The Washington Post

Obamacare is not ‘job-destroying’

Obamacare is not “job-destroying.” And the next time you hear someone insist that the Affordable Care Act (ACA) is that sort of pernicious economic malady, click on this report, which the the non-partisan and well-respected Urban Institute released Monday.

“The basic conclusion,” the report reads, “is that the ACA will not have a noticeable effect on net levels of employment.” Note, as Ezra Klein has, that this doesn’t accord with Democratic claims that the health-care law will be a job creator, either. There are three major reasons.

First, federal spending on the law over the next decade isn’t very large, particularly given the size of the economy. Further, cuts in Medicare and new taxes on medical device makers, pharmaceutical companies and others largely offset the new federal spending on subsidies the government will give Americans to purchase insurance.

Second, “impacts on business will be minimal.”

Small businesses are exempt from the law’s penalties and gain from its benefits, yielding an estimated savings of 8.7 percent for small firms on health costs. “It would become more attractive to start a small firm, given access to health insurance and ability to purchase health insurance through an exchange, as well as the opportunity for some to obtain employer subsidies. The incentives for entrepreneurship should increase, not decrease.” Nearly all medium and large businesses already offer coverage; those that don’t will face assessments or will have to begin covering employees. But those extra costs would be extremely small compared to aggregate labor costs.

Third, the studies that opponents of ACA have used to claim that it would “destroy” jobs are actually measuring the number of people who would leave the labor force or take part-time jobs voluntarily, given easier access to health-care coverage. This encourages mobility and, therefore, efficiency in the labor market. In an economy in which many people are looking for work, vacated slots will be easily filled.

But, the report stresses, just because ACA probably won’t have a strong net effect on employment any time soon, doesn’t mean the law won’t eventually have pronounced — and positive — effects on the economy. If, I should note, politicians develop the spine to defend some of its least popular elements -- the cost controls. Lowering Medicare and Medicaid costs would reduce the need for taxes and federal borrowing. “The Council of Economic Advisers (CEA) has argued that containing costs of the two large programs would reduce the federal budget deficit, increase national savings, keep interest rates lower, and increase economic growth.”

Meanwhile, “curtailing the growth in health-care costs will mean lower costs for businesses and individuals. The CEA has estimated that reducing the growth in health-care costs by 1 percentage point per year would result in a 4.0 percent higher GDP by 2030, due to a higher national savings rate, more capital formation and higher output. Faster growth in GDP would mean more jobs, lower unemployment, and higher family incomes.”

The ACA may just be one part of a larger effort to reform entitlement spending. But, too often,the post-passage debate on health-care reform has been about “covering more people” versus “spending more money and punishing business,” when one of the law’s most important elements — cost containment — promises to help do the former while avoiding the latter.

Stephen Stromberg is a Post editorial writer. He specializes in domestic policy, including energy, the environment, legal affairs and public health.


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