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.

Often-Quoted CNN/ORC Polls Shows that Majority Dislikes John Boeher AND Consistently Opposes Obamacare

A recent CNN/ORC poll attracted significant media attention because it indicates that a majority of those polled say that they favor somebody else as Speaker of the House over John Boehner.  See Question 10.

Sadly, the media failed to notice Question 14 that shows that a majority of those polled have consistently opposed President Obama's health care plan.  See the top graph.  In fact, the President's plan has never once received majority support.

For the record, I'm not a John Boehner fan either.  I just find it amusing what the media reports and what the media chooses to ignore.

On the Contrary Mr. President, ObamaCare Does "Shoot Rates Way Up"

UPDATED on 8-OCT-2013 with latest pricing information from Covered California.  The new pricing is slightly higher than the information available in September, before the exchanges opened officially.

In a September 16, 2013 speech, President Obama said of the "Affordable Care Act (ACA or ObamaCare), the signature legislation during his presidency ...

“There were lot of the horror stories, how this would shoot rates way up, how there were going to be death panels, and all that stuff. None of that’s happened."

I'm sorry, Mr. President, but you are WRONG and I have the numbers to prove it--at least for our family.  Maybe a DOUBLING or a TRIPLING of insurance costs may not qualify for "shoot rates way up" in your book, but they do in ours.

Here's a chart showing the actual monthly premium costs paid for our Blue Shield of California high-deductible plan since the President first proposed his major overhaul of the U.S. health care system.  As is PLAINLY obvious, our rates have more than DOUBLED!  We even experienced a 30% increase just months after the "Affordable" Care Act (ACA) was officially signed into law.

That red dot in the upper right-hand corner?  That the price of the least-expensive plan available from Covered California, the ObamaCare health insurance exchange.  Notice that it is HIGHER than what we pay now, unless we receive a taxpayer-financed subsidy.  So, if we adopt one of the President's plans, our insurance premiums will be 231% higher--more than TRIPLE--what they were when the President first proposed ObamaCare.  The ObamaCare policy is also roughly 50% HIGHER than what we pay now.

The dashed dark red line shows the trend line for a 20.1% annual growth rate since President Obama took office, which is MUCH, MUCH faster than the official rate of inflation.

On the Covered California exchange, the price you actually pay for health insurance depends on your family size, age, and--most importantly--how much money you make.  The least-expensive plan available for our family is $1,121 per month, or $13,452 per year.  Depending on your income, the price you pay for this policy ranges from $0 to $13,224 with any difference generously paid by taxpayers via a subsidy called "premium assistance," as shown in the following chart.

There's also an interesting "feature" of the pricing structure.  For example, should our family income be $110,279 (which isn't "rich" for many portions of Santa Cruz County and its high housing costs and cost of living), we would pay $446 per month ($5,352 per year) for a $1,121 per month ($13,452 per year) health insurance package. Despite our income, the additional $8,100 cost difference is generously paid by as a subsidy from taxpayers.

However, should I earn just $1 more, the ObamaCare pricing scheme "shoot rates way up," as the President so eloquently states it, by $8,100.  Earning just $1 more--$110,280 per year instead of $100,279--increases my health insurance cost by $8,100!

I understand the reader's skepticism at this seemingly ridiculous claim.  Consequently, I encourage you to visit the Covered California web site and double-check my numbers for yourself using the data provided above in the screen shots.  One can only hope that this is somehow a "glitch" in the system, but it appears to be built into the pricing scheme for all packages, just at different income levels based on the number and ages of people covered.

As a side note, I fully expect those income limits to remain firm as income naturally increase thanks to inflation.  That way, more and more people are forced off subsidies into paying the full cost.  The current income levels are likely set based on ballot-box power.  You only need a certain percentage of people receiving government benefits to force them to vote your way.

Surely, ObamaCare makes those earning above $100,279 pay more simply out of fairness, right? Let's instead evaluate ObamaCare premiums as a percentage of total family income, as shown in the following chart. Those in the Obamacare "Donut Hole" pay the most as a percentage of income. The donut hole extends from $110,280 to almost $290,000.  Those making less than $110,280 pay less thanks to taxpayer subsidies.  Those making more than $290,000 pay less because ObamaCare premiums are a smaller share of their family income.  The "affordability" red line under the "Affordable" Care Act is supposed that nobody should pay more than 9.5% of their income toward health care.  On that measure, Covered California fails those earning between $110,280 and a little more than $140,000. Those who suffer from the wedge will either work less or work more to avoid the extra burden.  This is not what sane policy looks like.

But it gets worse.  Consider your "after-insurance" income under ObamaCare.  If I made $110,279, I would pay $5,352 for insurance but receive a $13,452 insurance policy thanks to the generous $8,100 taxpayer-provided subsidy.  My effective after-insurance income would be $110,279 (income) - $5,352 (the cost of the ObamaCare policy) + 8,100 (subsidy to buy and benefit from a $13,224 insurance plan), which equates to $113,027.

However, if I earn jut $1 more--$110,280 instead of $110,279--my after-insurance income actually DROPS BY $16,199!  My effective after-insurance income would be $110,280 (income) - $13,452 (the cost of the ObamaCare policy) + $0 (subsidy), which equates to just $97,056.

Thanks to ObamaCare, I can earn $1 more and actually end up with $16,199 less!  That's Obamanomics for you.

I won't even discuss the much more limited access to doctors.  It took over two months for my daughter to see a doctor about a leg injury.  In the meantime, she's stuck on crutches.

See also ...

• Insurers limiting doctors, hospitals in health insurance market
  www.latimes.com/business/la-fi-insure-doctor-networks-20130915,0,2814725.story

Our Business' Real-World Experiences with ObamaCare and Blue Shield of California

Remember how the "Affordable" Car Act (ACA), a.k.a. ObamaCare would going to make health care--er, well--affordable?  As usual, be afraid when somebody says, "I'm from the government and I'm here to help you."  Here's our small business' real-world experiences with ObamaCare.  We are admittedly a small company so our experience, while certainly not unique, may not apply universally.  The number of employees has not changed since 2008.

Note the rapid procession of increases after President Obama proposed what eventually become the "Affordable" Care Act (ACA) and the large increase  (30%!) shortly after the President signed the bill into law after it passed Congress on a one-party, majority-forced vote.

According to the Society of Actuaries, even more "good news" awaits California's small businesses, with up to 62% more increases coming by 2017.  Supposedly, there will eventually be a small business credit under ACA, but I'll believe it when I see it.  Currently, it just means that our health care insurance costs have DOUBLED in the last four years with no improvements in benefits or services.  Thank you, Washington!  It's there somebody else that needs your "help"?

Now, back to figuring out how to double our revenues in less than four years to pay for all this "help".

A Small Business' Experience with ObamaCare and Blue Shield of California

I am a partner and owner in a small technical consulting firm that serves high-technology firms in Silicon Valley.  Despite the global financial crisis, we've held on to all of employees in the face of an ever-changing work dynamic and very late payments from some of our clients.

One new wrinkle to our small business' finances is the impact of ObamaCare.  All employees receive have a company-funded health savings account (HSA) backed up with a high-deductible major medical plan, roughly modeled on the highly effective Singapore plan.

While correlation does not necessarily imply causation, we've experience above-average rate increases by Blue Shield of California that seem to be tied to ObamaCare.  The following chart shows our health care premiums dating back to 2007, unadjusted for inflation.

President Obama proposed his vast expansion of U.S. government healthcare back in February 2009.  Four months later, we received a 15% rate hike--slightly ahead of schedule-- followed by another 15% rate hike just seven months later.

President Obama signed ObamaCare into law in March 2010.  Just five months later, we received a massive 29% increase followed by another 1% increase just 66 days later!  Since then, we're back to a 15% roughly every 1.2 years.

The net overall effect is that health insurance premium have more than DOUBLED for our firm in the last five years!  Certainly, part of this is due to the national increase in health insurance premiums (inflation and aging employees).  However, I don't believe it to be a coincidence that the biggest increase happened immediately after ObamaCare was signed into law.

An Honest Health Care Debate?: Are We Really THIS #*&@ Stupid?

Like many Americans, yes, I'm interested in real, sensible, practical health-care reform--you know, the type that makes sense, reduces costs, and improves care. However, I just have to shake my head when I see the blatant manipulation (they're not technically lies) coming from our so-called "leaders" in Washington.

Here's a little snippet that caught my eye about a month ago in a Washington Post article:
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/01/AR2009070100950.html

"In the stage-managed event, questions for Obama came from a live audience selected by the White House and the college, and from Internet questions chosen by the administration's new-media team. Of the seven questions the president answered, four were selected by his staff from videos submitted to the White House Web site or from those responding to a request for 'tweets.'

"The president called randomly on three audience members. All turned out to be members of groups with close ties to his administration: the Service Employees International Union, Health Care for America Now, and Organizing for America, which is a part of the Democratic National Committee. White House officials said that was a coincidence."

If this really was "a coincidence," I would suggest that the President buy himself a lottery ticket! His luck is truly phenomenal!

The Serivce Employees International Union (SEIU)? I've heard of them. As reported in the L.A. Times and the Chicago Tribune, didn't the SEIU spend $60 million to elect the President and now have unprecedented access to the White House? The SEIU is also #9 on the list of the largest political contributors to some of our lofty, ethical elected officials (97% from only one political party--you guess which).

I'm not familiar with Health Care for America Now. That sounds like a non-partisan group interested in prudent health-care reforms, right? Let's see what I can find out about them from their web site.
http://healthcareforamericanow.org/about-us/members/

Hmm, well let's see. There's ACORN, the AFL-CIO (#31 on the top politcal donors list), American Federation of State, County and Municipal Employees (#2 on the list), Americans United for Change (hey, isn't their former president, Brad Woodhouse, now the communications director for the Democratic National Commitee (DNC)?). Wow, and I haven't even made it out of the 'A's yet.

Again, I wasn't familiar with the name Organizing for America until I again searched the web. Oh yeah, this was the organization that then-candidate Obama formed when he was seeking the White House. The site helped organize his campaign in different states, mobilize his volunteers, and they maintain huge E-mail list. I scroll down the page. Wait a second, is this site managed by the DNC--the same DNC where Brad Woodhouse now works but used to be with Americans United for Change? Wow, another stunning "coincidence"!

And people thought Richard Nixon was tricky. Apparently President Obama excelled in his previous role as a "community organizer." These groups are well coordinated from the top, but they are also more inbred than some crazy dog breeds.

This so-called "national debate on health care" is a complete SHAM. This is a complete SHAME!!!