For avoidance of doubt, this is what I think about the CBO report

Last updated on: February 6, 2014 at 10:02 am by Jane the Actuary

For avoidance of doubt, this is what I think about the CBO report 2014-02-06T10:02:00-06:00 Jane the Actuary

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So I wrote about the CBO report last night, and, in the end, was pretty tired after I finished really working through it and summarizing it.

But here are the key points that people don’t seem to understand, as I read through blog posts and comments:

1) The CBO projection is for the years 2017 and afterwards, when they assume the economy will be “back to normal.” These are 2% fewer hours worked than would have otherwise been the case, assuming a healthy economy. They agree that, in the short-term, the labor force drop-outs or scale-backers will be replaced by other workers currently unemployed, but figure that won’t always be the case. If your expectation is that the job market will be lousy for generations to come, then, indeed, moving the marginally-attached out in favor of those who want to work isn’t as much of a problem. Which means that your opinion on the impacts of the ACA will be bound up with your opinion of the future of the American economy, and how well or poorly it will adapt to the imacts of globalization, immigration, technology, etc., on the nature and number of jobs.

2) The CBO projection looks at total hours worked — if a person leaves their job to find fulfillment as a freelance writer, but spends as much time working on a self-employed basis, this counts as no net effect.

3) Some of the CBO’s forecasted impacts are due to the really hideous cliffs — as has been pointed out, there are cases where an extra dollar earned in pay causes a loss of subsidies worth $10,000 or even $20,000. And some of them are just because, with the government subsidies, people need less wage income to maintain the same standard of living, which would be the case with any sort of universal coverage benefit. This is certainly the case for early retirees, and I can easily envision someone sitting down with a financial planner, working out a reasonable 401(k) withdrawal pattern, and adding in the (now reduced) cost of health insurance into their budget, to see more favorable numbers than a pre-ACA calculation would have generated.

4) The CBO doesn’t, as far as I can tell, factor in the potential impact on the overall economy, of more people collecting subsidies than forecast, except to say that it improves the economy due to “stimulus” type deficit spending. For clarity, I think this is a Bad Thing and am skeptical of Keynesian multipliers, which seem to be “proven” only by virtue of citing numbers produced by models.

5) Yes, the comments by Democrats defending the ACA who speak of no longer being tied to a job as “liberating” are flaky. It’s tempting to jump in and vent about how we are not a wealthy enough country to be able to support large numbers of people not working, or not working to their full capacity, due to the provision of government subsidies to meet their living expenses. But it’s clear that most of these comments are made based on the need to rise to ObamaCare’s defense. And some of it is a bit murky: retiring at 65 and collecting Medicare is OK, but retiring at 64 and collecting subsidies is “feeding at the public trough”? A couple where one party, in the future, decides to work part-time after the baby is born, because they can swing the finances, is a “taker”? Just because the Democrats are spouting out nonsense about finding fulfillment outside of the corporate world doesn’t mean you have to take their spin at face value.

6) It’s a model, people. All models are based on underlying assumptions which may or may not be correct.

7) Do you think the CBO is hiring? Do you think they’d hire an actuary, to work remotely and part-time, with somewhat weak technical skills?

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