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.]