Obamacare leading to Capitol Hill Exodus!

Posted on June 13, 2013 by

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Politico has the article today, which is sure to get major hits since its currently the lead Drudge Report article.  Staffers and aides are being forced to transition into Obamacare in lieu of their existing health care benefits, yet if they retire now they can continue on their current plan.  This is apparently a non-partisan revolt, as staff and members from both sides of the aisle are considering leaving.

There will be a lot of talk today on the hypocrisy of the lawmakers and staff, as well as Republicans likely saying “We told you so”.  This comes on top of the Forbes article a few days ago showing that individuals in Ohio would be paying 88% hire premiums on average.  And this was after the initial progressive victory claims of low cost in California were shown to be unrealistic.

Nevertheless, I’d like to take you back to one simple lesson that we learn from the Capital Hill exodus.  It’s not that people in Washington are often hypocrites; we knew that.  It’s not that Obamacare (like every other government program) will end up over promising and under delivering.  We knew that too.  The simple lesson is that yes, Virginia, incentives matter.  Of course, you aspiring Bereans already know that too, but its still useful to point out.  Our public policy (especially tax policy) uses static analysis (e.g., if we raise tax rates, we have raised tax revenues) because the elites assume that people won’t change their behavior–in other words, that incentives don’t matter.  Yet the fundamentals of economics suggest changes in relative prices (to include those through incentives such as taxes) will change economic behavior.  President Obama told us we would be able to keep our health care plan if we’re happy with it.  While technically true that Obamacare did not mandate we get into the government plan (as long as our existing plan met certain requirements), wouldn’t Obamacare change the incentives for firms to offer health care insurance?

Unions at least are now struggling with the implications, and they have turned against it.  Says one union leader,

“It makes an untruth out of what the president said, that if you like your insurance, you could keep it,” said Joe Hansen, president of the United Food and Commercial Workers International Union. “That is not going to be true for millions of workers now.”

This is of course just the beginning of the cracks in Obamacare.  Predicated on a static analysis and a belief that individuals wouldn’t react to changing relative prices, Obamacare is now having to face reality.  Yes Virginia, incentives matter.

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