'Job lock' and supply-side economics


Back when that H-bomb of a Congressional Budget Office forecast landed on ObamaCare, and panicked Democrats began running around like maniacs and burbling that unemployment is the essence of freedom, I thought they were making a huge and dangerous concession by admitting that government benefits provide a concrete and effective disincentive to work.  

It’s a concession to reality, to be sure.  Of course people respond to such disincentives.  But it has been an ironclad tenet of socialist dogma for decades to deny this, insisting that no significant number of people prefer welfare to work, refuse employment when it doesn’t pay appreciably better than their government benefits, or reduce the amount of work they perform in response to tax policy.  Remember, dynamic economics is the eternal bane of socialism; they are static theorists who insist as a matter of religious faith that only the most extreme government burden could possibly make the private sector go wobbly in the knees.  Atlas does not shrug.

It was only a few months ago that Democrats were angrily insisting that extended unemployment benefits don’t make unemployment worse by removing the incentive to seek employment, or giving beneficiaries the option to pass up on less-than-optimum jobs.  In fact, they savagely attacked anyone who said any such thing as cruel and out-of-touch.  How dare you imply that unemployment benefits that stretch on for years would take the urgency out of job hunting?  Everyone wants to work forty hours or more!  Unemployment was viewed entirely as a shortage of jobs on offer, not a shortage of demand for work.

But then comes the CBO report, and suddenly it’s awesome that ObamaCare is giving 2.5 million people concrete incentives to scale back on hours worked at the jobs they were previously “locked into.”  It’s the American dream to have benefits extracted from other people by force, which allow you to retire early or work less!

Thinking on the same wavelength, David Henderson at the Library of Economics and Liberty welcomes hard-Left economist (really, socialist propagandist, because no one outside the Church of Global Warming is more willing to cast aside science in the name of rigid ideology) Paul Krugman and his partner Alan Blinder to the world of… gasp! … supply-side economics:

So if low-income people are willing to work less in response to higher marginal tax rates, wouldn’t you expect higher-income people to do the same, especially since higher-income people have more options? I would expect that. And yet it’s hard to find Krugman and Blinder admitting that fact. That fact was one of the main building blocks behind the “supply-side” revolution in thinking about taxes in the late 1970s and early 1980s. Yet, pretty much whenever Krugman and Blinder discussed that revolution, they were hostile.

Well, better late than never. Welcome to the supply side, Paul and Alan.

In other words, in the course of pushing the Democrats’ dopey “freedom from job lock” spin, Krugman and those of like mind are finally making a concession they resisted for decades: static analysis is bunkum.  The happy-face spin is that ObamaCare seizes money from others to give its favored beneficiaries the wonderful gift of working less, but another way to put it is that ObamaCare applies a steep marginal tax on additional hours worked – the next hour you put in might cost you far more than your hourly wage in terms of lost subsidies.  

And if that principle is clearly affecting a large number of people – it’s actually a lot more than the 2.5 million number which appeared in the CBO summary, because a lot of people will trim back their hours instead of quitting their jobs altogether – then is it not equally logical to accept the supply-side contention that people in the upper income brackets respond the same way?  As Henderson notes, it’s actually much easier for them to downshift in response to economy-strangling government policies, because their lifestyle changes very little, they have more ways to scale back productive but heavily-taxed economic activity, and they’re more likely to be aware of the exact incentives they’re responding to – they’ve got accountants who can lay the situation out on spreadsheets for them.

Maybe all this will fade away after the current political crisis for Democrats fades.  They did a good job of tricking America into forgetting the lessons of the Eighties, after all.  But if our memory is better preserved this time, the Left’s “job lock” spin campaign might end up hurting them more than the bad news they were attempting to minimize.