The Agenda

Today’s Policy Agenda: There’s a Growing Consensus to Repeal the Employer Mandate

Rhode Island increased their minimum wage last week. The state’s unemployment rate is 8.2 percent — what are they thinking?

Last Thursday, Rhode Island governor Lincoln Chafee signed a bill to increase the state’s minimum wage from $8 to $9. At risk of re-litigating the minimum-wage debate, the specifics of the Rhode Island situation are unique and worthy of more analysis. While it’s true that the hike is just a 12 percent increase and will only apply to Rhode Island, which tend to have high prices and wages, unlike President Obama’s national proposal to raise the floor by 40 percent, the labor market in the Ocean State is among the weakest in the country.

At 8.2 percent, Rhode Island’s unemployment rate is the nation’s highest and clearly cannot endure the disemployment effects many economists and the CBO believe a minimum-wage increase will cause. But even if the CBO estimate (500,000 jobs lost nationwide with a $10.10 minimum wage, considered a mid-point in the academic literature) is too high and the disemployment effects are small, we know that those losses will be borne by the young and by low-skill, low-wage workers.

In Rhode Island, these groups are hurting: According to Census Bureau data, the teenage unemployment rate there is 24.8 percent, almost 14 percent of those with a high-school diploma or less are out of work, and unmarried men face an unemployment rate of 14.6 percent. These are the exactly the individuals who most need access to what work can provide: the first rung on the income ladder, inclusion in new, upwardly mobile social networks, the psychological benefits of working and experiencing human flourishing, growth in potential from learning new skills.

Maybe liberals are right and the costs of a wage hike will be small, but just moderate job losses are enough to put a better life a little farther out of reach for Rhode Island’s most vulnerable citizens.

Obamacare has increased coverage. How does this affect the starting point for conservative reforms?

The New England Journal of Medicine is out with a new study by David Blumenthal and Sarah Collins analyzing the state of Obamacare after the completion of its first enrollment period. They write:

Taking all existing coverage expansions together, we estimate that 20 million Americans have gained coverage as of May 1 under the ACA. We do not know yet exactly how many of these people were previously uninsured, but it seems certain that many were. Recent national surveys seem to confirm this presumption… With continuing enrollment through individual marketplaces, Medicaid, and SHOP, the numbers of Americans gaining insurance for the first time — or insurance that is better in quality or more affordable than their previous policy — will total in the many tens of millions.

While it’s true that rate shock and narrower networks will dampen consumer satisfaction with the new insurance products, it seems that despite the early struggles, the ACA has succeeded in at least reducing the numbers of the uninsured. This isn’t to say that Obamacare has been a success: We’re still far short of the goals set out in making the case for the law, and many of the conservative criticisms of the law still hold up and plenty of dire predictions have come true.

Yet when Republicans get their chance to move health policy in a market-oriented direction, they’ll have to do so in an environment where liberals made the case on moral and economic grounds for expanded insurance coverage, won that argument in the public square, and delivered on the expansion. This isn’t the end of the world: There are plenty of good Republican plans to reform health care that would also maintain or expand levels of coverage from the post-Obamacare status quo. But the starting point of the health-care debate seems to have changed for good.

Europe shows why we need to reform our entitlements now.

ECB Governing Council Member Christian Noyer made some interesting comments over the weekend, as reported by Mark Deen for Bloomberg.

“No country today has sufficient credibility to put in place a strategy” of financing public infrastructure with a major debt increase, Noyer said today at the Cercle des Economistes conference in Aix-en-Provence, France. “Decades of deficits have created profound skepticism.”

When deficits spiral out of control, forced, drastic austerity measures hurt the poor, and as French president François Hollande is discovering, debt-financed infrastructure investments — the kind of things governments are supposed to borrow to finance – are off the table.

If we reform our entitlements now before the worst of the demographic shift drives us to an unsustainable point, we can likely avoid the most painful of the possible paths to solvency. It’s critical, then, that the electorate and policymakers avoid “normalcy bias” and work now to enact sensible reforms.

There’s a growing consensus in favor of repealing the employer mandate.

For Politico, Paige Winfield Cunningham and Kyle Cheney report that many Democrats are changing their tune on Obamacare’s employer mandate:

The employer coverage rules were part of the ACA’s core philosophy that individuals, employers and the government should all contribute to paying health care costs. Some Democratic constituencies, including labor unions and Obamacare proponents like Families USA, still see it that way. But the shift among liberal policy experts and advocates has been rapid. A stream of studies and statements have deemed the mandate only moderately useful for getting more people covered under Obamacare. And they too have come to see it as clumsy, a regulatory and financial burden that creates as many problems as it solves. The main downside to eliminating the mandate, from the Democratic perspective? Money. Estimates of the mandate’s worth to Obamacare financing range from $46 billion to more than $100 billion over a decade. That helps pay for coverage expansion.

The employer mandate is, in a way, similar to the minimum wage: Politicians who want a certain benefit refuse to pay for it with subsidies and tax increases, so they pass off the expense on employers in an indirect way that lets them take the credit — while the costs are borne by the very people the policy was designed to help (through less employment). The employer mandate probably never should have been in the law in the first place, and now that liberals are finally realizing the unnecessary problems it causes, repealing the employer mandate should be the first of many changes to Obamacare. (Reihan wrote about the general issue of the employer mandate, in February.)

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