Thursday, February 6, 2014

For avoidance of doubt, this is what I think about the CBO report

So I wrote about the CBO report last night, and, in the end, was pretty tired after I finished really working through it and summarizing it.

But here are the key points that people don't seem to understand, as I read through blog posts and comments:

1) The CBO projection is for the years 2017 and afterwards, when they assume the economy will be "back to normal." These are 2% fewer hours worked than would have otherwise been the case, assuming a healthy economy. They agree that, in the short-term, the labor force drop-outs or scale-backers will be replaced by other workers currently unemployed, but figure that won't always be the case. If your expectation is that the job market will be lousy for generations to come, then, indeed, moving the marginally-attached out in favor of those who want to work isn't as much of a problem. Which means that your opinion on the impacts of the ACA will be bound up with your opinion of the future of the American economy, and how well or poorly it will adapt to the imacts of globalization, immigration, technology, etc., on the nature and number of jobs.

2) The CBO projection looks at total hours worked -- if a person leaves their job to find fulfillment as a freelance writer, but spends as much time working on a self-employed basis, this counts as no net effect.

3) Some of the CBO's forecasted impacts are due to the really hideous cliffs -- as has been pointed out, there are cases where an extra dollar earned in pay causes a loss of subsidies worth $10,000 or even $20,000. And some of them are just because, with the government subsidies, people need less wage income to maintain the same standard of living, which would be the case with any sort of universal coverage benefit. This is certainly the case for early retirees, and I can easily envision someone sitting down with a financial planner, working out a reasonable 401(k) withdrawal pattern, and adding in the (now reduced) cost of health insurance into their budget, to see more favorable numbers than a pre-ACA calculation would have generated.

4) The CBO doesn't, as far as I can tell, factor in the potential impact on the overall economy, of more people collecting subsidies than forecast, except to say that it improves the economy due to "stimulus" type deficit spending. For clarity, I think this is a Bad Thing and am skeptical of Keynesian multipliers, which seem to be "proven" only by virtue of citing numbers produced by models.

5) Yes, the comments by Democrats defending the ACA who speak of no longer being tied to a job as "liberating" are flaky. It's tempting to jump in and vent about how we are not a wealthy enough country to be able to support large numbers of people not working, or not working to their full capacity, due to the provision of government subsidies to meet their living expenses. But it's clear that most of these comments are made based on the need to rise to ObamaCare's defense. And some of it is a bit murky: retiring at 65 and collecting Medicare is OK, but retiring at 64 and collecting subsidies is "feeding at the public trough"? A couple where one party, in the future, decides to work part-time after the baby is born, because they can swing the finances, is a "taker"? Just because the Democrats are spouting out nonsense about finding fulfillment outside of the corporate world doesn't mean you have to take their spin at face value.

6) It's a model, people. All models are based on underlying assumptions which may or may not be correct.

7) Do you think the CBO is hiring? Do you think they'd hire an actuary, to work remotely and part-time, with somewhat weak technical skills?

2 comments:

  1. I think the CBO is a bit overblown, just because we have a nice experimental control for what happens when you break the employment-health insurance tie - Canada. Sorry to beat the "comparing the US to Canada" horse again, but it's by far the most similar country to the US, geographically, culturally, economically, and demographically, so if you're gonna do an international comparison, it's the place to look. Also I lived there a while and my boyfriend lives there still, so I am up there a lot. Currently Canada has a higher labour force participation rate than the US (66% Can vs 63% US).

    http://data.worldbank.org/indicator/SL.TLF.CACT.ZS

    The US has slightly more hours worked per worker - 1790 US vs 1710 Can. Doing a little multiplication gets 1129 hours per person per year for Canada and 1128 hours per person per year for the US, a dead heat.

    Now, it could be the case that Obamacare will push the US into a lower labour use trajectory than Canada, if the underlying US economy is weaker for example and the health insurance incentives were propping up labour force participation. Also, Canada doesn't have the income cliffs like Obamacare does; the provincial health programs are universal, and while not always free, the premiums are generally much below the actual cost of care.

    Oh, and the CBO seems to have some health economist positions open, no actuarial jobs listed though.

    ReplyDelete
    Replies
    1. Peter,

      I don't think it valid to view Canada as a control since if the US adopted the Canadian health system, you still couldn't assume the US labor numbers would look like Canada's. All the CBO is doing is trying to determine the delta for the US with and without the ACA- Canada doesn't really inform this issue at all.

      Delete

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