Flawed study misinforms on LA Obamcare impact
As midnight approaches for the Affordable Care and Patient Protection Act (“Obamacare”), its supporters summon any failed argument they can to try to stave off its inevitable demise. Thusly in Louisiana we hear a rehash of the widgets defense.
A report alleges that repeal of the wealth redistribution aspects of it and Medicaid expansion in Louisiana would cost $639.7 million loss in state and local taxes; $39.1 billion loss in business output and a $21.5 billion hit to the gross state product. Nationally, the presumed impact would mean a $2.6 billion loss in jobs in 2019 and a $1.5 trillion drop in gross state products between 2019 and 2023, according to the report.
But like all analyses supposedly touting the economics of Obamacare, it fails both in execution and conceptually. These always look only at the effect of adding money into the health care sector, not in the balancing of taking money out of the economy – with the latest Congressional Budget Office numbers forecasting at least $2 trillion removed by the federal government, some of which comes in direct taxation of individuals specifically to finance the scheme, plus over $600 billion more in fees and penalties over the 2016-25 period. That doesn’t even count the rapidly escalating cost of health insurance that shunts even more money from citizens who otherwise could have spent it on other economic sectors or have invested it – for 2017 an average annual increase of 25 percent for individual policies nationally and in Louisiana 17 percent.
Instead, this report looks only at the effect of federal money thrust into the states without any regard to the impact of removing that money from the private sector. In reality, that process seriously negatively affects the economy – a reduction of $170 billion in gross domestic product in 2015, costing 800,000 full-time equivalent jobs, an exfiltration forecast to remove around $300 billion annually by 2020. This has been reflected by continuing slow economic growth and four-decade low in the workforce participation rate (particularly given the disincentives Obamacare presents to working). Medicaid expansion alone caused as much as a 3 percent fall in that rate in some states.
Yet also consider the conceptual absurdity behind its analysis. It argues that by having less health care spending driven by government the economy suffers. Therefore, would not the economy create still more jobs and tax revenues by spending even more on health care? And wouldn’t an incredible amount of growth in jobs and tax receipts occur if simply all government spent on was health care? That’s the inherent illogic behind reports like these that rely on static analysis that ignores the complex dynamic reactions of the economic system as a whole.
To put it another way, if government-directed spending worked so well, why not, instead of health care, subsidize anything, like making widgets? Rather than Louisiana spend an extra $2.5 billion on health care year over year, why not plow it all into manufacturing widgets? You would see huge job growth and tax receipts rolling in for this sector – while ignoring the fact that government took the money to finance all of this out of people’s hides, suppressing the superior ability of the free market to allocate resources to their best uses and thereby suppressing jobs and tax revenues coming from other economic sectors.
Health care insuring does provide more value added than producing widgets. However, as with Obamacare when government mandates the buying of insurance in a rigidly-defined arena rife with inefficiency that also pushes aside private insurance options, you still get a regime that overall harms the economy compared to alternate uses of capital that would occur under different policy choices, even if continuing to spend in the area of health care.
Never forget that Obamacare is nothing more than a massive wealth redistribution boondoggle designed to aid lower-income individuals and health care providers. Advocacy in the guise of analysis that makes fundamental errors in its assumption reveals no helpful insights in analyzing the impact of this policy, but sure does enable dissemination of disingenuous talking points trying to defend the indefensible.
Posted by Jeff Sadow at 12:55