February 5th, 2014

Spinning the new CBO report on Obamacare’s economic effects

Before I even begin, let me just ask: why would anyone trust the CBO’s projections about Obamacare’s effects? You don’t even have to believe that the CBO is purposely lying about anything to perceive that such prognostications are inherently suspect because of the complexity of the matter and the possibility of unforeseen and/or unintended consequences galore. Plus, it’s not my impression that the CBO’s track record on these sorts of things is especially good.

But it’s what they do so they’ve got to go ahead and do it, and everybody seems to have to talk about it. And here I am, talking about them talking about it.

Reading the responses to the CBO’s latest on Obamacare it’s clear how easy it is to spin it one way or the other, and how difficult it is for most readers who are not well-versed in economics and statistics (and that would be “most people”) to try to wade through it all and come to something approximating the truth—if they’re even inclined to do so in the first place.

The liberal LA Times, for example, says the CBO Obamacare news is great; the predicted loss of workers from the labor force will be from people who are ill and near retirement and shouldn’t be working anyway. On the other hand, John Podhoretz characterizes the report as a “death blow” to Obamacare. He lists a lot of reasons, but emphasizes a very different phenomenon re the labor force:

First, the report says Americans will “choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive.”

Here’s why: Poor people get certain subsidies, which disappear once a worker achieves a certain level of compensation. So it may be better to work less, or not work at all, rather than reach that higher pay level, because the pay increase won’t offset the loss of the subsidy…

As the report says, “If those subsidies are phased out with rising income in order to limit their total costs, the phaseout effectively raises people’s marginal tax rates [the tax rates applying to their last dollar of income], thus discouraging work.”

There’s a problem on the other end as well — among those whose tax dollars pay for the whole shebang: “If the subsidies are financed at least in part by higher taxes, those taxes will further discourage work or create other economic distortions, depending on how the taxes are designed.”

Thomas Lifson at American Thinker evaluates some of the liberal versus conservative responses. His article is worth reading, but here’s a sample of his conclusions:

The cold hard facts are that CBO says that the availability of subsidies will induce people to work less. And therefore earn less, and pay less taxes (or get larger earned income tax credits, aka welfare by another name, not to mention Food Stamps, Section 8 Housing subsidies, and all the other taxpayer subsidies available in the new leftist welfare utopia). As Stephen Hayes of The Weekly Standard pointed out on Special Report with Bret Baier last night, this contention of Furman’s directly contradicts the traditional liberal assertions that welfare availability does not induce people to work less. Now they are admitting that people choose to work less when government subsidies are available. And they are celebrating it as liberation from drudgery.

The only problem is that the rest of us remained chained to drudgery in order to support their self-fulfillment. And we get to pay higher taxes in order to support all the people who are taking advantage of our involuntary largess.

I’ve been analyzing Obamacare myself for many months, crunching not the CBO-type numbers but the numbers that applicants themselves would deal with in applying for Obamacare. I learned how the subsidies work and it became glaringly and almost immediately obvious how the subsidies would act as disincentives to earning more money. I quickly discovered plenty of other facts too numerous to mention in this post, but described at length in the many many posts I’ve written on the subject since the rollout last October. And yet somehow I have a feeling that we ain’t seen nothing yet in terms of how bad this will be.

But maybe all of this CBO stuff, and then spin on the CBO stuff and evaluation of the spin, is just so much hot air for most Americans, who will evaluate this on their own. Obamacare is not some distant abstraction. It will affect almost all of us personally, in ways most people can understand and feel. It will affect their friends, their family, their workplace, the economy in general. And it may be that even the spinmeisters can’t hide what it will do.

[ADDENDUM: Megan McArdle is always worth reading on this sort of thing. Interestingly enough, her article seems to agree with my basic premise in the first paragraph of my post. Also worth reading are the comments to her article.

McArdle focuses on those who will quit their jobs entirely, rather than on those who may just reduce their hours and/or their efforts in order to earn less.

Also see this by Ross Douthat.]

29 Responses to “Spinning the new CBO report on Obamacare’s economic effects”

  1. waitforit Says:

    And thus the argument that John Roberts saw these consequences and allowed them to occur to educate the populace and effect a legislative rather than judicial change.

    http://www.americanthinker.com/2014/02/the_ghost_and_john_roberts.html

    That aside, what is there to say about the spin? Will the poor and the Washington elite heed the spin? Yes. Of course.

    Will we? We never have. So when will we do something radical about it?

  2. holmes Says:

    Also job losses from people MAKING LESS MONEY. They buy fewer things.

  3. MissJean Says:

    Neo, thank you for all the commentary and linking you’ve done on this subject. If I had to look for information on my own, it’s hard to filter through the commentary-disguised-as-news and the soundbites for substance.

    I have friends whose pediatrician just sent out a letter informing them that she is not taking their “new” insurance. They were surprised that I “predicted” this – but you and/or Bob Parks had linked to articles on that particular subject months ago.

    The hilarious thing about this CBO spin, at least from my POV, is that my local class-enviers have wanted the luxuries of being well-paid: travel, high-end appliances, etc. They never envied the free time, and it would never occur to them that sitting home with nothing to do is a “luxury.”

  4. Mr. Frank Says:

    In the case of a person working to keep employer provided health insurance he has an income for other things like rent and food. If the person elects not to work to qualify for subsidized ObamaCare, that income for rent and food and clothing is dropped. They also have to come up with part of the health insurance cost with income they don’t have. I don’t see how this makes sense unless all a person’s needs are covered by government programs. I guess that’s the point.

    Have you visited Indian reservations in the west? Medical care is “free.”

  5. T Says:

    “people who . . . shouldn’t be working anyway”

    Just think about what that LA Times sentence says about the Progressive mindset.

    They are not the opposition, they are THE enemy. They are the ubiquitous and nefarious “THEY” as in “they say . . . .”

  6. Ymarsakar Says:

    What kind of leverage does the Regime have on the CBO and when did they have it?

  7. waitforit Says:

    Abortion and now Obamacare: reducing growth.

    “Pro’s” are afraid of growth. Moral growth. Economic growth. Social growth.

    Where can this lead? Only to doom. Only to doom. So let us have doom now. Let us (wait for it) conserve.

    And you can’t blame them if you believe in a closed system.

  8. neo-neocon Says:

    T:

    That wasn’t a sentence in direct quotes. That was my summary of the message of the article and the spin from the left.

  9. Wolla Dalbo Says:

    Crapweasel Harry Reid says that this is a great development, since these former employees will no longer be tied to a particular employer and his health coverage–virtual “wage slaves” (free, free at last) –but will now be “free agents”-as if there were just tons of other jobs available that they could just slip right into.

    Spinning their particular line of crap, the New York Times says it’s just great, too, because now a lot of these “folks” can spend more time with their families—not telling us just who will be bringing in the cash to pay all the bills if they aren’t working.

    Of all the crap Obama & Co. and their MSM aiders, abettors, and co-conspirators have peddled, this stinks the most and is the least convincing.

  10. Geoffrey Britain Says:

    The MSM propaganda machine will continue to promote ObamaCare and minimize and ignore its actual effects and repercussions, until reality makes their spin untenable.

    Then they will engage in lying, obfuscation and false accusations in an attempt to historically revise the issue to their advantage.

    That the end justifies whatever means are necessary is a primary tenet on the left. As is the tenet that whatever advances the agenda is inherently moral.

  11. waitforit Says:

    Labor is the essence, the seed, the requirement of human existence. I cannot prove it, of course, but man will never reach leisure as hoped by Oscar Wilde. Leisure will never fulfill the human experience.

    Capital, if the “Pros” were paying proper attention, requires moral decision not to reduce labor but to increase it. The requirement is not to reach a steady state but, as Genesis requires, to multiply and subdue.

    This scares those who afraid of death in that quest. It is a fearful thing, but less fearful than the alternative: death by apathy.

  12. southpaw Says:

    “It will affect their friends, their family, their workplace, the economy in general. And it may be that even the spinmeisters can’t hide what it will do.

    But that’s not how the left thinks. They think only in terms of what it takes to win the next election: “how can we bullshit, scare, con, or bribe, just enough dummies to get stay in control for another 2 years? How many elections do we need to steal, how many Reppublicans do we need to destroy, how many promises do we need to make?”

  13. Mr. Frank Says:

    I am beginning to fear that we are in a no man’s land as far as fixing or killing ObamaCare. We can’t go forward because it does not work. We can’t go back because of the destruction OC has caused. Insurance plans we used to have are gone. Relationships with specific doctors have been lost. Businesses have already made decisions for the future. It looks like we can’t put Humpty Dumpty back together again.

    It has been argued that this is the objective to get us to single payer. I would argue that after the monumental government screw up, most people would be reluctant to turn over all health care to them.

  14. KLSmith Says:

    “We are five days away from fundamentally transforming the United States of America”. All is going according to plan.
    BHO

  15. Inkraven Says:

    Obamacare is just the welfare trap all over again, where if you work hard and get offered a 10% pay raise, it’s put you just out of the government handout bracket and you lose more than the value of the raise in benefit. Of course, this is right where the libs want everyone except for their chosen few.

  16. Lurker Says:

    Personally I took early retirement because of this stupidity. Also some of the “work less” is really “report less”. Washington State estimated a few years ago at least 99k unlicensed businesses in the state and thus not paying B&O and inventory taxes and not collecting sales tax. 99k!

  17. jvermeer Says:

    Two observations: Some liberals seem under the depression era idea that there are only so many jobs and that you have to get the old to retire so the younger ones can work. That isn’t true. Each additional person producing something creates it’s own demand: called Say’s law.
    If we have the same number of people working we’ll get the same amount of stuff. But if non-working people get more subsidies, then the standard of living of those working has to go down.
    I wrote, in part, the following to the local paper. I suggest you do the same.
    “Evidently the White House thinks working to fulfill your responsibilities is a bad thing, as they lauded the prediction as evidence that people will no longer be “trapped in a job”. So how would they term those people working to fulfill their own responsibilities as well as subsidizing someone else not working to fulfill theirs?”

  18. T Says:

    My apologies. I should have been clearer. Still, I don’t think it changes either my concern or their message.

  19. Matt_SE Says:

    Yep. I agree with Geoffrey Britain (again).

    The MSM and Dems will spin this because they have no other choice. These will be the lies of the con-men who are “all in.”

    And though galling, it won’t make any difference. Who are the voters going to believe, the politicians or their own lying eyes?

    You know the Dems are starting to see this. That’s why so many of them are retiring now.

    If the economy goes too, November is going to be a bloodbath…as long as Boehner doesn’t try amnesty.

  20. Matt_SE Says:

    One other thing:

    The CBO report only dealt with the lost jobs from Obamacare itself. If amnesty happens, there will be an immediate tidal wave of firings as low-skilled workers are replaced with illegals.

    That’s because employers don’t incur a penalty ($2000 to $3000 per employee) for hiring illegals under Obamacare.

    The economy is already shaky. Given this incentive, what employers will choose is a no-brainer.

  21. Matt_SE Says:

    BTW, I also agree with neo-neocon that anything published by the CBO needs to be taken with a grain of salt.

    These are the people who originally scored Obamacare much better than this current revision.

    If anything, they’re probably on the low side.

  22. waitforit Says:

    You know, it’s really hard to find work and it’s not our fault to just live. I mean we deserve food and shelter and education and healthcare and dignity and protection from big corporations, so if we’re here and the rich can provide that, the gov’t needs to make them do it. I mean it’s not our fault it we try and can’t.

    /sarc.

  23. RickZ Says:

    holmes Says:

    Also job losses from people MAKING LESS MONEY. They buy fewer things.

    The Unaffordable Health Insurance and Patient Denied Care Act has two serious problems which will negatively impact the economy, i.e., create job losses. One is as you state, people making less money to buy things thanks to reduced hours and/or job losses, thereby not buying goods and services which keep people employed. But the more insidious problem is the reduced, or total lack of, disposable income of those who still have jobs. The increased health insurance premiums (not going down by $2500 but up by 40% or more) and the skyrocketing deductibles reduce the disposable income of many people/families. If they are spending more on health insurance and it concomitant costs, then they aren’t buying that new fridge, or going out to a dinner and a movie. Add in an increased minimum wage to raise prices across the board and you have a deliberate progressive recipe for economic disaster.

    What frightens me most is that many lefty pols and economists pay lip service to these issues as actually helping the economy to grow. Calling such statements Orwellian doesn’t do them (social) justice.

    Geoffrey Britain Says:

    The MSM propaganda machine will continue to promote ObamaCare and minimize and ignore its actual effects and repercussions, until reality makes their spin untenable.

    Then they will engage in lying, obfuscation and false accusations in an attempt to historically revise the issue to their advantage.

    We’ve already heard a big one: 404Care’s failure is due to Republicans not helping with a ‘fix’, instead choosing to continue to criticize a law in which they had no hand nor votes. It’s a version of ‘You warned me I’d fukc up, I fukced up. Now help me unfukc myself. If you don’t, it’s all your fault!’ Progressives have the minds of self-centered, narcissistic two-year-olds. That self-centered narcissism is fine if you’re two-years-old, but it’s quite unbecoming in a 50-year-old president or in 70-years-old House Minority and Senate Majority leaders.

    I’ve said it before, I have never seen a more unserious government in my lifetime. But then we now are an extremely unserious People, swooning over bread and circuses, so the problem does go hand-in-hand. Whether us now being an unserious People is the chicken or the egg is up for debate.

    As a final thought which I’ve heard a thousand times before, just not from any progressive pol: When was the last time a poor person offered you a job with full benefits? But let’s demonize the rich with more class warfare and tax the bejesus out of them. Yeah, that’s the ticket, more envious class warfare. Uncle Sugar Government will take care of you, until it no longer has taxation ‘income’ to pay the bills to do so. This version of ‘kick the can down the road’ is not a child’s game at all.

  24. Wolla Dalbo Says:

    I don’t believe that there is such a thing as an objective, apolitical research organization within the Federal government, and that includes the CBO.

    These organizations all have institutional survival instincts and agendas, because they all have mission statements, budgets, tables of organization and staffing levels that can be expanded, contracted, or even zeroed out, according to Congressional whim or animus.

    So, unless very strongly ideologically driven—under Obama that would be practically all executive agencies, to name a few the DOJ, FBI, CIA, DOS, IRS, BLS and the Census, EPA, or NASA and “global Warming,” the Department of Energy and green energy projects, etc.–they usually tred very lightly, and try to avoid controversial subjects, or moving too far out on a limb.

    In the case of the CBO, being creatures of Congress, they dance to the tune set by Congress.

    For instance, by law each new piece of legislation considered by Congress has to be “scored” by CBO, so that members of Congress have some idea of the immediate and long term costs and the many potential impacts such legislation might have, should it become law.

    Well, CBO scores a piece of legislation according to the parameters given to them by those authoring the bill, i. e. bills can be written in such a way—one part taking effect before another part, for instance, to deliberately cause it to “score” well, or CBO can be told to score based on assuming that certain economic conditions prevail—say low inflation, and interest rates, or a certain employment rate—over a certain time period.

    My guess is that while the CBO report on the effects of Obama care on employment is damning, a truly objective and comprehensive report would have been much more damning by several orders of magnitude.

  25. Wolla Dalbo Says:

    In addition to the two bullshit explanations about how 2.5 million less jobs due to Obamacare is great news–Harry Reid’s “free agent” garbage, and the NYT’s spin that hey, out of work people “can spend more time with their families,” we now have Pelosi adding another load of shit to the increasing pile with her contribution that being out of work means that you are no longer subject to the dreaded “job-lock.”

    I swear, are there a couple of stoned college age schmucks in a basement somewhere who come up with these ridiculous ideas and terminologies?

  26. Spec Says:

    I think people should be careful to slam the CBO too much. From my understanding, they do a pretty good job with what they’re given. And that’s the rub. They have been manipulated by the past few presidents more than ever before.

    The premise behind the CBO is that when they are given a question, they are also given the parameters for that question and even told what data to consider. Like a calculator really, only as good as the info entered.

    Thus, if they were asked what 2+2 equals, but then were told that 2 is really only 1.4, then they really can come up with 2+2=2.8 with a straight face. That’s an extreme and simple example, but that’s how I understand it works.

    When the CBO was scoring Obamacare, Paul Ryan was going to great pains explaining why their numbers were correct for what they were being forced to score, but how that really didn’t capture the likely outcome. If you do a little research, you’ll find that this is true.

    In the end, politicians and presidents will use the CBO to help them get their way with absurdly low projections and then dismiss them later when they re-score for the emerging reality. Just like now.

    One would be better off looking at all past government programs and calculating what the proponents said it would cost versus what it ended up costing. And then using that percentage to recompute anything that comes out of a politicians mouth. 300%? 500%? I bet using math based on simple history would be far more accurate than CBO projections.

    The issue of course is that once the reality becomes known, it is far too late to stop the train. Which is why limited government form the get-go was the mantra of our founding fathers. They knew what would happen, and it is.

  27. Don Says:

    CBO works according to a set of rules that can be gamed. In fact, The Democrats made gaming CBO rules a science when they passed Obamacare.

    By its nature, CBO is limited in how it can predict things. Flip side is it strict rules mean that CBO itself can’t spin things much.

  28. Don Says:

    My guess is that while the CBO report on the effects of Obama care on employment is damning, a truly objective and comprehensive report would have been much more damning by several orders of magnitude

    I agree. And reality may end up being even worse then a ” truly objective and comprehensive report”.

  29. Matt_SE Says:

    I agree wholeheartedly with both of Don’s posts.

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Previously a lifelong Democrat, born in New York and living in New England, surrounded by liberals on all sides, I've found myself slowly but surely leaving the fold and becoming that dread thing: a neocon.
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