Something puzzling happened, in the wake of Tuesday’s Congressional Budget Office report suggesting the Affordable Care Act will cost as many as two million jobs starting in 2017. The White House defended the ACA by suggesting that employers wouldn’t stop hiring — a demand side problem — but that people would choose to work less — a supply side issue.
This is seemingly in agreement with the CBO report, but this rationale contradicts the White House’s earlier claims regarding another instance in which government incentivizes unemployment. Mainly, extending unemployment insurance.
Opponents of the extension have claimed that extending unemployment insurance incentivizes joblessness, and thus causes those out of work to forgo job opportunities, trapping individuals in long term unemployment.
Up until this point the White House has denied that a supply side employment problem was even possible. The Administration has gone so far as to attack the idea the people would willingly go unemployed.
“I can’t name a time where I met an American who would rather have an unemployment check than the pride of having a job,” the President himself claimed.
However, Tuesday’s CBO analysis tells a different story, albeit about a different entitlement. The report stated that the ACA will, “reduce incentives to work” and that “the loss of subsidies upon returning to a job with health insurance is an implicit tax on working.”
White House Economic Advisor Jason Furman defended the ACA, however. He said the subsidies would incentivize entrepreneurship, not unemployment.
“When you see changes, it’ll be that person who maybe didn’t want to work those hours,” he said on Tuesday during the White House press briefing.
And yet this logic doesn’t extend to long term unemployment benefits, according to the White House, even though the premise remains the same.
In regards to the ACA, the incentives will, in some cases, cause people to forgo work, because one will be able to receive greater health care subsidies by making less money. Those individuals would also lose those subsidies if an employer provided health insurance.
In the case of extended unemployment benefits, the incentives are equally dubious. One is paid unemployment insurance, so long as one doesn’t work. This can discourage people who would otherwise take a job with reduced pay or benefits. The National Bureau of Economic Statistics estimated that extended unemployment insurance added four percent to the unemployment rate.
Then again, the President probably can’t name a time when he met an American who would rather be unemployed and have subsidized insurance than the pride of having a job that provides health care without a subsidy.
