A Few Pieces from the Papes

June 18th, 2012 at 9:31 am

First, Greece. The “pro-bailout” New Democracy party won a plurality of the vote in the Greek election and will now try to form a governing coalition that will try to keep the troubled nation in the Eurozone.  But I suspect most folks paying attention to this are wondering two things: 1) what really changes? And 2) what does this mean for the US?

Re 1, probably not much but that’s to be seen.  There’ll be a short relief rally in markets by those worried that a leftist victory would have heightened the prospect of a disorderly Greek exit from the zone (a friend and I wondered if the rally would last a whole session or half-a-session).  But the thing to watch here is less the Greeks and more the European economic authorities, including the ECB, IMF, and the German government.

Before the vote, they all tried to assuage investors, saying in essence that they had big guns ready to deal with the uncertainty of a victory by the anti-bailout Syriza party.  The important thing to watch is whether such guns—loans not just to banks but to sovereigns themselves, a lower borrowing rate from the ECB, less punishing austerity requirements, larger backstop funds—go back in holsters.  If they do—if Europe’s policy makers go back to the same muddling strategies that have prevailed thus far—then the answer to what’s changed is: nothing.

Re 2, if nothing’s changed then Europe continues to be a threat to our already wobbly recovery.  My guesstimate is that the e-zone recession is currently sucking 25-50 basis points off of US GDP growth on an annual basis.  So if GDP ends up growing around 2% this year, absent the e-zone recession, it might have grown as much as 2.5%.  A Greek exit would have probably made that impact worse sooner, so I don’t think the election outcome hurts us more than we’re already hurting.

Next, a thoughtful treatise on the fiscal cliff from the NYT ed page.  I think the process they lay out is the right one.  Don’t panic, but start planning now for a quick trip down the fiscal slope that is reversed with a compromise involving the partial can-kick I describe here.

We should all be aware, however, that this sensible plan assumes that the politics of Jan 2013 are considerably better—where “better” means more open to compromise—than the politics of today.

Next, a nutty attack on the Affordable Care Act by Robert Samuelson at the WaPo.  None of it makes sense—reverse the polarity of almost every bullet point in there and you’ll have it right.  But for now, let me just hit on the claim that health care reform is a jobs killer.

The ACA /jobs question has far more moving parts than Samuelson’s lazy “If you increase the price of labor, companies will buy less of it. Requiring employers to buy health insurance for some workers makes them more expensive, at least in the short run.”  There are parts of the bill that raise costs, parts that lower them (subsidies for low-income families and small employers), parts that have no impact (firms with fewer than 50 workers are exempt from the coverage mandate), and importantly from a labor demand perspective, parts that significantly raise health coverage.

This very non-lazy analysis by Holahan and Garrett suggest these are all likely to offset each other re jobs impact, but we won’t know until we see how things pan out.  Which leads me to this particularly germane analysis of which Samuelson is apparently unaware (though HuffPo has it).  It’s a case study of a natural experiment of sorts: since MA has implemented a version of health care reform quite similar to the ACA, the study asks how has job growth fared in MA relative to neighboring states that presumably faced similar economic conditions.  And the answer is: no differently at all.

Massachusetts has achieved its goal of near-universal health insurance coverage under its 2006 health reform initiative, with no indication of negative job consequences relative to other states as a result of health reform.

I’ve often disagreed with Bob Samuelson but I’ve also often found his arguments to be well-researched.  The fact that he either didn’t bother to do the requisite research on this question or is ignoring the best work to date on the topic suggests ideology over empirical evidence.  And that’s exactly what we don’t need right now.


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5 comments in reply to "A Few Pieces from the Papes"

  1. AndrewBW says:

    I want you to show me one argument by Robert Samuelson that was ever well-researched.

    • Jared Bernstein says:

      I could be wrong, but to be more precise, he used to be more careful not to ignore research that went the other way from the point he insisted on making. He’d often incorrectly dismiss that other work, but you could tell he knew about it. To go through and find eg’s of this would be both too painful and too much a waste of my time.

  2. davesnyd says:

    I’ve not often founded Samuelson’s columns to be informative, so am surprised you seem to hold him in high esteem.

    I think you’re also not providing a complete answer: if the ACA “bends the curve”, then in the net aggregate, cost of health insurance will decrease.

    If companies aren’t currently providing insurance to their employees, then their costs may increase but that’s because, essentially, of an externality where we’re all covering their employees’ health insurance through hospitals providing pro bono care to the uninsured.

    Finally, the deciding voice on this, I would have thought, would have been the comment from an automaker five or six years ago to the extent that they would rather build and employee in Canada because health care costs there were lower and more predictable.

  3. Misaki says:

    (http://www.manhattan-institute.org/html/ir_6.htm, via Washington Post article)
    >Even though the Affordable Care Act counts part-time workers by aggregating their hours to determine the size of a firm, part-time workers are not subject to the $2,000 penalty. Hence, there will be fewer opportunities open for full-time work.

    How interesting.

    >Several restaurants received waivers from the Department of Health and Human Services in 2011, but these waivers will not continue into 2014, once the Act is fully phased in.

    Isn’t clear whether it would apply to McDonald’s: http://www.pbs.org/newshour/rundown/2010/10/mcdonalds-story-puts-spotlight-on-mini-med-health-plans.html


    >If Congress leaves these incentives in place, the reduction in full-time employment would be costly to the economy.

    This is wrong, if you define economic health as “low unemployment rate and high share of national income going to labor”. If you define it as GDP, then yes, working less would be “costly” to the economy.

    Guaranteed issue has not been very popular in states that once had it, with many ending up abandoning the requirement since it raised premiums too much. As they say, the ACA will make less sense if the individual mandate is removed… although this could be somewhat fixed by changing how pre-existing conditions are paid for with a 1-year phase-in and 1-year phase-out period when entering or leaving coverage, combined with making tax incentives more available to individuals who don’t get their coverage from an employer (the Republican party has mentioned doing this).

    Job creation without higher government spending, inflation, or trade barriers: http://jobcreationplan.blogspot.com/

  4. KathyF says:

    “But I suspect most folks paying attention to this are wondering two things: 1) what really changes? And 2) what does this mean for the US?”

    I seriously doubt *most* folks paying attention to the EU crisis are wondering what this means for the US. There are a lot more Europeans than there are Americans, remember. And a lot more people in the rest of the world than there are Americans.

    But you did nail a problem, that most Americans only see the world through American lenses. Including very educated Americans.