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benveniste

July 2017

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[personal profile] benveniste
Today the Congressional Budget Office issued its report on the budget and Economic Outlook: 2014 to 2024. Two of the sections dealt with the affordable health care act (ACA, aka Obamacare).


The first of these sections echos last May's analysis.  Over the next 10 years, the forecast is that the net of ACA spending and revenues will increase the federal debt by about $1.2 trillion over the next 10 years.  This shouldn't come as a shock to anyone; health care is expensive and the logic used to proclaim the ACA "revenue neutral" was always just a fantasy.  "Don't tax but spend anyway" has become mandatory for members of Congress no matter what side of the aisle they sit on.

The second section, though, I find a bit baffling.  It claims that the ACA will result in a 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.  However, the report states that this is not due to employers cutting back on hiring, or even shifting people to part-time, but rather it is "almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive."  Again quoting the report, "Subsidies that help lower income people purchase an expensive product like health insurance must be relatively large to encourage a significant proportion of eligible people to enroll. 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."

I'm not an economist, but I see some holes in that logic.  The first is that last time I looked, there are a lot of unemployed people in this country, and in fact the CBO projects that the unemployment rate will average at least 5.5 percent for the next 10 years.  The second is that there are still jobs that need to get done.  If the supply of labor drops and the demand of labor stays constant, the price offered for labor should increase until it attracts sufficient workers.  Perhaps the CBO calculations take that into account, but I don't see where.  Third, since the assumption is that people need large subsidies to get them to enroll, they were going without health insurance before the ACA came along.  That means that despite any subsidy they'll need more income, not less, to make up for the premiums they are now paying.  That doesn't pass the smell test.  In short, this seems to be a variation of the old argument that subsidizing the poor deepens the poverty trap.  I reject that and the idea that reducing the financial risks of healthcare is somehow going to make our society less productive as a whole.

It's time to accept that as a society, we should distribute the costs and benefits of basic healthcare to everyone.  But we also need to figure out how to remove the bloat and obfuscation in healthcare costs, and also what that "basic level" should be.  And those problems are even harder to solve than getting the populace to accept that government can't perpetually spend more than it takes in.
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