Obamacare’s $70 billion pay cut

Pete Souza/Whitehouse.gov

President Obama reviews his speech one last time while waiting in a room at the U.S. Capitol prior to delivering the State of the Union address in the House Chamber in Washington, D.C., Jan. 28, 2014

Article Highlights

  • @marcthiessen Obamacare means a 1 percent pay cut for American workers

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  • @marcthiessen Obamacare kicks the ladder of opportunity out from under working-class Americans

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  • @marcthiessen The biggest obstacle to Obama’s “opportunity agenda” is Obamacare

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  • @marcthiessen For millions, the price of Obamacare is sacrificing their rise up the ladder of opportunity

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  • @marcthiessen Two weeks after he announced it, Obama’s “opportunity agenda” is dead

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  • @marcthiessen The signature initiative of Obama’s 2nd term has been killed by the signature initiative of his 1st

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In his State of the Union address, President Obama urged Congress to “give America a raise.” Well, it turns out that Obama is giving America a $70 billion annual pay cut, courtesy of Obamacare.

That is the overlooked nugget in the new Congressional Budget Office report detailing the economic costs of Obamacare. While much attention has been paid to the report’s finding that Obamacare will reduce employment by as much as 2.5 million workers, buried on page 117 (Appendix C) is this bombshell: “CBO estimates that the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017-2024 period, compared with what it would have been otherwise.”

Translation: Obamacare means a 1 percent pay cut for American workers.

How much does that come to? Since wages and salaries were about $6.85 trillion in 2012 and are expected to exceed $7 trillion in 2013 and 2014, a 1 percent reduction in compensation is going to cost American workers at least $70 billion a year in lost wages.

It gets worse. Most of that $70 billion in lost wages will come from the paychecks of working-class Americans — those who can afford it least. That’s because Obamacare is a tax on work that will affect lower- and middle-income workers who depend on government subsidies for health coverage. The subsidies Obamacare provides depend on income. If your income goes up, your subsidies go down. This means Obamacare effectively traps people in lower-income jobs by imposing an additional tax on every dollar of additional income they earn. Working hard to earn a promotion or get a raise, or taking on additional part-time work — all the things people do to pursue the American Dream — are discouraged by Obamacare. As Keith Hennessey, former chairman of the White House National Economic Council, explains it, “Obamacare punishes additional work, education, job training and professional advancement, anything that generates additional income for those trying to climb into the middle class.”

This makes a mockery of the “opportunity agenda” President Obama announced with such fanfare in his State of the Union address a few weeks ago. In his address, Obama bemoaned the fact that over the past four years, “average wages have barely budged. Inequality has deepened. Upward mobility has stalled.”

Put aside for a moment the fact that Obama is describing the economy after five years of his economic stewardship. How can Obama complain that “average wages have barely budged” when the CBO says the signature initiative of his presidency will cut average wages by $70 billion? How can Obama complain about “income inequality” when Obamacare is reducing the incomes of working-class families? How can Obama say he is for upward mobility when the law that bears his name stifles mobility by encouraging millions of Americans to work less? How can Obama promise to “build new ladders of opportunity into the middle class” when Obamacare kicks the ladder of opportunity out from under working-class Americans?

Obamacare is an economic disaster for the country — because it will shrink the economy by encouraging people to work less. It is also a political disaster for Obama — because it turns his promise to focus on opportunity into nothing more than empty rhetoric. The biggest obstacle to Obama’s “opportunity agenda” is Obamacare. For millions, the price of Obamacare is sacrificing their rise up the ladder of opportunity.

What this means is that, two weeks after he announced it, Obama’s “opportunity agenda” is dead. The signature initiative of Obama’s second term has been killed by the signature initiative of his first.

But it’s not too late for Congress to address opportunity, upward mobility and income inequality. Lawmakers can start by heeding the president’s call to “give America a raise” — a $70 billion raise, to be precise. And the best way to do that is to repeal Obamacare.

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Marc A.
Thiessen

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