I hadn’t read this WSJ piece on Casey Mulligan until the persistent von Pepe sent me Cochrane’s blog treatment of it. Since I already knew Mulligan’s basic points, I didn’t think I’d get much out of it; after all, the CBO itself cited Mulligan’s research in the footnotes when explaining why it drastically increased its estimate of the negative supply-side effects of the Affordable Care Act (ACA aka ObamaCare).
But what I didn’t realize was just how well they were going to put their fingers on what has really annoyed me about the blogosphere reaction to the CBO’s updated numbers. Here’s the WSJ article:
Mr. Mulligan thinks the CBO deserves particular credit for learning and then revising the old 800,000 number, not least because so many liberals cited it to dispute the claims of ObamaCare’s critics. The new finding might have prompted a debate about the marginal tax rates confronting the poor, but—well, it didn’t.
Instead, liberals have turned to claiming that ObamaCare’s missing workers will be a gift to society. Since employers aren’t cutting jobs per se through layoffs or hourly take-backs, people are merely choosing rationally to supply less labor. Thanks to ObamaCare, we’re told, Americans can finally quit the salt mines and blacking factories and retire early, or spend more time with the children, or become artists.
Mr. Mulligan reserves particular scorn for the economists making this…argument…
A job, Mr. Mulligan explains, “is a transaction between buyers and sellers. When a transaction doesn’t happen, it doesn’t happen. We know that it doesn’t matter on which side of the market you put the disincentives, the results are the same. . . . In this case you’re putting an implicit tax on work for households, and employers aren’t willing to compensate the households enough so they’ll still work.” Jobs can be destroyed by sellers (workers) as much as buyers (businesses).
He adds: “I can understand something like cigarettes and people believe that there’s too much smoking, so we put a tax on cigarettes, so people smoke less, and we say that’s a good thing. OK. But are we saying we were working too much before? Is that the new argument? I mean make up your mind. We’ve been complaining for six years now that there’s not enough work being done. . . . Even before the recession there was too little work in the economy. Now all of a sudden we wake up and say we’re glad that people are working less? We’re pursuing our dreams?”
The larger betrayal, Mr. Mulligan argues, is that the same economists now praising the great shrinking workforce used to claim that ObamaCare would expand the labor market.
He points to a 2011 letter…signed by dozens of left-leaning economists including Nobel laureates, stating “our strong conclusion” that ObamaCare will strengthen the economy and create 250,000 to 400,000 jobs annually….
“Why didn’t they say, no, we didn’t mean the labor market’s going to get bigger. We mean it’s going to get smaller in a good way,” Mr. Mulligan wonders. “I’m unhappy with that, to be honest, as an American, as an economist. Those kind of conclusions are tarnishing the field of economics, which is a great, maybe the greatest, field. They’re sure not making it look good by doing stuff like that.” [Bold added.]
And now here’s Cochrane, following up on the above commentary:
The rhetoric of our national conversation is strangely asymmetric…Imagine if, say, a Republican congressman said how great it was that lower and middle income people were quitting their jobs, so they could become artists. He would be pilloried as completely out of touch with the realities of life in middle America. What, has he been hanging out with former President Bush too much?
There are a hundred disincentives to work in America right now. Job lock was a big problem with our employer-based health insurance system, and I’ve written against it too arguing for a system based on portable individual insurance. But as economists, we are supposed to look at overall distortions, understand that employer and employee distortions contribute equally, and that jobs represent two-sided matches. The idea that the full effect of government policy was to induce too many people to work is just silly. [Bold added.]
Here’s my challenge to people who want to say that the above is totally unfair, and that the reaction to the CBO report has nothing to do with politics: Can anybody point me to an economic analyst whose name I would recognize, who (a) publicly argued that one of the virtues of the ACA is that it would reduce the long-run employment of labor, particularly among low-income people; and (b) did so before the ACA was passed into law?
If that’s not possible, let me give you an easier request: Can anyone find me an example of an analyst whose name I have heard, who typically supports progressive policies, and who, at any time prior to the CBO report, made the case that low-income people were working too many hours? I imagine you might find something “near” this in the inequality discussions, but even there, I bet it would be saying stuff like, “The bottom 20% have only captured x% of the income gains over the last decade, even as their work week has risen by y%.” Yet that’s not the same thing as saying all things considered, low-income people are selling more of their hours to employers than is economically optimal.
Final thing: I’m not laying down the above as a rhetorical gauntlet; I’m genuinely asking. I will be very surprised if anyone finds an example of the first challenge, but maybe somebody made this point during the debate and I missed it.