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.


David Ricardo said...

While everything that Mr. Buchanan (and Mr. Krugman) has stated about the CBO report is true none of it obscures the fact that the health care reform act has been a political and policy disaster.

1. The legislation was so complex that even its sponsors didn’t understand it fully. Hence Mr. Obama’s statement that you could keep your existing insurance, which was just not true. This statement was not made out of an intent to deceive, it was made out of ignorance.

2. The Act leaves the major cause of high health care costs, fee for service, largely in place. No other nation has this type of payment system because of the sheer idiocy of such a system. Under fee for service, health care costs = income to health care providers. Gosh, who exactly doesn’t understand why health care costs are high?

3. The failure of the reform to anticipate and plan for disincentives to remain in the labor force was another aspect of the Act born out of sheer ignorance. Hence the disarray of the Administration and the defenders of the Act not only to have not dealt with the issue in the legislation but also to effective respond to the CBO analysis as it has now been presented.

4. The rollout – well no comment needed, is there.

Yeah, we could add more, the list is almost endless.

Yes the Act is a positive and the benefits for both the economy and individuals will be substantial, and yes the Republican alternative which is now being developed is even worse than the old system (it will be interesting to see Republican reaction if the CBO ever analyzes the Republican proposals and explains the huge shift in costs to the individuals, the astronomical costs of covering those with pre-existing conditions etc.) but none of that excuses the Obama Administration for largely blowing what may have been the only opportunity on our lifetime for effective, meaningful reform.

Paul Scott said...

you are right on #2.

On #1 you are technically correct but I think you are missing the problem of Kennedy death + Dem complacency. The ACA did not get its full vetting by the legislative process because the Senate was "lost" (well, no, but because of the filibuster it may as well have been). This is totally a Dem issue - because Brown had no business winning Kennedy's seat, but once that happened the legislative process that would have worked out a lot of these technical kinks came to an end.

On #3 I think I just disagree entirely. Well, I suppose I agree that disincentives to remain in the labor force were removed, but I don't think they were either unanticipated or unplanned. The shifting of work incentives was intentional and good.

I think you are also being overly pessimistic (or you are a 90-year old) about the only chance in our lifetime. These sort of social programs are winning the long road through demographics. Republicans would be a minority in both houses now if it were not for friendly redistricting. That, however, can't stem the tide forever. The enduring strength of the Tea Party within the Republican party is also a good sign for our long run.

The ACA was bound to be unpopular - even if almost all of its provisions are popular - because it is a large and complex piece of legislation. The Supreme Court didn't help with its Medicare expansion ruling - leaving a situation where people could get neither Medicare nor subsidies.

In any event, I think what we see today is not that much different from if the ACA had had a perfect legislative path and perfect rollout.

Bob Hockett said...

Quick query: Are there any reliable estimates out there on the mean IQs of Republicans and Democrats? My guess would be that the former would hover somewhere near 40 and the latter would hover somewhere near 120. Perhaps Dems should henceforth simply hold up signs showing these numbers, no matter the setting, any time sizable numbers of non-Democrats might be watching. Little if anything more need be said, unless it be that the ACA did not cover the Republicans' lobotomies.

Michael C. Dorf said...

I have read that republicans are, on average, better educated than democrats. Education does not equal intelligence, of course, but I do think the differences are not explained by either intelligence or education.

Bob Hockett said...

Another thought: If the ACA will marginally reduce involuntary employment in the short to medium term, is it not a corollary that it will likewise then tend, ceteris paribus, to reduce involuntary unemployment over the same interval?

Of course it is possible, if not indeed likely, that some who are now involuntarily unemployed will not qualify for some of the positions newly vacated by those whom the ACA enables to leave their unwanted jobs. But it is nevertheless difficult to see how it could not be the case that, on net, the latest CBO figures are not only not bad news where the short to medium term involuntary unemployment rate is concerned, but are affirmatively good news for the same.

It is likewise of course difficult to see how it could not be the case that, in the longer term too, the ACA will tend to lower involuntary unemployment. This it will do via the growth effects wrought by the greater factor mobility that decoupling health insurance from particular employers enables. Seems to me Neil has explained this quite well. Heck, even Bismarck - no friend of the left - understood it well over a century ago. Why then can't Republicans? Or is the failure to understand in this case more willed than passively experienced?

Paul Scott said...

The CBO figures are net. It is still a prediction over a 10-year span, so it could be wrong, of course. But the issue is not whether the CBO did a good job, it is whether it said what Republicans say it said. It did not, but the 2.5 million figure is still net and already includes replacement from un/under employed.

Bob Hockett said...

Thanks, Paul - understood and very interesting, but unless I am missing something I don't think my query's been addressed. Is it not an implication of the CBO report that the *involuntary* rate of unemployment will be *lowered*? If the labor force participation numbers drop by 2.5 million over 10 million, that is interesting, but is it interesting with respect to what typically concerns us most - the involuntary, rather than the voluntary, rate of unemployment?

Many thanks,

Shag from Brookline said...

The "shouting Point" was put in perspective for me as I read Matthew L.M. Fletcher's "Bullshit and the Tribal Client" which while focusing on Indian law also ties in public relations people and politicians to bullshitting, which is distinguished from outright lying. (The article can be linked to at Larry Solum's Legal Theory Blog where he gives it a "Recommended!" after his "my, my" over the word bullshit.) While the primary focus of the article demonstrates the uphill battles of tribal inhouse counsel, it has interesting commentary on the Supreme Court bar and its role in bullshitting..

So Republicans were bullshitting us (assuming they were not outright lying). Watch out for the "HOOPA!"

Joe said...

Overall, it is unclear to me how much of a "disaster" the PPACA has been. Republicans simply don't have a real alternative & can't really oppose chunks of it.

Who wants to deny giving parents a chance to add kids on their policy? Who wants pre-existing condition barriers allowed? The "policy disaster" of expansion of Medicaid is unclear too. Again, in state after state, even after the USSC (wrongly) made it optional, Republican governors have accepted it. How is this a "disaster"?

"2. The Act leaves the major cause of high health care costs, fee for service, largely in place."

First, let's not skip over "largely." So, you are saying that somehow the act addresses that? Also, it is just plain Pollyannish to think any law would actually do that now. Health care is a huge issue. DECADES of failure to pass reforms. No one law is going to re-write for profit health care in this country.

As to #1, ANY legislation is likely to be complex. How can it not be given the subject matter? And, Obama's statement was for most people pretty true. So, "just not" accurate there. We can play such a game all day. Want to bet that FDR or LBJ blithely said something similar about major legislation too? Then again, we don't have "Johnson-care" while we have Obamacare. Different rules.

As to the "rollout," first, the law has been being "rolled" out for years now. It has many parts and misleading comments about the 'rollout' just starting, it has been in place for a few years now.

Also, there were some glitches on the website etc. On some level, big deal. This is a major change. We can't look at how it is going a month or two in. That's ridiculous on some level. It is like looking at social security right after it started.

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