“Misrepresenting The Facts”: Obamacare Critics Still Tell Just One Side Of The Jobs Story
The economics profession is famous for its balance—as the joke goes, we always need more hands to express all the caveats to our conclusions. (“On the other hand … and on the other hand … and on the other hand…”) That is why arguments about last week’s report from the Congressional Budget Office have become so frustrating, even when accomplished scholars are the ones doing the arguing. Instead of addressing a subtle and complicated issue with (at least!) two sides, the law’s critics keep turning it into a single-sided moral diatribe about the work ethic and the supposed damage Obamacare is doing to it. A perfect illustration is a recent New York Times Economix column by Casey Mulligan, a University of Chicago economist whose own research has become part of the debate — and who, in the course of dismissing the Affordable Care Act’s virtues, took a swipe at me, as well.
The genesis of Mulligan’s article is the surprisingly famous appendix to that CBO report—the part where the agency predicts that the Affordable Care Act will be associated with a reduction in the workforce of the U.S. The bottom line of that report is that the ACA will result in 2 million fewer jobs by 2017. And, as is typical of the generally excellent CBO studies, this report is careful in describing the genesis of this conclusion. The CBO highlights that there are essentially two different sources of the reduced labor supply. The first is voluntary job leaving by those who have been “locked” into their jobs by fear of losing health insurance. Some of these individuals would happily turn down their wage to be retired or caring for children, but were previously unable to do so because they had no other insurance options; now they are able to pursue those preferred approaches. The second is those who are deterred from working by higher marginal tax rates. In particular, since the Affordable Care Act’s financial assistance phases out as income rises, the incentive to work more also declines at higher incomes. In other words, the law’s financial assistance is an implicit tax on earnings—and the tax gets higher as people earn more.
Mulligan’s article, and a number of his recent papers, are focused on the effects of these tax rates. He performs detailed computations which show that, for some individuals, that the tax rates can be quite high. In his recent post, Mulligan implies that these high tax rates are the reason for the CBO conclusions on reduced labor market participation. He dismisses the job lock effects as “a completely different issue…and far less prevalent.” He even cites the sentence on page 119-120 which ends with a footnote citing his work as evidence that CBO’s report is focused on high tax rates.
But Mulligan doesn’t mention that, in the very next paragraph, CBO dismisses his argument. According to the report, his suggested effect doesn’t impact labor supply, but rather health insurance offering (which they model elsewhere). Mulligan claims that CBO was “aware of instances of 100% tax rates,” which may be true, but the entire Appendix doesn’t mention this fact even once. It is not surprising that, unlike Mulligan, CBO economists did not harp on examples of 100% tax rates. They are uninterested in calculations that highlight extreme cases. They are more interested in modeling the overall impact on the workforce. Showing that tax rates might be high for a small number of workers is not as important as assessing what happens to aggregate labor supply.
More important, though, is Mulligan’s casual dismissal of the other reason why the labor market is shrinking, which was highlighted by a broad array of analysts. The CBO explicitly states that at least some of the labor supply reduction that they measure is from loosening “job lock,” and they never say anything which would lead the reader to conclude that job lock concerns are “far less prevalent” as an issue. That is simply Mulligan’s editorializing with no substantive basis.
Moreover, the CBO also includes a lengthy discussion of the potential positive productivity effects of loosening job lock. Since the CBO is cautious, and there is no consensus evidence on the productivity effects of job lock, they do not provide any estimates of the countervailing benefits of loosening job lock in their labor supply modeling. But at least they don’t ignore the topic, as Mulligan’s article would lead you to believe.
Mulligan says that the Obama administration “spun the high marginal tax rates as a policy achievement,” when, in fact, the post he cites is about job lock—not implicit marginal tax rates. Mulligan then goes on to misuse a quote of mine (as well as of Paul Krugman’s) that implies that we applaud the reduction in labor supply due to high marginal tax rates. Nothing could be further from the truth. My quote came from a Los Angeles Times opinion column. In it, I laid out clearly both of the effects documented by the CBO. Since this was, after all, an opinion piece, I also offered my view that—on balance—the CBO report was positive, because the benefits of the first labor supply effect (ending job lock) would be larger than the costs of the second (the implicit marginal rates). But I don’t claim that I know for sure that this is the case. Krugman’s quote came as part of a series of posts he wrote, describing the economics case for allowing those who are better off not working to leave their jobs rather than to continue to work just to get health insurance. Krugman also gave a more balanced view, acknowledging the downside of implicit marginal tax rates but arguing that, in the end, the upsides were greater.
Mulligan—like so many of the law’s critics, in and out of the economics profession—gives a more one-sided view. He talks only about the marginal tax rates. A reader who relied exclusively on his column would have no idea the CBO cited multiple reasons for the shrinking workforce—and that some of these reasons were utterly defensible. Ironically, while making a surprisingly moral case against examples of 100% tax rates, he ignores the moral case for leveling the playing field by breaking the link between work and insurance, so that workers are not chained to jobs where the value of their compensation is well below their disutility of working.
The Affordable Care Act, like any major reform, has its virtues and its flaws. The best economists, like the best public officials, are the ones who deal with both.
By: Jonathan Gruber, The New Republic, February 13, 2014
“Inequality, Dignity And Freedom”: People Least Inclined To Respect Efforts Of Ordinary Workers Are Winners Of The Wealth Lottery
Now that the Congressional Budget Office has explicitly denied saying that Obamacare destroys jobs, some (though by no means all) Republicans have stopped lying about that issue and turned to a different argument. O.K., they concede, any reduction in working hours because of health reform will be a voluntary choice by the workers themselves — but it’s still a bad thing because, as Representative Paul Ryan puts it, they’ll lose “the dignity of work.”
So let’s talk about what that means in 21st-century America.
It’s all very well to talk in the abstract about the dignity of work, but to suggest that workers can have equal dignity despite huge inequality in pay is just silly. In 2012, the top 40 hedge fund managers and traders were paid a combined $16.7 billion, equivalent to the wages of 400,000 ordinary workers. Given that kind of disparity, can anyone really believe in the equal dignity of work?
In fact, the people who seem least inclined to respect the efforts of ordinary workers are the winners of the wealth lottery. Over the past few months, we’ve been harangued by a procession of angry billionaires, furious that they’re not receiving the deference, the acknowledgment of their superiority, that they believe is their due. For example, last week the investor Sam Zell went on CNN Money to defend the 1 percent against “envy,” and he asserted that “the 1 percent work harder. The 1 percent are much bigger factors in all forms of our society.” Dignity for all!
And there’s another group that doesn’t respect workers: Republican politicians. In 2012, Representative Eric Cantor, the House majority leader, infamously marked Labor Day with a Twitter post celebrating … people who start their own businesses. Perhaps Mr. Cantor was chastened by the backlash to that post; at a recent G.O.P. retreat, he reportedly urged his colleagues to show some respect for Americans who don’t own businesses, who work for someone else. The clear implication was that they haven’t shown that kind of respect in the past.
On the whole, working Americans are better at appreciating their own worth than either the wealthy or conservative politicians are at showing them even minimal respect. Still, tens of millions of Americans know from experience that hard work isn’t enough to provide financial security or a decent education for their children, and many either couldn’t get health insurance or were desperately afraid of losing jobs that came with insurance until the Affordable Care Act kicked in last month. In the face of that kind of everyday struggle, talk about the dignity of work rings hollow.
So what would give working Americans more dignity in their lives, despite huge income disparities? How about assuring them that the essentials — health care, opportunity for their children, a minimal income — will be there even if their boss fires them or their jobs are shipped overseas?
Think about it: Has anything done as much to enhance the dignity of American seniors, to rescue them from the penury and dependence that were once so common among the elderly, as Social Security and Medicare? Inside the Beltway, fiscal scolds have turned “entitlements” into a bad word, but it’s precisely the fact that Americans are entitled to collect Social Security and be covered by Medicare, no questions asked, that makes these programs so empowering and liberating.
Conversely, the drive by conservatives to dismantle much of the social safety net, to replace it with minimal programs and private charity, is, in effect, an effort to strip away the dignity of lower-income workers.
And it’s something else: an assault on their freedom.
Modern American conservatives talk a lot about freedom, and deride liberals for advocating a “nanny state.” But when it comes to Americans down on their luck, conservatives become insultingly paternalistic, as comfortable congressmen lecture struggling families on the dignity of work. And they also become advocates of highly intrusive government. For example, House Republicans tried to introduce a provision into the farm bill that would have allowed states to mandate drug testing for food stamp recipients. (A commenter on my blog suggested mandatory drug tests for employees of too-big-to-fail financial institutions, which receive large implicit subsidies. Now that would really cause a panic.)
The truth is that if you really care about the dignity and freedom of American workers, you should favor more, not fewer, entitlements, a stronger, not weaker, social safety net.
And you should, in particular, support and celebrate health reform. Never mind all those claims that Obamacare is slavery; the reality is that the Affordable Care Act will empower millions of Americans, giving them exactly the kind of dignity and freedom politicians only pretend to love.
By: Paul Krugman, Op-Ed Columnist, The New York Times, February 13, 2014
“John Boehner’s Sunshine Band”: A Cartoon Festival Of Illusions That Would Embarrass Disney’s Brilliant Fantasists
From now on, it’s the Zip-a-dee-doo-dah House.
The political world stopped for a moment when Speaker John Boehner broke into the jaunty old Disney tune — “My, oh my, what a wonderful day” — after a news conference in which he threw in the towel on the debt ceiling fight. He found himself trapped between the immovable object of Democrats determined that they’d never again let Republicans take the nation’s credit hostage and the irresistible force of a dysfunctional, crisis-addicted GOP majority of which he is the putative leader. Boehner decided to skip away in song.
Feb. 11, 2014, was , in fact, a wonderful day. It marked the end of a dismal experiment that saw the right wing of the conservative movement do all it could to make the United States look like a country incapable of governing itself rationally. We were so caught up in our own nasty politics that we forgot that we’re supposed to be a model for how democracy should work. There will be other episodes of foolishness, but the debt-ceiling bomb finally has been defused.
Moreover, there were lessons here that should be applied from now on. The first is that refusing to negotiate over matters that should not be subject to negotiation is the sensible thing to do. President Obama learned this the hard way after the debilitating budget battle of 2011.
It’s true that both parties have played political games around the debt ceiling. But until our recent tea party turn, politicians kept these symbolic skirmishes within safe limits. The 28 House Republicans who faced reality by voting to move on for another year sent a signal that they want to return to those prudent habits.
But this means that 199 Republicans voted to go over the cliff. Or, to be more precise, many pretended they were willing to take that leap to appease big conservative funders and organizations, knowing that a minority of their GOP colleagues and the Democrats would bail them out. These profiles in convenience included Reps. Paul Ryan (R-Wis.), chairman of the Budget Committee, and Cathy McMorris Rodgers (R-Wash.), who chairs the House Republican Conference.
This tells us something important: The House Republican majority now governs largely through gestures and is driven almost entirely by internal party fractiousness and narrow political imperatives. When Boehner tried to tie the debt ceiling vote to a popular proposal to restore modest cuts to military pensions, Rep. Tom Cotton (R-Ark.) complained that he could not vote to raise the debt limit but also didn’t want to vote against the pension restoration.
It’s a perfect parable: Cotton, an Army veteran who is trying to unseat Sen. Mark Pryor, a Democrat, this fall, felt a need to placate pro-spending and anti-spending interest groups at the same time and didn’t want Boehner to call his bluff. No wonder the speaker gave up on mollifying his caucus and, bless him, offered his ironic melody about all the sunshine coming his way.
Something else happened on Tuesday: Fully 193 of the 195 Democrats voting were prepared to shoulder the burden of hiking the debt ceiling. This vote, like many before it, proved that there is a moderate governing majority in the House. It could work its will again and again if only Boehner were willing to put bills on the floor and give practical-minded Republicans a chance join with Democrats to enact them.
This proposition deserves a test on immigration reform. Supporters should be thinking about a discharge petition to force Boehner’s hand — or maybe even to allow him to do what he’s said privately he’d like to do. If a majority of House members signed it, there could be a successful vote for the immigration bill the Senate already passed.
The largest lesson is to those who make a living bemoaning Washington gridlock and demanding a return to old-fashioned, bipartisan, good-faith negotiations.
That would be very nice if we were dealing with the GOP of yesteryear. We’re not. The debt-ceiling vote confirms what has long been obvious: Getting to yes on anything begins with an acknowledgment of how many members of Boehner’s caucus are ready to blow up our governing process and how many others feign a desire to do so to avoid political pain from their right.
The Zip-a-dee-doo-dah House has become a cartoon festival of illusions that would embarrass Disney’s brilliant fantasists. Exposing the fantasies is the first step toward sunshine.
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, February 12, 2014
“Recycling For Fun And Profit”: The Imminent Return Of The ‘Clinton Scandals’
Hillary Clinton may well run for president in 2016. Or she may not. But while the nation awaits her decision, both jittery Republican politicians and titillated political journalists – often in concert – will seize upon any excuse to recycle those old “Clinton scandals.”
The latest trip around this endless loop began when Senator Rand Paul, the Kentucky Republican of extremist pedigree and nebulous appeal, deflected a question about his party’s “war on women” by yapping about Monica Lewinsky, former “inappropriate” playmate of Bill Clinton. Then the Free Beacon, a right-wing Washington tabloid, published some old papers about the “ruthless” Hillary and the “loony-toon Monica” from the archives of the late Diane Blair, a longtime and intimate Arkansas friend of the Clintons.
Suddenly the media frenzy of the Nineties resumed, as if there had never even been a pause.
What was truly bizarre in Senator Paul’s outburst was his suggestion that somehow Hillary Clinton is implicated in the Lewinsky affair (which he and others have wrongly characterized as “harassment” or victimization of the young White House intern). Most voters will consider that kind of insinuation more repulsive than persuasive.
Still, there were other long-running pseudo-scandals that featured Hillary. Are we doomed to revisit every crackpot allegation and conspiracy theory? Very likely so, if only because that brand of moonshine brought in wads and wads of money from the same credulous wingnuts who follow Fox News. Last week many of them surely sent money to Senator Paul or clicked on the Free Beacon.
The Clintons are still big box office in the mainstream media as well. Our historical amnesia will make the old charges against them sound new again. And if there’s a sucker born every minute, a lot of minutes have passed since they left the White House.
To prepare for the coming tsunami of bullbleep, a brief guide to past scandals may prove useful. Then when another lightweight politician or television personality starts spouting about Whitewater or Filegate or Travelgate – about which he or she actually knows approximately nothing – pertinent facts will be available. (For the longer version, with colorful narrative, consult The Hunting of the President.)
Whitewater: Kenneth Starr spent roughly millions of dollars trying to find evidence of chicanery in a land deal that lost money for the Clintons – and his probe ended up demonstrating their innocence, like several earlier investigations. Having whispered to gullible journalists that he was about to indict Hillary in December 1996, Starr instead abruptly resigned as independent counsel in February 1997, knowing he had no case against her.
Indeed, the Clintons have undergone more thorough and invasive financial vetting than any couple in American history, from the exhaustive Starr investigation through Hillary’s Senate financial disclosures to the Clinton Foundation donors disclosed before her nomination as Secretary of State.
Travelgate: Feverish coverage of Hillary Clinton’s firing of several White House employees who handled press travel arrangements neglected some salient facts –such as the suspicious absence of accounting records for millions of dollars expended by the White House Travel Office, the Travel Office director’s offer to plead guilty to embezzlement, and evidence that he had accepted lavish gifts from an air charter company. The First Lady and her staff didn’t handle the controversy skillfully, but she had plenty of reason to suspect chicanery. And again, exhaustive investigation found no intentional wrongdoing by her.
Filegate: Sensational accusations that Hillary Clinton had ordered up FBI background files to target political opponents soon became a Republican and media obsession, with respectable figures warning that Filegate would be the Clintons’ Watergate. “Where’s the outrage?” cried Bob Dole, the 1996 Republican presidential nominee. Starr investigated the matter and found no evidence of wrongdoing. Finally, in 2010, a Reagan-appointed federal judge mockingly dismissed a civil lawsuit based on the allegations, saying “there’s no there there.”
In truth, there never was.
By: Joe Conason, The National Memo, February 14, 2014
“Coming Soon, The United States Of Comcast”: Comcast Time-Warner Merger Will Create Orwellian Monopoly
In George Orwell’s 1984, the world is divided into three totalitarian superstates, but in the world of broadband and cable television only a single company may soon reign supreme. Comcast announced today it has agreed to acquire Time-Warner, its largest and only significant competitor in the cable and broadband business.
Some financial analysts are claiming Verizon will still provide stiff competition to the new mega-company. “Verizon is offering video service in the most markets Comcast is participating in,” a Yahoo Finance reporter declared. But Verizon’s FiOS service is available to only 15 percent of Comcast’s existing customers, and in the fall 2011, Comcast and Verizon reached an agreement that solidified Comcast’s control over the non-wireless industry. In exchange for parts of the wireless spectrum that Comcast owned, Verizon agreed not to expand its FiOS network, which offers far superior service to that of Comcast or Time-Warner.
The combined company would now serve about thirty percent of the cable television market. That doesn’t seem large until you realize that it would have a virtual monopoly in 19 of the 20 largest media markets. (Here’s a useful map.) It would also serve over half of the customers who buy “triple-play” cable-telephone-broadband services. (I haven’t seen figures on the companies’ high-speed internet penetration, but according to the National Broadband Plan, only about 15 percent of consumers have a choice of more than one plan.) The companies claim that the merger wouldn’t threaten consumers because they operate in different markets. But that’s ludicrous. The merger would replace two monopolists (that is, very large companies with monopoly power over a market) by an even more powerful single monopoly, even better equipped to discourage competition.
Large companies, even monopolies, are not necessarily contrary to the public interest if they are strictly and intelligently regulated. But in the wake of the 1996 telecommunications act (which idiotically assumed that deregulation would lead to competition) and a pliant Federal Communications Commission, the big telecom companies have progressively avoided regulation. As a result, they are already committing many of the abuses that come with monopoly power, and if the new merger passes muster, will do so with a vengeance.
Monopolies make it more difficult for new entrants to compete. As a result, they allow the larger companies to raise prices without fearing a loss of market share. Since deregulation in 1996, cable prices have risen at about three times the rate of inflation. According to a study from the Free Press, prices for expanded cable service (what most consumers purchase) went up five percent from 2008 top 2013 –almost four times the rate of inflation. Monopolies also allow companies to neglect service to consumers. The American Customer Satisfaction Index rated Comcast and Time-Warner the two worst cable and broadband companies.
Monopolies can also have a corrosive effect on related industries. The big cable companies have been able to squeeze cable content providers—even to cut off access to customers, as Time-Warner did with CBS last fall. If they also own content providers, as Comcast does, they can harm rival content providers—as Comcast seems to be doing to Netflix.
Monopolies also slow innovation, because companies have less incentive to replace older equipment. That was a major argument for the breakup of the old AT&T telephone monopoly in 1982. According to a report from the New America Foundation’s, Open Technology Institute, the United States has lagged behind other countries in the price and quality of its broadband service. The American city with the highest quality internet is Chattanooga, Tennessee, which gets its service from a municipally owned provider.
Under the new merger, the new company—let’s call it Xsanity—will be in an even stronger position to raise prices, neglect service to its customers, squeeze content providers, harm rival content providers and slow innovation. If local, state or national officials attempt to police them, the single big company will have even greater clout. Of course, Comcast will promise to keep prices down, enforce net neutrality, and spur innovation. There is reason, however, not to take these promises seriously.
When Comcast and Verizon were seeking FCC approval of their agreement in 2011, they promised that they would create a technology/research and development joint venture. Comcast Executive Vice President David Cohen told a Senate Subcommittee that “by enhancing the Cable Companies’ and Verizon Wireless’s own products and services, the Joint Venture will … spur other companies to respond, perpetuating a cycle of competitive investment and innovation.” Two years later, the two companies abandoned the joint venture.
In short, the only beneficiary of these merger will be Xsanity’s management and stock holders. Consumers will get screwed. The American telecom/broadband industry, already lagging behind South Korea and other upstarts, will fall further behind. Of course, the FCC or the Justice Department could block the merger. But what has happened before does not inspire confidence. Obama’s Justice Department did threaten to block the merge of AT&T and T-Mobile, USA, but Comcast has strong ties to the administration—Comcast’s CEO Brian Roberts is one of Obama’s golfing buddies and Cohen has been a major fundraiser—and in the past, the administration has been soft on the company. The FCC approved the merger of Comcast and NBC and the agreement between Comcast and Verizon.
The merger of these giants on the top of American business—not simply insulated from regulation but with the power and money to block any future attempt at regulation—is an awful prospect to contemplate, but it could well come to pass.
By: John B. Judis, The New Republic, February 13, 2014
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