“Obamacare Won’t Cause Society To Collapse”: Americans Choosing To Work Less Doesn’t Mean They’re Losing Their Jobs
A small war has erupted over the recent Congressional Budget Office report on the employment effects of the Affordable Care Act. Last week, the CBO itself felt compelled to offer a lengthy and detailed rebuttal to the spin that millions of Americans will “lose their jobs” as a result of Obamacare.
So let’s first be clear about what the CBO report concluded: As a result of the ACA, millions of Americans will choose to work less, if at all. That doesn’t mean that they will “lose their jobs.” Rather, it means that many will choose to give up working double-shifts just so they can make enough to afford health insurance or leave jobs they hate but have kept simply because they can’t maintain their coverage otherwise. In virtually all cases, these are decisions people are making for themselves and presumably welcome. As the CBO points out, as opposed to “losing their jobs,” in which case we’d all feel sad for them, friends and neighbors will invariably feel happy for these individuals.
But, of course, not everyone. To conservatives, the CBO report demonstrates what they have said about Obamacare – and about the government dole generally – all along: It creates “perverse incentives” encouraging people not to work.
The conservative argument is based on several underlying assumptions, like a DirecTV ad: When you give things to people, they work less. When they work less, they’re worse off. When they’re worse off, they demand more. When they demand more, liberals give them more. And when liberals give them more, society collapses. Don’t have society collapse: Stop the Affordable Care Act.
Of course, the CBO report did in fact find that providing this health coverage will induce millions of people to work less or not at all. So let’s look a little more closely at this syllogism.
It’s undoubtedly true that if you give things to some people, they’ll work less. But it’s not true in all cases. Unfortunately, this sort of assertion is a staple of anti-government rhetoric: For any government expenditure, it can be shown to have enriched some deadbeat or rip-off artist. But so has the derivatives market. Meanwhile, plenty of people work more when you give them more.
In fact, most conservative policies these days are based on the idea that certain people need to be given more to induce them to work harder and to produce more. Of course, those highly-sensitive individuals are the rich and corporate executives, who, without more money (including from the government) simply wouldn’t keep working and creating. By the same logic, though, we should extend even more benefits to more working people – perhaps even raise wages at the low end – to encourage them to work. But for some reason low-income Americans, unlike the wealthy, are presumed to work best if we take incentives and benefits away from them.
Moreover, as the CBO pointed out, there is indeed a “perverse” work disincentive in Obamacare – but it’s the opposite of what conservatives have taken the report to say. Rather, it’s that, as people’s incomes rise, they get less support – a “tax,” in effect, on work. And, of course, taxes are bad. So we actually should be less stingy about giving even better health care benefits to even more people.
Of course, we’d need to pay for those expanded benefits, which appears to be the real point of the “collapse of our culture” argument – not so much that people won’t work as that people who do work will wind up having to support them. But there’s then an obvious way to pay for these benefits if you want to encourage work: tax unearned income (which accrues, by definition, to nonworkers) at a higher rate than we tax earned income. And if giving people money or benefits for which they didn’t have to work encourages sloth, then we’d best start taxing away all inheritance post-haste, as well.
We don’t, of course, because that would tax primarily the rich. But most parents want to leave something behind for their children, because we know that getting a leg up is usually the way to climb even higher. Few people throw their kids out of the house with no means of support, on the grounds that that will make them more successful. Nevertheless, many argue that helping other people’s children only cripples them as opposed to, well, helping them.
It is incumbent upon liberals to assert not just that children “deserve” health care or that people “shouldn’t have to” work grueling hours and still not make ends meet. Such assertions are, after all, merely subjective. But if investments in human capital actually improve total productivity, then the only argument against is that “the poor you always have with you” actually is a commandment, not a condemnation. And various studies (such as this and this) have shown – not surprisingly – that health care is one of the better bets for boosting productivity and workforce engagement.
And productivity, after all, is really the issue. No one longs for the days when people had to toil every waking moment to scrape out subsistence livings, instead of a modern world where a 40-hour work week can enable one to produce more economic value than the greatest medieval monarchs could even dream of. So do we really think it’s good if more and more Americans feel compelled to work 80 hours a week just to make ends meet? Would it mean our economy, or our morals, were headed downhill if more Americans decided they didn’t need to work two shifts every day but could get by, having all they want, on only one?
In short, it isn’t clear that more work is self-evidently good. Or that society will collapse if people work a little less – let alone if it makes them more productive overall – because they have health care. Just as it didn’t collapse when we moved to a 40-hour workweek and ended child labor. But it’s possible. After all, when I can’t get cable, I do get angry.
By: Eric B. Schnurer, U. S. News and World Report, February 22, 2014
“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
“The GOP’s Health Crisis”: The Republican Party’s Worst Nightmare Is Coming True
Oh dear. The Republican Party’s worst nightmare is coming true. Obamacare is working.
The news that nearly 1.2 million people signed up last month for insurance through the Affordable Care Act exchanges is highly inconvenient for GOP candidates nationwide. It looks as if the party’s two-word strategy for the fall election — bash Obamacare — will need to be revised.
Wednesday’s status report on the health-insurance reforms was by far the best news for Democrats and the Obama administration since the program’s incompetent launch. January was the first month when new enrollments surpassed expectations, as the balky HealthCare.gov Web site began functioning more or less as intended.
Cumulatively, 3.3 million people had chosen insurance plans through the state and federal exchanges by the end of January. That is fewer than the administration had originally hoped but well above the predictions of critics who believed — or hoped — that the program would never succeed. The Congressional Budget Office projects that 6 million people will have chosen plans through Obamacare when the initial enrollment period ends March 31, down from a pre-launch estimate of 7 million. Not bad at all.
The numbers are even more encouraging when you look more closely. The proportion of young people — from 18 and 34 — who chose insurance plans through the exchanges increased slightly to 27 percent, compared with an average of 24 percent in previous months. This is important because premiums would have to rise if not enough young, healthy people enrolled.
The administration had hoped the percentage of young enrollees would reach about 40 percent. But the January figure — and the rising trend — should put to rest any notion that the whole program could go down the drain in an actuarial “death spiral.” Administration officials are convinced this won’t happen.
According to the January report, about 80 percent of those signing up for Obamacare are eligible for subsidies to help them pay for insurance. The administration believes, but does not have the data to prove, that most of the new enrollees were previously uninsured.
These figures do not include the additional people who have been determined newly eligible for insurance under the federal-state Medicaid program. Overall, the program appears to be doing exactly what it was designed to do: make health insurance accessible and affordable for those who truly need it.
The Affordable Care Act could be doing even more if Republican governors such as Rick Perry of Texas and Rick Scott of Florida were not doing all they could to sabotage the program. But even in states that refused to set up their own health-insurance exchanges or to expand Medicaid eligibility, growing numbers of the uninsured are obtaining coverage.
Politically, this is terrible news for Republicans who hoped that the botched Web site launch and President Obama’s misleading “you can keep your insurance” pledge would be the gifts that kept on giving.
Bashing Obamacare will always have resonance for the GOP’s conservative base. But if you’re trying to win the votes of independents, it’s more profitable to target a failed program than a successful one.
Critics will doubtless try to blame Obamacare for anything bad that happens to anyone’s health insurance before the November election. But all of this is just noise without the central narrative of a “failed program.”
Attack ads against vulnerable Democratic senators, such as Kay Hagan of North Carolina and Mary Landrieu of Louisiana, are already trying to paint Obamacare as a character defect — the president and his supporters “lied” when they said everyone could keep their insurance. The response from Democrats should be to shift the focus to the actual program and its impact. Imperiled incumbents can point to constituents who are benefiting from the Affordable Care Act in life-changing ways.
If you assume that Affordable Care Act enrollment remains on its current trajectory, the February numbers should look even better. Polls consistently show that even if voters have mixed views about the health-care reforms, most do not want to see them repealed. By the fall, the whole Obamacare-is-a-disaster line of attack could sound stale and irrelevant.
Republicans may even have to take the drastic step of saying what they advocate, rather than harping on what they oppose. Is there a GOP plan to cover those with preexisting conditions? To cover the working poor? Is expanding access to health insurance really such an awful thing?
Sorry, I didn’t catch what you said.
By: Eugene Robinson, Opinion Writer, The Washington Post, February 13, 2014
“Republicans Are Losing All Credibility On ObamaCare”: At Some Point, Voters Are Going To Stop Paying Attention To Their Scare Tactics
Even before President Obama signed the Affordable Care Act into law, GOP critics assailed it as a socialist, job-killing overreach indicative of a government run amok. In the years since, we’ve seen no shortage of scare-mongering and hand-wringing about how the law would harm Americans and bring the republic to an ignominious end.
Yet as ObamaCare gradually went into effect, reality began to undercut the thrust of that argument. Remember those terrifying death panels Sarah Palin warned us about? And over the past few months in particular, facts have shot down a handful of the more apocalyptic claims about the law.
In the most recent instance, a report last week from the Congressional Budget Office estimated that ObamaCare would trim the labor force by 2 million full-time jobs by 2017, and by 2.5 million come 2024. Critics seized on that as proof that the law would indeed spook businesses and stifle job growth.
What the report actually showed, though, was not a dearth of jobs, but a dearth of labor. Incentives in ObamaCare that make insurance cheaper and easier to obtain, the report suggested, would encourage some people to retire earlier or work less, thus shrinking the labor pool.
With spin and misinformation flying about, the CBO on Monday made that point clear.
“Because the longer-term reduction in work is expected to come almost entirely from a decline in the amount of labor that workers choose to supply in response to the changes in their incentives, we do not think it is accurate to say that the reduction stems from people “losing” their jobs,” CBO head Doug Elmendorf wrote.
So much for that talking point.
The same CBO report also undercut another meme on the right, that ObamaCare contains a big bailout for insurance companies.
The scuttlebutt involves the risk corridors built into the law, which cap how much insurance companies can make or lose in their first three years on the exchange marketplace. (You can read a more thorough explanation on risk corridors here.) Since taxpayers could theoretically be on the hook for covering the losses of flopping companies, a cadre of Republicans, led by Sen. Marco Rubio (R-Fla.), labeled the provision a “bailout” and vowed to repeal it.
As it turns out, the CBO found that insurance companies would receive $8 billion — but pay back double to the government. In other words, the supposed bailout — which was really just standard actuarial practice to begin with, and not a literal bailout — would actually save the government billions of dollars.
Then there’s the zombie claim that lawmakers and their staffs are exempt from ObamaCare. Last month, Sen. Ron Johnson (R-Wis.) said he was filing suit over that boondoggle, arguing the administration had “exceeded its legal authority” in “arranging for me and other members of Congress and their staffs to receive benefits intentionally ruled out by” ObamaCare.
In truth, the law does offer a unique subsidy to Capitol Hill employees to offset the cost of obtaining insurance through the exchanges. But lawmakers and staffers only qualified for that subsidy because the law, via an attempted GOP poison pill amendment, stripped them of federally subsidized coverage and forced them onto the exchanges in the first place. Even National Review thoroughly debunked the exemption claim.
Republicans also warned that Healthcare.gov’s early glitches exposed the entire law as an unworkable train wreck. Writing in The Hill, Rep. Bill Johnson (R-Ohio) called the problems “catastrophic,” and likened the site to cooked eggs: “You see, you can’t recook eggs!”
Following a massive IT effort though, the site is now running much smoother, and enrollments are surging as a result.
That brings up another ObamaCare bogeyman: the dreaded death spiral.
ObamaCare needs a bunch of young enrollees to offset the cost of enrolling older folks. If not enough young people sign up, premiums for everyone else could spike and the system could crash.
Yet despite the best efforts from some on the right to convince young adults not to enroll — one ad campaign featured a creepy Uncle Sam sexually assaulting young patients — the death spiral, too, was more myth than reality.
Enrollment among young adults has indeed been lower than the administration’s target, but it’s expected to surge as the enrollment deadline nears. And even if the current demographic breakdown remains unchanged, an analysis from the Kaiser Family Foundation determined the consequences “are not as great as conventional wisdom might suggest.” In a worst-case scenario, the report found, the effect on premiums from an unbalanced pool of enrollees would still be “well below the level that would trigger a ‘death spiral.'”
Phew. That’s a lot of debunked arguments. Next thing you know, critics will be trying to falsely claim the law won’t help enough people get coverage. Oh, wait.
Now, the GOP was right to be skeptical of Obama’s claim that everyone could keep their health insurance under ObamaCare. That turned out to not be the case.
But the party’s overall success rate on loaded ObamaCare allegations is terrible, and is only getting worse. The danger is that at some point, voters are going to stop paying attention.
By: Jon Terbush, The Week, February 11, 2014
“Bette In Spokane”: Consumers Hear More About The Horror Stories Than The Follow-Up Reports Proving The Horror Stories Wrong
For the last several months, conservative opponents of the Affordable Care Act, including congressional Republicans, have encouraged Americans to contact the GOP with “Obamacare horror stories.” The more the right can highlight those adversely affected by the law, the argument goes, the more ACA critics can undermine public support for reform.
To that end, Rep. Cathy McMorris Rodgers (R-Wash.), the House Republican Conference chair, used her party’s official response to the State of the Union to highlight a woman in her home state who, she claimed, was better off before the law.
“Not long ago, I got a letter from Bette in Spokane, who had hoped the president’s health care law would save her money, but found out instead her premiums were going up nearly $700 a month…. No, we shouldn’t go back to the way things were, but this law is not working.”
Almost immediately, red flags went up among those who follow the health care debate closely. And for good reason: over the last several months, Republicans and their allies have put a spotlight on quite a few “Obamacare victims,” but the stories invariably fell apart after modest scrutiny.
With this in mind, it was only natural to wonder about the circumstances surrounding “Bette in Spokane,” who presumably represented the single best piece of anecdotal evidence McMorris Rodgers could find as part of her ACA indictment. Fortunately, we now have a better sense of the relevant details, which, like so many “Obamacare horror stories,” don’t help the Republicans’ case at all.
The local newspaper, the Spokesman-Review, tracked down Bette Grenier, who wrote the letter used in McMorris Rodgers’ remarks.
[T]he “nearly $700 per month” increase in her premium that McMorris Rodgers cited in Tuesday night’s GOP response to the State of the Union address was based on one of the pricier options, a $1,200-a-month replacement plan that was pitched by Asuris Northwest to Grenier and her husband, Don.
The carrier also offered a less expensive, $1,052-per-month option in lieu of their soon-to-be-discontinued catastrophic coverage plan. And, Grenier acknowledged the couple probably could have shaved another $100 a month off the replacement policy costs by purchasing them from the state’s online portal, the Health Plan Finder website, but they chose to avoid the government health exchanges.
In a familiar situation, the horror story isn’t as horrible as we’d been led to believe. In this case, “Bette in Spokane” didn’t have a health care plan so much as she had insurance that covered catastrophic coverage – and nothing else – with a $10,000 deductible.
Because the law transitions consumers from these bare-bones plans to actual coverage – plans that offer meaningful health care security – she had to choose real insurance. For reasons that are unclear, “Bette in Spokane” refused to check the exchange marketplace to see if she could find a good deal and instead chose an expensive plan from her existing insurer.
Also note, it’s not too late for “Bette in Spokane” – the state insurance commissioner said his office can help her and her family review the available options.
In the official Republican Party’s SOTU response, all of these relevant details were ignored. Viewers were led to believe the law forced higher premiums on this consumer as part of some kind of inherent flaw in the system, but that’s not at all what happened in reality.
And circling back to the last time we talked about a story like this, it’s worth emphasizing that there are Americans who’ve been adversely affected by health care reform. In a nation of 314 million people, it will be possible to find some who didn’t benefit as much as everyone else. In fact, it’s inevitable.
But in the rush to condemn the law, the public has been confronted repeatedly with anecdotal evidence that’s completely fallen apart. Worse, consumers invariably hear more about the horror stories than the follow-up reports proving the horror stories wrong.
If the Affordable Care Act were really as awful as the right claims, shouldn’t it be easier to find genuine examples of Obamacare’s “losers”?
By: Steve Benen, The Maddow Blog, January 31, 2014
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