Not working just won’t work


Congress’s bean-counters have rendered their verdict on Obamacare’s economic impact — and it’s not good for the president.

According to a new Congressional Budget Office (CBO) report, the president’s healthcare law will reduce the number of hours Americans work by 1.5 percent to 2 percent — the equivalent of 2.5 million jobs — by 2024.

The White House claims that this is because Obamacare reduces “job lock” — whereby people keep working just for the insurance. So the law helps Americans “choose” not to work.

Don’t believe it. The CBO report provides proof that Obamacare will make work less rewarding, redistribute income to subsidize non-work, and reduce employers’ demand for labor.

Obamacare’s supporters have tried to blunt the 2.5-million-jobs-lost figure by citing the report, which says that the reduction in employment will happen “almost entirely because workers will choose to supply less labor.”

What’s wrong with voluntarily working less? Isn’t that what we all aspire to?

The law’s cheerleaders stopped their quotation of the report too soon. The CBO goes on to say that people will work less “given the new taxes and other incentives they will face and the financial benefits some will receive.”

The devil is in the details of those “taxes,” “incentives,” and “financial benefits.”

Obamacare provides subsidies for people with incomes of between 138 percent and 400 percent of the poverty line — from $11,670 to $46,680 for individuals and $23,850 to $95,400 for families of four.

Those subsidies decline as one rises from the poor to the middle class. When someone works more and earns more money, he or she is punished with higher insurance premiums and more cost-sharing.

Consequently, some will decide that working more or lobbying for a raise isn’t worth it.

The situation will be similar for the rich. The law hits individuals who make more than $200,000 a year — and families with more than $250,000 in income — with a 0.9-percent increase in the Medicare tax and a 3.8-percent tax on investment income. Both levies will discourage people from putting in extra hours in order to avoid crossing those income thresholds. Lower incomes lead to less spending — and thus less job creation.

The CBO also identifies an “income effect.” This happens, in the CBO’s words, “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 uses tax dollars to pay people not to work.

These effects don’t enable free “choices.” They warp decision-making — discouraging lower-income Americans from climbing the opportunity ladder and taxing the well-off to pay for it.

The CBO report also explores the incentives employers face. In 2016, employers with between 50 and 99 full-time-equivalent employees must provide health coverage or pay a penalty that increases with each full-timer so they can purchase insurance in one of the exchanges. For those with 100 or more workers, the employer mandate, which was delayed only one year, kicks in on Jan. 1, 2015.

The effects will be similar. Employers will reduce wages to pay for coverage. Work will become less rewarding, and employees will therefore supply less labor.

Some employers could also hire fewer workers or shift to part-timers to stay under the 50-employee threshold or reduce their per-employee penalty. That means fewer jobs.

Indeed, as the CBO notes, there are already reports of businesses doing this — including Target, Home Depot, and Trader Joe’s — even though the penalties haven’t kicked in yet.

The report tries to hedge its estimates by saying that they’re “subject to substantial uncertainty.” But the agency’s predictions about Obamacare have a history of growing direr with time.

In 2010, when the CBO last forecast Obamacare’s effect on the labor market, it predicted less than half the harm it now foresees.

Why the difference? The new analysis factors in consequences that weren’t considered before, as well as new research. The more the CBO learns about Obamacare, the more destruction it predicts.

Obamacare’s critics have long called it a job-killer, highlighting the problematic incentives the law creates and the damage it does to employers. As the law approaches its fourth anniversary, the nation’s top nonpartisan budget authority has confirmed that those critics are correct.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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