JONATHAN CHAIT FEBRUARY 11, 2011
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Republican pollsters have found that, to whatever degree people are upset about the Affordable Care Act, it is primarily a function of economic conditions rather than ideological opposition to the concept of the law. They accordingly have done everything to frame their opposition in terms of jobs, including titling their repeal bill the "Repealing The Job-Killing Health Care Law Act."
Yesterday, CBO Director Doug Elmendorf testified before the House Budget Committee, and confirmed his agency's finding that the Affordable Care Act would, very slightly, reduce employment levels. In keeping with their policy of loudly touting every CBO analysis that backs up their talking points while dismissing out of hand every CBO analysis that refutes them, Republicans excitedly circulated the video. Here are typical reactions from the Weekly Standard's Jeffrey Anderson ("CBO Director Says Obamacare Would Reduce Employment By 800,000 Workers") and National Review'a Yuval Levin ("Job Killing.")
This description is, at best, highly misleading. CBO did not find that the ACA would kill jobs. It found that "the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply." It won't be the case that there will be fewer jobs available. It's simply that fewer people will choose to work. Why? CBO explains:
The expansion of Medicaid and the availability of subsidies through the exchanges will effectively increase beneficiaries’ financial resources. Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market. In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work. But because most workers who are offered insurance through their jobs will be ineligible for the exchanges’ subsidies and because most people will have income that is too high to be eligible for Medicaid, those effects on financial resources and marginal tax rates will apply only to a small segment of the population.
Other provisions in the legislation are also likely to diminish people’s incentives to work. Changes to the insurance market, including provisions that prohibit insurers from denying coverage to people because of preexisting conditions and that restrict how much prices can vary with an individual’s age or health status, will increase the appeal of health insurance plans offered outside the workplace for older workers. As a result, some older workers will choose to retire earlier than they otherwise would.
In other words, people who are only working because they desperately need employer-sponsored health insurance will no longer do so. They're not going on the public dole -- they're just people who have the means not to work full-time and will be free to make employment decisions that aren't premised upon an individual health insurance market that shuts them out. Some workers will choose to retire early because they now have the ability to buy their own health insurance. This is what Republicans call "destroying jobs."
Now, CBO does show a very minor effect of higher taxes discouraging the work incentive. But this is a very small portion of what is a fairly small effect to begin with. Basically the analysis shows the effect of giving workers with preexisting conditions access to a health care system that doesn't lock them into the employer-provided system. Apparently, in the conservative view, being chained to your desk at some big company until you're 65 and unable to retire or start your own business because the individual market is rife with adverse selection is defined as "freedom."
Freedom!
15 comments
Freedom is slavery.
- liberalref
February 11, 2011 at 12:55pm
The Republicans are playing word games and twisting the truth to suit their agenda? I'm shocked! Shocked!
- GSpinks
February 11, 2011 at 1:18pm
I don't see why more workers voluntarily retiring would lead to decreased employment at all. It seems that businesses will hire to replace those retirees. Instead of losing jobs, I would just expect to see a shift in who held those jobs. Indeed, some businesses might decide to hire two younger, cheaper workers to replace their older, more expensive retirees. To say nothing of the people that take advantage of increased flexibility in the health care market to start their own businesses and hire their own employees.
- sep2126
February 11, 2011 at 1:27pm
Because only the rich and powerful get to RETIRE, the rest of us wage-slaves must be chained to our desks by whatever means necessary. Otherwise we'll get lazy, vote ourselves bread-and-circuses, might even get uppity with management. And we can't have that.
- AllanL5
February 11, 2011 at 1:28pm
Like Captain Renault, and like you, GS, I am shocked, too.
- liberalref
February 11, 2011 at 1:30pm
sep is absolutely right. The reasons given by the CBO do not even remotely suggest that overall employment will decrease. This is the neo-classical theory that the level of employment is fundamentally a function of how much people want to work rather than of aggregate demand. We are plagued by dumb, right-wing economic orthodoxy at every turn.
- roidubouloi
February 11, 2011 at 2:20pm
The CBO's 800,000 figure is based on a projected 160 million jobs in *2020*. Current employment is around 140 million jobs, according to Bureau of Labor Statistics. So CBO still projects an additional 20 million jobs created by the end of the decade.
- koppgeo
February 11, 2011 at 2:38pm
Aha! I knew it. Low tax rates on the rich discourage them from working! I see the headlines now. "15% max cap gain/dividend rate kills thousands of employees daily. Details at 6:00. Film at 11:00"
- Nusholtz
February 11, 2011 at 2:40pm
"We are plagued by dumb, right-wing economic orthodoxy at every turn."
I nominate the king of the bouloi for comment of the week
- GSpinks
February 11, 2011 at 2:40pm
Why thank you, GS. I am flattered. I might also have pointed out that, with the ratio of workers to mouths to feed on the verge of declining due to boomer retirements, we can expect the real wage rate, the capital-labor ratio, and labor productivity all to rise and swamp the eensy-weensy effects commented upon by the CBO. You would think that at least the orthodox right-wing economists would understand the difference between partial and general equilibrium. But they don't.
- roidubouloi
February 11, 2011 at 3:40pm
In reality, we are afflicted by precisely the opposite, an anti-orthodoxy of the right. Even among conservative economists, competent ones, that is, ones who matter, all believe that supply-side economics is bunk. And so it goes with so much else on the right, besides the ss nonsense.
- liberalref
February 11, 2011 at 4:32pm
The natural extension of this reasoning is that anything that increases worker efficiency, i.e. produces more with less labor, is "job-killing." Computers are putting bank tellers out of work! Our blacksmithing industry has collapsed because cars eliminated them along with buggy drivers! Surely there must be a way to blame those on Obama too.
- Ouroboros
February 11, 2011 at 10:03pm
Love when you comment Roid. I am just waiting for the "replace" part of all this. I mean this will be some wonderful bill. It will not let people with pre-existing conditions be denied coverage, it will allow young adults to stay on parents plans, there will be no mandate, there will be no cuts in Medicare or tax increases, and it will health care costs down and insure acess to health care for even the most poor Sign me up for this!!! All this can be done apparently by some simple tort reform and letting people buy policies across state lines. LOL!
- MikeB.
February 12, 2011 at 9:22am
What keeps coming up is Orwellian in my thinking. Conservative double-think abounds. The CBO is just an opinion...or it is gospel truth...compared to what the issue is.
- MikeB.
February 12, 2011 at 9:23am
The same "logic" applies to Social Security, doesn't it? The program allows people to retire who would otherwise have to keep working. So it should be obvious that Republicans must now make it a priority to repeal the "job killing" Social Security system! I'm not holding my breath.
- dsimon
February 12, 2011 at 9:59am