On Work Disincentives: An Imperfect Analysis Making a Nearly Perfect Point; ObamaCare’s Disincentives Would Make Things Dramatically Worse
At Zero Hedge (the original analysis apparently comes from a gentleman named Walter Emmerich at the Cleveland, Mississippi Current, but I’m not aware of any available direct link):
In Entitlement America, The Head Of A Household Of Four Making Minimum Wage Has More Disposable Income Than A Family Making $60,000 A Year
Zero Hedge should have picked a better term than “disposable income”; Mr. Emmerich’s “Total Economic Benefit” is better.
The places where Mr. Emmerich falls down include at least these:
- The Medicaid benefit may cost $16,500, but it doesn’t deliver that much in value to recipients. From a taxpayer’s standpoint the figure is correct. From the recipient’s standpoint, it’s at least a few thousand less because of waste, fraud, abuse, and excessive bureaucracy.
- The same issue is there with the School Lunch program, but in much smaller amounts. If 2 kids are getting 200 meals each per year at school while school is in session, the $1,800 would represent a ridiculous $4.50 per lunch ($1,800 divided by 400 meals). Again, it may cost that much, but that’s not what’s getting delivered. The pure food cost per meal is probably the neighborhood of $1.00 – $1.50.
- If (emphasis if) the $60K per year family has employer-paid health insurance, the net value of what is provided (after subtracting out the employee portion of all premiums, all deductibles, and copays) should be added. I believe that net number would be in the neighborhood of +$10,000 for the $60K family.
My back of the envelope adjustments would end up showing the following “Economic Benefits”:
- For the $3,625 family, about $5,000 less, or $26,630.
- For the $14,500 family, again about $5,000 less, or $32,777.
- I’d shave a bit less from the Medicaid number for the $30K family, leaving them at about $25,000.
- The $60,000 family, assuming health care coverage, would be at about $45,000.
There’s a whole host of other factors to consider, especially at the 60K two-income level, not the least of which relate to the financial stresses and requirements of having a higher-paid job, which evidence themselves in higher commuting (which could include tolls, fares, and/or parking), clothing, meals at home and meals away from home costs, even extending to the legitimate need for two cars vs. one in at least the two lowest scenarios. It wouldn’t be tough to build an argument that these extra costs could be as high as $10,000 per year, especially if you compare two cars to one.
Look at the chart that follows developed by Robert Rector at the Heritage Foundation. ObamaCare’s subsidy structure is such that the sum of additional costs incurred and government benefits given up in some cases end up being more than increased income earned — even before considering the factors brought up by Mr. Emmerich:
The orange boxes represent income breaks where the amount of the lost health care subsidy alone — again, before considering any of the other factors noted by Emmericah — is over 80% of the additional reported income earned.
The maroon boxes represent income breaks where the lost health care subsidy is over 100% of the additional reported income earned.
The blue boxes show how much extra a married couple who are both 60 years old and who earn identical reported incomes give up in health care subsidies by remaining married.
Disincentives to work are bad enough now. If ObamaCare is allowed to kick in, they’ll become positively stifling.
Addendum: I added “reported” before “incomes” in the final few paragraphs because the incentive to earn money under the table will be self-evidently huge. Not reporting a few grand in income, in addition to avoiding existing income and Social Security taxes, will be rewarded with literally thousands in health care subsidies.