Tag Archives: Max Baucus

Obamacare’s “Wage Growth” Hoax

Families across the country are facing escalating out-of-pocket health care costs and, as a result, less disposable income, thanks to Obamacare’s Cadillac Tax. A major funding mechanism for the law, the 40 percent excise tax forces employers to cut back on health benefits, leaving workers increasingly subject to higher deductibles and copayments.

(Note: See here, here, and here for more details on the Cadillac Tax.)

The drive-by media originally maintained the Cadillac Tax was merely a justified penalty on unusually expensive gold-plated plans — such as those owned by Goldman-Sachs executives — that theoretically encourage over-utilization of medical care. 

However, we now know that the tax was designed to eventually target every employer-sponsored insurance (ESI) plan. We’re talking about 158 million Americans.

Since employers have already begun reducing the generosity of their plans to prepare for the tax’s 2018 implementation, even the drive-by media has had to pay attention to a flurry of reports — from sources like Forbes, The Los Angeles Times, Bloomberg, the Institute for Policy Innovation, The Wall Street Journal, and more — on soaring employee cost-sharing.

Completely blindsided by these revelations, Progressives are now referring to copayment and deductible victims as “underinsured” and calling for action, including government requirements that insurers lower deductibles. Some are even demanding a repeal of the Cadillac Tax.

This situation shouldn’t have been a surprise to anyone. This is, as they say, a feature, not a bug, of the law; the Cadillac Tax was always intended to discourage patients from consuming health care. This is Obamacare’s promised “cost control.”

Law professor (and big-time Cadillac Tax fan) Edward Zelinsky explains:

 “Those who drafted the Cadillac Tax presumed that this tax…would be passed on to the employer and that the employer, in turn, would transfer this additional cost to its employees. In this indirect fashion, the Cadillac Tax should sensitize employees to the high costs of their health care coverage.”

Steve Wojcik of the National Business Group on Health described the policy’s intention:

“If employees have more cost sharing…then they’re more mindful when they access health care to choose a more efficient provider or say, ‘You know, I don’t need to go to the doctor every time I have a cough.’” 

America, you were conned from the very start. Not only did politicians lie — including Obama, dozens of times — in maintaining we could keep our plans, period, but so did Progressive reporters, who insisted that job-based coverage would be untouched.

Young Jonathan Cohn explained that for most of those with employer-sponsored insurance, Medicare, or Medicaid, 

“Very little about their health plans are changing because of the law,
at least outwardly.”
 

America’s alleged wunderkind and intellectual giant Ezra Klein told us

“For most companies, the Affordable Care Act won’t bring much change at all.” 

And Ryan Lizza  assured readers that:

“About eighty percent of Americans are more or less left alone by the health-care act—largely people who have health insurance through their employers.” 

To prove that most people wouldn’t be affected by Obamacare, the liberals even paraded a pie chart, because apparently, in their view, “stupid” Americans understand colorful pictures more clearly than words. 

Even now, in the midst of this massive shift to higher employee cost-sharing, at least one of the law’s engineers is still perpetrating the fable that Obamacare isn’t affecting company plans.

Why did Obamacare’s designers aim to abuse American workers this way? Why was it necessary that Americans lose their policies to make Obamacare work?

To rake in more federal money, of course. The tax was devised to undercut the IRS provision that allows workers to receive tax-free company benefits. Policy experts estimate the government is robbed of $250 billion per year through this arrangement. 

And Progressive lawmakers rationalized that as employers scaled back or eliminated tax-free plans, they’d offset the loss with pay raises — in other words, taxable wages.

Here’s then-Senate Finance Committee chair Max Baucus explaining your raise.

Progressive politicians — backed by the Congressional Budget Office (CBO) — predicted that the excise tax itself would raise relatively little, since companies would have no choice but to bring plan costs below the tax’s threshold. Obamacare crafter Jonathan Gruber is quoted to say, “I would be surprised if [the IRS] even collect[s].’” 

Most of the $201.4 billion revenue over 2013-2019 was predicted to result from payroll and income taxation of, yes, your raises.

Are you following? America’s gonna get a raise, any day now.  There’s even an econo-wonk term for this phenomenon — the “Wage Growth” effect.

So what about this “Wage Growth?” And who was the genius predicting with absolute certainty how companies would react to any savings on benefit costs?

Let’s flip the calendar back to 1993-94, when Hillary Clinton and Friends were busily at work trying to accomplish a very similar government takeover of America’s health care sector. 

“Wage Growth” was a major assumption in the Clinton bill: employers were expected to “shift to wages” any savings or costs they experienced due to the employer mandate to offer insurance. Those offering ESI for the first time were predicted to offset costs by reducing wages; companies that had previously offered ESI would receive government subsidies and were expected to pass along those savings to employees. 

The proponent of the Wage Growth hypothesis was 28-year-old Jonathan Gruber — yes, that Jonathan Gruber — who explained it to a health reform group in December 1993, and in testimony before a House committee five days later. When testifying before a Senate committee in July 1994, he again maintained the legitimacy of his unproven assumption.

Gruber was successful in persuading the 1994 CBO to accept the same premise: “employers facing an increase in their premiums would probably shift most of the added cost to their workers by reducing cash wages” and “employees of firms that would pay less would receive higher wages.” CBO’s evidence? Two research papers (one of which was still “forthcoming”) written by Jonathan Gruber.

Fifteen years later, in the midst of the Obamacare battle, Gruber was again peddling Wage Growth, offering professional papers and articles attempting to prove that Wage Growth would materialize with Obama’s reform package as well. Gruber, then more heavily involved with the CBO, influenced the body to repeatedly make the same Wage Growth assumption with Obamacare. (That’s for a subsequent post.)

For now, remember that it was critical that CBO find that Obamacare would pay for itself, as Obama promised and demanded a reform package that didn’t increase the deficit by a dime. Also remember that CBO analysis killed HillaryCare when it found the proposal increased the deficit by $74 billion

Obama and his Progressive Senate buddies couldn’t endure such an outcome. And government control of one-sixth of the economy couldn’t wait. 

So Jonathan Gruber rode in to save Obama by convincing just about everyone who mattered that the plan was deficit-friendly. Gruber then effectively went “on tour” to sell his claim to the American people, citing the support of the “independent CBO” — that’s right, the CBO that relied upon his Wage Growth hypothesis. 

Why is this important now, six years later? Because a wage increase has not occurred, despite ever-increasing benefit cuts, and was known to be improbable before Obamacare was passed. In a December 2009 Mercer employer survey, only 16 percent of respondents said they’d convert any cost savings into pay raises. In Towers Perrin’s September 2009 survey, a paltry nine percent said they’d increase wages.

It’s less than clear that even Jonathan Gruber believed in the Wage Growth hypothesis, since he appears to have solely relied on his analysis of wage and health insurance trends in the late-90s. And he doesn’t appear entirely convinced he hadn’t overlooked some confounding variables.

Gruber told The New York Times in January 2010, “‘There are many academic studies showing that when health costs rise, wages fall,’ he said. ‘In the mid- and late-1990s, when we got health costs under control, wages rose nicely.’ But he added that other factors could have also lifted wages during that period.” (More on that later, too.)

Additionally, liberal economist Lawrence Mishel, a critic of Gruber’s Wage Growth hypothesis, wrote on January 12, 2010, that ”Gruber clearly overreached with the argument about health care driving wage trends and has acknowledged that to me privately (yesterday).

Given this, one must wonder: would Obamacare have passed if not for the false narrative of deficit reduction? Even in Gruber’s 2011 comic book, he admits this about the law:

“There are risks.  But we have the benefit of
the independent projections of the CBO
…to suggest that this should work out.”
 

Now we’re discovering that those CBO projections were not very “independent” and instead were biased by Gruber’s assumptions.

Stay tuned. A subsequent post will explain how Jonathan Gruber manipulated economic research to advance his Wage Growth hoax.