What’s the worst economic development during Obama’s reign?
Some would say it’s the higher tax burden.
Some would say it’s the wasteful faux stimulus.
Others would say it’s the fiscal nightmare of Obamacare.
And others would say it’s the loss of millions of workers from the labor force.
I suppose there’s no objective way to pick the most ill-conceived policy, but if you think the biggest problem is either Obamacare or falling labor force participation, then I have some very grim news that will confirm your fears.
According to new research, it appears Obamacare will drive many more people from the labor force. More specifically, the Medicaid expansion will alter – in a very destructive way – the tradeoff between labor and leisure.
Researchers Laura Dague, Thomas DeLeire, and Lindsay Leininger argue in a National Bureau of Economic Research working paper that Medicaid enrollment will lead to significant and lasting reductions in employment among childless adults. …Dague and her colleagues conclude that if the Medicaid expansion enrolls about 21 million additional adults, anywhere from 511,000 to 2.2 million fewer people will be employed. Furthermore, they argue that the Medicaid expansion will knock almost a full point off of today’s labor force participation rate — or share of the civilian population that is working — a measure of economic health that is already at its lowest point since 1977. …This research provides strong evidence for the contention that enrolling in Medicaid traps people in poverty and makes it harder for them to make their way into the middle class. Furthermore, it links the Medicaid expansion to the weakening of our nation’s economy.
By way of background, Medicaid is the federal government’s healthcare entitlement for (supposedly) poor people, while Medicare is the entitlement for old people. And, as part of Obamacare, the eligibility rules for Medicaid were dramatically weakened.
But the new research cited above shows that if you give people “free” health care, that makes them less likely to work.
Particularly when you combine that freebie with food stamps, housing subsidies, welfare, and other handouts.
That’s obviously bad news for taxpayers, who bear the direct cost of a bloated welfare state.
But it’s also bad for the less fortunate. They get trapped in a web of dependency, both because handouts reduce the incentive to work (humorously depicted here and here), band also because they face very high implicit marginal tax rates if they actually try to escape government dependency.
But Obama and other leftists probably see this as a feature, not a bug.
After all, those who are lured into being dependent on government presumably have an incentive to vote for those who give them the most goodies.
[…] The moral of the story is that the best way to really create jobs is to get government out of the way rather than adding new burdens. […]
[…] Obamacare may have lured as many as 2 million people into full […]
[…] Obamacare may have lured as many as 2 million people into full […]
[…] Obamacare may have lured as many as 2 million people into full […]
[…] Obamacare may have lured as many as 2 million people into full […]
[…] Obamacare may have lured as many as 2 million people into full […]
[…] But over the past couple of decades, laws like Obamacare have given people goodies without any conditionality, which has resulted in many people deciding once again that they don’t need to work. […]
[…] But over the past couple of decades, laws like Obamacare have given people goodies without any conditionality, which has resulted in many people deciding once again that they don’t need to work. […]
[…] don’t like Obamacare because it is driving people out of the labor force and into government […]
[…] don’t like Obamacare because it is driving people out of the labor force and into government […]
[…] of the forest by fixating on this particular tree. The reason we should care is that Medicaid is an initiative-sapping, money-draining program that greatly contributes to the mess in our overall healthcare […]
[…] To understand what this means, just contemplate the disastrous impact of Obamacare on the job market. […]
[…] Sure, some additional people have health insurance coverage, but is he blind to rising premiums, job losses, higher taxes, loss of plans and loss of doctors, dumping people into Medicaid, and other downsides […]
[…] We already know that Obamacare discourages people from working. […]
[…] But Medicaid isn’t just a problem because of its adverse fiscal and economic impact. […]
[…] The president effectively outlined how Obamacare is a disaster for taxpayers, for consumers, for the economy, and for the healthcare […]
[…] Medicaid isn’t just a problem because of its adverse fiscal and economic […]
[…] working or for having low levels of income, which is why research has shown that policies such as Obamacare, jobless benefits, and food stamps are associated with lower levels of employment. In other words, […]
[…] are suffering adverse consequences. These are folks who did nothing wrong, but now are paying more, losing employment, suffering income losses, and/or being forced to find new plans and new […]
[…] a jobs perspective, the law was bad news because it increased the attractiveness of government dependency compared to […]
[…] a jobs perspective, the law was bad news because it increased the attractiveness of government dependency compared to […]
[…] maybe she’s even familiar with the research, from both private scholars and the Congressional Budget Office, on Obamacare having a negative impact on […]
[…] And if you go to the actual CBO report, you’ll see that the story is accurate. And the CBO report is very consistent with some of the academic research on the issue. […]
[…] And if you go to the actual CBO report, you’ll see that the story is accurate. And the CBO report is very consistent with some of the academic research on the issue. […]
[…] And don’t forget that while Obamacare discourages entrepreneurs from creating jobs, it also discourages people from seeking jobs. […]
[…] misguided? And why should people be concerned about high marginal tax rates or double taxation? Or Obamacare subsidies? Or unemployment […]
[…] They look at increased migration, but at best that’s a beggar-thy-neighbor approach. They look at increased labor force participation, which would be a very good development, but it’s hard to see that happening when nations have redistribution policies that discourage people from being in the workforce. […]
[…] Sometimes I’ll add some more detailed economic analysis and explain that redistribution programs undermine growth by reducing labor supply (with Obamacare being the latest example). […]
[…] bureaucrats expect better economic performance if Obamacare is repealed. First, people will have more incentive to work because of a reduction in […]
[…] My response: Fully agree. […]
[…] creating new entitlements (such as Obamacare) that alter the already perverse tradeoff between work and leisure. Then people might feel a […]
[…] cited his work last year showing how Obamacare undermined incentives to work. And other academics have reached the same […]
[…] But if they chose productive behavior, they would get hit with punitive taxes and have less disposable income (we have the same self-destructive policy in America, and it’s getting worse thanks to Obamacare). […]
[…] But if they chose productive behavior, they would get hit with punitive taxes and have less disposable income (we have the same self-destructive policy in America, and it’s getting worse thanks to Obamacare). […]
[…] But if they chose productive behavior, they would get hit with punitive taxes and have less disposable income (we have the same self-destructive policy in America, and it’s getting worse thanks to Obamacare). […]
[…] But if they chose productive behavior, they would get hit with punitive taxes and have less disposable income (we have the same self-destructive policy in America, and it’s getting worse thanks to Obamacare). […]
[…] deserves its own special mention since it imposes a significant penalty on […]
[…] deserves its own special mention since it imposes a significant penalty on […]
[…] deserves its own special mention since it imposes a significant penalty on […]
Amen for finally recognizing the most destructive part of ObamaCare, rather than just wage battle over fringe concepts and distractions, like “death panels” etc. But nobody wanted to pursue that argument, because most of the electorate just did not want to consider it. The argument that prosperity is associated with unadulterated (i.e. steeper) effort-reward curves is not something that will garner majoritarian support any time soon.
If Obamacare could provide healthcare for all without flattening the effort-reward curve then it would be a wonderful thing. But that is little more than stating that a perpetual motion machine that generates energy out of nothing would be a wonderful thing – a pipe dream.
The worst permanent effect of this administration is a trajectory where EVERY policy move amounts to a systematic flattening of the once uniquely steep American effort-reward curve. The once uniquely American environment of self-reliance, low insulation from the consequences of mediocrity which made this country uniquely prosperous – and ironically propelled even the mediocre amongst its citizens into the richest 10% of this planet. But this culture has fallen out of favor with the American electorate, bamboozled by the ever present sirens of an easier prosperity through coercive collectivism. The vicious cycle of American decline has been entered.
People who drop out of the workforce will not be “trapped” into government dependency. Government dependency will simply become comfortable enough for many people; so it is wrong to use the word “trapped”. Those who will be “trapped” are those who remain employed who must support a rising majority who chooses mediocrity. It is the inevitable outcome of flattening the effort-reward curve. There is no way around it any more than there is a perpetual motion machine.
Jayna:
Assuming that Medicaid is a loan and not an Entitlement, even though people act as though it is, that makes the Welfare Cliffs even more calamitous. Someone making an extra $1 might not lose just $6,000 in on-going benefits, but an additional $18,000 for three previous years!
Assuming for the moment that there isn’t any fraud involved [that’s my economist side speaking], we must incentivize people to support themselves going forward. This means we drop the concept of a loan, but we must also recognize that on-going support might be necessary.
My nephew Ben requires $40-60,000 a year in medical support from Medicaid and Social Security. Wouldn’t it be better to tax any income at a flat rate [25%]? Ben, who is brilliant, would have the incentive to reach his full potential, which might even pay for his on-going medical needs. Now he has no incentive, because any money he receives is taken, and if he earns above a specific amount [it used to be $14,133] he loses his life saving support.
that MIGHT happen…………………. HAHAHA!
Medicaid? An Entitlement? Medicaid, like welfare, is a loan. If the recipient somehow becomes successful and acquires property, jobs, income, money and other investments, the states government can attach or seize those assets to “pay back” the loan that state Medicaid and welfare really is. This author needs to actually read the law. And so, then let’s dump on old people and take away their social security retirement and medicare. I guess I will have more time on my hands to go hunting.
Instead of “free healthcare” part of the “prebate” described above could be a deposit to a Health Savings Account. Based on what we currently expend in Medicaid health insurance support, ACA benefits, $3,000 out of Medicare, and the Healthcare tax deduction, we could give every adult citizen $3,000 and come out even.
For family of four, that would be $6,000 to buy minimal healthcare or a substantial replacement for the healthcare tax deduction. People would spend this money wisely, verses government spending it unwisely.
Much is made of Laffer Curve effects on those paying the “highest” marginal rates.
While I agree, those paying the highest marginal tax rates are women with children attempting to work their way out of poverty.
On Julia’s Mother’s chart, what is the marginal tax rate for earning $1 above $29,000; if such an increase loses $6,000 in health benefits?
The flat tax concept is that no one pays a higher marginal rate than the flat rate. This concept must hold for all. While I agree with Dan on federalization of welfare, any politically acceptable flat tax must become progressive.
For example, a $1,000 “prebate” on a 25% flat tax makes the flat tax progressive, in that someone making $10,000 has an effective tax rate of 15%. A graph of net federal taxes would start at $1,000 on the “y” axis and move upwards in a straight line.
How progressive the tax code becomes depends on the amount of the prebate. [I would favor 100% of the poverty line, verses current federal/state welfare benefit levels of +200%.]
Welfare coming from the States could be reduced by $1,000/annually as could Social Security and Unemployment/Disability benefits. Note that beneficiaries in all three cases would see no net change, but incentives dramatically change as prebate levels are increased.
Obama’s most ill-conceived policy has been to present long-term dependency on government as a viable life choice.
Reblogged this on Taking Back America.
I try very hard to be respectful of the office of the president of the united states… but with each new disclosure… with each passing day… that task becomes increasingly difficult…
Why can’t I post this to Facebook? There’s no “Share” icon. V