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SMART TALK ON OBAMACARE

pic_giant2_111114_SM_Jonathan-Gruber_0-300x180,Jonathan Gruber, the MIT economist who helped fashion the Affordable Care Act, recently gained notoriety for saying the law counted on the “stupidity” of voters, who could be tricked into believing it was not a tax.

His comments conveyed a contempt for the public on the part of the developers of the law that outraged Americans.

But Americans might be further outraged if they considered the analysis of an economist who isn’t interested in misleading voters.

Casey Mulligan, a University of Chicago professor of economics, recently discussed how Obamacare’s taxes would affect economic productivity during a Hillsdale College Free Market Forum in Indianapolis.

His alarming findings are worth attention, particularly as Republicans take control of the Senate next year and consider ways to revise or scrap the law.
(Hillsdale College, founded in 1844, is an independent liberal arts college that does not accept federal or state taxpayer subsidies.)

Mulligan writes how taxes cause “distortions” — changes in business behavior that would not occur were it not for the taxes.

And he describes how two Obamacare provisions represent a tax on full-time employment: the requirement that businesses with more than 50 employees either provide health insurance for full-time employees or pay a penalty, and the exchanges where individuals can buy health care independent of employment.
He explains how the employer mandate discourages employment: “ … the penalty applies only in the case of full-time employees and only to employers that don’t offer health coverage, and it applies only in those months during which those full-time employees are on the payroll. If an employee cuts back to part-time work, the employer no longer has to pay the penalty.”

Obviously, the tax distortion here gives employers a financial incentive to hire part-time workers.

Similarly, the government offering subsidies to citizens seeking health insurance on the exchanges provides a perverse incentive:
“If you want to get the subsidy, you need to become a part-time worker or spend time off the job. In other words, this discount, too, is a tax on full-time employment.”
Mulligan says when you tax something, you get less of it and “if you tax labor, you get less labor. As a result of the ACA then, we are going to have fewer people working and less value created overall.”

Moreover, Obamacare’s requirements will have enduring and profound impacts on business practices.

“Businesses will change the way they do business, whether it’s by bending over backwards to stay below 50 employees or by having more part-time employees and fewer full-time employees — not because these policies create value or satisfy customers, but because they avoid penalties or enhance subsidies.”

Although most Americans could not have put their objections in Mulligan’s terms, they’ve recognized something was terribly wrong with this elaborate federal entanglement of the nation’s economy. It is a major reason, as The Wall Street Journal points out, 30 of the 60 senators who voted for the ACA are no longer in office.

The nation does need health care reform, and the newly empowered GOP needs to remember that the situation prior to the Affordable Care Act was hardly satisfactory, particularly for the working poor. Republicans need to offer reasonable alternatives or revisions.

But as Mulligan details, Obamacare in its present form represents a major obstacle to the country’s economic growth. Change is mandatory

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