White House Grilled Over CBO Report on Obamacare

WH: Obamacare Could Make People Better Off By Incentivizing Them to Work Less

February 4, 2014

Chairman of the White House Council of Economic Advisors Jason Furman contended Obamacare could still make individuals better off even if it incentivized them to work less Tuesday in the White House press conference. A CBO report released today indicated Obamacare will reduce the number of full time workers by 2 million over the coming years.

The Harvard educated Furman used a hypothetical of an individual who may elect to work 35 hours a week instead of 60 hours a week to garner a greater subsidy or be eligible for Medicaid, thus purportedly making that individual better off.

Fox News reporter Ed Henry challenged Furman, asking how someone could be better off if changes in the Affordable Care Act would make it appealing for an individual to effectively cut their income in half. Furman deflected, telling Henry he would not prescribe the most rational economic course of action for every single worker in America.

However, Furman argued by definition if someone makes a decision with respect to lowering their weekly hours for the purposes of attaining government assistance that person could not be worse off. "There's no way you have a set of stuff; you can make exactly the same choice you made before, and now, I give you something else, that you could be -- that you're worse off as a result of that," he said.

Henry interjected, asking Furman how introducing an incentive for some people to work less is not tantamount to inducing those people to become less productive.

Furman, seeming to sense he was cornered, pivoted to the administration's talking point that Obamacare in aggregate actually increases economic productivity.

Full exchange:

ED HENRY: Jason, on your example, and you're talking about somebody making -- working 60 or 65 hours a week and they might now be able to work -- I can't remember if you used 30 or 35 hours a week -- and they'd have health insurance, just an example. So it's a good thing that they now have health care; maybe they didn't before. But isn't that man or woman going from 60 or 65 hours to 30 --

JASON FURMAN: No, I'm saying --

HENRY: They're making less money, right?

FURMAN: Well, I'm saying if they -- yeah, if -- the main thing going on here was a change in labor demand. And labor demand, just to be clear, that is the decision that employers are making. So employers are cutting jobs because of the Affordable Care Act, that would be a bad thing because that means somebody who really wanted a job wouldn't be able to get one. You might see the unemployment rate go up as a result of that, for example.

CBO explicitly says that you're not going to see an increase in the unemployment rate, that when you see changes it'll be that person who maybe didn't want to work those hours. They still have the option to. They still can, but in that case maybe they'll decide they don't need to anymore. And that, in their case, might be a better choice and a better option than what they had before.

HENRY: Sure, but if they make that choice and they go from 60 to 30, 35 hours, presumably that family is going to have a lot less take-home pay and they're going to have less money to put back into the economy.

FURMAN: Right. But we just described that example -- I mean, first of all, it's a hypothetical example. But --

HENRY: Well, it was your hypothetical.

FURMAN: It was my hypothetical, that is -- that is -- that is completely fair. Again, it's a choice they're making. This doesn't -- they had something before, which was a 65-hour job, and maybe no health care and no great health care options. You now give them a new option they didn't have, a brand new thing. It's -- you know, an option to buy in the marketplace.

It is subsidies for that. Maybe it's Medicaid if their income is low enough. They still have everything they had before; labor demand hasn't changed. They still have that job; they can still go to that job; they can still do that, but you give them this extra new thing. You can't have made that person worse off. If they make a new choice, it's because they're -- you know -- in economics language, they're optimizing subject to a new constraint, and then they -- (inaudible) -- better off.

HENRY: Right, but if -- (inaudible) -- work hours wise, maybe better for the family to have health insurance, but a lot less take-home pay. When you go from 60 to 30 --

FURMAN: But they -- in my example --

HENRY: Are you going to make more money if you go from 60 to 30, or -- I'm just trying to follow the math.

FURMAN: Some people may choose to -- I'm not going sit here and go -- give a list of 140 million Americans and tell you how many hours each of them should work, and that's not what the Affordable Care Act -- (inaudible) -- you know, I -- that's not what the Affordable Care Act does. The Affordable Care Act says you can do just what you did before, you know, in this regard, with some puts and takes, but sort in aggregate, you can basically do the same thing you did before, but now, you have this new thing you didn't used to have. If because of this new thing, you make a different choice than you're used to, you are by definition not worse off. There's no way you have a set of stuff; you can make exactly the same choice you made before, and now, I give you something else, that you could be -- that you're worse off as a result of that.

HENRY: Doesn't, Jason, that incentivize though, some people to do less, that all of a sudden, there's an incentive to do less, because if your salary's less, you're still getting government subsidies but then benefits?

FURMAN: First of all, for many people, that's potentially an incentive to do more. There's an incentive for more entrepreneurship, because they're not locked into a job, there's an incentive for hire -- for employers to be able to hire more people, because the cost of health care is lower. There's an incentive to hire workers who are going to be absentees less.

Published under: Ed Henry , Obamacare