Will Health “Reform” Really Save Jobs?
The Center for American Progress recently released a report synthesizing two previous studies regarding health care costs and economic growth to allege that passage of health “reform” legislation could create up to 400,000 jobs per year. Some Democrats have begun to use this study to bolster their assertions that their bill will help to create jobs. While this argument is politically convenient given the current state of the employment outlook, a closer look at the paper reveals problems with the study – and the underlying bills:
- While 400,000 jobs per year sounds impressive, such numbers (even if accurate) represent a comparatively small fraction of the total job “churn” annually. Most experts believe that the economy must gain at least 150,000 jobs per month – or 1.8 million per year – just to keep pace with population growth. And the Labor Department reported last week that in December 2009, 661,000 individuals stopped looking for work – so 65% more people in one month left the workforce than would be helped in an entire YEAR under the best Democratic assumptions.
- In a similar vein, nearly 2.8 million jobs have been lost since President Obama signed the $787 billion “stimulus” back in February. Again, using the best assumptions, it would take seven years just to regain the number of jobs present when the President signed the “stimulus” – this as a result of enacting a bill that would spend $2.5 trillion more.
- The even small assumption of 400,000 jobs gained annually from health “reform” is itself seriously flawed. While the study does take into consideration some job loss from new mandates on employers to offer coverage, it does NOT take into account the other “deadweight” losses that arise from imposing other broad-based taxes. A model developed by Christina Romer, President Obama’s chief economic advisor, found that the more than $700 billion in tax increases in the House bill would destroy up to 5 million jobs – far exceeding the predicted 400,000 annual job gain. With the Senate bill increasing the Medicare payroll tax – and Democrats discussing the further unprecedented step of applying the “payroll” tax to capital gains and dividends that companies use to invest back in their firms – the negative economic effects of the bill’s major tax rises are almost certainly understated in the report.
- The study also presumes that higher job growth will result from lower health care costs. However, the Congressional Budget Office found that premiums in the individual market will rise by as much as $2,100 per year for families, and the Administration’s own actuaries have found that the House and Senate bills would both RAISE health care costs, not lower them.
- Finally, other health “reform” advocates have argued that the bill will raise wages for workers. For instance, MIT professor (and heretofore undisclosed Administration consultant) Jonathan Gruber wrote in the Washington Post recently that the “Cadillac tax” in the Senate bill isn’t really a tax, because firms will pass their lower health costs on to workers in the form of higher wages. Therein lies a further flaw in the CAP study: Even presuming official actuaries are incorrect and the bill reduces health care costs, the same savings can’t be used by businesses to BOTH increase hiring AND raise wages – it’s an either/or proposition. Given the debate about the “Cadillac tax” and the current jobs situation, this is an argument that may recur in the future, as Democrats attempt to portray their health bill as delivering all things to all people.