CBO's estimate of Obama's new federal debt was based on optimistic assumptions. It assumed low inflation rates, low interest rates and a national economy that grows for 10 straight years after this year without dipping into another recession. It also assumed that the Bush tax cuts would expire as planned after 2010 and income tax rates would rise for middle-class Americans.
The CBO estimate of Obama's borrowing and spending was also made before Congress finalized drafts of the health care reform legislation Obama has pushed as his signature policy proposal.
Obama has said he would not sign a health care bill that increases the national debt, and when the CBO released its analysis of the Senate health care bill last month it concluded that the bill would actually decrease federal deficits by $130 billion over 10 years.
But that was an illusion.
The key elements of the bill (including federal subsidies to buy health insurance for people making less than 400 percent of the poverty level) do not take effect until 2014 -- after Obama runs for re-election in 2012. As a result, the bill's full cost is not exposed during the initial 10-year time frame that the CBO analyzes when making its official cost estimates.
In fact, according to CBO and the Joint Committee on Taxation, the new entitlements in the bill will cost $0 in 2010 (when Congress is up for re-election), $1 billion in 2011, $4 billion in 2012 (when Obama and Congress are both up for re-election) and $4 billion in 2013. The cost will then balloon to $48 billion in 2014, before rising steadily to $196 billion per year by 2019.
Yet it doesn't end there. The cost of the new health care entitlements will be "growing at about 8 percent per year toward the end of the 10-year budget window," reported CBO. "As a rough approximation, CBO assumes continued growth at about that rate during the following decade."
Do the math: If the bill follows the spending trajectory predicted by the CBO, it will cost $423.13 billion in 2029 and its total 10-year cost from 2020 through 2029 will be $3.07 trillion. Obamacare will cost more in its second decade than the entire federal government cost the year Obama was elected.
At that price tag, it does not even accomplish the goal of universal health care. "By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 31 million, leaving about 24 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants)," say the CBO report.
But if Obama succeeds in enacting his health care reform, he will move on to his plan for a "comprehensive immigration reform" that will put illegal aliens on a "pathway to citizenship" -- making them eligible for the federal health care entitlement.
If Obama succeeds, get ready for the crash. It is coming.