Friday, February 7, 2014

Republicans Discover Evidence of Jobs Crisis

By Ezra Klein Feb 6, 2014

The U.S. has been in a jobs emergency since at least 2008. The cause of the crisis -- too little demand -- isn’t mysterious, and neither are the solutions. We could invest in infrastructure to create construction jobs. We could give tax breaks to employers who hire new workers. We could restore the payroll tax cut to workers so they have more money to spend. We could help state and local governments hire back some of the employees they laid off during the recession. Macroeconomic Advisers, an economic consulting firm, found that the American Jobs Act, which contained many of these policies, would have created 2 million jobs.

But in recent years, these policies have been either blocked or canceled by congressional Republicans. They fought Democrats to scuttle the American Jobs Act and allow the payroll tax break and long-term unemployment benefits to expire. Creating jobs, they argued, was neither feasible nor affordable.

That’s the proper context in which to view this week’s hysteria about Obamacare. The nonpartisan Congressional Budget Office just released updated estimates for the health law. It found that the disastrous rollout last fall put Obamacare behind schedule -- on track to insure 2 million fewer people than projected by the end of 2014. On the other hand, it also found that insurance premiums were about 15 percent lower than projected, and that the law would cost less than previously estimated. It found that the risk corridors designed to safeguard insurance companies from the effects of acquiring too many high-risk customers -- which Republicans have been calling an “insurer bailout” -- will actually yield $8 billion in net payments from insurers to the federal government.

The finding that made the news, however, concerned the Affordable Care Act’s long-term effect on labor supply. In past reports, the CBO has estimated that the law will, on net, lead some people to drop out of the labor market or cut back on their hours because their health insurance is no longer tied to their job. Imagine a 62-year-old who would like to shift to part-time work but can’t because he can’t afford -- or, due to pre-existing conditions, wouldn’t even be sold -- insurance on the individual market. Now, because Obamacare has made that insurance affordable and available, he can -- and will. As a result, his work hours will be (voluntarily) reduced.

Previously, the CBO had estimated this would reduce total hours worked by about 0.5 percent. Now, it estimates the effect at 1.5 percent to 2 percent of hours worked -- a reduction in hours equivalent to more than 2 million full-time jobs.

The CBO was very clear about what this means: “The estimated reduction stems almost entirely from a net decline in the amount of labor workers choose to supply, rather than from a net drop in business’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment.”

The CBO’s clarity didn’t forestall a festival of motivated misreadings. The conservative Washington Times, for instance, featured this headline: “Obamacare will push 2 million workers out of labor market.” That has the distinction of being not only untrue but also the very opposite of the truth. Workers are choosing to cut back hours -- not being pushed to do so.

Whether this is good or bad depends on your views about human flourishing. Lower labor-force participation is bad for economic growth. On the other hand, the point of life is not for everyone to work every possible hour until they die. Workers should be able to choose to leave their jobs or cut their hours without worrying that their families won’t survive a medical emergency. In addition, as the Urban Institute’s Donald Marron tweeted, “employers will be competing harder for workers,” which will push wages to rise for everyone remaining in the workforce.

In context, the freakout over the CBO estimate is perverse. Is it really the Republican position that we should do nothing - - in fact, cut aid -- for the millions of long-term unemployed, but express shock and terror that employed people will, in a few years, cut back their hours or leave the labor force by choice? Shouldn’t we be more concerned about people desperate to join the workforce, who can’t, than about people voluntarily leaving the workforce, who can?

Some Republicans will say, of course, that they don’t oppose helping the jobless. They just oppose increasing the deficit or increasing taxes to do so. But repealing Obamacare raises the deficit, too! So rather than increasing the deficit to help people who want jobs get them, we would be increasing the deficit to make sure people who want to leave their jobs can’t. That’s insane.

Policies don’t exist in vacuums. By untying the link between employment and health care, the Affordable Care Act reduces the incentive to work. But there are ways to increase incentives to work without making people dependent on their jobs for health insurance. We can help people without taking away their health care.

So here’s a simple proposal. Repeal of the Affordable Care Act would cost hundreds of billions of dollars over the next few decades because of the law’s spending cuts and new revenue. So instead of repeal, how about if Congress devotes that same amount of money to policies to increase employment now. Republicans could even dictate that all the money flow to targeted tax cuts.

If they are worried about employment rather than scoring points against Obamacare, this should be an easy compromise to strike. Anyone think it will be?