Trahison des économistes

The Congressional Budget Office has changed its story about the impact ObamaCare will have on the US labour market. The bottom line is that some 2.3 million will be priced out of the labour market.

This is an example of “volunatary” unemployment – with a cynical political interpretation of the work “voluntary”. It isn’t that 2.3 million individuals have necessarily made a personal choice not to work, but rather that high-income elites have chosen that somebody else is going to be unemployed as a consequence their own personal policy preference.

The Wall Street Journal has an article on Casey Mulligan – the economist who belled the ObamaCare cat.

… more than anyone, Mr. Mulligan is responsible for the still-raging furor over the Congressional Budget Office’s conclusion that ObamaCare will, in fact, harm growth and jobs.

The CBO’s intellectual conversion is all the more notable for accepting Mr. Mulligan’s premise, which is that what economists call “implicit marginal tax rates” in ObamaCare make work less financially valuable for lower-income Americans. Because the insurance subsidies are tied to income and phase out as cash wages rise, some people will have the incentive to remain poorer in order to continue capturing higher benefits. Another way of putting it is that taking away benefits has the same effect as a direct tax, so lower-income workers are discouraged from climbing the income ladder by working harder, logging extra hours, taking a promotion or investing in their future earnings through job training or education.

Quick translation – means testing causes poverty traps and distorts the labour market.

Okay – but what is the spin?

The new finding might have prompted a debate about the marginal tax rates confronting the poor, but—well, it didn’t.

Instead, liberals have turned to claiming that ObamaCare’s missing workers will be a gift to society. Since employers aren’t cutting jobs per se through layoffs or hourly take-backs, people are merely choosing rationally to supply less labor. Thanks to ObamaCare, we’re told, Americans can finally quit the salt mines and blacking factories and retire early, or spend more time with the children, or become artists.

Shocking. Why not just ban work altogether? Mind you. it seems Mulligan isn’t actually opposed to a bit of nudge.

“I can understand something like cigarettes and people believe that there’s too much smoking, so we put a tax on cigarettes, so people smoke less, and we say that’s a good thing. OK. But are we saying we were working too much before? Is that the new argument? I mean make up your mind. We’ve been complaining for six years now that there’s not enough work being done. . . . Even before the recession there was too little work in the economy. Now all of a sudden we wake up and say we’re glad that people are working less? We’re pursuing our dreams?”

I particularly like the last bit:

Mr. Mulligan [asks] “Why didn’t conventional economic analysis make its way to Washington? Why was I the only delivery boy? Why wasn’t there a laundry list?” The charitable explanation, he says, is that there was “a general lack of awareness” and economists simply didn’t realize everything that government was doing to undermine incentives for work. “You have to dig into it and see it,” he explains. “The Affordable Care Act’s not going to come and shake you out of your bed and say, ‘Look what’s in me.’ ”

Judging by their reaction to the CBO report, the less charitable explanation is that liberals would have preferred that the public never found out.

Like the WSJ I think Mulligan is being far too generous. We know that government undermines work incentives, we know that government intervention either increases prices or leads to shortages, we know about unforeseen consequences and perverse incentives.

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4 Responses to Trahison des économistes

  1. entropy

    Health insurance should be a personal choice and not linked to the employer.

  2. Token

    The NY Times has a spin on the events, the “liberation” of working class people from the need to work:

    The Congressional Budget Office estimated on Tuesday that the Affordable Care Act will reduce the number of full-time workers by 2.5 million over the next decade. That is mostly a good thing, a liberating result of the law. Of course, Republicans immediately tried to brand the findings as “devastating” and stark evidence of President Obama’s health care reform as a failure and a job killer. It is no such thing.

    This scarily honest assessment should tell everyone that the left no longer believes that their role is to provide work to society, rather just welfare to its client classes.

  3. Ant

    Don’t forget the “job-lock“.

    Ooooooo, the job-lock. Look out! It’s gonna get you.

  4. Token

    Just in case anyone doubts the fact the Demoncrats designed Obamacare to permanently locking people out of employment:

    House minority leader Nancy Pelosi says the CBO report vindicates Obamacare, because “this was one of the goals: to give people life, a healthy life, liberty to pursue their happiness. And that liberty is to not be job-locked, but to follow their passion.” Pelosi is particularly invested in this view. She’s been mocked for years now for her repeated claims that Obamacare is an entrepreneurial bill because it would let Americans quit their jobs to, among other things, “write poetry.”

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