other people's pockets. This money gets its value ultimately from the real wealth American society produces, which, in turn, comes from the past and present productive efforts of everyone, and the productive capacity that all of us together have created over the years and still create.

There is no right to share in this wealth equally, and there is no right for the elderly to cause younger people to go without, or to sacrifice opportunity. But American society is wealthy enough to make choices like these unnecessary. It is wealthy enough to provide an old age for its citizens that is free from want and fear.

Roosevelt knew that and it's part of what he included in his second bill of rights. But Roosevelt's old enemies, the Hooverians, have come back. They go by different names now. Sometimes, they're called neo-liberals, sometimes austerians, sometimes Petersons, sometimes deficit hawks or doves. But whatever they're called, the message is always the same, and that message is that money is limited, and that when it is given to some, it must be taken from others.

If the Government wants to spend money, it must be taxed away from some, or borrowed away from others. And finally, because money is limited, there are always hard choices to make, choices that sometimes put money ahead of people, and that make it necessary for "courageous people," like the wealthy neo-liberals who talk and write this way, to choose who will prosper and who will suffer, who will be eating caviar, and who will subsisting on catfood or worse. That's unfortunate, but it's just the way of the world and we all must adjust to it.

The Austerity Doctrine is not, in the end, part of the American, or the progressive outlook. We are an optimistic people. We know that money isn't really limited and that our constitution allows us to provide enough of it to make the economy we want. We also know that even though certain real resources are limited, resource limitations can be overcome using new human knowledge, by redefining the practical meaning and use of existing resources. We also know that real wealth, the stock of valuable goods and services, is increasing all the time as the mix of different kinds of capital, human knowledge, and human effort changes in accordance with the development of human society.

So, the truth is not Hooverian, it's Rooseveltian, we know that Federal money isn't limited, and we also know that real wealth can be increased through effort that in turn can be mobilized by nominal wealth (Federal money). We aren't playing a zero-sum game in which some must win and some must lose. We are playing one in which everyone can win.

So, in the nature of things we don't need to take anything away from retirees, because of some imaginary fiscal crisis. We can easily do what's right and not only maintain Social Security and other entitlements, but even increase their benefits. All we need to do is to revise a few laws to say that all entitlements will be automatically paid for by the Government in perpetuity out of general funds, and that all entitlement trust funds are abolished. Let's make Congress get off its high horse, show some real courage, and do it!

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

On Health Reform, Three Cheers for Kucinich (And Ann Coulter's Still Alive! Who Knew?)

Richard Eskow — Thu, 18 Mar 2010 13:47:17 -0400

The CBO now says health reform will cut the Federal deficit by $138 billion That's a win for the bill's backers, and should make it tougher for self-described 'fiscal conservatives' in the Democratic Party to vote against this bill. (No, let's re-frame that as a positive statement: It will make it easier for Conservadems to embrace this bill.) Now what's left is a battle between two clear political philosophies on the left and right: The principled but pragmatic progressivism embodied by Dennis Kucinich, or the nihilistic fury and self-interest that's best represented by Ann Coulter. Since both Coulder and Kucinich had a lot to say about health reform this week, it's worth taking a moment to compare and contrast their philosophies.

Let's start by offering three cheers for Kucinich. Cheer #1 is for his principled stand in favor of single-payer solutions, either at the national or state level. While I see a lot of economic and administrative problems with this large a transformation of our trillion-dollar health economy - problems not yet sufficiently addressed by single-payer advocates - Medicare For All is ethical, humane, moral, and fair. It was never going to pass, but Kucinich kept the flame alive and laid the groundwork for further progress toward a goal that may be achievable someday..

Cheer #2 is for Kucinich's tenacity in fighting for a meaningful public option, and for some other fair and meaningful ideas cut from this bill. A progressive's job is not to make things easy for those in power, but to fight to make every bill as good as it can possibly be. Someday we may have some things to say about progressives who became cheerleaders for the Senate bill way too early, undercutting efforts to make it better and fairer. The Left needs to learn from errors like these - but that's a discussion for another time.

Cheer #3 come from Kucinich's reluctant yet heartfelt decision to vote for the bill as it currently stands. Like many other progressives, I've watched in frustration and dismay as leaders in the White House and Congress fumbled one opportunity after another to come up with a better (and more popular) bill. Democrats need to do some serious soul-searching about back-room deals and corporatist politics. But Kucinich doesn't have the luxury of criticizing from the sidelines. His only choice is to vote "yes" or "no." He struggled with his decision, just as many of us have struggled privately with our own feelings.

Kucinich made the right decision. By voting for this bill, he'll be ensuring that nobody will ever be denied needed health insurance for pre-existing conditions. He'll be providing help to get coverage for people who can't afford to pay for it. He ... well, you probably know what this bill accomplishes by now. And, if you're reading this, you probably also know that major bills like Medicare and the Civil Rights Act began as compromised reforms and were strengthened later.

It's easy to empathize with progressives who are frustrated with this bill, but the fighting's all done. What was false before is true now: it's this bill or nothing. The new progressive challenge is to pass it, then keep fighting to make it better. That can only happen if members of the Congress are open to persuasion, which won't happen if the Right sweeps the next election.
__________________

Which gets us to Ann Coulter. (Yes, she's still alive. I'm a surprised as anyone. I guess her star's faded quite a bit now that Glenn Beck's the new popular kid on the mean-yet-wealthy playing fields of Crazytown High.) Coulter put out her own "health reform plan" this weekend, andI I've got to had it to her. It neatly summarizes the program and philosophy we're likely to get if Dems lose power in Congress, namely:

No.

No, no, no, no, no - to every meaningful policy and proposal.

Well, actually Coulter proposes "a one-page bill creating a free market in health insurance.." What's a "free market" to Ms. Coulter? First and foremost, she wants to "allow interstate competition." As one of the angry commentators who serve as the GOP's unfettered Id, she freely admits the reality that her party's pols continue to deny: "Every insurance company in the country would incorporate in the state with the fewest government mandates, just as most corporations are based in Delaware today." That's exactly what will happen if we adopt the GOP health care "proposal."

Why do credit card companies rip you off? Because until recently we regulated credit cards the way Republicans want to regulate health insurance. They're all based in South Dakota (where politicians are cheaper to buy because political campaigns are cheaper to run). Here's what you'd get for health insurance under the GOP's Coulteresque proposals: State regulators for sale to the highest bidder, followed by an insurance market where every abuse you've ever heard about happens over and over again ... to everybody. Will they take your premiums and then drop you when you get sick? Check. Deny your claims even for covered services? Check. Run deceptive advertising? Check. Horrible stuff they haven't even thought of yet? Check. And check and check and check and ....

That's the political struggle before us now: Pass the bill and work to improve it, or return to the Party of No and the Politics of the Corporate Ripoff.

Since Coulter's from the personal-attack school of political discourse, naturally her piece naturally includes a few quease-inducing insults - about Harry Reid's age and sexuality, Obama and dying medical patients, and "hypochondriac liberals." But on the principle that a stopped clock's right twice a day, Coulter makes a good point too. She wants to remove the antitrust exemption for insurance companies, which is a very good idea.

Now we know that if Dennis Kucinich introduces a bill ending antitrust exemptions for insurance companies, he can count on Ms. Coulter's enthusiastic support.

An Overlooked Number: How Overstated Is That CBO Estimate of $149 Billion in Excise Tax Revenue?

Richard Eskow — Mon, 14 Dec 2009 12:47:42 -0500

The $149 billion number - the amount of revenue the CBO estimates the excise tax will bring in - has becoming gospel in Washington. But there's a very good chance the number is overstated, possibly by tens of billions of dollars, and the mistake seems to have been completely overlooked. Here's how it happened:

In its November 18 analysis of the Senate bill, the CBO footnotes the $149 billion figure with this comment: "If employers increase or decrease the amount of compensation they provide in the form of health insurance (relative to current-law projections), CBO and JCT assume that offsetting changes will occur in wages and other forms of compensation—which are generally taxable—to hold total compensation roughly the same." (emphasis mine)

In other words, the CBO assumes that workers will receive approximately as much in wages (which are taxable) as is taken away from their benefits. That's an enormous assumption, based in large part on some long-term studies on the relationship between wages and benefits in past decades. Here's the problem: We now know that only 18% of employers surveyed by the Mercer group indicated that they would actually pass some of their savings on in the form of higher wages. If that figure is accurate - and there's no reason to believe it isn't - whatever figure the CBO used could be overstated by five to one. What's more, we can't assume that even those 18% will pass all of the benefit savings along in the form of wages.

Nobody has asked the CBO to reassess its estimate in light of the Mercer study. We don't know what portion of the $149 billion was attributed to the rise in taxable wages, and what portion was attributed to collection of the excise tax itself. (We will research that number, however, and let you know if and when we find it.) But it's fair to assume that the real savings attributed to the tax is significantly less than $149 billion.

The $150 billion attributed to the Sanders-Franken-Brown Amendment stands unchallenged as of this writing.