Claim: Although Democrats say their bill will be "deficit neutral," its benefits will cost billions, surely adding to future deficits.
Democratic leaders argue that the health insurance overhaul will not add to budget deficits. House Speaker Nancy Pelosi said Thursday, "One thing is for sure: the bill will be paid for." President Obama pledged Thursday, "I won't sign a plan that adds one dime to our deficit — either now or in the future." But critics wonder how the Democrats' new health insurance subsidies and huge expansion of Medicaid cannot enlarge deficits.
Fact or fiction?
Fiction. Debates about whether a bill will be "deficit neutral" (won’t add to future deficits) or will reduce deficits are based on Congressional Budget Office estimates of what deficits will be over the next 10 years. CBO projects that between 2010 and 2019, cumulative federal deficits will be $7 trillion, or about 4 percent of the 10-year gross domestic product. This is CBO’s "budget baseline," the benchmark against which it measures the effect of proposed legislation. The CBO said yesterday that Senate Finance Committee chairman Max Baucus' bill "would result in a net reduction in federal budget deficits of $49 billion over the 2010–2019 period." Even though the Baucus bill includes $774 billion of new spending, it would more than offset this with $409 billion in spending cuts and $393 billion in new tax and other revenues. Even so, if the Baucus bill became law, the deficit in 2019 would still be about $700 billion.
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