Monday, February 17, 2014

CBOghazi

Republicans recently applauded a report from the Congressional Budget Office (CBO) purportedly showing that the Affordable Care Act (aka Obamacare) will cause the loss of over two million jobs.  Here’s House Majority Leader Eric Cantor (R-VA): “Under Obamacare, millions of hardworking Americans will lose their jobs and those who keep them will see their hours and wages reduced.”

Understandably, the liberal blogosphere erupted.  What the report really showed was that Obamacare will reduce the number of hours worked in the economy by between 1.5 and 2 percent, amounting to the equivalent of about 2 million jobs.  Why? In large part, it’s because Obamacare reduces the number of Americans stuck in “job lock”—the feeling of being trapped in your current job because you aren’t sure you can get health insurance coverage elsewhere if you leave.  Now that Americans can get subsidized health insurance on the individual market, many no longer feel compelled to work a full-time job, so can now retire, spend more time with their families, etc.  That’s very different from suggesting people will lose their jobs.


This distinction was so important to the integrity of CBO’s report that the agency felt compelled to issue a follow-up document explaining its findings.  Here’s the key takeaway:
“Q: Will 2.5 Million People Lose Their Jobs in 2024 Because of the ACA?
A: No, we would not describe our estimates in that way.”
But the facts don’t always penetrate the right-wing fever swamps, where fake scandals like Benghazi and the IRS still linger in the conservative psyche.  Dave Weigel, hilariously, started referring to this most recent brouhaha as CBOghazi.  Even the fact-checkers felt compelled to get involved.

Yet my colleague David Weinberger thinks there’s still an argument to be made here, and even goes as far to suggest that the left’s stance amounts to “celebrating unemployment.”  I’m not sure that’s true, but let’s take David’s points at face value.  The crux of his argument is that incentivizing people to work less is toxic both individually and collectively—the latter, because it lowers the economy’s gross domestic product (GDP).

David’s right about one thing.  CBO estimates that the employment effects of Obamacare will reduce the overall size of the economic pie as some workers withdraw their labor.  But those same workers will also take home a proportionally smaller share of the economic pie because they will be earning less. So the question is, why do you care how much other people work? True, there are some hidden costs associated with these workers paying less in taxes, but reasonable people can disagree on whether those costs outweigh the benefits of insuring 13 million people.

To be sure, work disincentives are intrinsic to any effort aimed at significantly increasing health insurance coverage.  As Jonathan Chait points out, “if you give people the chance to leave the safety of employer-sponsored insurance without risking the horrors of the pre-Obamacare individual market, many of them will.”  Even the most recent Republican “proposal”, to the extent you can call it a proposal, would have approximately the same impact on the labor supply as Obamacare.

Oh, and just to be clear, we’re talking about long-run effects on employment and output.  In the short-run, as long as the economy remains depressed, the reduction in work hours should correspond with more job opportunities and more work hours for others.  That means higher incomes and higher overall employment.

David also takes issue with the employer mandate portion of Obamacare, arguing that it results in some employers cutting wages, inducing workers to supply less labor. I’m somewhat more sympathetic to this line of reasoning because I don’t think the employer mandate is very good policy.  As the Center on Budget and Policy Priorities made clear some time ago, the employer mandate gives employers a reason to have fewer full-time workers.  It also gives them a reason to have fewer low-income workers.

So why include an employer mandate at all? Mostly, it’s political. Imagine the wave of cancellation notices that could have been sent out to the nearly 55 percent of Americans with employer-based health insurance coverage.  By preventing a rush of employers to drop insurance, the mandate also serves as a mechanism for holding down budget costs.  Still, we could nix the employer mandate without undermining the basic working of the law.

Semantics aside, at the end of the day, it’s important to realize that things like CBOghazi have become par for the course for the contemporary GOP.  From death panels, to false claims about Obamacare raising the deficit, to fake horror stories of all those Americans facing enormous rate increases, we’ve now got the GOP misrepresenting the facts again.  To his credit, David avoids the most egregious of these, but still ends up drinking the GOP Kool-Aid.      

2 comments:

  1. Hey Tim, to your last point about 'horror stories' as a result of Obamacare, I personally know 3 different people who are seeing significant financial ramifications because of it. One is having her hours cut from 39.5 to 29.5, which doesn't work financially for her and her husband; my in-laws insurance costs are literally doubling; a close friend from church has a mom who has had Leukemia for 5 years now and needs a medication to keep it at bay and now because of the changes in their health plan thanks to Obamacare now have to to pay full price for the meds which cost $5k a month (their health plan was dropped and they were forced onto a different employer's plan, very high deductible, and they don't have the money to pay it).

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    Replies
    1. Hi Kris,

      Thanks for your comments. Obviously there are winners and losers when it comes to Obamacare. My comment at the end was to say that the magnitude of how much the losers "lose" is overblown. This was all, by the way, tangential to the larger point of my post.

      If you read my post, I actually said that I don't agree with the employer mandate, which is presumably the reason your friend is having her hours cut.

      I'd be curious to know about your in-laws whose premiums are doubling. What kind of plan do they have, and what was their premium before? This is all relative, of course. If their premium went up from $20 to $40, this isn't a very big deal. Beyond that, does their premium include subsidies? Obamacare was designed so that health costs are less than 8 percent of income. So the only way people experience giant premium increases is if they either make well over $100k per year or they had a catastrophic policy that didn't really offer much protection.

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