Ken Buck: Biden’s ‘Savings’ Increased National Debt Further
TL/DR –
Former President Joe Biden’s Inflation Reduction Act was initially projected to reduce healthcare costs, deliver $290 billion in savings, and cap prescription drug costs. However, the Congressional Budget Office found these estimates to be wrong, with the law actually adding $700 billion to the federal deficit. This discrepancy is attributed to incorrect economic modeling, with savings from drug price negotiations and rebates being overstated and costs from higher-than-anticipated drug utilization being understated.
The Inflation Reduction Act: A Misnomer and Its Aftermath
Four years back, ex-President Joe Biden’s Inflation Reduction Act was presented with the assurance that it would decrease healthcare expenditures. As per Democrats, the legislation would lead to $129 billion in taxpayer savings, a significant portion of the $290 billion savings that the law was touted to deliver. Besides, it promised to cap prescription drug costs and broaden Obamacare coverage.
“It’s a Godsend. It’ll literally be a Godsend,” Biden had proclaimed.
However, as per an old adage, if something appears too good to be true, it most likely isn’t. A reassessment of these estimates revealed that the initial calculations were off the mark, and the predicted reductions actually increased the federal deficit.
Projections Miss the Mark
Last month, the Congressional Budget Office (CBO), acting on the request of a group of House Republicans, re-evaluated the projected savings. The findings indicated that the law, instead of reducing the deficit by $129 billion as initially estimated, ended up adding a staggering $700 billion to it.
The error in prediction came from typical Washington D.C., math where the economic modeling overstated savings and underestimated the expenses. It took into account drug price negotiations, rebates, and higher-than-predicted drug utilization. This situation sheds light on the pitfalls of large-scale government intervention.
Price Controls and the Fallout
The anticipated healthcare savings were based on price controls on drug prices. These were marketed to voters as a win-win situation. However, as the demand rose, so did the expenses. Consequently, what was supposed to be a deficit reduction turned into a substantial addition to national debt.
The Inflation Reduction Act exemplified this pattern of assured yet ultimately fruitless savings. Promoted as a necessary step to combat inflation and provide a “sounder economic footing,” as progressive legislators like Sen. Elizabeth Warren termed it, the law in essence, was an exercise in socialist philosophy.
Despite the law’s projected $250 billion deficit reduction – a figure largely dependent on delayed spending cuts and optimistic projections such as the misrepresented Medicare savings – the purported savings were negated several times over by Democrats’ uncontrolled spending.
Increasing Expenditures and Inflation
By the close of 2024, only two years post the signing of the Inflation Reduction Act, the Biden administration and its Congressional allies had amplified spending by three dollars for each additional revenue dollar. The result was an extra $1 trillion added to the yearly deficit, more than what was anticipated when Biden assumed office.
Furthermore, inflation under Biden’s term surged over 20%, and real wages and benefits diminished by more than 3%. Inflation surpassed the Federal Reserve’s 2% target throughout his term, necessitating the central bank to hike interest rates. Consequently, the monthly payment for a median-priced home loan surged over 50%, making homeownership even more elusive for many.
With historic inflation, higher consumer costs, and an additional $7.2 trillion in federal debt, the idea of “sounder economic footing” appears far removed from reality.
Call for Spending Cuts
It’s crucial to acknowledge that leaders from both political spectrums are accountable for the rapidly increasing national debt. The essence of the issue lies in a fundamental truth: Unless Washington makes earnest efforts to slash spending—real cuts based on quantifiable data and evidence—the debt will continue to mount at an accelerated pace.
As reported by the House Oversight Committee earlier this year, the United States currently has a debt of around $39 trillion. When implicit obligations, such as Medicare and Social Security payments, are considered, this figure leaps to a whopping $65 trillion. Considering the current rate, the national debt could become the largest federal budget item within the next five years.
Washington’s flawed mathematical approach combined with continuous false savings claims and superfluous spending on unneeded and unaffordable programs could lead us to a fiscal cliff that might be impossible to recover from. The lawmakers would do well to heed an old piece of advice: Stop digging when you are in a hole—in this context, it means “stop spending.”
Ken Buck, a law graduate from the University of Wyoming, served in the U.S. House of Representatives from 2015-2024, representing Colorado’s 4th congressional district. Currently, he is a Fellow with the Independent Center.
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