The Democrats and their media allies have predicted wrack and ruin if the Supreme Court rules against the government in King v. Burwell, a decision that would stop the IRS from issuing Obamacare subsidies through federal insurance exchanges in three-dozen states. They have wildly exaggerated the inconvenience that such a ruling would cause a tiny percentage of the population and ignored the benefits that it would provide tens of millions of Americans. One of these benefits would be the removal of PPACA’s dead weight from an economy whose first quarter performance suggests that the anemic Obama recovery may be stalling.
During the first three months of 2015, Gross Domestic Product contracted at an annual rate of 0.7 percent. And, euphoric “news” stories about the government’s May jobs report notwithstanding, this year’s monthly job gains remain well below last year’s average. It is difficult to prove that Obamacare alone has caused the slowdown, but it tends to confirm the inauspicious findings of several Federal Reserve surveys concerning the law’s economic effects. Even if “reform” isn’t solely to blame, there can be little doubt that removing its mandates from the backs of employers and workers in three-quarters of the states would stimulate the national economy.
And a SCOTUS ruling against the Obama administration would eliminate those job-killing mandates. Media coverage concerning King v. Burwell has focused on the loss of subsidies that some would face if the Court rules in favor of the plaintiffs, and a few million people may indeed have to pay the full price of their own Obamacare coverage. But that’s only a small part of the story. Such a ruling would emancipate 11.1 million people from the individual mandate, according to a study recently released by the American Action Forum (AFF), which also estimates that 262,000 businesses would be freed from the law’s employer mandate.
The economic advantages of manumission from Obamacare’s mandates would be numerous. Employers would no longer be incentivized to forego expansion and the creation of new jobs. Nor would they face pressure to replace full-time employees with part-timers or to hold the latter to fewer than 30 hours per week. The study’s authors estimate that these changes could produce 237,000 new jobs, add nearly 1.3 million workers to the labor force, and improve the plight of 3.3 million part-time employees who would no longer face an impediment to getting more hours. They estimate that all this will result in a $13.6 billion increase in total pay.
How would striking down the subsidies accomplish these miracles? The subsidies themselves trigger Obamacare’s employer mandate, individual mandate, and their accompanying fines. The former works thus: Businesses with 50 or more full time workers must offer government-approved health coverage to their employees. A company failing to do so must make a “shared responsibility payment” (i.e. a fine), but only if one or more of its employees apply for subsidies through an exchange. If SCOTUS rules that such subsidies are illegal when issued via federal exchanges, there will be no mechanism to trigger this fine in three dozen states.
As to the individual mandate, one of Obamacare’s many perversities is that millions would be eligible for exemptions if the subsidies didn’t hold their health insurance premiums below the qualifying threshold. Anyone unable to find individual coverage for less than 8 percent of their household income is eligible for an “affordability exemption.” Many people who would be eligible for this exemption fail to qualify because the Obamacare subsidies push their premiums below that 8 percent mark. But, if they receive this “premium assistance” through some federal exchange, SCOTUS can release them from this trap by ruling such subsidies illegal.
Consequently, a high court ruling against the Obama administration could have the ironic effect of preventing the “Affordable Care Act” from doing further harm to an already limping economy. The White House would, of course, dispute this. In fact, the President’s minions have recently taken to claiming that Obamacare is actually stimulating the economy: “Obamacare is a boon to the U.S. economy, President Barack Obama’s top economic adviser said in a speech aimed at changing the tone of debate over the Affordable Care Act’s effects, though he offered little direct evidence.” It’s difficult to provide evidence for a nonexistent phenomenon.
Meanwhile, back in the real world, there is actual evidence that Obamacare is at the very least a drag on the economy. For example, though health care inflation has been slowing since the Bush years, Obamacare has created an environment in which the average American is spending more money out-of-pocket for medical care. In our economy, this dynamic comes with an all too real opportunity cost. As Steven Hansen writes at the Nasdaq website, “In the end, the majority of consumers are now spending more on health care based on the emerging evidence. As the USA economy is consumer driven, taking money from consumers is an economic headwind.”
This headwind will dissipate somewhat if the Court rules for the plaintiffs in King v. Burwell. As the AAF study notes, “Almost 11.1 million individuals will become eligible for an exemption from the individual mandate penalty… employers will also be released from the employer mandate penalty, which could lead to wage increases… and would eliminate employment restrictions that have left 3.3 million part-time workers unable to work more hours.” All of this will pump money into the economy, eliminating negative growth and sluggish job gains. The Democrats and the media will no doubt heap praise on SCOTUS for this service.
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