A new report out Tuesday suggests that the Republicans have it wrong ― that, if anything, repeal will cause more joblessness, at least of the involuntary kind.
It also jibes with some pretty standard theories about how the economy works.
From the day Obamacare became law, back in 2010, Republicans have been saying that it would muck up the economy with taxes that sap people’s will to work and regulations that hamstring corporations from expanding.
Get rid of the law, they predicted, and the economy would pick up new steam ― creating growth and, as a result, more jobs.
Josh Bivens, research director at the Economic Policy Institute, studied the law and came to a very different conclusion: Repeal could actually slow down the economy, so that by 2019 the number of jobs would be almost 1.2 million lower than it would be if the law had remained in place.
That’s a big number, and depends on a bunch of assumptions (about the state of the labor force today and the actual provisions of a repeal bill, among other things) that are simultaneously debatable and defensible.
But what matters isn’t the magnitude of Obamacare’s effect on the workforce. It’s the direction ― the idea that repeal could actually make it harder for people who want work to find jobs.
And the EPI report makes a solid case.
Repeal would eliminate the new taxes that the Affordable Care Act imposed, and, all else equal, eliminating taxes is bound to boost growth ― because, crudely speaking, it means people have more money to spend.
The spending cuts in repeal would be bigger than the tax cuts.
But repeal would also eliminate the program’s new spending, on newly expanded Medicaid programs and tax credits for people buying private insurance on their own. Those types of spending cuts would reduce growth, because they would leave people with less money to spend.
In other words, the effect of cutting the health care law’s taxes and cutting its spending would push in opposite directions.
But they wouldn’t push with equal force. For one thing, if repeal keeps the reduction in Medicare payments to hospitals and other parts of the health care industry that are part of the law ― as Republicans have indicated they are inclined to do ― then the spending cuts in repeal would be bigger than the tax cuts. In 2019, the year EPI chose as its focus, repeal would mean $109 billion in less spending, compared with just $70 billion in lower taxes.
In addition, the tax and spending cuts would affect different populations. Affordable Care Act taxes fall exclusively on corporations and the wealthiest Americans. When wealthy Americans have more money in their pockets, they tend to save it rather than spend it, and in the short term that doesn’t do much for job growth.
By contrast, the health care law’s spending raises incomes for low- and middle-income people ― what economists call “cash-constrained households.” Take away that money, and the folks who live paycheck to paycheck would have to cut back on spending quickly ― by holding off on car repairs, for example, or stretching grocery dollars even farther.
Either way, it’d be less money flowing into the economy right away, and that would mean less job growth.
EPI’s report doesn’t address the economic impact of the law’s regulations, which conservatives maintain has a wholly separate ― and negative ― effect on the economy. But that claim is as subject to dispute as the rest of the conservative case against the law.
As Politico health care writer Dan Diamond has pointed out repeatedly, private sector employment has risen every single month since March 2010, when President Barack Obama signed the Affordable Care Act into law. Meanwhile, the Affordable Care Act has made it easier for aspiring entrepreneurs to leave large companies and start their own businesses, since the self-employed no longer have to worry about insurers denying coverage for pre-existing conditions.
To be clear, none of this is to say the health care law has created an economy with more jobs on net. In 2014, the Congressional Budget Office predicted that the health care law would reduce the supply of labor, and thus the total number of jobs in the workforce. Republicans and economists like Douglas Holtz-Eakin, a former CBO director who is president of the American Action Forum, pounced on that finding as proof that the health care law really is a job-killer.
But the job loss CBO predicted was largely a matter of voluntary unemployment ― people giving up full-time jobs in order to work fewer hours, or retire early, because they no longer needed that full-time position to get health benefits.
As Bivens told The Huffington Post, “I think [EPI’s] number matters more because it’s a measure of involuntary job-loss ― jobs reduced because there is deficient aggregate demand, which means more people looking for jobs than are jobs available. The CBO numbers on labor force reductions due to the ACA are voluntary changes ― people chose less work because the inefficient job/health-insurance link was usefully loosened by the ACA.”
One way this might be playing out is by helping parents spend more time with their kids. Dean Baker, co-director of the Center for Economic and Policy Research, has long argued that parents opting out of full-time jobs in order to take family-friendly, part-time positions is one of the most underappreciated stories of the health care law.
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