Economy & Budget

Obamacare’s ‘poverty trap’

Obamacare's 'poverty trap'

The fiery debate over Obamacare this week sparked new fears about the harm it will inflict on our economy, jobs, and the rising costs of medical care.

They were ignited by the Congressional Budget Office’s troubling forecasts of the health insurance law’s impact on all of us that raised many more questions than answers.

A few things became clearer, though, in the aftermath of this week’s firefight between the White House and Democrats, and the law’s Republican critics.

The law will further reduce our nation’s dwindling workforce. It will cut the hours worked by many Americans as employers attempt to avoid its employment health care costs.

The vastly inflated enrollment numbers used by President Obama and his administration do not hold up to serious scrutiny.

The White House, whose dishonesty index skyrocketed when 5 million Americans lost the insurance they liked and their doctors, defended the program.

Mr. Obama’s health care law is “helping labor markets, is helping businesses and is helping jobs,” said Jason Furman, the president’s chief economist.

That’s not how Sen. Bob Corker, Tennessee Republican, described the CBO’s outlook on what Obamacare would do to the U.S. economy in the years to come: “Today’s CBO report gives a sobering outlook on our economy. It confirms what we’ve known all along: The health care law is having a tremendously negative impact on economic growth.”

Stripped of its other economic analysis, the CBO essentially forecasts that more than 2 million Americans who have relied on health insurance through their employer will see their work hours reduced or they will stop working altogether as a result of Obamacare’s benefits.

Why? CBO Director Douglas Elmendorf offered this answer Wednesday at the House Budget Committee’s hearing that made some Democrats cringe:

“By providing heavily subsidized health insurance … to people with very low incomes … [Obamacare] creates a disincentive for people to work relative to what would have been the case in the absence of the [law].”

Then Budget Committee Chairman Paul Ryan, Wisconsin Republican, weighed in with this jaw-dropping observation: “These changes — they disproportionately affect low-wage workers. Translation: Washington is making the poverty trap worse.”

All of this opens up a new political can of worms for an unpopular law that has been racked by multiple debacles during its botched website rollout, shaky finances, despotic mandates and new constitutional court challenges.

The latest revelations now further threaten Democratic lawmakers with widespread retaliation from the voters in the 2014 midterm elections. There were new signs this week that many of Obamacare’s once-stalwart defenders were distancing themselves from the controversial law.

The Washington Post, one of the law’s most enthusiastic defenders, reported Wednesday that when the CBO report came out, “few Democrats publicly defended the law, a sign that lawmakers recognize its vulnerability.”

Rep. Hakeem S. Jeffries, New York Democrat, said at the House Budget Committee hearing on the report that the CBO’s findings triggered “hysteria” on his side of the aisle.

Maybe that’s why Mr. Obama devoted a mere 462 words to his signature law in his State of the Union speech that was 6,778 words long.

The CBO tried to steer a middle course through its thorny economic forecasts. It insisted that businesses would not significantly cut employment rolls or reduce hours work to stay under a 30-hour threshold to avoid providing workers with health care benefits.

No one believes that except its most ardent defenders. The forecast does predict long-term employment trouble ahead in future years, saying Obamacare will result in the economy losing 2.3 million full-time workers by 2021. That is almost three times its earlier estimates.

Then there are the wildly exaggerated estimates by the administration of the number of Americans who have signed up for Obamacare and its expanded Medicaid program.

For example, the administration claims 6.3 million Americans became eligible for Medicaid between October and December owing to the new law. A study by the health care industry consulting firm Avalere Health found a much smaller number (1 million to 2 million) actually signed up because of Obamacare.

Many were renewals in the usual ebb and flow of the Medicaid enrollment population that have more to do with rising and falling incomes, the study found.

Judith Solomon, vice president of health policy at the Center on Budget and Policy Priorities, told The Washington Post that Avalere’s numbers were likely more accurate than the administration’s figures.

One of the biggest and most politically explosive issues raised by the CBO report became lost in all of the mumbo-jumbo of its findings.

It was left to Mr. Ryan to lay bare one of Obamacare’s worst offenses; namely, that it will hurt many millions of Americans, especially the poorest, most vulnerable in our economy.

At one key point in the hearing, Mr. Ryan bored deeper into Obamacare’s many flaws, asking Mr. Elmendorf whether the new law’s effect of reducing the labor-participation rate would also hurt economic growth. The CBO chief agreed that, yes, this would happen.

There are broader problems in the CBO’s estimates, according to the University of Maryland’s business school economist Peter Morici. The impact would be worse than CBO forecasts: “CBO once again low-balls the impact of the Affordable Care Act on labor-force participation and the economy,” he writes in his analysis of their report. The economic-growth rate “and employment for most workers will be harmed,” he said.

This is just the tip of the economic iceberg that lies beneath Obamacare. Higher poverty rates, disincentives to work, and a shrinking American workforce that will further weaken our sluggish economy are just the beginning of what awaits us under this harmful law.

Donald Lambro is a syndicated columnist and contributor to The Washington Times.

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