Friday, February 07, 2014

The Accelerated Life Cycle of a Shouting Point

-- Posted by Neil H. Buchanan

The big political story of the week began with what is usually a non-story for everyone except economic policy nerds.  The Congressional Budget Office (CBO) issued one of its periodic updates on the federal budget and related matters.  Because of a very poor choice about how to present one of the statistical findings in the report, however, we were suddenly overrun with stories claiming that "Obamacare will kill 2.5 million jobs!"  Republicans (and their masters at Fox News) were elated.

Although the story has only been around for a couple of days, it has already been completely refuted.  Here, I will briefly summarize the misunderstanding at hand, comment on the remarkably rapid path that this claim has traveled to become a zombie idea, and then make a (very easy) prediction about how this will all play out going forward.

The basic story turns out to be surprisingly simple.  One of the major reasons that employer-based health insurance has always been a bad idea is that it ties employees to their jobs, giving them reasons to stay put purely to hold onto their health insurance.  People who would otherwise have liked to retire (due to poor health, for example), or who would have chosen to move or change jobs, or who would have preferred to reduce their working hours, were confronted with the unyielding reality that they needed to be working full time -- and to be doing so for one of the shrinking number of employers who provide health benefits -- in order to maintain their insurance coverage.  For those who wanted to continue working full time, it might have been possible to find a new job with health benefits, but it was not a sure thing.  For anyone else who might not wish to be in a traditional full-time job, there really was not much of a choice: Work full time, or face the dysfunctional individual insurance market (which meant either paying extremely high premiums, or not being able to find coverage at all).

CBO's economists understood that one of the policy improvements embedded in near-universal health insurance is the end of such "job lock."  (As the new cliche has it: "It's not a bug, it's a feature.")  So, CBO has been estimating the likely labor supply effect of freeing people from the shackles of the old way of doing things.  The most recent estimate showed that some people will retire earlier than otherwise, and that quite a few people would decide to reduce their hours.  Even though CBO's report explicitly said that this would all happen because people would "choose" to work less, it also added up the total number of reduced hours from their forecast and expressed the total as the equivalent of 2.5 million full-time workers.  (This is not quite as bad as describing a trillion dollars in terms of the height of a stack of $100 bills adding up to $1 trillion, but it's close.)

That is all the Republicans who hate the Affordable Care Act (that is, all Republicans) needed.  We were quickly overrun with "job killing" and all of the other shouting points that their echo chamber is so good at generating.

If this had happened before the Super Bowl this past Sunday, the infamous interview on Fox of President Obama by Bill O'Reilly surely would have included plenty of outrage from O'Reilly about the CBO report.  As it was, O'Reilly went through the usual list of zombie claims that the Republicans have been pushing for what seems like forever, prominently including Benghazi and the IRS non-scandal scandal.  It does not matter that neither of those shouting points has amounted to anything, notwithstanding months of investigation.  It has all been debunked, but people like O'Reilly simply do not care.  (In the case of the IRS, it had been established by mid-June of last year -- less than two months in -- that there was no "corruption" or tie to the White House, yet even now we have people continuing to call it a "scandal.")  Many Republicans are still convinced that the Clintons murdered Vince Foster, and they are just as sure that Obama did something bad re Benghazi and the IRS.

What is interesting about the CBO labor supply estimates is that anything scandalous in them arrived pre-debunked.  There was nothing to investigate, nothing to uncover, and no wrongdoing to condemn.  The report simply said that ending job-lock would allow people to make different choices about when, where, and how much to work.

Back during the 1982 recession, Ronald Reagan famously said that people should respond to the weak economy in the Rust Belt by "voting with their feet," that is, by moving to the Sun Belt to find (non-union) jobs.  That people were locked to their current jobs and locations by things like unsalable homes mattered not to the patron saint of "free choice."  The possibility of changing jobs was not only all-American, but it was used as a way to blame unemployment (lack of labor demand) on former employees (insufficiently pliant labor supply).

Even so, within the space of a few days, we have seen an excited response from Republicans who think this is all manna from heaven.  Watching Stephen Colbert's bone-headed conservative alter ego has been especially instructive.  On Wednesday's show, he showed a clip of a hapless Jason Furman (a top Obama economic advisor) mumbling his way through an explanation, with the camera then showing Colbert falling asleep on his desk.

On last night's show, Colbert perfectly predicted what will happen next.  His guest was Paul Krugman, who has been all over the CBO story, debunking it on his blog, e.g., here.  (I assume that his NYT column today will also deal with the uncontroversial controversy.)  On Colbert, when Krugman tried to explain, even in the simplest and briefest way, why the Republicans were wrong, Colbert gleefully held up a printed sign that simply read: 2.5 million.

We thus have the perfect distillation of how this non-story will congeal.  It is yet another example of the adage, "If you're explaining, you're losing."  It does not matter what the facts are, because Republicans can now respond to anything with, "But Obamacare will kill 2.5 million jobs!"

But, one might respond, are Republicans not the party that lauds freedom of choice (everywhere except in reproductive matters, choice of marriage partners, and which language to speak)?  "2.5 million!!"

And are you not the party that says that politicians needs to "understand economics," so that perhaps the difference between supply and demand ought to inform one's opinion?  "2.5 million!!!"

Move over, Vince Foster.