Truth and Consequences of Obamacare Distortion

The CBO report was misinterpreted by the GOP for political gain as the White House deflects the big issue.

Supporters of the Tea Party movement demonstrate outside the Capitol in Washington, DC, on March 20, 2010.
National Journal
Ron Fournier
Feb. 5, 2014, 3:50 a.m.

The Con­gres­sion­al Budget Of­fice re­port pre­dict­ing that Obama­care will shrink the U.S. work­force by the equi­val­ent of 2 mil­lion full-time jobs is a test for the polit­ic­al sys­tem. Is there still room for truth and fair de­bate? Or is Wash­ing­ton only cap­able of hy­po­crisy, de­mon­iz­a­tion, and short-term think­ing?

Don’t put your money on the truth. Both Re­pub­lic­ans and Demo­crats are vastly over­sim­pli­fy­ing the CBO re­port and the ef­fects of the Af­ford­able Care Act, the GOP most egre­giously.

The non­par­tis­an budget of­fice’s ana­lys­is pro­duced a raft of mis­lead­ing head­lines. “The CBO Just Nuked Obama­care” “¦ “Obama­care’s Score­keep­ers De­liv­er a Game-Changer” “¦ “CBO: Obama­care to Cost 2.3 mil­lion Jobs Over 10 years.”

Know­ing bet­ter, Re­pub­lic­ans called the ana­lys­is “dev­ast­at­ing,” “ter­rible,” and proof that Pres­id­ent Obama’s sig­na­ture ini­ti­at­ive was a jobs killer. As An­nie Lowrey and Jonath­an Weis­man wrote in The New York Times:

The re­port did say that the law would re­duce hours worked and full-time em­ploy­ment, but not be­cause of a crip­pling im­pact on private-sec­tor job cre­ation. With the ex­pan­sion of in­sur­ance cov­er­age, the budget of­fice pre­dicted, more people will choose not to work, and oth­ers will choose to work few­er hours than they might have oth­er­wise to ob­tain em­ploy­er-provided in­sur­ance. The cu­mu­lat­ive re­duc­tion of hours is large: the equi­val­ent of 2.5 mil­lion few­er full-time po­s­i­tions by 2024, the budget of­fice said.

People will choose to leave the work­force en­tirely, or shift to part-time work, for two reas­ons, ac­cord­ing to CBO. First, their ac­cess to health care is no longer linked to their em­ploy­er. They’re not locked in­to stifling jobs or ca­reer paths by a health care sys­tem built for the 20th cen­tury. Second, the ACA sub­sidies are based on in­come, which means it will be cheap­er for some work­ers to leave work or go part time.

In oth­er words, Ob­ma­care will give work­ers choice. It will free mil­lions from bur­eau­crat­ic re­straints and open op­por­tun­it­ies to cre­ate small busi­nesses (Sam Stein of The Huff­ing­ton Post has a good ex­ample here), seek train­ing for postin­dus­tri­al em­ploy­ment, or spend more time rais­ing their chil­dren. Fam­ily val­ues and in­di­vidu­al free­dom are sup­posed to be GOP hall­marks. Why are they cherry-pick­ing from the CBO re­port?

Be­cause it’s great polit­ics. In 2012, the Re­pub­lic­an Party hammered Demo­crats with CBO es­tim­ates that the ACA would re­duce the work­force by 800,000. With that es­tim­ate more than doubled, and midterm elec­tions loom­ing, the GOP hopes to rep­lic­ate their suc­cess in de­mon­iz­ing Obama­care dur­ing the 2010 con­gres­sion­al con­tests.

The shame of the GOP sim­pli­fic­a­tion strategy is that it glosses over some ser­i­ous, gen­er­a­tion­al ques­tions.

Do we want to re­duce the work­force par­ti­cip­a­tion rate? Some eco­nom­ists say it’s already a ma­jor con­cern as the baby-boom gen­er­a­tion leaves the work­force, and the ACA ap­pears to hasten that trend. Oth­ers see the mer­its in nudging out older work­ers to make room for rising mil­len­ni­als, a gen­er­a­tion stifled by war and re­ces­sion.

Will the budget be hurt by the loss of taxes from 2.3 mil­lion work­ers? As Glenn Kessler writes in The Wash­ing­ton Post, the budget im­plic­a­tions are real. Oth­ers might ar­gue that near-uni­ver­sal health care is a de­cent so­cial trade-off.

Will em­ploy­ees be en­cour­aged to in­vest less in their work­ers? CBO says yes, not­ing that busi­nesses will be less likely to spend money on train­ing, for in­stance, if they ex­pect big work­force turnover.

Should pub­lic policy en­cour­age people to work less or not at all in hopes of max­im­iz­ing their gov­ern­ment sub­sidy? One read­er spoke for many by tweet­ing un­der the handle @li­ber­rocky, “From wel­fare queens to health­care queens, heck of a job Obama.”

All fair ques­tions, lost in the sep­tic spew we call de­bate. For me, the big story in the CBO re­port got little cov­er­age:

CBO es­tim­ates that fed­er­al debt held by the pub­lic will equal 74 per­cent of GDP at the end of this year and 79 per­cent in 2024 (the end of the cur­rent 10-year pro­jec­tion peri­od). Such large and grow­ing fed­er­al debt could have ser­i­ous neg­at­ive con­sequences, in­clud­ing re­strain­ing eco­nom­ic growth in the long term, giv­ing poli­cy­makers less flex­ib­il­ity to re­spond to un­ex­pec­ted chal­lenges, and even­tu­ally in­creas­ing the risk of a fisc­al crisis (in which in­vestors would de­mand high in­terest rates to buy the gov­ern­ment’s debt).

I’ll ad­dress this more deeply in a sep­ar­ate column, but CBO es­tim­ates that the na­tion’s debt will be 100 per­cent of GDP (that’s cor­rect, 100 per­cent!) by 2038 un­less we change course. That means wrench­ing en­ti­tle­ment cuts and/or sig­ni­fic­ant tax in­creases, the former op­posed by most Demo­crats and the lat­ter re­jec­ted by most Re­pub­lic­ans. Here’s where the White House over­sim­pli­fies things.

Know­ingly de­ceiv­ing the pub­lic, Obama and his al­lies dis­miss the debt crisis by not­ing that the de­fi­cit (an­nu­al levels of red ink) is lower than it has been. It’s a false vic­tory. CBO ex­pects an­nu­al de­fi­cits to start climb­ing again in 2016 as the pop­u­la­tion ages fur­ther, and neither party has ad­dressed the causes of dur­able debt that threaten the na­tion’s fisc­al strength and solvency.

That is the hard truth. Don’t ex­pect to hear much of it.

{{ BIZOBJ (video: 4708) }}

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