American Elephants

CBO Destroys Democrats’ Utopian Dreams by The Elephant's Child

Democrats don’t seem to have a high opinion of ordinary American citizens. They usually want to buy their votes, with some promised legislation. Their big, big idea has been raising the minimum wage to $15 an hour. Trouble is some people simply aren’t worth the raise. There has to be a spot in our economy for people just starting out, who don’t yet know how to be useful workers. Some businesses are too small to pay that much, and must either do the work themselves or give up the business.

The Congressional Budget Office has estimated (their median estimate) that under the $15 an hour option, 1.3 million workers who would otherwise be employed would be jobless in an average week in 2015. (That would equal an 0,8 percent reduction in the number of employed workers).

Zero Hedge has the full CBO report, with graphs and a thorough explanation of the effects.

The $15 option would affect family income in a variety of ways. In CBO’s estimation, it would:

  • Boost workers’ earnings through higher wages, though some of those higher earnings would be offset by higher rates of joblessness;
  • Reduce business income and raise prices as higher labor costs were absorbed by business owners and then passed on to consumers; and
  • Reduce the nation’s output slightly through the reduction in employment and a corresponding decline in the nation’s stock of capital (such as buildings, machines, and technologies).

On the basis of those effects and CBO’s estimate of the median effect on employment, the $15 option would reduce total real (inflation-adjusted) family income in 2025 by $9 billion, or 0.1 percent.

“If You Like Your Job…” ObamaCare Will Increase Unemployment by The Elephant's Child

The Congressional Budget Office says that ObamaCare will increase unemployment. There are 7.8 million Americans working part-time who want full-time work. Mr. Obama changed the subject to raising the minimum wage.

On Tuesday no less than the Congressional Budget Office reported that the health law is causing Americans to work less or not at all, in a remarkable intellectual turnabout for the budget shop that Democrats cited repeatedly when selling ObamaCare. Now CBO—full of liberal-leaning economists—says the economy will lose the equivalent of two million full-time workers by 2017 and 2.5 million over the next decade, a threefold increase over its prior estimate.

ObamaCare’s complex design includes new subsidies, new taxes and new mandates. For low wage, lower-skilled or discouraged workers ObamaCare offers incentives that can force them to trade jobs for entitlement benefits. The CBO concludes that ObamaCare will encourage people to supply less labor by working fewer hours to qualify for more benefits. The incentives suggest watching carefully the overtime, a promotion or training in hopes of higher future earnings — it might boost you into another category with less or no subsidy. The question becomes how many people can the nation support on entitlements? I thought the numbers were already too high.

The CBO’s job-loss prediction doe not include the impact of ObamaCare’s employer mandate, which requires businesses with 50 or more full-time employees to offer insurance or pay a $2,000 penalty for each worker beyond 30 employees. The mandate has been delayed by executive order for a year. so it won’t take effect till 2015, which probably means the CBO is vastly underestimating job losses.

The White House, of course, denies everything. “Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report,” the White House, in the person of Jay Carney, declared. The White House seems to mean that the report is positive because”individuals will be empowered to make choices about their own lives and livelihoods” and “have the opportunity to pursue their dreams.” Didn’t Nancy Pelosi suggest that they would have more time to do art or crafts or maybe music?

Incentives matter. People respond to incentives. And there’s nothing in the act that encourages businesses to hire more workers and be more competitive. Like “if you like your doctor,” it may include “If you like your  job…” The law is a job destroyer that is taking away rungs from the ladder of upward economic mobility.

How Do You Make Sense of the Claims? by The Elephant's Child

The new House Republican majority will use the three weeks before President Obama’s State of the Union address to repeal the healthcare law, cut spending and scrap federal regulations, according to incoming Majority Leader Eric Cantor (R-Va.)

Cantor said Republicans would be a “cut and grow majority” emphasizing the GOP’s twin goals of reducing government spending while expanding the economy.  First Republicans will vote to repeal ObamaCare — the Democrats healthcare overhaul.  Then they will move to fulfill their commitment to cutting spending to 2008 levels.  The third step will be to target “job-killing” regulations across the federal government.

Their goal is to make a statement before Obama addresses the new Congress in his annual State of the Union speech, expected to take place in the last week of January.

So how do you make sense of all the claims and counterclaims?  You will find everyone citing the pronouncements of the Congressional Budget Office (CBO) often to support opposing claims.  I’ve often cited something from the CBO myself.  The CBO is the servant of Congress, and does, by statute, exactly what Congress asks.  They are a very slick budget office.  They do the hard math for Congress, but they include what they are asked to include, and exclude what they are asked to exclude, so that Congress gets the specific answers they want.

Last week, the CBO examined H.R.2 (The Repealing the Job-Killing Health Care Law Act) and came to the conclusion that “enacting H.R.2 would probably increase federal budget deficits over the 2012-2019 period by a total of roughly $145 billion.”

Democrats are loudly trumpeting that repeal is an act of fiscal hypocrisy by Republicans.

The rules forced the CBO to include a big range of budget gimmicks in their original estimate of the costs of the health care law:  (from Douglas Holtz-Eakin, former CBO Director)

—They left out the $115 billion in discretionary spending needed to implement the bill.
— They counted the $70 billion in premiums for long-term care insurance (CLASS Act), but ignored the unsustainable CLASS Act spending that starts after 10 years.
— Used $50 billion in higher Social Security taxes to offset health spending
— Left out entirely the cost of paying Medicare doctors.
— Pretended that $450 billion in payment cuts to Medicare providers is possible without changing the operation of Medicare.
— Planning to collect a tax on cadillac health plans that the unions have already gutted and will not tolerate.

There was never any reason to believe that ObamaCare reduced the deficit by $140 billion over 10 years.  The CBO didn’t do anything wrong here, you just have to understand the rules by which they work.  If they have to tell you how much a bunch of pixie dust will cost, you just have to know that it is pixie dust that they are budgeting.

Dang.  This stuff is really complicated.

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