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Posted Feb 22, 2012, 8:49 am
The exaggerated Republican claim that the new health care law "kills jobs" was high on our list of the "Whoppers of 2011." But the facts haven't stopped Republicans and their allies from making the "job-killing" claim a major theme of their campaign 2012 TV ads:
- Five ads by the U.S. Chamber of Commerce attack Democrats by repeating the "Obamacare will kill jobs" refrain.
- Seven other Chamber spots praise Republicans, using the same theme.
- An ad from the group Freedom Path, supporting Utah Sen. Orrin Hatch, says the law is "devastating to small business."
- Republican Rep. Jo Bonner of Alabama features a large stack of papers he claims are "job-killing regulations and taxes" in one of his spots.
All of this is health-care hooey, aimed at exploiting public concern over continuing high unemployment, with little basis in fact.
As we've said before (a few times), experts project that the law will cause a small loss of low-wage jobs — and also some gains in better-paid jobs in the health care and insurance industries.
It's also expected that more workers will decide to retire earlier, or work fewer hours, when they no longer need employer-sponsored insurance and can obtain it on their own with help from federal subsidies. But that just means fewer people willing to work — and it will free up jobs for those who want them. If anything, that could reduce the jobless rate.
Claims about the alleged devastation of small business are also off base. The fact is, businesses with fewer than 50 workers are exempt from the requirement to provide coverage, or pay a penalty to the government. Furthermore, some small businesses with fewer than 25 employees are already getting tax credits under the new law to help defray the cost of providing worker coverage.
The GOP ads tend to combine the mostly bogus "job-killing" claim with their well-worn slogan calling the law a "government takeover" of health care, which isn't true. The law expands the government's Medicaid system to cover some who are not currently insured, but it also greatly expands private insurance. After the law takes effect, the government's share of all spending on health care will still remain well under half, rising less than 4 percentage points, according to official projections.
Read on to our Analysis for more on the law's projected impact on jobs.
Conservatives have been pushing their job-killing mantra since at least January 2011, when they tried to repeal the Patient Protection and Affordable Care Act with legislation titled "Repealing the Job-Killing Health Care Law Act." At the time, House Speaker John Boehner used the phrase "job-killing" an average of once every 2 minutes in a 14-minute press conference. At the end of last year we listed this overblown claim as one of the "Whoppers of 2011," right up there with the Democratic counter-claim that Republicans were out to "end" Medicare. Now Republicans and their allies are still repeating their assertion in election-year ads.
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The U.S. Chamber of Commerce ads are part of a major campaign launched Feb. 9 in 12 congressional districts and eight states. Several of the ads praise Republican lawmakers and say, "Obamacare will kill jobs and limit future job creation." We've included the ad about Rep. Mike Fitzpatrick of Pennsylvania below; others support Reps. Mike Coffman of Colorado, Dan Lungren of California, Sean Duffy of Wisconsin, Robert Dold of Illinois and Jim Renacci of Ohio. Another similar ad from the Chamber supports Rep. Fred Upton of Michigan.
In the same vein, Alabama Rep. Jo Bonner tosses out a job-killing dig at the health care law in his ad. Bonner sits next to a big stack of papers that he says are a couple thousand pages of "job-killing regulations and new taxes, what you and I know as Obamacare."
The Chamber attacks Democrats with the same "Obamacare will kill jobs" claim. These ads also claim that Sens. Claire McCaskill of Missouri, Sherrod Brown of Ohio and Jon Tester of Montana "cast a deciding vote for Obamacare." (We suppose every vote helped decide the outcome, but it seems to be a stretch to say all of their votes were "deciding" ones.)
Another ad attacks Rep. Tammy Baldwin, who is running for a Wisconsin Senate seat, with the "kills jobs" claim.
When we asked the Chamber for back-up for the claim, a spokesman directed us to three documents: reports from the conservative Heritage Foundation and the National Federation of Independent Businesses, and a letter from some conservative economists. These are not neutral sources, however, and all have their problems.
The Heritage Foundation report, dated Jan. 19, 2011, says the penalty on employers that don't provide coverage — those with more than 50 employees will be fined — will "likely" lead to "lower profits for many businesses, lower wages for millions of workers, increased unemployment, and higher prices for many goods and services." Other experts agree that added costs borne by businesses will be passed along to employees or consumers. How much of an effect would this have on jobs? Heritage answers that by committing a similar error we've seen from many Republicans — offering a misleading interpretation of a Congressional Budget Office report.
The Heritage report says: "The CBO predicts that [the Patient Protection and Affordable Care Act] will reduce the amount of labor being used in the economy by approximately one-half of 1 percent. This equates to about 700,000 additional Americans being unemployed." But CBO didn't say that 700,000 Americans would be without jobs unwillingly, as that statement implies. Instead, it said there would be a reduction in the amount of labor supplied by workers — many of whom would decide to retire earlier than they normally would, or work fewer hours or fewer jobs, because of the subsidies provided by the law, and greater security for those buying their own coverage outside the workplace. In fact, this frees up jobs for those who are looking for work.
CBO: The Congressional Budget Office(CBO) estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply. …
The expansion of Medicaid and the availability of subsidies through the exchanges will effectively increase beneficiaries' financial resources. Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market. …
Changes to the insurance market, including provisions that prohibit insurers from denying coverage to people because of preexisting conditions and that restrict how much prices can vary with an individual's age or health status, will increase the appeal of health insurance plans offered outside the workplace for older workers. As a result, some older workers will choose to retire earlier than they otherwise would.
CBO Director Douglas Elmendorf estimated in February 2011 that "roughly half a percent" of the labor in the economy would be equal to 800,000 jobs at the end of this decade, a statement Republicans, including Minnesota Rep. Michele Bachmann, twisted into saying 800,000 jobs would be killed. But, again, Elmendorf and the CBO didn't say that those jobs would be lost, but rather that, primarily, the reduction in labor would occur because people would choose to work less.
A lower unemployment rate?
And when persons in their 60s decide to retire earlier, or younger persons work fewer hours or leave their jobs, that means more jobs are available for those who are unemployed. "Most labor economists would agree with that," Gary Burtless, an economist at the Brookings Institution, told us. "If some people give up their jobs because they now have assured and affordable health care outside of employment, those jobs that are freed up will be quickly filled." Quickly, because, right now, we have more job seekers than jobs available. "The people who will hold the jobs will be different people," but it's wrong to say we'd have less jobs, Burtless said.
It's even possible that the unemployment rate could edge down just a bit as more currently unemployed persons move into those vacant jobs. Burtless says he wouldn't expect to see a big change – unemployment might drop a couple of tenths of a percentage point – and "all of these effects will take years to unfold." Plus, the way the economy is now, with unemployment at 8.3 percent, there are discouraged adults who have given up looking for work, and they would enter the labor force again. "I don't know if the unemployment rate would fall all that much," Burtless says, "but there would be an exchange of jobs," with those who were holding onto employment just for the health insurance leaving the workforce, and younger workers filling those jobs.
'Small' job loss
It's true that the CBO and other experts have said there will be a small loss of jobs, mainly of low-wage positions. In fact, the CBO agrees with the Heritage Foundation that the cost of the employer mandate "will, over time, generally be passed on to workers through reductions in wages or other forms of compensation." Since businesses can't lower wages below the minimum wage, some businesses "will probably … respond by hiring fewer low-wage workers." Or, the CBO said, some companies may hire more part-time or seasonal workers — the complicated employer mandate says businesses pay no penalty for part-time employees.
John Sheils, senior vice president of the Lewin Group, told us when we first looked into these types of claims that there would be a "small net job loss," because of the health care law. He said his analysis showed 150,000 to 300,000 low-paying jobs lost, for the same reason the CBO gives. He said those would be lost permanently, and there would be job growth as well in other job sectors, such as health care. (Lewin is a subsidiary of UnitedHealth Group, but operates independently of the insurance company.)
Sheils said there was "a potentially painful process here in changes in employment in some industries … versus others," with skilled workers more likely to benefit.
His estimates are in the same range as those from a study by the National Federation of Independent Business, which the Chamber of Commerce also cites as support for its claim. (NFIB isn't a neutral source on this issue — it is opposed to the law, and filed a lawsuit challenging its constitutionality.) The group says that a premium tax on insurers would increase premiums. And if the increase was 2 percent to 3 percent, NFIB's model projects a loss of jobs between "125,000 to 249,000 jobs in 2021, with 59 percent of those losses falling on small business."
Keep in mind, NFIB defines "small businesses" as firms with fewer than 500 employees. Not everyone would agree that a firm with hundreds of workers is "small."
Furthermore, that estimate doesn't account for any job gains in other employment sectors.
Finally, the Chamber points to a Washington Examiner article from nearly two years ago, which mentions a letter from more than 100 conservative and free-market economists, predicting that taxes in the law "will eliminate jobs, reduce hours and wages, and limit future job creation."
But that five-paragraph letter didn't provide any detailed analysis of the bill being considered. It was mainly a rebuttal to an earlier claim by former House Speaker Nancy Pelosi that the measure would create hundreds of thousands of additional jobs — the sort of liberal spin we've never found to be supported by independent analysis. To repeat, neutral experts we spoke with, and the very few nonpartisan analyses that exist on the subject, project a rather small loss of mostly low-wage jobs.
For example, we spoke with Elizabeth McGlynn, associate director of the health unit at RAND Corp., when we reported on the legislation's impact on jobs back in November 2009. Back then, the House had a bill with tougher employer requirements than what eventually was signed into law. But even under the stricter penalties, McGlynn told us, the effect on jobs "is likely to be quite minimal." She said: "Most large businesses already offer health insurance. And most small businesses are excluded from the mandate. So it's relatively few firms that will be affected."
What exactly does the law say about employer requirements? First, it says there is no penalty for employers with 50 or fewer full-time employees. Second, those with 51 or more workers and no offer of insurance coverage would pay a fine of $2,000 per full-time worker, excluding the first 30 workers. Again, there's no fine assessed for part-time workers who don't get health care coverage. Third, firms that offer coverage must meet an affordability standard — employees can't be required to pay more than 9.5 percent of household income for their share of premiums. If employees do pay more, workers would receive tax credits to buy coverage on state-based insurance exchanges. If that happens, such businesses would be fined the lesser of $3,000 per employee receiving the credit, or $2,000 per employee, excluding the first 30 workers.
The Chamber ad criticizing McCaskill also repeats the well-worn claim that the health care law is "government-run health care." It even says so twice in a mere 30 seconds. But as we've said many times, the health care law doesn't come close to a "government-run" system, where the government is the source of insurance, or also the source of health care. Instead, the law greatly expands the private insurance market. Requiring individuals to have insurance, and providing subsidies to help them pay for it, will add millions to the private insurance rolls, creating business for private companies. It's true that the law expands Medicaid, too, but there's no government takeover of insurance here, much to the chagrin of single-payer advocates who wanted exactly that type of health care system.
We pointed out in November, when the Chamber made a similar "government-run" claim, that government spending accounted for 43.6 percent of all health care spending in the U.S. in 2009, a year before the new law was enacted. That's according to the Centers for Medicare and Medicaid Services and includes federal, state and local spending.
The CMS projects that figure will creep up just slightly to 47.4 percent in 2015, after the law's major provisions on subsidies go into effect. Only some of that will be the result of the new law. Much would come from what the CMS calls a "robust Medicare enrollment growth" as baby boomers retire.
But even if the new law was the only cause — which it isn't — an increase of 3.8 percentage points in the government's share of health-care spending hardly qualifies as a "government takeover." Even by 2020, the CMS figures less than half — 49.2 percent — of health care spending will be paid by federal, state and local governments.
More on small businesses
Another ad from a group called Freedom Path, supporting Utah Sen. Orrin Hatch, claims that the health care law is "devastating to small business." The ad cites a press release on the NFIB study, which projected job losses at firms with fewer than 500 employees.
But how "small" are these small businesses that would be hurt? The ad doesn't say, and the law exempts businesses with 50 or fewer full-time employees from paying any penalties.
Sheils told us that truly small businesses would likely be winners under the law. "I think they actually could come out ahead," Sheils said. "They don't face the mandate and they could get a tax credit at least for a while for their health benefit. … It gives them an advantage in the marketplace," if they're competing against larger firms.
Small businesses with fewer than 25 full-time workers would be eligible for the tax credits to help them buy coverage, if they choose to do so. Businesses would have to have average wages under $50,000, and pay half of the cost of employee health plans.
Overall, it remains to be seen how the many provisions of the health care law affect jobs, or businesses, or health care premiums. What we have so far are educated estimates, or partisan reports. But it's certainly no fact that the law will be "devastating to small business," and the report on which Freedom Path bases that claim includes many businesses that most would not consider to be "small."
This ad also includes a graphic that says the law amounts to "$1.5 trillion" in "new gov't spending," but that negates the revenue-raising and cost-saving elements in the legislation. And the figure is a bit high, even for the cost provisions alone.
The CBO says the cost of providing subsidies and business tax credits and expanding Medicaid will cost $1.4 trillion over 10 years. That total drops to $1 trillion once CBO subtracts related savings, such as an excise tax on high-cost, employer-based plans. But the law also is expected to bring in $520 billion in revenue over 10 years through various tax measures, such as increasing payroll taxes on those with high incomes. And there are $732 billion worth of savings in the law, which come from cutting the growth of future spending. That all works out to a $119 billion reduction in deficits over those 10 years.
We've said before that it's unclear whether all of those cuts in future spending will be implemented, particularly for Medicare. Savings from Medicare changes make up about 40 percent of the total cuts. But savings aside, there's still more than half a trillion dollars in revenue that the Freedom Path ad ignores.