David Gamage is an assistant professor of Law at UC Berkeley who has worked on the tax provisions of Obamacare for the Treasury Department. In an October 30 article in the Wall Street Journal (“ObamaCare’s Costs to the Working Class“), he expresses sincere concern over the presumably unintended consequences of the Obamacare law as written. Instead of repenting of his support for the law however, he advocates “further reform,” failing which dire consequences will ensue. What needs to be understood by ordinary citizens who are not privileged enough to be paid by the government to help the government command other people’s lives and money is that these consequences are predictable, were predicted, and that this is only the beginning of a vicious downward spiral.
The term “perverse incentive” appears seven times in Professor Gamage’s article. Accepting a higher-paid job could cost a citizen more on net balance than it is worth due to the loss of health-care subsidies. Employers now have every incentive to make as much of their workforce part-time (and thereby ineligible for health insurance benefits) as possible. “ObamaCare’s new subsidies may also create penalties for marriage and incentives for divorce.” People who have access to affordable individual coverage but NOT affordable family coverage through their employers will be disqualified from receiving family coverage from the Obamacare plan. And so on and on.
Yet he explicitly rejects any suggestion that the law is a lemon at best and that we should go back to the drawing board. Indeed, he opens with “It is time to move past the debate over whether ObamaCare was a good or a bad idea.” Really?
The second most-repeated phrase in the article is “further reforms” (which even appears once in the same sentence with the other winner, ‘”perverse incentives”): “Without further reforms, the law will create unnecessary costs for working-class Americans.” “Without further reforms, many employers and employees will jointly benefit if employers make low-income employees part-timers rather than offering them health insurance.” “Even if these perverse incentives affect only a limited number of individuals, lawmakers should still strive to mitigate them through further reforms.” “Hence, whether we want to ‘repeal and replace’ ObamaCare, or ‘improve ObamaCare through further reforms,’ is merely a question of semantics.”
But “further reforms” is not a solution; it is merely continuing down the path to worse problems in response to problems created by the original legislation. Are we really supposed to believe that a 2,700-page bill and 10,000+ pages of derived regulations are fundamentally sound but merely insufficient, that we emphatically need more, more, further, further, further rules and regulations? Do we believe that more meddling and fiddling about to fix the first unintended consequences will have no unintended consequences of their own?
Government interventions in the market always create worse problems than the unsatisfactory original conditions they intend to solve. Maximum-price controls on milk to help poor mothers feed their babies lead to shortages of milk (and/or surpluses of butter, yoghurt and cheese) as marginal producers are unable to recoup their costs and go out of business and more people clamor for the lower-priced product, which leads the government to control the price of cattle feed in hopes of lowering dairy production costs, which leads to a shortage of cattle feed and an increase in the percentage of cows slaughtered for meat instead of being kept as milk producers. It’s called Econ 101.
The only surprise in any of this is that people capable of passing the bar exam are unable to comprehend it.
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