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No matter how CBO scores it, Obamacare reduces the deficit

Sen. Mike Enzi (R-WY), right, requested a dynamic scoring of Obamacare repeal.
Sen. Mike Enzi (R-WY), right, requested a dynamic scoring of Obamacare repeal.
Alex Wong/Getty Images

Repealing Obamacare would increase the deficit by at least $137 billion or as much as $353 billion, a new Congressional Budget Office report published Friday finds.

The report, requested by Senate Republicans, uses two methods to measure the economic effects of Obamacare — one that looks at the provisions of the law itself, and one that looks at how the act's effects will ripple through the economy.

The latter approach is called dynamic scoring, and, beginning this year, Congress has mandated that CBO use this methodology to more widely estimate the effect of laws like Obamacare. Traditionally, the nonpartisan agency has only used microeconomic modeling to measure the effect of something like a health insurance expansion.

Dynamic scoring sounds like a reasonable idea on its surface, but it's important to understand that people aren't really arguing about the general principle. The crux of the argument is something more specific: that conservatives believe these dynamically scored budget estimates say that large tax cuts will have a relatively small impact on the deficit — or even that they make the deficit smaller.

You see this play out in the Obamacare report, albeit not necessarily in the way Republicans might have hoped. The new CBO report shows that Obamacare reduces the deficit no matter how it's measured, although it reduces the deficit less when macroeconomic factors are taken into account.

Obamacare reduces the deficit by at least $137 billion — and leaves 19 million fewer uninsured

The CBO has repeatedly projected that the Affordable Care Act will, overall, reduce the deficit in the United States. It did this last in thesummer of 2013, and does it again in this report. You can see in this chart what that looks like over time, when macroeconomic factors are and aren't taken into account:

(Congressional Budget Office)

The big reason the deficit would go up in either scenario is that the Affordable Care Act makes significant cuts to what Medicare pays doctors. And if those cuts were reversed, the federal government would end up buying health care at higher prices.

As for the difference between the score, that has to do with how CBO thinks Obamacare will affect labor markets. The agency expects that the health-care law will encourage low-wage workers to work fewer hours, as they can get bigger insurance subsidies if they earn less. This means less employment and less taxable income for the government — all a net negative for the budget deficit.

Repealing Obamacare would curtail that downshift in hours. And that, the CBO estimates, would decrease the deficit by 0.7 percent per year between 2021 and 2025.

But even in that scenario, the CBO still thinks Obamacare repeal would be a net negative for the deficit.

It would also, unsurprisingly, reduce the number of people with health insurance: about 19 million more people would lack coverage in 2016 than in a scenario where the ACA sticks around.

A blow for Republicans

The request for this CBO report came from Senate Budget Chair Mike Enzi (R-WY), who opposes Obamacare and presumably hoped that the new, dynamic score of the law would help make the case for repeal as a way to reduce the federal deficit.

That didn't exactly happen: while the report looks less good for Obamacare than traditional scoring, it doesn't look bad either. Republicans cannot send out press releases saying that Obamacare increases the deficit; they can just say it reduces the deficit less than they'd previously thought (not an especially compelling sound bite).