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The Congressional Budget Office (CBO) today estimated that repealing the 2010 Affordable Care Act (ACA) would increase federal budget deficits between next year and 2022 by around $109 billion, only a small change from previous estimates. The CBO suggests that this can also be considered a rough estimate for how much the ACA reduces the deficit over the same time period.

The CBO cautions, however, that its estimates are uncertain because the projected effects of the law are themselves “highly uncertain.” The law contains some provisions that are projected to cost the government money, but others that would save money or provide additional revenue.

Also updated were CBO’s estimates of the budgetary effects of just the ACA’s health insurance coverage provisions in light of last month’s Supreme Court decision, which allows states to choose whether or not to expand eligibility for coverage under their Medicaid programs.

The budget office now estimates that these coverage provisions would have a net cost of $1,168 billion from 2012 to 2022, a net reduction of about $84 billion from estimates last March. This slightly reduced spending would come about because even with some states opting out of the relatively cheap Medicaid expansion and pushing some...

This post was co-authored with Louise Mackey, intern from the Washington Ireland Program 

Interest rates are at historically low levels, making borrowing very affordable for consumers -- and the United States government. When it issues debt, the federal government, like any other borrower, pays interest. This is how the government finances its annual budget deficits.

Why are interest rates so low now?

There are two primary reasons. First, during the recession there was less demand for credit. And to combat this, the Federal Reserve brought interest rates down to spur borrowing. Second, in response to the global economic slowdown, investors around the world have been desperate to place their money in a safe haven -- and U.S. Treasuries are still considered the safest investment in the world.

Interest rates are projected to stay at or near historic lows over the next two years as the economy continues to recover. Eventually, though, interest rates will begin to return to normal levels as economic growth puts inflationary pressure on the economy. This normalization of rates will increase the government’s borrowing costs. Those costs will also be going up simply because the government is borrowing...

The Medicare actuaries have just updated their projections for National Health Expenditures (NHE) and the overall picture they illustrate is a welcome one, but likely reflects temporary factors and cannot serve as an excuse for politicans to rest on their laurels.

On the plus side, health care cost inflation has slowed pretty dramatically over the last three years (2009-2011) and is also projected to be slower than normal for 2012 and 2013 -- with those costs staying nearly constant as a percent of GDP throughout the entire time period (around 17.9 percent). Furthermore, while spending is projected to jump in 2014, as the major health insurance provisions of the Affordable Care Act (ACA) extend coverage to approximately 22 million people, over the period 2011-2021 spending is projected to grow at an annual average of 0.9 percent above GDP growth. This is good news because most budget experts consider health care cost growth of 1 percent over GDP the "gold standard" for a tough, but theoretically obtainable, spending target. (Historically, health care costs have risen 2 percentage points faster than GDP.)

The actuaries suggest most of the recent slowdown in health care spending can be attributed to the recession and...

The Congressional Budget Office (CBO) has released an excellent analysis on the "Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013."  The CBO term “fiscal restraint” has been more popularly referred to as “the fiscal cliff.” That is because there are so many large, sudden fiscal policy changes awaiting us at the turn of the year that if we think of the U.S. economy as a train, it is heading straight for a dramatic fall-off in consumer demand (and hence in overall activity in an economy still constrained by inadequate demand) as these policy changes all happen at once.

Some of the main changes we will face are the expiration of the 2001 and 2003 tax cuts, the expiration of the payroll tax cut, and the beginning of automatic spending cuts required by the debt limit law passed last August. The concern is that taking so much money out of the economy at one time, through either tax increases or a reduction in government spending on goods and services, would slow consumer spending. That would reduce businesses’ desire to increase hiring, which would lead to continued high unemployment. 

And yes, the worry is that the rapid deficit reduction will be harmful. As I explained...