Tom Coburn, Back in Black

[The Vorlon]

 And didn't we just cut 500 billion from Medicare a year and ahalf ago?

ObamaCare is magic, you insure 35 million additional people, increase the number of services provided, eliminate disqualification for pre-existing conditions, and you save 500 billion dollars.

Haven't you been reading your DNC mailers?

[The Vorlon]

Forgive me if I have this totally wrong, but as far as I understand it, Social Security doesn't actually contribute to the deficit. It's entirely self-financed, and is restricted from drawing money from outside it's own funds when it can't completely pay it's bills. From what I know of the program, it's literally forbidden by law from contributing to the deficit.

let me take a stab at explaining......

Social Security has a "trust fund" run by a board of directors, advised by a bunch of actuaries, that looks after the fund.

When SS started up in the 30s, the retirement age was 65, and average life expectancy was 61 years, for every person collecting SS benefits, there were about 9 people paying into the system.  

As people started living longer, and also on average entering the workforce later in life due to more education, this ratio started to shift.  Currently there about 2 folks paying in for every person collecting... the ratio shrinks to about 3 to 2 at the peak of the baby boom bulge getting into retirement.

In the early 80s they "fixed" social security by raising SS taxes and very modestly tweaking retirement ages in the future and a few other minor changes.

Because of this fix, SS actually ran a pretty healthy surplus in most of the 80s and 90s, where the money flowing into the SS trust exceeded the benefits being paid out.. the theory being that like good fund managers they were building up a surplus now in the knowledge that in out years their obligations would rise.... based upon these accumulated surpluses SS is, officially at least, solvent till about 2030 or so.. (this may have slightly changed due to the recent fiddling with payroll taxes in the stimulus package, bust tax cut extension, etc)

Where this ties into the federal deficit is that the single and only asset in the SS trust fund is special US Treasury bills, so the 2.5 trillion that "officially" exists in the trust fund to help offset rising costs as the baby boomers retire exists only to the degree that the US Treasury can actually redeem these Treasury bills to the SS fund.

SS is now pretty close to "breakeven" (I think very mildly negative IIRC)  on a cash flow basis with revenues coming in matching payments pretty closely, but in out years the cash flow gets very negative and the SS fund will require the treasury to redeem these special T-Bills in order to have the cash to actually payout the benefits to the baby boon.

The effective consequence of this is that soon tens, and fairly soon hundreds of billions of dollars a year of the special T-Bills held by the SS Trust fund will need to be redeemed by the treasure to fund SS benefits... this need to replay these T-Bills is what, on a cash flow basis, will massively contribute to the deficit faced by the federal government.

The short and dirty skinny on this is that the SS fund saved +/- 2.5 trillion dollars to pay for the benefits of the babyboomers, they invested the 2.5 trillion in the Federal government, and the feds spent the 2.5 trillion and more....

Now the the SS Funds needs those trillions back, where they are going to come from is... unclear at this moment......

Strictly speaking, yes these payments have no effect on the Federal deficit, you redeem a trillion in bonds, you have a trillion less in cash, but also a trillion less in liabilities....  

But on a cash flow basis, where do you get the extra trillions you need to redeem SS Trust fund T-Bills in addition to the borrowing you might need for other government activities...? - This is where the crunch comes in....

[The Vorlon]

 And didn't we just cut 500 billion from Medicare a year and ahalf ago?

... you save 500 billion dollars.

That's not what he wrote. Precision is important in questions and phrasing, otherwise you can get misleading answers or the wrong conversation.

I'm not sure I follow, but I think the Vorlon is implying that those 500 billion weren't actually saved because it was impossible?

He's stating that Obama claimed to save $500 billion through his health care plan as a whole and calling bullsh**t on it. That's not what Obama claimed nor does it follow from what Marokai wrote, which was about $500 billion cut from Medicare, which was actually used to fund changes elsewhere.

You're being very kind in your post, but I think The Vorlon is tough enough to stand by his own words as he wrote them, and accept if there's a mistake.

Let me be a little more precise.....

ObamaCare trims about $500 billion from medicare, essentially by simply putting into law that providers of medicare will be paid less for their services.  They then use about $400 billion of these savings to fund other elements of the bill.

As a result the CBO scoring of Obama care is a "savings" of about $100 billion over the next decade.

This scoring is an absolute fiction.  CBO is in a bind, they must run their projections based upon the law as it is written, no matter how insane or improbable.

For example, the Alternative Minimum Tax, as written and sitting on the books will raise +/- 1.5 trillion over the next 10 years, despite the fact that year after year for the last couple decades every year Congress passes a "temporary" fix to keep it from whacking the middle class.

As a leftover from Gramm-Rudman-Hollings in the 1980s, Medicare payments to doctors should be every year reduced by hundreds of billions of dollars, but again, every year Congress passes a temporary "Doctor fix", so "on the books" payments to doctors as defined by the law will be 100s of billions less, so CBO scores it this way in the out years.  CBO also assumes under it's budget scoring that the Bush Tax cuts for everybody will expire in 2013, because that is the current law, as written and passed.

As CBO has said, the "can't score a speech"

CBO is doing their job, they by definition have to project based upon the existing law, even if the laws are from la-la-land and have no connection with probably reality.

If Congress passed a law saying the Air force will invent anti-gravity field levitation and that by 2015 all Air Force planes will magically fly on their own without jet fuel, the CBO wold "score" the 2015 Air Force jet fuel budget at $0.

The CBO scoring, including what was done for ObamaCare, is a classic example of Garbage In, Garbage Out....

The projection that ObamaCare will insure an extra 30 million people, expand the scope ofcoverage, eliminate pre-existing condition disqualifications, AND save money is, well..... similar to anti-gravity levitation...  It just ain't so.....

IMHO anyway