Chiefly because for many Americans Obamacare subsidies and high marginal tax rates will make not working more attractive than working, there will be “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,” said the Congressional Budget Office in report Feb. 3.
This is a good thing, Democrats said.
“Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams,” said White House Press Secretary Jay Carney.
“The Affordable Care Act will enable more than 2 million workers to escape ‘job-lock’ – the situation where workers remain tied to employers for access to health insurance benefits,” said House Democratic leader Nancy Pelosi, D-Calif.
“The single mom who’s raising three kids [and] has to keep a job because of health care can now spend some time raising those kids. That’s a family value,” said Sen. Charles Schumer, D-N.Y.
Americans work too much, said Rep. Keith Ellison, D-Minn. Now thanks to Obamacare, “People are going to be able to retire. People might actually be able to cook dinner rather than have to order out and get some takeout.”
They’ll be able to “tuck their child in bed at night and read a bedtime story,” said Rep. Marc Pocan, D-Wis.
Imagine how happy people must have been during the Great Depression, when so many had so much leisure time.
The Economist magazine, which described the CBO report as a “grim prognosis,” which is “devastating to Democrats,” pointed out the chief fallacy in this argument. Health insurance subsidies are good for the people who receive them, but “such coverage cannot buy dinner or pay rent.”
Many of those who’ll opt out of the labor force won’t be doing it because they want more time to cook dinner and read bedtime stories. It’s because the perverse incentives in Obamacare means they’d lose income if they work.
Keith Hennessey, an economic adviser to President George W. Bush, explains it this way:
“I will give you, fresh from the oven, either a home-baked Toll House chocolate chip cookie or a Krispy Kreme donut. Your choice.
“Let’s say you choose the donut.
“Now I pour rancid ketchup on the donut and offer you the choice again.
“You now choose the cookie.”
This is essentially what the CBO said when it said of Obamacare: “Some provisions will raise effective tax rates on earnings from labor and thus will reduce the amount of labor that some workers choose to supply.”
Obamacare subsidies diminish as income rises. For many, the reduction in the subsidy could approach, and may exceed, the additional income from a better job, or any job at all (after taxes and work-related expenses are taken into consideration).
“As income goes up, workers earning between roughly $11,500 and $46,000 receive a declining amount of tax credits to help pay for health care insurance,” said Liz Peek of the Fiscal Times. “The curve is steep, analogous to a highly progressive income tax; consequently, being rational, workers punished by the sharp subsidy losses will respond by leaving their jobs.”
Obamacare could effectively raise the marginal federal tax rate (the tax on the next dollar earned) for a moderate-income family from 37 percent to 50 percent, Mr. Hennessey calculated, while pointing out that the subsidies would make it easier for that family to buy health insurance.
The marginal tax rate for the top 1 percent of wage earners last year was 35.3 percent.
One can argue that a particular family which has more leisure, but whose income is frozen at a low level and made dependent upon government largesse, is better off. But the more people riding in the wagon, the fewer people pulling it, the slower the economy grows.
With the economy growing more slowly than in any other “recovery” since World War II, and the unemployment rate higher than in any other presidency since the Great Depression, the additional reduction in jobs the CBO forecasts could be devastating.
Which is why Democrats are spinning it so frantically.
“At a time of depressed growth, chronically high unemployment, stagnating wages and a labor participation rate as low as it has been since 1978, CBO report is as deadly as they come for the president’s allies facing re-election,” said Noah Rothman of Mediaite.
“All the spin in the world won’t ease that condition for Democrats, but that does not seem to mean they won’t amusingly keep trying.”
Jack Kelly is a columnist for the Post-Gazette (email@example.com, 412-263-1476).