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No, Professor Gruber, Obamacare Won’t Boost the Economy

The father of PPACA peddles piffle about the economic impact of his progeny.

By 7.16.12

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George Orwell is often credited with writing, "Some ideas are so stupid that only intellectuals believe them." As it happens, Orwell didn't pen those words. That much-used aphorism merely paraphrases a pithy but somewhat less glib observation he made in a 1945 essay titled, "Notes on Nationalism." Still, it nicely captures a proclivity peculiar to the luminaries of academia, the "news" media and progressive think tanks: a willingness to believe things that no ordinary person would be foolish enough to credit. A textbook case of this phenomenon can be found in a recent column published in the New Republic by Jonathan Gruber.

Gruber is a Professor of Economics at MIT and has been dubbed, by Avik Roy and others, "the intellectual father of Obamacare." Thus, it will come as no shock that he spends a good deal of his time defending the health care "reform" law. What does surprise is that Gruber, who is a first class economist and a genuine intellectual, continues to write astonishingly stupid things about the dangerous and destructive creature he sired. In his TNR piece, for example, he advises us, "[W]e know that the ACA will increase jobs in the medical sector in the short run, above and beyond any partial offsets from new excise taxes on that sector."

Assuming that Gruber isn't employing the majestic plural in that sentence, it begs the question: Who's "we"? He can't be including anyone actually working in health care. Those of us who labor in those vineyards know that his brainchild is actually killing medical sector jobs by the thousands. All across the nation, hospitals are slashing payrolls in preparation for the $155 billion in payment cuts to which industry lobbyists agreed in a 2009 Faustian bargain on Obamacare. The largest expense in any hospital's budget is labor, so they are reluctantly resorting to reductions in force (RIF) to balance the books.

In February, for example, officials at Jackson Memorial in Miami said the hospital would RIF more than 1,000 workers. Such layoffs have a profoundly negative effect on local economies, where hospitals often rank among the largest employers. Nonetheless, the list of casualties grows. RIFs have recently been announced at Pennsylvania's Crozer-Keystone Health System, New York's Sheehan Health Network, Tennessee's Erlanger Health System, Oregon's Silverton Health, Maryland's Adventist HealthCare, Arizona's Yuma Regional Medical Center, California's Queen of the Valley Medical Center, ad infinitum.

Somehow, one doubts that the victims of these RIFs would agree with Gruber's claim that "ACA will increase jobs in the medical sector." Moreover, despite his attempt to pass lightly over "new excise taxes," these will contribute greatly to the economic carnage. Obamacare levies a 2.3 percent tax on medical device manufacturers beginning in 2013. How do businesses react when a government raises the cost of doing business in this way? They go elsewhere. Last year Boston Scientific, which manufactures defibrillators, pacemakers, and stents, announced a RIF of 1,200 to 1,400 jobs and "disclosed it was… hiring 1,000 people in China."

So, Obamacare's medical device tax has forced Boston Scientific to outsource American jobs to a far away country whose Communist leaders are more business-friendly than the President of the United States. And this trend will continue. The Massachusetts Medical Device Industry Council estimates that about 90 percent of its members will cut back on "operational costs and jobs" after the tax takes effect. This is what Gruber calls "partial offsets from new excise taxes." The people who lose their jobs at Boston Scientific and other medical device manufacturers will likely employ less euphemistic terms like "layoff" and "bankruptcy."

How can Gruber be blind to all of this? The first part of the answer lies in his apparent failure to grasp the significance of the recent Supreme Court ruling. He writes, "the law will result in more than 30 million additional Americans getting health insurance," having apparently forgotten that nearly 20 million of those newly insured patients were going to be covered by a vastly expanded Medicaid program. But the Court struck down the section of Obamacare that would have forced the states to implement the coercive Medicaid mandate, and many governors have already announced that they have no intention of expanding the program.

Combined with a similar reluctance to implement the law's insurance exchanges, this refusal by the states to expand Medicaid could keep the number of newly insured patients well under 10 million. This means that Gruber's predictions about a spike in demand for medical workers are delusional. And his notions about "uninsured consumers" who "set aside money in low interest liquid accounts to make sure they have enough to cover unexpected medical costs" caused me to laugh aloud when I read it. To quote Orwell's actual words, "One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool."

Now that we're back to Orwell, it's worth pointing out that he long ago explained the second reason a smart guy like Gruber can produce such a purblind analysis of Obamacare's economic effects: "At any given moment there is an orthodoxy, a body of ideas which it is assumed that all right-thinking people will accept without question. It is not exactly forbidden to say this, that or the other, but it is 'not done' to say it, just as in mid-Victorian times it was 'not done' to mention trousers in the presence of a lady." Among the intelligentsia of our time, it is "not done" to question the virtues of Obamacare, particularly if you helped beget the beast.

If Gruber so far forgot himself as to challenge progressive orthodoxy on Obamacare, he would soon find himself ostracized. He would be publicly vilified as Senator Joe Lieberman was when he refused to parrot liberal pieties about Iraq. He might even be denounced by his MIT colleagues as Larry Summers was by the faculty of Harvard for committing a far less conspicuous act of heresy. Thus, even if Gruber were introspective enough to see that he has been wrong all along, he would probably never admit it. He would just continue to write stupid things like "The Affordable Care Act will boost the economy."

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About the Author

David Catron is a health care consultant. He has an MBA from the University of Georgia and blogs at Health Care BS.