EFFECTS OF THE AFFORDABLE CARE ACT ON ECONOMIC PRODUCTIVITY

BY Casey Mulligan, Ph.D in economics, Univ. of Chicago

The topic of my talk today is the economic side effects of the Affordable Care Act (ACA) (or Obamacare).Since most of the economy has to do with labor and work, that’s where I’ll start. …… From an economic or labor-market perspective, I’m going to explain how the costs of the ACA outweigh its benefits. …………………………..

The Key economic concept required to understand the labor market effects of the ACA is what economists call “tax distortions.” Tax distortions are changes in behavior on the part of businesses or household for the purpose of reducing their taxes or increasing their subsidies.  We call them distortions because they don’t occur for real business or real personal reasons.  They occur because of the tax code. ……..

THE EMPLOYER MANDATE/PENALTY/TAX   So what are the tax distortions that emanate from the ACA? Here let me simply focus on two aspects of the law:  the employer mandate or employer penalty-the requirement that employers of a certain size either provide health insurance for full-time employees or pay a penalty for not doing so; and the exchanges–some-times they’re called marketplaces–where people can purchase health insurance separate from their employer.  The mandate or penalty is intended, of course, to encourage employers to provide health insurance.  And the exchanges are where the major government assistance is provided, since those who purchase insurance in an exchange typically receive a tax credit. As I’ll explain, taken together, the penalty on employers and the subsidies in the exchanges add up to a tax on full-time employment-a tax that you pay if you work full time but not if you work party time or don’t work at all.  And the problem with that, of course, is that by taxing full-time work–which is the same as subsidizing part-time work and unemployment–you get less of the former and more of the latter two.

(this article goes on to explain the ramification of the above penalties and tax. and ends:)

In summary, the ACA has three major taxes in it.  Two are taxes on full-time employment and the other is a tax on income.  they may be implicit, they may be hidden, politicians may not call them taxes, but that’s what they are.  Their economic impact on workers varies widely, effecting low-skill workers the most.  They create all kinds of productivity problems and will have visible and permanent effects on the economy…………………I have estimated that employment will be three percent less over the long term because of the ACA, and that national income–or GDP, if you like to think of it that way–will be two percent less.  If you look at the productivity costs alone–forgetting the fact that there will be a number of people not working anymore–they come to $6,000 per person who gets health insurance because of the law.  And I’m not beginning to count the payments needed of health care providers.

In Conclusion. I can make you this promise: If you like your weak economy, you can keep your weak economy.

YOU CAN READ THE WHOLE REPORT AT:  http://www.hillsdale.edu    under IMPRIMIS.  LOOK IN THE archives for Nov. 2014 Effects of the Affordable…..

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