“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
“Don’t Bank On It”: Can Republicans Govern If They Win In 2014?
What’s the worst-case scenario for Republicans in November? Maybe victory.
A Republican takeover of the Senate is somewhere between plausible and very likely. (If you want more exact predictions, you have to provide a less volatile political climate.) So for argument’s sake, let’s assume Republican candidates roll to victory from Alaska to North Carolina. The Democrats’ 54-46 Senate majority is supplanted by a narrower Republican majority, with Kentucky Republican Mitch McConnell or someone of nearly equal skill installed as majority leader.
The Republicans would then control both the House and the Senate. In the Senate, the most enthusiastic partisans in the new majority would be eager to dispense with the filibuster on legislation, allowing bills to pass on party-line Republican votes. Let’s assume that happens, too.
What exactly would they do with these newfound powers?
They wouldn’t pass a jobs bill because they don’t want President Barack Obama to gain credit for an improving economy. Besides, they’ve convinced themselves that jobs bills don’t work — at least until a Republican occupies the White House.
What about health care legislation? Jonathan Bernstein parses the prospects on his blog. According to a CBS News poll in January, only 34 percent of Americans support repealing Obamacare; it would be a nonstarter even if the health care and insurance industries weren’t already too far down the Obamacare road. If Republicans took the plunge to create legislation, the real-world impacts of their proposals would be scored by the Congressional Budget Office and outside policy groups. It’s hard to imagine what Republicans could devise that would satisfy their ideological needs without undermining health security for millions while increasing the deficit. There’s a reason they keep talking about health care but never get around to doing anything.
How about immigration? Senate legislation drafted by Republicans would look nothing like the bipartisan immigration bill passed by the Senate last June. Senate Democrats would have little incentive to support a vastly more conservative bill, which would rely even more on employment enforcement and militarization of the border while offering far-less-generous terms to undocumented immigrants. Under such circumstances, House Democrats would surely abandon House Republicans to their own devices, as well.
Without Democratic votes, the House cannot pass anything more comprehensive than an immigration crackdown. The fate of the 11 million undocumented immigrants in the U.S. would be unresolved at best. The political failure would be a fiasco, further undermining Republicans among Hispanic and Asian voters while simultaneously opening the door to another round of nativist big-talk among Republican presidential hopefuls. (The U.S. Chamber of Commerce would express its heartfelt disappointment, then funnel millions of dollars to Republican incumbents.)
The party’s internal conflicts would all be exacerbated by a Senate takeover. Imagine, for example, how much leverage a narrow Republican majority would grant to Senator Ted Cruz — and the chaos that could ensue.
In its current incarnation, the party is more or less an anti-tax lobby grafted to a Sons of the Confederacy chapter. Genuine areas of policy consensus among Republicans are few — spending cuts for the poor, tax cuts for the rich and promotion of incumbent dirty energy industries at the expense of Obama’s green agenda. None of these is popular. (Although in coal and oil states the energy reversal would be welcome. Keystone, too, if its construction is not already underway in 2015.) All would face probable Obama vetoes.
What’s left? Entitlement reform? The Republicans’ elderly base is not eager for changes in Medicare or Social Security. That leaves culture warrior stuff, mostly. New abortion restrictions, perhaps? One last lunge against gay rights? Not much electoral magic there.
The party’s capacity to please its right-wing cultural base, its anti-tax, anti-regulatory donor base and a slim majority of American voters is almost nonexistent. Democratic control of the Senate has shielded Republicans both from their own divisions and from the unpopularity of their causes.
Indeed, it’s possible that the Boschian hellscape over which John Boehner presides in the 113th Congress could actually get uglier and more bizarre if Republicans win the Senate in the 114th. I’m not sure even these Republicans deserve that.
By: Francis Wilkinson, The National Memo, February 11, 2014
“Deficit Of Truth”: What Republicans Hope You Don’t Know And Never Find Out
Listening to Republicans in Congress wailing incessantly about our spendthrift culture raises a nagging question: What would they do, besides talking, if they actually wanted to reduce federal deficits and, eventually, the national debt?
First, they would admit that President Obama’s policies, including health care reform, have already reduced deficits sharply, as promised. Second, they would desist from their hostage-taking tactics over the debt ceiling, which have only damaged America’s economy and international prestige. And then they would finally admit that basic investment and job creation, rather than cutting food stamps, represent the best way to reduce both deficits and debt, indeed the only way — through economic growth.
Fortunately for those Republicans and sadly for everyone else, the American public has little comprehension of current fiscal realities. Most people don’t even know that the deficit is shrinking rather than growing. According to a poll released on Feb. 4 by The Huffington Post and You.gov, well over half believe the budget deficit has increased since 2009, while less than 20 percent are aware that it has steadily decreased. (Another 14 percent believe the deficit has remained constant during Obama’s presidency.)
Unsurprisingly, perhaps, it is Republican voters, misinformed by Fox News, who most fervently and consistently insist on these mistaken ideas, with 85 percent telling pollsters that the deficit has increased. Less than a third of Democrats gave that answer. But nearly 60 percent of independent voters agree with the Republicans on that question and only 30 percent of Democrats understand the truth – an implicit repudiation, as The Huffington Post noted, of the president’s political decision to prioritize deficit reduction rather than job creation.
The facts are simple enough even for a Tea Party politician to understand. The federal deficit reached its peak – in dollar amount and as a share of the national economy – in 2009, which happens to be the year that Obama took office. Thanks to the profligate war and tax policies of the Bush administration — which undid the fiscal stabilization achieved under President Clinton — the Treasury had no financial margin when the Great Recession struck. Federal spending required to avoid another (and possibly far worse) worldwide Depression, combined with declining tax revenues that resulted from economic stagnation and tax cuts, all led inevitably to that record deficit.
Over the past five years, the red ink has swiftly faded. This year’s deficit will be about $514 billion, or about one-third of the $1.5 trillion deficit in 2009; next year’s will be even lower, at around $478 billion. As when Clinton was president, those marked fiscal improvements are mainly the product of a slowly recovering economy and growing incomes, along with federal budget cuts.
But not only is the good news about the shrinking deficit widely ignored; it isn’t actually good news at all. By avoiding a mostly mythical “budget crisis,” federal policy has created a very real jobs crisis that persists, with particular harm to working families. The latest Congressional Budget Office report on the fiscal outlook for the coming decade strongly suggests that the cost of reducing the deficit has been – and will continue to be – substantial losses in potential economic growth and employment.
The ironic consequence, as former White House economist Jared Bernstein recently explained, is that the fiscal outlook for the next 10 years will be somewhat dimmer than expected. In other words, we will return to higher deficits because fiscal austerity –enforced by Republicans and accepted by Obama – is still dragging the economy down.
To restore the kind of growth that lets families prosper and ultimately erases deficits, the Republicans would have to listen to the president — especially when he calls for public investment in infrastructure and an increased minimum wage, the first steps toward robust growth and fiscal stability.
If Americans understood the truth about deficits and debt – and how the federal budget affects their jobs and income – the congressional obstruction caucus, also known as the GOP, would have no other choice.
By: Joe Conason, The National Memo, February 6, 2014
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