The Inevitable Center for American Progress Pushback Against Jonathan Gruber (Updated)

Now that comments by Obamacare architect Jonathan Gruber have entered their fourth day of dominating the non-network news cycle, the White House allied Center for American Progress is beginning to push back by claiming Gruber is simply wrong. But is CAP correct about what Gruber said or are they misreading him?

CAP President Neera Tanden has a piece in the Wall Street Journal which promises to get to the bottom of Grubergate. “Mr. Gruber’s comments in 2013
that the law passed only because of “the stupidity of the American voter” and a “lack of transparency” by the Obama administration are simply incorrect,” she writes.

Mr. Gruber has also said that the Affordable Care Act was written “in a tortured way” to make sure the CBO did not score the individual mandate as a tax. In fact, the Congressional Budget Office and the Joint Committee on Taxation scored the individual mandate as increasing revenue from penalty payments. Whether they viewed the mandate as a “tax” had no impact on their analysis; the economic effect is the same regardless of the name. That is precisely why Chief Justice John Roberts found in favor of the individual mandate when it came before the Supreme Court in 2012.

This basic argument is repeated at CAP’s Think Progress blog where author Igor Volsky calls Gruber’s claim about the scoring of the individual mandate “demonstrably” false.

There are at least two things that need to be pointed out in response to these claims. The first, and most obvious, point is about transparency. Claiming, as Neera Tanden does, that the Supreme Court sorted out whether the mandate penalties for those who don’t buy insurance was a tax two years after the bill became law is not really proof of administrative transparency. In fact, back in 2009 when the issue was still under consideration by Congress and the public, President Obama repeatedly denied the mandate penalties were a tax at all.

Transparency would have been having the President admit the mandate penalties were a tax before the bill had become a law not ruefully admitting it years later after the Supreme Court forces your to do so.

And before moving on to point two, it’s worth noting that Think Progress was not exactly a proponent of transparency during the debate over the law. In fact, Volsky argued that President Obama should break his campaign promise to have negotiations over the bill televised on C-Span. “Health care reform is only possible because of the ritualistic ping-pong back and forth that occurs through private conversations,” he wrote in January 2010. That point can be debated but it’s fair to say CAP’s Think Progress blog was not pushing for greater transparency around the ACA but for less.

The second point about this is more complex but just as important. It goes to Gruber’s credibility as an observer of the process, specifically whether what he said about the CBO scoring the mandate is true or, as CAP claims, demonstrably false.

It’s true that the CBO did consider money collected from the mandate penalties as revenue in their score of the bill. So if that is what Gruber was talking about last year when he said, “If CBO scored the mandate as taxes, the bill dies,” then he was wrong. But there is another, more likely, explanation for his comments.

The economic impact of the ACA mandate is not limited to penalties for those who refuse to buy insurance. In fact, one could argue that all of the economic activity generated by a federal mandate is in fact part of the mandate even if that money flows through private entities. Back in May 2009, that’s exactly what the CBO was considering. In a report section headlined “The Budgetary Treatment of a Federal Mandate”, CBO looked at two questions:

  • Can cash transactions between private entities—in which the funds do not pass through the U.S. Treasury—be reflected in the federal budget?
  • Does the existence of a federal mandate, by itself, justify inclusion in the budget of the private-sector costs of the mandated activity?

CBO said the answer to the first question was yes. It offered the example of the Universal Service Fund, the charge which helps pay for those free cell phones for the poor. Although the money collected by the USF is managed by a not-for-profit, CBO states, “payments to the USAC and its disbursements are included in the federal budget because those payments are essentially federal taxes and its disbursements are federal subsidies.”

When it came to the second question–should all of the private-sector activity generated by the mandate be included in the budget–the CBO said no.

CBO therefore concludes that a national requirement for individuals to buy health insurance would not, by itself, justify including the costs of that insurance in the federal budget and that other factors, in addition to the existence of a mandate, should be considered in making that determination.

But CBO makes clear the dividing line between mandated government activity and free market activity under a mandate is unclear saying, “there is no well-defined dividing line between the two concepts. Rather, proposals may fall at various points along the broad spectrum between the two extremes, and characterizing a proposal as being in one category or the other can be challenging.” In short, this was a judgment call.

This judgement call by the CBO did not happen by accident. The Cato Institute’s Michael Cannon pointed out (back in 2009) that the CBO had made the opposite decision about Hillary’s health reform effort in the 90s and that this had–according to progressive wonk Ezra Klein–led to the demise of the bill. So progressives knew that in order to get a bill passed this time around, they needed to either drop the mandate or massage the CBO. Obama eventually went with the latter option:

Obama budget director Peter Orszag laid the groundwork for this feat. While director of the CBO in 2007 and 2008, he fostered a more
collaborative relationship between the CBO and members of Congress, which enabled the agency to provide behind-the-scenes guidance to
Democrats crafting their mandate. That’s why the cost of the Democrats’ individual mandates appears nowhere in the half-dozen or more “preliminary cost estimates” the CBO has completed on various Democratic health-care bills.

Of course it’s not possible to know for certain what Jonathan Gruber had in mind when he spoke about the mandate and the CBO last year. He could perhaps tell us, though whether anyone would believe him at this point is an open question. But it seems more reasonable to assume Gruber was speaking about the CBO decision not to include the entire bill under the federal budget (a move which helped kill previous attempts to pass reform) than to assume he simply didn’t know the facts as CAP and Think Progress are now claiming.

Update: The NY Times’ Neil Irwin also thinks Gruber was talking about the May ’09 CBO decision about whether to put all of Obamacare under the federal budget. He connected that directly to Gruber’s comments about the law failing if CBO scored the mandate as a tax. You can read his take here.

Update #2 (11/17): The Wall Street Journal also says Gruber’s comments were a reference to the May CBO decision: “On the tape, Mr. Gruber also identifies a special liberal manipulation:
CBO’s policy reversal to not count the individual mandate to buy
insurance as an explicit component of the federal budget.”

I pointed this alternative explanation out to both Neera Tanden and Igor Volsky on Twitter. Tanden admitted she didn’t know for certain what Gruber meant but maintained she thinks he meant the penalties. Of course, no one reading her piece (or Volsky’s) would know there was another plausible explanation.

Thanks to @morgenr and @justkarl for contributing to this story. You can follow John Sexton on Twitter.