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They Called Obamacare A 'Job-Killer.' Were They Wrong?

This article is more than 9 years old.

Barring an asteroid or the biggest economic surprise in recent history, Friday's jobs report will be the 60th straight month that America's private sector has gained jobs.

That's a new record — but another milestone this month arguably looms larger.

March marks five years since the Affordable Care Act was passed … amid Republican cries that the ACA was a job-killer.

To put that more plainly: The private sector hasn't lost jobs since Obamacare was officially created.

Were Republicans wrong?

The state of the debate: 2010

To understand that question — and the peculiar political implications when answering it — we need to revisit the heated months when the ACA was limping toward passage. A time when Republicans, trying to derail the bill, began actively labeling the health-reform legislation a "job-killer."

"Economists agree," House Speaker John Boehner's office announced on March 17, 2010, just five days before President Obama would sign the ACA into law.

"The President … continues to push his job-killing government takeover of health care that will hurt small businesses at a time when they need certainty, not more Washington tax hikes and mandates."

Boehner was citing a protest letter from 150 economists, but his comments weren't isolated. Across 2009 and 2010, Republicans repeatedly branded health reform (as well as many other pieces of Democrat-led legislation) as "job killers."

In 2011, House Republicans even passed the "Repealing the Job-Killing Health Care Law Act" — the first time that any piece of congressional legislation ever had "job-killing" in its title.

But to be fair, it wasn't just Republicans playing labor politics with health care.

The White House — trying to create a major entitlement program in the middle of the nation's worst economic crisis in 80 years — had clear incentive to position the law as job-boosting, too.

"It's about jobs," House Minority Leader Nancy Pelosi said in February 2010, at a White House summit intended to save the flagging health care legislation. "In its life [the Affordable Care Act] will create 4 million jobs, 400,000 jobs almost immediately."

Pelosi was citing data from David Cutler, a prominent Harvard professor and key adviser to Obama's health care strategy.

Writing with co-author Neeraj Sood in a January 2010 study (you can see an archived version of the report here), Cutler made the case that lowering health costs and specifically Americans' premiums would create 250,000 to 400,000 per year through 2020, or up to 4 million new jobs.

Under their theory, reducing individuals' and employers' health spending would make the U.S. economy more dynamic, while the ACA's coverage provisions would free up workers from "job lock" and help protect them as they looked for better, more desirable employment.

"Health care reform is one aspect of a comprehensive jobs package," Cutler and Sood wrote in a commentary piece about a month after their study.

"It is not the only valuable element, but it provides an additional rationale for addressing health care and job creation early in 2010."

The state of the debate: 2015

That was then.

This is now: Most of the ACA's provisions have taken effect. The economy looks drastically different than in March 2010 — more than 11 million jobs have been created, and the unemployment rate has been cut nearly in half.

So what do the ACA's supporters and critics make of it?

I took the last five years of economic data to several of the economists who'd been most vocal about Obamacare in 2010. It turned out to be sort of a Rorschach test — they looked at the same charts, and saw a completely different picture.

And if anything, their opinions have calcified.

For instance, Diana Furchtgott-Roth — director of Economics21 at the Manhattan Institute for Policy Research — was one of the 150 economists who signed that protest letter over the Affordable Care Act in 2010.

"By no stretch of the imagination can we say the economy's doing well," Furchtgott-Roth now says. "The economy's just stumbling along."

For example, she cites the lackluster labor-force participation numbers, especially among "prime age workers" or those ages 25 to 54. Furchtgott-Roth points out that the labor-force participation rate has plunged as the economy has gained jobs, which she says is atypical of other post-recessions, such as in the United Kingdom.

Furchtgott-Roth has specifically studied the ACA's effect on the franchise industry, and she argues that the health law's employer mandate is set up to hurt younger, unskilled workers trying to get their first jobs.

In an excerpt from her upcoming book "Disinherited: How Washington Is Betraying America's Young," Furchtgott-Roth writes that "government programs such as the Affordable Care Act rob the young ... [and] as the labor-market repercussions of the Affordable Care Act begin to take effect in full force, the number of part-time workers will probably rise."

Casey Mulligan, University of Chicago professor and author of "Side Effects: The Economic Consequences of Health Reform," goes even further.

Per his own book's title, Mulligan has modeled out the law's impact and believes that the ACA cuts deep — he thinks the labor market will permanently shrink by up to 3% thanks to Obamacare.

That would be on the order of 3 million to 4 million jobs lost because of Obamacare this year.

And Mulligan believes we can detect the ACA's effects already. Consider the growing number of people working part-time jobs of less than 30 hours, which seems designed by businesses to evade the ACA's employer mandate.

"Have you ever seen a recession that created '29ers?" Mulligan asks, using the slang term. "Or a recession that caused 49-employee firms to increase sharply relative to 50-employee firms?"

Mulligan also thinks that last year's jobs growth — the best single year of jobs gain since the Clinton administration — isn't explained by the ACA's Medicaid expansion and exchanges kicking in.

"Note that 2014 was supposed to feature the ACA's employer penalty, but the Obama [administration] decided not to enforce the penalty until 2015, and even then not fully until 2016," he says.

Mulligan also observes that the Emergency Unemployment Compensation program expired at the end of December 2013. "This by itself would reduce unemployed, and — by coincidence? — unemployed trended remarkably downward after that."

"Thus, one would not expect, and I did not predict, a labor market contraction," Mulligan adds — but he does expect the economy to shrink in the future.

Also See: Companies Are Cutting Part-Time Workers' Hours. Blame Obamacare?

Cutler, meanwhile, stands by his projection that the economy would gain up to 400,000 additional jobs per year after passing the ACA.

(To put that in perspective, the economy gained 3 million jobs last year, or about 250,000 jobs per month.

If Cutler's math is right, the health law basically added an entire extra month's worth of jobs gains on its own — think of it as November, December, and Obamacare.)

To help make his case, Cutler hails data that demonstrates persistently slow health care spending growth, even after the economy exited the recession.

"Indeed, medical cost increases have been coming in very low, and that is contributing to low labor cost growth, which is one reason (among many), while employment is trending up," Cutler now argues.

"I don’t know of any econometric estimate about how much of employment growth is due to different factors, but I believe a reasonable reading suggests that some is a result of the health cost slowdown."

It's worth repeating: The U.S. labor force has gained more than 11 million jobs since March 2010. Nearly 10 million of them aren't in health care.

Refereering the arguments

So: Is Obamacare a job-creator, or a job-killer?

Maybe you're swayed by Cutler and the chart showing a labor-market recovery. And it certainly seems like the states that have fully committed to the ACA and its Medicaid expansion are seeing clear job gains.

Maybe you agree with Furchtgott-Roth and Mulligan, and believe the economy would be even better without Obamacare. There's evidence to support this too, from big-business anecdotes to small business owners who say they've held off on hiring.

But there's a third school of thought: That the whole idea to link Obamacare to jobs was ridiculous, and we shouldn't have done it in the first place.

Writing in the New England Journal of Medicine in 2012, Harvard professors Amitabh Chandra and Kate Baicker detailed what they called "the health care jobs fallacy," or the error of viewing the ACA as a jobs program.

"Politicians on both sides of the aisle are quick to emphasize the “job-creating” or “job-killing” aspects of reforms" write Chandra and Baicker. "But this focus on health care jobs is misguided."

They add:

The bottom line is that employment in the health care sector should be neither a policy goal nor a metric of success. The key policy goals should be to achieve better health outcomes and increase overall economic productivity, so that we can all live healthier and wealthier lives.

If you're going to track the ACA's impact, here's how you'd do it

Three years later, Chandra still doesn't believe Obamacare should be viewed as a job-killer or job-creator. He does, however think the economy is much healthier than when the ACA was passed.

"I think the labor market is extremely strong right now, and the economy is finally recovering," he now says.

If you must look for the ACA's jobs impact, Chandra says you should look to the industry it most affects: The health care sector.

But let's say you model out all the Americans presumably gaining coverage and multiply their added spending. That's still only "$36 billion or so more sloshing around the system" says Chandra — a pittance in the multi-trillion dollar health care industry.

That perspective is echoed by economists Ani Turner and Paul Hughes-Cromwick of the Altarum Institute, a not-for-profit, non-partisan think tank.

Altarum issues monthly health sector indicators, which have served as a targeted way of following the ACA's impact on the industry. And both Turner and Hughes-Cromwick note that, despite common perceptions, the health sector's rate of job growth has actually slowed down compared to previous recoveries — in an interview, they proactively cited the "slowth" of the industry — which means the nation's economic rebound can't be chalked up solely to health care or by extension, Obamacare.

"If the labor force has shrunk in some permanent way, it has little to do with the ACA," says Turner. "But there are also reasons to think that ACA, at least the coverage expansions, is having a small positive effect" and creating jobs.

For example, she notes that expansions in coverage have led to reductions in uncompensated care for hospitals, potentially explaining why hospital hiring rebounded last year.

Surprise: Health Care Jobs Grew 50% More In 2014 Than In 2013

"My sense now is the ACA's going to be a net positive for hospitals, if we stay on the path we're on," Turner adds.

But the three economists reiterated: It's hard to track Obamcare's impact, both in health care and in the broader economy.

"Talking about employment seems really premature when we don't know the impact of coverage," Chandra says, noting that there are still debates over how many people have even gained insurance through the ACA.

"It seems wildly unrealistic to think that we know the effect of things that are fourth-order, when we don't know the effect of things that are first-order," Chandra adds.

"It's like a pharmaceutical company saying, we don't know the effects of this drug on your health … but let me tell you about what it does to people's relationships, or likelihood to take a vacation in Italy."

Hughes-Cromwick goes even further.

"If you look at basic job growth by year," he says, "you'd have to be an idiot to say the ACA has saved the labor market, and even more of an idiot to say the ACA has destroyed the labor market."

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