Obamacare resulted in big increases in the fiscal burden of government (ironically, it would be even worse if Obama hadn’t unilaterally suspended parts of the law).
The legislation increased government spending, mostly for expanded Medicaid and big subsidies for private insurance.
There were also several tax hikes, with targeted levies on medical device makers and tanning beds, as well as some soak-the-rich taxes on upper-income taxpayers.
These various policies are bad news for economic performance, but the damage of Obamacare goes well beyond these provisions.
Writing for Real Clear Markets, Professor Casey Mulligan of the University of Chicago explains that Obamacare contains huge implicit tax hikes on work and other forms of productive behavior.
…can we begin to take seriously the idea that the fiscal policies and regulations hidden in the Affordable Care Act are shrinking our economy? …Politicians and journalists use the term tax more narrowly than economists do, but the economic definition is needed to understand the economic effects of the ACA. …Withholding benefits from people who work or earn is hardly different than telling them to pay a tax. For this reason, economists refer to benefits withheld as “implicit taxes.” What really matters for labor market performance is the reward to working inclusive of implicit taxes, and not the amount of revenue delivered to the government treasury… The ACA…is full of implicit taxes. Many of them have remained hidden in the “fog of controversy” surrounding the law and their effects excluded from economic analyses of it.
In other words, his basic message is that the government reduces incentives to be more productive and earn more money when it provides handouts that are based on people earning less money.
Indeed, click here to see a remarkable chart showing how redistribution programs discourage work.
And speaking of charts, here’s one from Professor Mulligan’s article, and it shows the nation’s largest tax hikes based on what happened to the marginal tax rate on working.
Wow. No wonder we’re suffering from a very anemic recovery.
Professor Mulligan elaborates.
During a period that included more than a dozen tax increases, the ACA is arguably the largest as a single piece of legislation, adding about six percentage points to the marginal tax rate faced, on average, by workers in the economy. The only way to cite larger marginal tax increases would be to combine multiple coincident laws, such as the Revenue Acts of 1950 and 1951 and the new payroll tax rate that went into effect in 1950. Even with these adjustments, the ACA is still the third largest marginal tax rate hike during the seventy years. …Let’s not be surprised that, as we implement a new law that taxes jobs and incomes, we are ending up with fewer jobs and less income.
By the way, other academics also have found that Obamacare will lure many people out of the workforce and into government dependency.
The White House actually wants us to believe this is a good thing, as humorously depicted by this Glenn McCoy cartoon.
But rational people understand that our economic output is a function of how much labor and capital are being productively utilized.
In other words, Obamacare is a mess. It’s hurting the economy and should be repealed as the first step in a long journey back to market-based healthcare.
P.S. Mulligan’s chart also re-confirms that unemployment benefits increase unemployment. Heck, that’s such a simple and obvious concept that it’s easily explained in this Wizard-of-Id parody and this Michael Ramirez cartoon.
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There are some liberals claiming that the recent drop in GDP comes from a reduction in healthcare costs as ACA bends the cost curve down.
That may actually be true. People who previously paid for modest health insurance got booted off their plans and now pay nothing. Those who signed up for the new plans don’t go to the doctor because of the high deductibles they face. While some of those savings may have merit for visiting should not have occurred, however there’s no question that Obama are has been a net negative for the majority.
On a personal note, yesterday my prescription for 30 pills cost $310. Thank god it was a one time occurrence. Thank you FDA for the billions that had to be spent to get this drug certified, while it’s probably been available elsewhere for years at significantly lower prices.
Errr… perhaps that famous effort-reward curve is flattening some? Perhaps by an additional 5-6 percentage points? Perhaps now its flatter than it is in the top group of most competitive nations in the world? Perhaps now American voters will try to neutralize the slower growing pie by ever more redistribution? Perhaps the virtuous cycle of American prosperity had passed the point of no return into a vicious Euro cycle of decline?
Perhaps. Time will tell what the new pie growth trajectory is compared to world growth. But the last half dozen quarters don’t look good, and imply that something more fundamental has happened to the American pie growth trajectory. The fifteen trillion dollar question is: Will Americans, as is typical of other electorates, try to compensate with even more redistribution? Zorba says yes! Why? “Because they can!” Zorba comes from Europe. He had seen this movie before . Many times…
Mr Obama was very perceptive in his assessment that once voters touch the electrified wire of redistribution they will no longer be able to let go. Stated another way, “the first few redistributions are free”. Then, once everyone depends on everybody else, nobody can let go. And nobody is capable of mustering enough motivation to outcompete the remaining seven billion of this world, because of the unexceptional mediocre Euro style effort reward curves.
American miracle R.I.P.
Its time for others to take the lead in freedom, self determination, and prosperity.
Wise people will be planning beyond America. The patriots will go down with the ship.