After the CBO report on Obamacare landed yesterday, finding that Obamacare would reduce labor supply by the equivalent of 2.5 million jobs, conservatives were beside themselves with glee. They blared that Obamacare is a job-killer, abetted by irresponsible mainstream journalists. Politico characteristically declared that facts don’t matter, that the spin is all that matters and the spin is bad. The “Jobless Care Act,” yelled the WSJ editorial page.
Conservatives might have a small point about the labor market. But the real point about this mini-flap is that it reveals once again that their carping about jobs is transparently ridiculous.
We are more than five years into a mass unemployment crisis that Republicans have utterly ignored except to attack the president and the Democrats. They have no policy proposals to increase employment at all, and have blocked every one of the Democrats’ job proposals. When it comes to jobs, they don’t have a leg to stand on.
Here’s a representative sample from John Podhoretz. Here’s the only labor supply issue he discusses:
First, the report says Americans will “choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive.” Here’s why: Poor people get certain subsidies, which disappear once a worker achieves a certain level of compensation. So it may be better to work less, or not work at all, rather than reach that higher pay level, because the pay increase won’t offset the loss of the subsidy. This is the classic problem of a government handout: It can become more alluring to those who receive it than the prospect of a life lived without it.
On the narrow point, this is basically accurate, but overall is a distortion of the law’s effects. Josh Barro has a more comprehensive take, pointing out that the “income effect” of Obamacare is a positive thing, allowing increased freedom for people with guaranteed access to health insurance. That’s nothing compared to the subhead on the WSJ piece: “Congress’s budget office says ObamaCare will increase unemployment,” which is 100% backwards. Reducing labor supply will decrease unemployment, by shrinking the pool of people looking for work — thereby increasing wages.
Anyway, the upshot of this is that yes, Obamacare probably has some undesirable labor market effects. I’d be happy to talk about trying to reform the law to reduce the bad ones.
But it is beyond perverse to be freaking out about labor supply right now. We are starting our sixth year of a mild depression. The labor market has been absolutely swamped with “supply” (meaning, millions of unemployed people) since the financial crisis, and Republicans have not just been completely unresponsive, they’ve actively made things worse as fast as possible, demanding austerity at every turn.
Because when it comes to increasing employment, there are two tools: fiscal stimulus and monetary stimulus. Republicans loathe the first and are suspicious of the second. To this day Republicans have no unemployment agenda whatsoever. They favor deregulation, drill-baby-drill, tax cuts for the rich, and slashing social insurance. It’s the same thing they always favor and none of it will make much of a dent in unemployment.
It’s hard to know where the cynical political posturing ends and the ideology begins. George W. Bush, after all, was a big-time Keynesian — remember the 2008 Bush/Pelosi stimulus? And conservatives’ beloved tax cuts are supposed to work, in part, on straightforwardly Keynesian reasoning: “by letting Americans keep more of their hard-earned money.” But the flipside of the very same idea — that government spending also puts money into the economy — sends conservatives into hysterics.
In any case, if conservatives want to talk about fixing the labor market, I’m all ears. But until they can get past fixation on supply-side issues to the total exclusion of everything else, they will be utterly worthless when it comes to jobs.