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Krugman: Work, health care and lies

  • (NICK ANDERSON / Houston Chronicle)

On Wednesday, Douglas Elmendorf, the director of the nonpartisan Congressional Budget Office, said the obvious: losing your job and choosing to work less aren’t the same thing. If you lose your job, you suffer immense personal and financial hardship.

If, on the other hand, you choose to work less and spend more time with your family, “we don’t sympathize. We say congratulations.” And now you know everything you need to know about the latest falsehood in the ever-mendacious campaign against health reform.

Let’s back up. On Tuesday, the budget office released a report on the fiscal and economic outlook that included two appendices devoted to effects of the Affordable Care Act.

The first appendix attracted almost no attention from the news media, yet it was actually a bombshell. Much public discussion of health reform is still colored by Obamacare’s terrible start and presumes that the program remains a disaster. Some of us have pointed out that things have been going much better lately — but now it’s more or less official. The budget office predicts that first-year sign-ups in the health exchanges will fall only modestly short of expectations and that nearly as many uninsured Americans will gain insurance as it predicted last spring.

This good news got drowned out, however, by false claims about the meaning of the second health care appendix, on labor supply.

It has always been clear that health reform will induce some Americans to work less. Some people will, for example, retire earlier because they no longer need to keep working to keep their health insurance. Others will reduce their hours to spend more time with their children because insurance is no longer contingent on holding a full-time job. More subtly, the incentive to work will be somewhat reduced by health insurance subsidies that fall as your income rises.

The budget office has now increased its estimate of the size of these effects. It believes that health reform will reduce the number of hours worked in the economy by between 1.5 percent and 2 percent, which it unhelpfully noted “represents a decline in the number of full-time-equivalent workers of about 2.0 million.” Why was this unhelpful? Because politicians and, I’m sorry to say, all too many news organizations immediately seized on the 2 million number and utterly misrepresented its meaning. For example, Rep. Eric Cantor, the House majority leader, quickly posted this on his Twitter account: “Under Obamacare, millions of hardworking Americans will lose their jobs and those who keep them will see their hours and wages reduced.” Not a word of this claim was true. The budget office report didn’t say that people will lose their jobs. It declared explicitly that the predicted fall in hours worked will come “almost entirely because workers will choose to supply less labor” (emphasis added). And as we’ve already seen, Elmendorf did his best the next day to explain that voluntary reductions in work hours are nothing like involuntary job loss. Oh, and because labor supply will be reduced, wages will go up, not down.

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