Wednesday, February 5, 2014

What Does the CBO Report REALLY Say About How ObamaCare Affects Jobs?

SUMMARY #1: If the Government takes from Peter to pay for Paul's health insurance, Paul has less or no incentive to work to pay for his own insurance.

SUMMARY #2: ObamaCare means more able-bodied people in the wagon and fewer workers to actually pull the wagon.

The Obama Administration and their allies are attempting to blunt the harsh reality escaping from the Congressional Budget Office (CBO) report, The Budget and Economic Outlook: 2014 to 2014 (February 2014).  The report includes Appendix C, titled "Labor Market Effects of the Affordable Care Act: Updated Estimates," beginning on page 117 (PDF page 123).  I encourage you to download and read the CBO's words for yourself.

Here are a few of my favorite snippets, free from the Administration's bogus claim that ObamaCare (a.k.a., the Affordable Care Act or the ACA) "liberates" people from jobs that they supposedly held only because it provided health insurance benefits.  In fact, ObamaCare reduces the size of the available workforce and inflicts disincentives to productive work.
"How Much Will the ACA Reduce Employment in the Longer Term?
The ACA’s largest impact on labor markets will probably occur after 2016, once its major provisions have taken full effect and overall economic output nears its maximum sustainable level. CBO estimates that the ACA will reduce the total number of hours worked ... almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive."
Of course, by complete and accidental coincidence, the largest impact happens after 2016, which just happens to be a Presidential election year.
"The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024."
How big a loss is 2 MILLION full-time-equivalent workers? The entire U.S. job market lost 8.7 million full-time jobs after the 2008 recession caused by the global financial crisis. Those 2 million full-time-equivalent workers equates to about 23% (one-fifth to one-fourth) of all the jobs lost during the last recession.  Additionally, 2 million jobs represents 74% of the number lost in the 2001 recession after the 9/11 terrorist attacks.  The number is NOT inconsequential.

But there is an important distinction. According tot he CBO report, the JOBS won't disappear but the WORKERS will.  In other words, they'll be more able-bodied people in the wagon and fewer able-bodied workers to pull the wagon.

"The decline in full-time-equivalent employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours ...."
As widely reported, employers have cut work hours to avoid some of ObamaCare's poor policy mandates.  The White House, who once claimed that ObamaCare has no effect on the labor market, now also claims that these lost hours are a good thing because it "liberates" people from jobs they held only to receive health benefits.  Never mind that some of those "liberated" receive big, taxpayer-funded subsidies paid by "un-liberated" (i.e., enslaved) people still in the work force.
"The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week)."
Hmm. A reduction in labor force participation, huh? Do you mean like a further reduction in the lowest participation rate in the civilian job since 1978?

Or, does the CBO mean a further reduction in the jobs-to-population ratio, which appears to be stuck at its lowest level in a generation?

Ask also, WHY would "workers choose to supply" less labor? Is it because they don't feel like working?  Did they suddenly win the lottery?  Did they find a rich sugar-momma cougar and they're now entertained as a cabana boy and paid in "free" margaritas? No, it's because SOMEBODY ELSE is paying for their health insurance via ObamaCare's taxpayer-funded subsidies.  ObamaCare's subsidies are poorly designed and seemingly designed to punish middle-class families here in California.  Earn just $1 more a year and your health insurance costs jump by over $8,000 and your after-insurance take-home income drops by $16,000.  This is NOT sane policy.

The CBO report openly admits this later, on pages 118-119 (PDF pages 124-125).
"In CBO's view, the ACA's effects on labor supply will stem mainly from the following provisions, roughly in order of importance:
  • The subsidies for health insurance purchased through exchanges;
  • The expansion of eligibility for Medicaid;
  • The penalties on employers that decline to offer insurance; and
  • The new taxes imposed on labor income.
"Some of those provisions will reduce the amount of labor supplied by some workers; other provisions will increase the amount of labor supplied by other workers. Several provisions also will combine to affect retirement decisions."
WHY do taxpayer-provided subsidies matter? Here, let the CBO elaborate:
"For some people, the availability of exchange subsidies under the ACA will reduce incentives to work both through a substitution effect and through an income effect. The former arises because subsidies decline with rising income (and increase as income falls), thus making work less attractive. As a result, some people will choose not to work or will work less—thus substituting other activities for work. The income effect arises because subsidies increase available resources—similar to giving people greater income—thereby allowing some people to maintain the same standard of living while working less."
In other words, ObamaCare will take money from those in the workforce by necessity and give it to others so that they no longer need to work.  Again, this is NOT sane policy.

Democrats, of course, focus on another portion of the CBO report, which highlights ObamaCare's "stimulative" effects.  Unfortunately, these "stimulative" effects were debunked in Bastiat's "Broken Window Fallacy" written back in 1850.

"... the ACA’s subsidies for health insurance will both stimulate demand for health care services and allow low-income households to redirect some of the funds that they would have spent on that care toward the purchase of other goods and services—thereby increasing overall demand. That increase in overall demand while the economy remains somewhat weak will induce some employers to hire more workers or to increase the hours of current employees during that period."
Why are these "stimulative" effects fallacy? Prior to ObamaCare, workers provided value or created wealth in return for income that paid for all or a portion of their health insurance.  Now, thanks to ObamaCare, most if not all of the insurance is paid by subsidies.  Where does the money for the subsidies come from? It comes from OTHER workers who provide value or create wealth in return for income.  Thanks to ObamaCare, these OTHER workers are now deprived of funds to pay for their own healthcare or to purchase their own "other goods."  ObamaCare is NOT real economic stimulation. It's simple income redistribution in another guise.

See also ...

The CBO wrote that ObamaCare  subsidies "reduce incentives to work" by "making work less attractive. As a result, some people will choose not to work or will work less—thus substituting other activities for work."  While the following video clip is for California's Food Stamp program, the effects are the same. Some completely able-bodied individuals will choose to live off the work of others courtesy to the government's redistributionist policies. These individuals are applying rational thought to the government's irrational policies.

1 comment:

  1. .It must be brutal for you to live in what I've always described as an enclave of Canada.
    Cheers Philip