This is the Cato Daily Podcast for Thursday, December 3rd, 2009.

I'm Caleb Brown.

The Congressional Budget Office can do a much better job projecting spending in the future when Congress does what it says it will do.

Therein lies the rub.

Dan Mitchell, Senior Fellow at the Cato Institute, believes Congress's gaming of the CBO process makes Obamacare a budget buster.

The assumptions made by the Congressional Budget Office and the Joint Committee on Taxation

are rather flawed because they don't capture the way people

respond to changed incentives.

If the government starts offering a handout for something, obviously some people are going to change their behavior to take advantage

of that handout. And likewise, some of the tax increases to finance government-run health care,

while the people who are hit by those tax increases will change

their behavior as well. As a result, the government is going to wind up spending a

lot more than they're projecting and they're not going to collect nearly as much

tax as they think they will.

And as a result, this thing will be vastly more expensive.

Blow a hole in the budget as people sometimes like to say,

but it's just a giant step toward a welfare state.

The projections for the cost savings that Obamacare is supposed to create are based on hundreds of billions of dollars and cuts to Medicare.

If you look at the overall Obamacare proposal, there's more than a trillion dollars of

new spending, at least that's what they're claiming,

and then there's more than 500 billion dollars of higher taxes, but part of the new spending

is financed by at least claimed reductions in the growth rate of Medicare

...