Saturday, January 10, 2015

Ezra Klein Finally Admits Obamacare Affects Employment

I confess I was much disappointed to read Reason's Peter Suderman's negative assessment of the recently passed GOP Obamacare "fix". This changed the employer mandate threshold from 30 hours per week to 40, with the net effect that more people will be forced into individual plans, with attendant public subsidy:
The problem is that, far from being a practical improvement, the change the Republicans have chosen makes the health law worse.
For one thing, it would make it more expensive. By rewriting the rules so that businesses no longer have to cover individuals working between 30 and 40 hours a week, the change would shift roughly a million people off of employer coverage. About half would then end up enrolled in coverage either through Medicaid or Obamacare’s subsidized exchanges. The public, in other words, would be picking up the tab. According to the Congressional Budget Office, the change would increase the deficit by about $53 billion by 2025.
In addition, it would probably not end the cutting or limiting of work hours in response to the law. Instead, it would shift the point at which the cutting and capping is done.  Rather than capping employees who might otherwise have worked, say, 30 or 32 hours, employers under this provision would have an incentive to cap hours for employees who work roughly 40 hours each week. That’s an awful lot of workers. As Yuval Levin noted at National Review Online last November, one study found that, amongst the large employers affected by the requirement, about 29 million work between 40 and 44 hours a week. Just seven million work between 30 and 39 hours.
Of course, this assumes that King v. Burwell won't void subsidies for states without exchanges. If that does happen — and there's a significant chance it will (thank you very much, Jonathan Gruber) — the legal, fiscal, and most importantly, political landscape changes considerably. Just as a first-order-of-magnitude thumbnail guess at places that might vote for a measure repealing Obamacare, I first looked at the states with exchanges, and their representation in the House:
  • California - 53
  • Colorado - 7
  • Connecticut - 5
  • Hawaii - 2
  • Idaho - 2
  • Kentucky - 6
  • Maryland - 8
  • Massachusetts - 9
  • Minnesota - 8
  • Nevada - 4
  • New Mexico - 3
  • New York - 27
  • Oregon - 5
  • Vermont - 1
  • Washington - 10
This gives a grand total of 150 Congressional seats, not including Utah, which has promised to open an exchange but has yet to do so. So, subtracting that from the 435 seats in the House, states without exchanges approach a two-thirds, veto-proof supermajority needed to pass overriding legislation. While this is an oversimplification, it shows that the terrain for partial or whole repeal is not, at first glance, as daunting as some might think.

So to Ezra Klein's ill-considered Vox explainer. His is a reactive trap, and moreover, a very bad tactical move for the Democrats. Klein:
The problem, however, is that the mandate creates a cliff from an employer's point of view. As soon as a worker becomes full-time, he becomes much more expensive. That creates strong incentives to cut workers' hours. Thus this issue has become a lynchpin of a conservative narrative about "part-time America" and a key example of how Obamacare is making the economy weaker.
Well, wait just a minute now. Does that finally mean, as conservatives, libertarians, and virtually all economists not named Krueger and Card have been saying for years, that a higher labor cost causes employers to cut hours, i.e. that labor is not magically inelastic? And if it's true that a 40 hour cutoff is dire, why is the 30 hour threshold — other than the absolute number of people affected — less important? This answer to Republican Obamacare critics opens a Pandora's box that its supporters probably don't want to see the light of day.

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