Why is the White House cheering disincentives to work?

posted at 11:01 am on February 6, 2014 by Ed Morrissey

The short answer to the headline question is that they don’t have much choice. After years of promising to bend cost curves downward, provide no disruption to existing insurance plans or provider networks, and laughably insisting that ObamaCare would create four million new jobs almost immediately, the latest CBO report on the central “achievement” of Barack Obama and the Democrats leaves them with no fig leaf left to use. The work force will decline by 2.5 million full-time-equivalents, heavily on the lower-income side of the scale, and all of a sudden Democrats have gone from promising massive job expansion to an end to “job lock.” What else can they possibly argue, except that suddenly fewer jobs are great for the economy?

Of course, this is a disaster for upward mobility, which Paul Ryan explained when CBO Director Doug Elmendorf testified that of course subsidies provide a disincentive to work:

He declared, “[B]y providing heavily subsidized health insurance to people with very low income and then withdrawing those subsidies as income rises, the act creates a disincentive for people to work—relative to what would have been the case in the absence of that act.”

Elmendorf, a Democrat, tried to claim that these people who would “have less of an incentive to work” would be “better off,” but Budget Committee chairman Paul Ryan was having none of it.

Ryan replied, “I guess I understand the ‘better off’ in the context of health care. But better off in inducing the person not to work who’s on the low-income scale, not to get on the ladder of life, to begin working, getting the dignity of work, getting more opportunities, [raising] their income, joining the middle class, this means fewer people will do that. That’s why I am troubled by this.”

That’s not the only troubling aspect, either. In my column for The Fiscal Times, I point out that no matter how the economy manages to shed 2.5 million FTEs from what would have otherwise existed — layoffs, voluntary unemployment, or curtailed investment, and likely a combination of all these — the fact remains that tens of billions of dollars will come out of what the economy would otherwise have produced. And that has some big implications for economic growth and tax revenue, too:

A reduction of 2.5 million FTEs from Obamacare would result in a reduction of $80.5 billion each year in gross compensation, even at the low-income average of $35,000 a year. That means less economic activity, and lower tax revenues, thanks to the decrease in income that the loss of 2.5 million FTEs entail — no matter how they disappear.

Besides, if the argument in favor of cheering subsidized disincentives to work is to be offered, then we should know how those subsidies work and who benefits. The Obama administration has insisted that the Obamacare subsidy structure benefits middle and working-class families that most often feel the squeeze from government programs. Anew study from the liberal Brookings Institute contradicts that claim. Instead, as the study shows, the redistribution comes from all but the bottom quartile of earners.

“On net and under the broadest income measure, the gains and losses cause small proportional drops in income for Americans in the top three-quarters of the income distribution which offset the larger proportional gains obtained by Americans in the bottom quarter of the distribution,” write Henry J. Aaron and Gary Burtless, and that is under a broader definition of income than the Census Bureau uses.

When the study breaks down the distribution by tenths rather than quarters of the population, only the bottom 20 percent will see a net gain in income. In fact, the two steepest drops in average income come from the third and fourth tenths from the bottom, 0.9 percent and 1.1 percent respectively. The top tenth will only see a reduction of 0.3 percent in average income.

You can do this calculation at whatever average income level you want to assign a FTE, which the CBO avoids doing in its report. Even if it’s $25,000 a year — half of the average household income in the US — that comes to $62.5 billion that will not be in the economy annually by the end of the period. That means lower tax revenues at the same time we’re paying more and more subsidies for people not to produce.

The White House’s “Yay, disincentives!” message isn’t playing terribly well. The Chicago Tribune calls this disincentive process “not healthy for the nation”:

It does mean many workers will have less incentive to work. Some will gain welcome flexibility — if they have clung to jobs just to keep employer-based health care, they will have access to coverage that’s not conditioned on holding a job.

But, and here’s where the impact is likely pernicious, some will quit or work less precisely because they’ll now qualify for Medicaid or for subsidies under the law. In effect, they’ll have a government incentive to be less productive. Some higher-income workers also will have a disincentive — higher taxes under Obamacare — for providing more labor. That is, a disincentive to work.

Government subsidies that persuade people to be less productive are not healthy for the nation. They’re also costly. Which goes to the more alarming news that came out of the CBO this week.

The CBO — as close as you’ll get in Washington to a nonpartisan source of information — released its federal budget projections for the next 10 years. The prospect is bleak:

The agency projects that annual deficits will stabilize through 2017 but then will launch into a long rise. By the most useful measure — debt as a percentage of our gross domestic product — the CBO sees that number rising from 72.1 percent in 2013 to 79.2 percent by 2024. That would be the highest U.S. debt burden since the years after federal borrowing spiked to fight World War II.

The Obama administration has counted on impossibly rosy projections of future economic growth to get us out of the deficit hole. But when asked about that possible growth in the face of these disincentives, the White House’s Jason Furman had trouble squaring the two:

But when reporters asked Obama’s top economic adviser, Jason Furman, about this ill effect, he repeatedly dodged the question. Here’s a typical exchange:

Reporter: “If 2.5 million people change their choice about working, that is not a net drag on economic growth?”

Furman: “First of all, I haven’t accepted the number. There’s a lot of factors that go into that number, not all of them an uncertainty. And second of all, I’m saying that that whole analysis refutes the claim that this is about employers cutting back on jobs and increasing unemployment, and that has been a central argument against the Affordable Care Act. Instead, this analysis itself — which isn’t a complete analysis — but this analysis itself is about the choices that people make and the new options that they have.”

Reporter: “But you didn’t answer my question.”

Furman: “I could repeat that if that would help.”

National Economic Council chair and Obama adviser Gene Sperling also tried disputing the CBO figures. Dana Milbank explained earlier this week why that won’t fly, citing the many times the White House used CBO scoring on the more ambiguous legislation to justify it:

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. …

Gene Sperling, Obama’s top economic-policy adviser, walked to the White House lawn and told CNN’s Wolf Blitzer that he rejected the finding. “When you have two parents and they’re both working full time to provide health care and they don’t feel they’re there to do homework with their kids and this allows one of [them] to work a little less because they have health care, that’s not costing jobs,”Sperling argued.

Sounds nice, except the CBO said its more pessimistic workforce view had been shaped by recent studies, “in particular” those looking at “expansions or contractions in Medicaid eligibility for childless adults.” In general, the CBO explained, phasing out subsidies to buy health insurance when income rises “effectively raises people’s marginal tax rates . . . thus discouraging work.” …

Obamacare has been undermined by the very entity they had used to validate it.

As I said, they have no fig leaf left. But they still have plenty of chutzpah. Yay, stagnation! may well be their next rallying cry.


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No Work Will Set You Free

Ben Hur on February 6, 2014 at 12:12 PM

No Work Will Set You Free

Ben Hur on February 6, 2014 at 12:12 PM

Thread winner

Keine Arbeit Macht Frei

gwelf on February 6, 2014 at 12:15 PM

Obama has raised the weekly work hours ration from 40 to 30, and in many cases supplemented it to zero.

Ray Van Dune on February 6, 2014 at 12:15 PM

A nine word title: “Why is the White House cheering disincentives to work?”

Deserves a nine word response: Every citizen made gob’mint dependent is another Dimmocrat vote!

Pecozbill on February 6, 2014 at 12:18 PM

A less productive society will be a poorer society with an overall lower quality of life.
The poor and middle class will be affected the most by this, but even the very wealthy will feel the negative effects of a poorer society.

Leftists are fine and dandy with this, since their view is that the United States’ gains have been ill-gotten, and that the U.S. consumes a disproportionate amount of the earth’s resources. Leftists always believe that the United States needs to be knocked down a peg or two.

justltl on February 6, 2014 at 12:18 PM

It is a bit disheartening that none of you, including the authors of the postings on this subject, can see you lose this argument cold with the working class.

Fewer people choosing to work is not something that is likely to worry working people whose wages get pushed up by the lack of supply of the product they are selling.

fadetogray on February 6, 2014 at 12:20 PM

Most workers will be replaced by robots anyway. Welcome to the Brave New World.

happymullah on February 6, 2014 at 12:20 PM

What’s the republican alternative to healthcare?

what will they do with the 3 million people on Obamacare and over 6 million or so who have signed up for other related medical programs.

Obamacare is here to stay.

liberalrules on February 6, 2014 at 11:16 AM

Look what the open registration blew in.

Shy Guy on February 6, 2014 at 12:23 PM

Obama has discovered a nifty shortcut to the old Soviet system.

They had to go through the ‘we pretend to work and they pretend to pay us’ phase.

We don’t even bother with the pretending.

Obamacare was truly the ‘masks-off’ moment for the Left.

Art Vandelay on February 6, 2014 at 12:03 PM

Ocare is going to hurt your architecture firm, to be sure.

Throat Wobbler Mangrove on February 6, 2014 at 12:24 PM

Fewer people choosing to work is not something that is likely to worry working people whose wages get pushed up by the lack of supply of the product they are selling.

fadetogray on February 6, 2014 at 12:20 PM

Fact of the matter is the group of “working people” (as if you have to be low or no-skilled to be called working) will not see their wages pushed up by demand. If it happens that would come by way of government mandate. Of course, that is also when technology comes in and replaces them. Things like replacing counter workers at fast food places with an order kiosk not only is more efficient but doesn’t demand time and a half for working overtime.

Happy Nomad on February 6, 2014 at 12:25 PM

I think we all need to be careful what we say, lest we tip MiniTrue off about what to use when it’s our turn to visit Room 101.

Ray Van Dune on February 6, 2014 at 12:25 PM

In addition to the above lefty core belief, Obama has additionally had it ingrained in him from birth that the U.S. was built on the backs of slaves. He is not only fine and dandy with redistribution of income, but is glad that the U.S. is getting its comeuppance.

justltl on February 6, 2014 at 12:26 PM

The Choom Gang way…

d1carter on February 6, 2014 at 12:31 PM

What would Hillary do..?

d1carter on February 6, 2014 at 12:33 PM

Throw in a narcissistic personality disorder and you get exactly what behaviors you see in Obama today.

justltl on February 6, 2014 at 12:33 PM

You really can’t make this up. The twisted logic that the Obama administration uses is that we are again saving you from the destructive workplace. Your welcome, signed the gubment. Your check will be in the mail. All you have to do is ensure that you vote for the democratic party ticket

PaConservative4485 on February 6, 2014 at 12:36 PM

Megyn Kellys Lipstick on February 6, 2014 at 11:46 AM

I think this distorts my point. I know they like extending the benefits. But they have never offered the rationale that it gives people the freedom not to work.

At least, I’ve never seen that rationale offered…even by Pelosi.

EastofEden on February 6, 2014 at 12:38 PM

“As I said, they have no fig leaf left. But they still have plenty of chutzpah. Yay, stagnation! may well be their next rallying cry.”

+ + +

Well, plenty of Greens do want a zero-growth economy, no? Add in more delays on the Keystone XL pipeline, and maybe Obama is aiming to be the greenest president ever…

Teleros on February 6, 2014 at 12:39 PM

I have two questions for the Administration:

1. How can the GDP rise if people opt to work less?
2. If fewer people work, where will the revenue come from that can be used to pay the subsidies to those who choose to work less?

Blaise on February 6, 2014 at 12:39 PM

Has it occurred to anyone else the reason the GOP is pushing this Americans Choosing Not To Work Because Of Obamacare theme so hard is it is a set up to finding more workers who will do the work Americans won’t do after the primaries?

fadetogray on February 6, 2014 at 12:44 PM

Liberals: Wages have been stagnant!
Conservatives: Its the free market, why should employers pay more when they know they don’t have to with this many people seeking employment.
Liberals: Obamacare reduces job demand, which will incentivize employers to raise wages to attract workers.
Conservatives: NOOOOOOOOOOOO!
Liberals: Why?
Conservatives: I….don’t know exactly. I think its because I kind of like when wages are stagnant.
Liberals: Even though most people, and most conservatives and their families are employees and rely upon wages to make a living?
Conservatives: Yeah…weird huh?

libfreeordie on February 6, 2014 at 11:28 AM

Remind us again what the preferred Democrat immigration policy is again?

Will putting all of them on the government dole work too or do you think they’re going to “take the jobs Americans are being paid not to do”?

gwelf on February 6, 2014 at 12:45 PM

1. How can the GDP rise if people opt to work less?
2. If fewer people work, where will the revenue come from that can be used to pay the subsidies to those who choose to work less?

Blaise on February 6, 2014 at 12:39 PM

Math is hard.

oldroy on February 6, 2014 at 12:47 PM

Happy Nomad on February 6, 2014 at 12:25 PM

You are correct that there are tremendous downward pressures on wages for low skill and unskilled labor.

fadetogray on February 6, 2014 at 12:48 PM

Let me be honest with you. We all know that most conservatives are only a paycheck or two from becoming (D) voters.

Things like motivation, initiative, and pride can easily evaporate when there’s a family to feed and bills to pay. When you’re sitting at home waiting for that government check and waiting for your EBT card refill, it’s awfully hard to pull that lever for a guy campaigning on “entitlement cuts”.

A few million newly unemployed Americans equals a few million new voters for our compassionateside.

Frank Lib on February 6, 2014 at 12:49 PM

Sprinkle with amorality and vindictiveness and a heaping measure of pettiness, et voilà! Obama.
Only his laziness and lack of intelligence spares us somewhat from his pathology, however, his minions pick up the slack for him.
The moral reprobate Clinton bogusly claimed, with lip all aquiver, that he “felt our pain”.
Obama causes our pain, feels out pain and revels in it.

justltl on February 6, 2014 at 12:50 PM

A few million newly unemployed Americans equals a few million new voters for our compassionateside.

Frank Lib on February 6, 2014 at 12:49 PM

Which is exactly why Obama has to continue to destroy the job market.

oldroy on February 6, 2014 at 12:51 PM

We don’t have enough workers! We don’t have enough workers! Don’t let the workers leave! Fewer workers reduces the GDP!

Can none of you see that is a set up for amnesty?

fadetogray on February 6, 2014 at 12:58 PM

Limbaugh was nailing this today. The very things Rush spoke about for the 2008 and 2012 elections and what exactly he wanted the president to fail at are the very things that are destroying the US. Obamacare be the chief coffin nail in this once great country.

hawkdriver on February 6, 2014 at 1:00 PM

By this logic we can liberate illegals from having to worry about a job here by deporting them.

oldroy on February 6, 2014 at 1:00 PM

If an increasing number of people stay out of the workforce by choice the gib’mint can stop reporting them as unemployed. Looks like a win-win to me! More people happily collecting their share of free stuff, fewer numbers on the unemployment rolls.

bigbeachbird on February 6, 2014 at 1:02 PM

In a sane world, millions of angry Americans would have descended upon the White House and Capitol by now to deal with the conmen and destroyers.
But it’s not a sane world and few Americans have the ways, means or desire to deal with them.
And we are, therefore, doomed.

justltl on February 6, 2014 at 1:04 PM

If a mother continues to allow a child to nurse at age 5 rather than force a move to solid food is she providing the child with a “choice” or being an abusive mother?

If you can be self-sufficient, the government should encourage you to be self-sufficient rather than temp you truncate your potential.

KW64 on February 6, 2014 at 1:10 PM

Allow me to introduce myself. I am a huge Gopher fan.

airupthere on February 6, 2014 at 11:55 AM

You/me – instant friends :)

gophergirl on February 6, 2014 at 1:10 PM

If a mother continues to allow a child to nurse at age 5 rather than force a move to solid food is she providing the child with a “choice” or being an abusive mother?
KW64 on February 6, 2014 at 1:10 PM

If she allows the child to nurse at age 5, she isn’t being an abusive mother. Perhaps if she didn’t allow her child to eat anything else, then maybe. Simply allowing nursing until 5 isn’t abusive.

cptacek on February 6, 2014 at 3:33 PM

You/me – instant friends :)
gophergirl on February 6, 2014 at 1:10 PM

Yay!
I thought of registering as gopherguy, but I have been reading here for years and did not want to confuse anyone since I have seen your posts here for quite awhile.

airupthere on February 6, 2014 at 3:33 PM

I just now got to this, having heard about it for over a day. So, someone else has probably already asked the question, but just in case…

So, this is the new ‘FunEmployment”?

MikeinPRCA on February 6, 2014 at 4:10 PM

Why are they cheering? Because they hate America.

307wolverine on February 6, 2014 at 4:35 PM

This kills upward mobility… maybe that’s the goal?

I know when I try to climb a ladder I prefer one where some b***ard hasn’t cut off the bottommost rungs.

But maybe that’s just me. Any liberals here care to explain how cutting off the bottom rungs on the ladder helps people climb?

gekkobear on February 6, 2014 at 5:05 PM

I didn’t read the CBO report myself. Did it happen to say “unexpectedly”.

Is the White House saying this is unexpectedly great news?

kpguru on February 6, 2014 at 5:44 PM

“Work saves us from three great evils: boredom, vice, and need.” — Voltaire

“Funemployment: Working stiffs pay for your weed!” – Doug Elmendorf

Sig Sour on February 6, 2014 at 6:35 PM

Let me be honest with you. We all know that most conservatives are only a paycheck or two from becoming (D) voters.

Things like motivation, initiative, and pride can easily evaporate when there’s a family to feed and bills to pay.

Methinks you know no Conservatives. Things like motivation, initiative, and pride don’t evaporate when coupled with a work ethic. It only makes us more determined to make it through hard times when there’s a family to feed and bills to pay. Been there. Done that. Sans any form of handouts.

fresh air on February 6, 2014 at 8:47 PM

Is the “Safety Net” now a hammock? Is that what they’re trying to do?

Let me be honest with you. We all know that most conservatives are only a paycheck or two from becoming (D) voters.

Heck, I’d live in a cardboard box and shine shoes for a living again before voting Dem. and jumping in the hammock. Some people refuse to be looters or enable them.

Methinks you know no Conservatives. Things like motivation, initiative, and pride don’t evaporate when coupled with a work ethic. It only makes us more determined to make it through hard times when there’s a family to feed and bills to pay. Been there. Done that. Sans any form of handouts.

fresh air on February 6, 2014 at 8:47 PM

Right!
Going from 5 or 6 good meals a week to paying cash (earned from sweat) for a new 4Runner and tuition for my child is more gratifying than any handout.

P. Logan on February 6, 2014 at 10:20 PM

All amusing. And telling.

Democrats are ostensibly about the redistribution of wealth via social programs. Well:

1) If people cut their hours (or entire jobs) due to the ACA, that also decreases output, which means…..

2) Receipts inflowing to Treasury from both income and corporate taxes are decreased as well. The result is either (a) less money for social programs, or (b) larger deficits.

You can’t be a Democrat and like this report; it means less available money for redistributive schemes. And you can’t be a Republican if you like this report; it means less money to reduce the debt and deficit with.

So, if anyone says “This is all OK”, then they’re exposed as a lightweight who cares more about their party than America.

kady on February 6, 2014 at 11:56 PM

Oh, now I see! Unemployment is good! Now I understand.

virgo on February 8, 2014 at 1:03 AM

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