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March 18, 2010 4:00 A.M. The Perseverance of Pelosi How student loans will "pay" for Obamacare.The German philosopher Arthur Schopenhauer wrote that music is the purest embodiment of will, but he never met Nancy Pelosi. Having resorted to the legislative equivalent of brute force to sign her members up for a bill they don't wish to vote for, she now must contend with the Congressional Budget Office as she tries to expand spending and delay taxes while maintaining the fiction that Obamacare will reduce the deficit. This task would seem mathematically impossible, but CBO is no match for Pelosi's will. The speaker has a powerful stick with which to beat the numbers into compliance: billions in phony savings from a government takeover of student loans.
It works like this: Most of the things House Democrats would like to "fix" about the Senate health-care bill involve spending more and taxing less. They want to "fix" the Cornhusker Kickback by giving every state the same sweet deal (full federal funding for the bill's Medicaid extensions). They want to "fix" the Medicare prescription-drug benefit by making it more generous. They want to "fix" the Cadillac tax on high-cost health benefits, a tax the unions hate <http://article.nationalreview.com/427599/patriot-games/stephen-spruiell>, by delaying its implementation until 2018.
All of these fixes increase the bill's cost, but under the rules of reconciliation, the package must reduce the deficit by at least $1 billion. Clearly that's not going to happen, so Pelosi's plan involves attaching a separate student-loan bill to the reconciliation package and using the "savings" from that bill to fund the health-care cost overrun.
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Here's the problem: Even if the student-loan bill doesn't save nearly as much money as the Democrats say it will --- and there are good reasons to think it won't --- all the spending predicated on those savings will still occur. The Democrats' student-loan bill would eliminate subsidized private student loans and replace them with a government direct-loan program (for details see our editorial, "The Real Health-Care Plan <http://article.nationalreview.com/427454/the-real-health-care-plan/the-editors>"). According to our government accounting practices, the move would save taxpayers $68 billion over ten years.
But the calculations used to reach this number assume that the government will enjoy absurdly low borrowing costs for the foreseeable future and that it faces no risk of a spike in student defaults (it is precisely to compensate these risks that the government provided subsidies to private lenders in the first place). The $68 billion also fails to include an estimated increase in the government's administrative costs of $6 billion.
Sen. Judd Gregg (R., N.H.) asked CBO to re-run the numbers on a fair-value basis, accounting for increased administrative costs and the cost of risk. The CBO's new estimate <http://cboblog.cbo.gov/?p=494> knocked the savings down from $68 billion to $40 billion. But even though this number is closer to reality, it's not the number the Democrats are going to use. Under government accounting rules, they can instruct CBO to ignore this more accurate estimate and use the larger number when scoring their reconciliation package. That gives them $28 billion dollars to play with.
The prospect of a student-funded piggy bank for health care isn't the only reason the Democrats are folding the student-loan bill into the reconciliation package. Another reason is that, according to most reports, they couldn't get 60 votes for the student-loan bill in the Senate. Seeing as Congress can only pass one reconciliation bill per year, the Democrats decided to put as much into this one as they could possibly fit. Fortunately for them, the student-loan bill happens to include a pot of money they can use to pay for health care instead of, say, education or (gasp!) deficit reduction. The "savings" in the student-loan bill were originally slated to be used for these latter priorities, with a bias toward more spending on Pell Grants and community colleges. Now comes word that the planned spending on community colleges might be sacrificed entirely so that Pelosi can grease the skids for health care. The idea that any of this will reduce the deficit is fanciful, but Pelosi has the CBO working around the clock <http://www.politico.com/news/stories/0310/34571.html> as she hammers and tweaks her fictions like a student with unlimited tries to pass an exam.
"Every man takes the limits of his own field of vision for the limits of the world," wrote Schopenhauer. Say this for Nancy Pelosi: The limits of her field of vision are broad indeed --- broader, unfortunately, than our Constitution allows, and than our economy can bear.
/--- Stephen Spruiell is an NRO staff reporter./ -- Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum* Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more.
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