Accounting Gimmicks in Washington

March 16, 2012

In Washington, accounting can be fuzzy, not exact, and downright weird. When it comes to the nation’s budget and how the Congressional Budget Office (CBO) totals the cost for a piece of legislation, the math can take on the above adjectives and more. Recently the CBO released a new report totaling the cost of the recently passed, Affordable Care Act, or healthcare reform. The report received a lot of attention.

But the real question is being missed. You see, CBO scores everything over ten years.  And since many parts of the health care reform doesn’t take effect until 2014, it makes the numbers look better since it’s scored over ten years.  While most Americans assume that the CBO reports the full price of each bill in their reports, this isn’t the case.

The CBO uses a standard set down by Congress to score bills costs over a decade and no more. When the healthcare law was originally considered, the CBO scored the bill over ten years, but many provisions don’t go into effect until years later. Today, the CBO report includes a new timeline, where many of the provisions are closer to taking effect, so as aresult the numbers have changed.

To give you a clear example, imagine a bill that does not take affect until 11 years from today. Imagine this bill will cost the American taxpayers an infinite amount of money. Got it?   Well, get this.  The CBO would score this bill as spending nothing since the spending occurs outside of the 10-year window. It is because the CBO does not use longer than 10 year forecasting that numbers are constantly changing on bills and laws that permanently affect spending in Washington and at home.

Both parties have become experts over the years at gaming the system.  Look, it’s hard to know how much a massive piece of legislation will cost.  But when politicians are drafting a bill, and determined to keep cost down, that should be upfront about it and not use accounting tricks.

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