Donald Marron provides a very clear explanation of why it’s so hard to find offsets to pay for expanded health coverage that indeed would cover its costs over the longer run (emphasis added):
In short, it is particularly challenging to find offsets for new health spending, since that spending tends to rise faster than other parts of the budget. That suggests that offsets that are also driven by health spending might be particularly attractive. CBO notes that one potential source of such offsets would be reductions in other health spending. On the revenue side, the obvious potential source would be reductions in the tax exclusion for employer-provided health insurance.
Finding an offset that would truly offset rising health costs is hard to do, because there are so few parts of our economy that can be expected to grow so much faster than the economy like health care costs do. So yes, daring to touch (scale back or even eliminate) the big tax exclusion is a really good idea because it has the potential to raise an amount of revenue that would rise along with health care costs (and it would improve incentives to help “bend down” health costs at the same time). And yes, reducing other health spending would also save an amount of money that would tend to rise with the costs of the new health spending. But a still surer way to save an amount of money that grows with the costs of the new health spending? Don’t do the new health spending.
Now, I don’t really mean to suggest that’s a good idea in the context of health care reform (to just not do it), but I use the example to illustrate that this general principle applies to the costs of any new government spending (or tax cut) that’s proposed that the Administration and Congress seem to have trouble paying for. When you can’t find a way to pay for it, the answer shouldn’t automatically be “so let’s not pay for it.” The best answer could very well be “let’s not do it.” I say this because (it’s well known that) I’ve always disliked the deficit-financed Bush tax cuts, and I dislike them even now that they may become the deficit-financed Obama tax cuts. When politicians “explain” that we can’t possibly pay for the extension of these tax cuts because that would be “the largest tax increase in American history” (or variants of the same argument), the right response is not “so don’t pay for them.”