Thursday, June 23, 2011

Democrats’ Brickbats Towards McKinsey

The Wall Street Journal has a great editorial this morning about the vilification campaign against consultants at McKinsey – complete with letters asking for the names of its biggest clients (what exactly do Democrats intend to do with that list…?).  McKinsey’s “sin” in this case was daring to speak a politically inconvenient truth – that employers may well drop coverage for their workers in 2014 because of Obamacare’s perverse incentives for them to do so.

Democrats claimed vindication because McKinsey rightly claimed their survey was a study of employers and not an economic analysis.  The Administration’s supposed logic behind that claim?  “An analysis of business attitudes in the real world is less credible than CBO’s macroeconomic models that depend on undisclosed assumptions.  These are the same models that claim the stimulus ‘created or saved’ millions of jobs.”  (Incidentally, if Democrats are interested in transparency – rather than just intimidating people with whom they disagree – why aren’t they asking for CBO to make public the “undisclosed assumptions” in its model?)

But consider this quote: “It appears that the new law will make it beneficial for many employers to drop their health insurance coverage.  In 2014 and beyond, once federal money is available through the insurance Exchanges, switching from employer coverage to the Exchanges may benefit both employers and workers in a wide range of income levels.”  That quote comes not from McKinsey, but from the Tax Policy Center – hardly a conservative, and perhaps not even a moderate, think-tank.  Their analysis from last year confirmed the same findings as former CBO Director Doug Holtz-Eakin – that firms will gladly pay a $2,000 fine to shed health insurance obligations that can exceed $15,000 per year.

Just to emphasize, daring to point out employers will make economically rational decisions in response to perverse incentives from government has prompted a massive vilification campaign from the White House and Congressional Democrats.  At a time of anemic growth and record-high unemployment, it’s a sad commentary indeed on American economic policy.