Denial of facts not a healthy mindset

The Congressional Budget Office, the non-partisan agency of Congress, has projected that administration policies will impede future job growth, a real embarrassment for Democrats - and a crushing disappointment for 10 million unemployed Americans in a national economy not growing fast enough to create many new jobs, and a state economy that hasn't created any new jobs in about a quarter century.

On Feb 4, the CBO reported that Obamacare will: "Reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor - given the new taxes and other incentives they will face and the financial benefits some will receive (This) represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017"

Alarming news. So, Obamacare supporters launched an immediate damage control campaign. First, they focused on the discretionary dynamic ("workers will choose") and asserted that job-loss by choice is benign - that choosing to quit or work less is not the same as losing your job. Of course, getting fired is far worse for the employee involved. But the economy doesn't care whether jobs are lost to benign or harsh forces. Fewer jobs will make America less productive and lead to even slower economic growth.

Next, supporters called it unfair and misleading to characterize "less work" as "jobs killed." But, once again, the economy doesn't care whether labor is withdrawn from production in the form of "whole jobs" or in increments of fewer hours worked. The result is the same.

So, then, supporters presented a facile version of supply-and-demand: with fewer workers, wages will increase, implying that higher wages would help the economy. Sounds logical, but this would only happen in a tight labor market, which is not our current or prospective circumstance. Our labor market is incredibly loose: record low participation and still high unemployment. And labor markets are now global with lower overseas wage rates restraining ours. If wages did rise significantly, we might lose more jobs overseas. So wage increases are not at all likely.

The problem is that, for every American choosing less work, others are paying for it. Indeed, the "payers" face a double whammy: as the "choosers" work less and pay less income taxes, the "payers" have to pay proportionately more taxes; and, as the "choosers" receive an expensive new benefit, subsidized health care, the "payers" have to pay even more taxes to fund the subsidies.

The "choosers," mostly beneficiaries under Obamacare, have less need to work. The "payers" have less incentive to work, i.e. less take-home pay. Of course, some "payers" need all the take-home pay they can get, so they will work even harder. But the CBO found that, overall, less work will be done.

The point is not whether there should be government supported health care, but rather that this particular program involves substantial costs; an embarrassing fact that supporters seek to deny.

Instead of trying to hide the costs, the supporters should make a positive case for Obamacare because, as critics have said all along, there are other ways to expand health care coverage.

Unfortunately, the CBO analysis provides precious little to make a positive case. While a healthier workforce was supposed to be more productive, the CBO says Obamacare's actual provisions will negate that dynamic. By requiring businesses to provide coverage to full-time employees but not part-timers, the law creates an incentive to prefer part-timers. Well, part-timers are usually less proficient than full-timers, so any gain in productivity from better health will be lost to the lower productivity typical of part-time labor.

The CBO report was devastating, despite the vigorous efforts of defenders of the Affordable Care Act to deny the report's bad news about jobs and the economy, the two things that ultimately make any social benefit program affordable. So - affordable care - maybe not so much.

Also last month the CBO estimated that the administration's plan to raise the minimum wage would eliminate another half-million jobs. Well, that was just too much for the beleaguered administration. Its chief economist simply rejected the CBO report, saying, "Sometimes, you have to have respectful disagreement."

The president is scheduled to visit Connecticut tomorrow to promote his minimum wage proposal. Maybe someone should ask him, or his host and new self-appointed spokesman Gov. Dannel P. Malloy, about these Democratic policies that are costing the nation 2.5 million jobs; more than all the new jobs created in the last year.

Red Jahncke heads the Townsend Group, a business consulting firm in Greenwich and is an occasional contributor to The Day.

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