“Americans will lose their health coverage because of his proposal. And it is a job loser. Estimated to be 1.8 million jobs lost. Donald Trump is a job loser.”
— House Minority Leader Nancy Pelosi, remarks to reporters. June 9, 2017
In 2010, Pelosi also famously once predicted that Obamacare would “create 4 million jobs, 400,000 jobs almost immediately.” She was citing an optimistic study at the time, and economists will argue forever whether the law spurred employment or was a drag on it. But recent research indicates that, contrary to the spin by both sides, the ACA had minimal effect on employment, hours of work and compensation.
So where’s this number coming from?
Pelosi spokesman Drew Hammill said that she was relying on a March report by the left-leaning Center for American Progress, adapting an earlier study by experts at George Washington University on the impact of full repeal of Obamacare. That study found that full repeal would lead to a loss of almost 3 million jobs by 2021.
Strikingly, the left-leaning Economic Policy Institute in March did its own report on the impact of the AHCA, using a different methodology, and came up with a similar number as the CAP report: 1.8 million jobs lost by 2022.
EPI’s report was more hedged, saying it was a “rough estimate of the potential drag on job growth.” The author, Josh Bivens, noted that macroeconomic projections have often been wrong. “Given all of this uncertainty, we present our findings as a drag on potential job growth, rather than as clear predictions of ‘jobs lost.’ ”
Still, two reports suggesting that the AHCA would result in 1.8 million fewer jobs by 2022 would seem to be a point in Pelosi’s favor.
But here’s the rub: The George Washington University experts whose research was the basis for the CAP report did their own study on the AHCA, which was published in June. They estimated a loss of 413,000 jobs by 2022, less than one-quarter of the two other estimates. (By 2026, the predicted job losses would reach 924,000.) Moreover, the researchers said that the repeal of tax cuts in the law would help to initially increase the number of jobs by 864,000 in 2018. Most of the long-term job losses would be in the health-care sector.
The authors of the CAP study and the GWU authors said they have not studied each other’s work closely enough to understand why the results are different, even though CAP adapted the model used by GWU to come up with its much higher figure.
To put these numbers in perspective, the United States currently has about 146 million nonfarm jobs – and added 2.3 million jobs in 2016, according to the Bureau of Labor Statistics.
Meanwhile, when the Congressional Budget Office in 2015 evaluated the impact of repealing the Affordable Care Act on the economy, it determined it would be a net plus, boosting economic output. We won’t get into all of the technicalities, but the CBO focused on the impact of labor supply and demand, while the reports showing job losses from AHCA focus more on labor demand — the number of jobs that are available. (Right-leaning economists tend to focus more on labor supply — how many people choose to participate in the work force.)
“You’re right that our analysis is mostly focused on changes in the demand for labor,” said Leighton Ku, director of the Center for Health Policy Research at GWU. “Our interpretation of the research about how the ACA changed labor supply is that the logic used by CBO in its earlier reports don’t really square with subsequent experience and empirical analysis.”
He said that “while labor supply effects are important, they are highly uncertain” and ambiguous. He noted that more recent economic research suggests that some of the predictions in CBO’s report did not actually pan out and the ACA did not have the effect of suppressing employment – or have major effects increasing it either.
Ku said that CBO decided that because the law’s expansion of Medicaid and the premium tax credits in Obamacare are income-related, it imposed marginal tax rates on new earnings, potentially discouraging people from working. (CBO also said that some 2.3 million workers stop working or reduce their hours because they could obtain health insurance without having to secure employment – an observation that was the source of many false job-killer claims by the GOP.)
But Ku argues the impact by the AHCA will be muted because it would not end but shift marginal rates, in ways that might reduce work incentives. He added that the tax credits are so low in the AHCA that they become irrelevant, making it harder for people to leave jobs.
Bivens also said that it was more important to focus on labor demand because the job losses would be involuntary, compared to a voluntary decision to work more hours or for longer.
A key critique of these studies from right-leaning entities, such as the American Action Forum, is that they assume that less government spending means fewer jobs, when in fact that spending came mostly from additional taxes. Since each dollar spent by the government means one less dollar for a taxpayer to spend, the net effect on economic activity would be small, this argument goes.
The studies, however, do not assume the tax cuts and spending in the AHCA are necessarily equal, in large part because the tax cuts go mostly to the wealthy while the spending cuts mostly affect lower-income Americans. The impact thus is presumed to be different. The revised GWU study concludes the AHCA’s tax cuts create more than 1 million jobs by 2026, but that’s not enough to counter the nearly 2 million jobs lost through spending cuts on health care coverage.
Pelosi spokesman Hammill responded that two reputable organizations separately came up with the same estimate for the number of jobs lost through the GOP plan – 1.8 million – making it a good estimate for her to use.
The Pinocchio Test
We often warn readers to be wary of job claims made by politicians based on think-tank studies. This is a case in point. Pelosi was careful to say “estimated,” but two groups of researchers, using apparently the same economic model, came up with different estimates of jobs losses under the AHCA by 2022 – 1.8 million and 413,000.
Meanwhile, another economic model suggested 1.8 million lost jobs – while others perceived job gains. We don’t doubt the care these economists took in creating these reports. But the nuances and caveats are often lost when the figures are used in political discourse. As we have shown, the overheated claims of job losses and job gains stemming from Obamacare turned out to be false. The impact appears to have been more muted than what either side had predicted.
Given the range of outcomes, Pelosi should be more careful about citing such a precise figure. She earns two Pinocchios.
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