Thursday, February 13, 2014

Leftists On The Effects On Employment From Government Subsidies

Recently, the Congressional Budget Office (CBO) in the United States estimated in a report on Obamacare that Obamacare will reduce employment by more than two million as the incentive of work is weakened. Somewhat surprisingly, leftists like Dean Baker, Matthew Yglesias and Paul Krugman and also President Obama, didn't even try to dispute that conclusion. Instead, they argued that conservatives (and libertarians) had misrepresented the decline in employment as meaning that two million people will be fired from their jobs, even though CBO argued that it reflected entirely, or almost entirely, people quitting their jobs voluntarily. And people leaving their jobs voluntarily implies a higher quality of life for these people, they argued. But while it is true that some people did misrepresent the conclusions of the report, their own conclusion that it is a good thing if Obamacare makes people leave the work force isn't correct either, because while the people receiving subsidies makes that decision voluntarily, the people who pays for the subsidy don't do that voluntarily as paying taxes isn't voluntary. It may be good for the people who receives the subsidy, but nor the people who pays for it or for the economy. Furthermore, as Peter Schiff points out, the same people who now concedes the fact that Obamacare subsidies reduces labor supply furiously denies that unemployment benefits will reduce labor supply. But there is no reason to believe that unemployment benefits will reduce labor supply less than Obamacare subsidies, quite to the contrary, as the former unlike the latter depends on you not having a job.


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