Tuesday, February 4, 2014

CBO moves toward my estimate

I have predicted that the ACA would contract the labor market about 3 percent. Maybe more, maybe less, but that was my best guess. I continue to work on it.

Meanwhile, CBO was saying 0.5 percent, and my critics (rather than giving an economic argument), point to the "nonpartisan CBO's" estimate as proof that I am out on the fringes.

Today CBO revised -- tripled -- its estimate to 1.5 percent. They still have a bit of the economics wrong, but it is a major step that they now acknowledge most (but not all) of the incentives that have been identified, and their analysis is vastly closer to mine now.

CBO should be credited for honestly re-assessing perhaps their most cited estimate ever. I imagine that it might have been tempting to stick with the original. But CBO Director Elmendorf was one of my teachers in college, and knowing him I expected that a better estimate would be forthcoming as research increasingly clarified what was missing in the original.

I also give the CBO credit for never falling into the trap that ACA = Romneycare, ergo the ACA's labor market effects are minimal. HHS will be asked to answer the CBO's revision, and I guarantee you that they will tempt the rest of America to fall in the trap.

The real problem for America was not the CBO estimate but that such a sweeping law was passed before the best economists in the nation could digest the incentives and unintended costs that it contained.


Patrick Sullivan said...

You remember all those claims by Obama during the debates that, 'If you don't like your job, you won't have to keep it after the ACA passes'?

That's the latest response.

rafal said...

Germany has very generous unemployment/welfare benefits which include health insurance. Yet, they have a vibrant economy and low unemployment rate. Australia is a similar example. Care to explain? Does your theory apply to those two countries?