Did the CBO just kill Obamacare?

On Tuesday, the Congressional Budget Office released a report that estimates, among other things, that enough Americans will reduce their work hours, or leave the workforce, to be equivalent to 2 million Americans leaving the workforce because they can obtain health insurance through the ACA (i.e., Obamacare) rather than from an employer.

Republicans are saying they were right all along: the ACA is bad for the economy.

Democrats are noting that the short-term economic benefits of the ACA still stand—deficit reduction, unemployment reduction—the CBO report doesn’t change any of that.

Both are right.

In the end, the ACA is a social safety net. All social safety net programs are costly, and none are designed to “improve the economy.” For the Democrats, it was convenient and serendipitous that the initial CBO evaluations of ACA indicated some economic benefits to the economy (such as deficit reduction and lower unemployment), but these consequences were—of course—never the goal of the ACA. The primary goal of the ACA was to get people affordable health insurance. The ACA is the government’s response to the terrible problem of 40 million Americans who had no health coverage and are essentially denied access to basic health care, which to many seems inhumane, especially in a rich country like ours.

It should come as no surprise that the long term costs of the ACA include a downside. All social safety nets are expensive. It’s expensive to keep the sick, old, and impoverished from living in squalor. We don’t enact programs like this because it will benefit the economy or raise the GDP or achieve any other macroeconomic goals—we do it because we agree as a country that it’s the right thing to do. It turns out, we also have to pay for it.

On the other hand, the GOP is, predictably, overstating the downside. It’s important to note that CBO is NOT saying that unemployment will go up; it’s saying that a certain number of people will leave the workforce or reduce their hours (recall that leaving your job only makes unemployment go up if you desire–and seek– to have another job). In other words, the CBO is saying that there is a segment of the population that is only working to maintain their health insurance. It may be true that the ACA provides an incentive for some to leave the workforce, but it is not necessarily a bad thing that these folks leave the workforce or reduce their hours. Social Security also provides an incentive for old folks to leave the workforce, and most people don’t see that as bad. It’s also important to note that the CBO points out that the workforce reduction in coming decades is due MUCH more to the aging baby boomer generation than it is to the ACA and its incentives.

If anything, the CBO report snaps us back to reality. Big government programs are expensive. We do not engage in social regulation to improve the economy, we engage in them to improve our society. They are not meant to be efficient. We should not measure them by their efficiency. Rather, we should agree that as a society we will pay to keep the poor, sick, and old from living destitute lives.

Yes, a strong, large, healthy, and growing workforce is desirable. And we don’t want to enact too many laws and regulations that would diminish our incentives for such positive features of our economy, but I don’t think we should seek those positive features at any cost.

Politically, I don’t see why the Democrats aren’t making these arguments.* President Obama’s claims that he could create a huge government safety net of health insurance without much disruption to the status quo (i.e., “If you like your health plan you can keep your health plan”), was disingenuous. Rather, if we agree that it’s the right thing to do to help all people in our country achieve a baseline quality of life, then we must agree to pay for it. To do otherwise is disingenuous.

The Democrats are likely to spend the next several months clawing back at the CBO report and the GOP bravado about it, when what they should be doing is changing the subject and reminding people that nothing comes for free.

The question is: which is worse, millions of Americans without health insurance, or a smaller workforce due, in part, to increased health insurance options? There are reasonable arguments on both sides, but it’s helpful if we’re upfront about the choices.

*Here, I’m being disingenuous because, of course I see why the Democrats don’t make this argument. The “You should be happy to pay more for X” message has never been a winning one, even when it’s true.

[Cross-posted at The Mischiefs of Faction]