— The CBO is not an all-powerful seer that gazed into its crystal ball this morning and foresaw an army of unemployed rising from the barren wastes of the Patient Protection and Affordable Care Act. It is full of very smart people who are phenomenally dedicated to their appointed tasks. But those people frequently work with very incomplete information, and this is one of those cases. We’ve never done this before, and 2 million may be an overestimate, it may be an underestimate or it may be just right. We may never even know which of those three was the case; any disemployment effect is going to be hard to pick out of the statistical noise. …
— Determining whether this is good or bad is an exercise that must be left for the reader. Social conservatives might like the idea of Obamacare effectively subsidizing stay-at-home moms in low- to middle-income families. (As it does.) Or they might object to subsidizing early retirement with taxpayer dollars. (As it does.) Liberals might have the opposite reaction: Worry that you’re subsidizing women to leave the workforce when they may have a hard time getting back in; celebrate the subsidy that allows folks to retire and start enjoying their golden years while they’re still healthy.
The CBO projects that the act will reduce the supply of labor, not the availability of jobs. There’s a big difference. In fact, it suggests that aggregate demand for labor (that is, the number of jobs) will increase, not decrease; but that many workers or would-be workers will be prompted by the ACA to leave the labor force, many of them voluntarily.
As economist Dean Baker points out, this is, in fact, a beneficial effect of the law, and a sign that it will achieve an important goal. It helps “older workers with serious health conditions who are working now because this is the only way to get health insurance. And (one for the family-values crowd) many young mothers who return to work earlier than they would like because they need health insurance. This is a huge plus.”
More important, CBO says, most of the people working fewer hours will be choosing to do so. And that’s a very different story from the one Obamacare critics are telling. Some of the people cutting back hours will be working parents who decide they can afford to put in a little less time with their co-workers and a little more time with their kids. Some will be early sixty-somethings who will retire before they reach 65, rather than clinging to low-paying jobs just to get health benefits. “This is what we want in a fair society,” says Jonathan Gruber, the MIT economist and Obamacare architect. “We don’t want to enslave the old and sick to their jobs out of some sense of meanness. If they are dying to quit/retire, then let’s them. That’s a good thing, not a bad thing.”
Of course, some able-bodied Americans will cut back on hours for reasons that conservatives, in particular, might not like. To put it crudely, they’ll work fewer hours simply because they don’t feel like working so hard. But whether or not that’s so problematic, it’s also the inevitable by-product of any program that makes assistance conditional on income. The Earned Income Tax Credit works that way. So do food stamps and Medicaid.
But there also lots of people who emphatically do not benefit from being given an incentive to either detach from the workforce or (if they’re already unemployed or underemployed) remain detached rather than taking a lower-paying job. And given the current economic landscape, especially — in which persistently high unemployment coexists with a growing population of workers too discouraged to even look for work — the size and scope of a work-discouraging effect matters a great deal: The bigger the effect, the more likely that the people dropping out aren’t just, say, parents cutting hours to spend more time at home while the other spouse works full time, but people we should want to be attached to the workforce, for their own long-term good and the good of the economy as well.
The overall impact on the community will be muted, moreover, because most of that effect will be seen at the lowest levels of the wage-earning scale. The effect will be “small or negligible for most categories of workers,” the CBO says, because there will be almost no impact on workers who get their insurance from their employers or who earn more than 400% of the federal poverty line (for a family of three, that’s $78,120), the point at which eligibility for federal premium disappears.
As for labor demand, the CBO estimates that on balance, the ACA will increase aggregate demand for goods and services, in part by relieving lower-income people of the burden of health insurance or healthcare expenses, so they can increase their spending on other things. In turn, that will “boost demand for labor,” especially in the near term, while the economy remains slack.
Given the rocky start, 14 million additional Americans covered by insurance through the exchanges and Medicaid is sound progress; and the budget office projects a sharp increase in enrollment in 2015 and 2016 and a bigger net reduction in the number of uninsured. Its projections for subsequent years remain essentially unchanged. In 2017, it predicts 12 million more in Medicaid and 24 million more in private coverage through the exchanges.
The new law will free people, young and old, to pursue careers or retirement without having to worry about health coverage. Workers can seek positions they are most qualified for and will no longer need to feel locked into a job they don’t like because they need insurance for themselves or their families. It is hard to view this as any kind of disaster.
CBO’s job-loss prediction is all the more remarkable because it doesn’t include the impact of ObamaCare’s employer mandate, which requires businesses with 50 or more full-time employees to offer insurance or pay a $2,000 penalty for each worker beyond 30 employees. CBO more or less punts on the issue because the White House delayed the mandate for a year and the changes would be hard to model. But this means CBO is probably still underestimating job losses because common sense says that labor mandates raise hiring costs and induce businesses to hire less, or pay lower wages, or slash hours, or all three.
Too bad this reality isn’t permeating the liberal force field of thinking only positive thoughts. “Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report,” the White House declared Tuesday. By “facts,” the White House seems to mean that the report is positive because “individuals will be empowered to make choices about their own lives and livelihoods” and “have the opportunity to pursue their dreams.” There you have it: the new American dream of not working.
At the very same time as the White House and its friends were taking credit for having emancipated the American people from the indignities of having to keep down a career, others seemed to be insisting that the labor market and the government are wholly discrete entities. This isn’t about Obamacare “killing” jobs, the Washington Post’s Glenn Kessler wrote, “it’s about workers — and the choices they make.” “Look at it this way,” he explained. “If someone says they decided to leave their job for personal reasons, most people would not say they ‘lost’ their jobs. They simply decided not to work.” To an extent, this distinction is a fair one, although there is a great deal of truth in The Economist’s observation that “a job is an economic transaction between a seller and a buyer of labour, and can be ‘destroyed’ if either seller or buyer walks away.”
Either way, it fails to address the material question, which is, “Why, in this case, will those people ‘decide not to work’?” The answer, of course, is that the intrusive federal action that one party supports and the other opposes has changed the calculation for them. It really is this simple: Before Obamacare, there was a status quo. With Obamacare, the government changed that status quo. As a result of that change, people are making different decisions. One can claim that the change will help to diminish youth unemployment or allow the elderly to enjoy more leisure time or do wonders for the gardening industry. But one can’t pretend that the state doesn’t have full culpability for those different decisions being made. That is a step too far.
For years, the White House has trotted out the nonpartisan Congressional Budget Office to show that Obamacare would cut health-care costs and reduce deficits:
“CBO Confirms Families Will Save Money Under Health Reform.”
“CBO Update Shows Lower Costs for the New Health Care Law.”
“CBO Confirms: The Health Care Law Reduces the Deficit.”
Live by the sword, die by the sword, the Bible tells us. In Washington, it’s slightly different: Live by the CBO, die by the CBO.