Saturday, July 07, 2012

Lies, Damned Lies, and Austan Goolsbee's Defense of Obamacare

Austan Goolsbee
Austan Goolsbee says that Obamacare is not prolonging the recession and, in no surprise to Mark Twain, he says that he has the statistics to prove it.  In the Wall Street Journal, Mr. Goolsbee, a former Obama adviser, writes:
The employer mandate requiring firms to pay money if they do not offer health insurance, which critics highlight as the biggest culprit for our slow growth, does not apply to companies with less than 50 employees. If this mandate limited growth, then 60-person companies should suffer compared to 30-person companies.…  The data don't show it.
This computer-science name for the logical process that he is using is garbage-in-garbage-out.   Mr. Goolsbee starts with the assumption that the Obamacare mandate is the biggest problem affecting businesses and that, since the mandate applies only to businesses with 50 or more employees, anticipation of Obamacare's effects should not be slowing the growth of smaller businesses.  This is nonsense.  Obamacare's pre-existing-condition clause will disrupt or, more likely, destroy the market for individual insurance which is the kind widely used by businesses too small to qualify for group plans.  Thus, Mr. Goolsbee's starting assumption is simply false.

These issues affect businesses now. even before Obamacare is fully in effect, because, unlike governments, businesses will quickly go broke if they don't plan ahead.  It is reasonable for businesses, both large and small, to anticipate that Obamacare will drive their insurance costs up and no one knows by how much.  That makes hiring risky.  So businesses seek to avoid hiring.

Yes, I know that the Obamacare individual "mandate" is nominally supposed to make the pre-existing-condition clause compatible with insurance.  It doesn't.  Under Obamacare, a person can wait until he is seriously ill before buying insurance.  Compared to the cost of insurance, the tax penalty paid for waiting in this way is quite minor.  For the responsible people who actually bought insurance in advance of need, this drives up the price likely to the point where insurance will be unaffordable.  The Washington Democrats understood this problem but lacked to political will to deal with the consequences.  They have left the rest of us with a system that is broken in more ways than Mr. Goolsbee can imagine.

Mr. Goolsbee's article concludes:
Health-care reform and regulations are not the reason for the economy's slow recovery.
If he talked to actual businessmen, he would know better.  In survey after survey, they cite regulations in general and Obamacare in particular as stifling the recovery.

Mr. Goolsbee was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.


Anonymous said...

Perhaps a simpler explanation is that most under 50 employee sized businesses anticipate growth beyond 50 in a relatively short time horizon. That they are under 50 now gives no comfort that they won't suffer huge new and unknown costs along their anticipated growth curve. That affects job growth from the get-go.

John said...

That is a good point.

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