New midterm battle line on poverty

Greg Nash

The midterm election focus on poverty and economic opportunity sharpened Wednesday as Republicans and Democrats clashed over whether ObamaCare will makes things better or doom more people to poverty and dependence on government.

House Budget Committee Chairman Paul Ryan (R-Wis.) said a bombshell report from the Congressional Budget Office showed that ObamaCare was a “poverty trap,” creating disincentives to work, and that people would avoid longer hours or higher pay for fear that they’d lose subsidies.

Democrats angrily countered that Ryan’s logic would have killed Social Security and all but accused Republicans of a war on the poor and middle class.

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Rep. Chris Van Hollen (Md.), the panel’s ranking Democrat, accused Ryan and the GOP of being “stuck in the mindset of Mitt Romney’s 47 percent comment,” referring to the Republican presidential nominee’s suggestion that 47 percent of the population would vote for President Obama because they were receiving federal handouts.

“This is not about people looking for an excuse not to work; this is giving people the freedom to do other things including starting a business,” Van Hollen said of the healthcare law. 

The row was triggered by a Congressional Budget Office (CBO) report released Tuesday that concluded ObamaCare would lead to a loss equivalent to 2.5 million people from the workforce because people, especially on low incomes, would chose insurance over work.

The report helps Republicans amplify their 2014 midterm election message that the healthcare law is dragging the economy down by raising uncertainties and regulatory restrictions on business. They say the sluggish recovery from recession is due to ObamaCare and other administration policies.

Obama’s and Democrats’ election strategy centers on their efforts to fight income inequality. They demand a hike of the federal minimum wage to $10.10 per hour and an extension of unemployment benefits.

On healthcare, they have said it is a good thing that the law is bringing insurance to the uninsured, which they see as countering inequality.

Ryan at Wednesday’s hearing said he understood the arguments that low-income workers would be better off with health insurance. But he was “troubled” that the law would prevent them from “getting the dignity of work, getting more opportunities, raising their income” and “joining the middle class.”

“Washington is making the poverty trap that much worse,” by giving people incentives not to climb the economic ladder, said Ryan, who is preparing a fiscal 2015 budget to beat poverty.

Van Hollen, visibly angered by Ryan’s comments, said the CBO found that workers would have more choices after 2017 because their healthcare was being improved. 

He and other Democrats cited a 2008 conservative Heritage Foundation report arguing that healthcare reform should reduce “job lock,” and give people more freedom to leave their jobs.

Democrats also pointed out that while the CBO predicts ObamaCare will cut the workforce in the next decade, it will also lead to lower unemployment in the near term. 

Another fiery moment came as Rep. Bill Pascrell (D-N.J.) peppered CBO Director Doug Elmendorf with questions about what would happen if Social Security were repealed or reduced. The director answered that it would increase labor supply among the elderly.  

“This isn’t employers cutting jobs, this is workers being empowered,” Pascrell said of the CBO’s findings. 

Ryan shot back that lower-income workers are less likely to accept longer hours for fear that higher incomes could deprive them of health insurance.

Ryan’s arguments were backed up by conservative scholar Keith Hennessey and Charles Blahous of the George Mason University Mercatus Center.

“For the past month elected officials have been talking about making sure the bottom rungs of the ladder of opportunity are strong. If, however, you raise the safety net so high that it is above those bottom rungs, then people would be irrational to start climbing the ladder at the bottom. That’s the unavoidable downside of the generous income-targeted premium subsidies in the Affordable Care Act,” Hennessey argued on his blog.

Blahous told The Hill that Democrats were mistaken to compare the effect to “job lock.”

“This is the opposite effect. It is joblessness lock,” he said. “I think in the long term, it is a problem.  When you are out of work, you do not develop the skill sets you need to advance.”

Liberal economist Sharon Parrott of the Center on Budget and Policy Priorities said Ryan is exaggerating the effects of how ObamaCare subsidies phase down as income rises. She also said he was ignoring the fact that ObamaCare addresses the Medicaid cliff that existed previously for much lower-income workers, who would see all their benefits disappear once they started work. 

Professor Timothy Jost of Washington and Lee law school argued the solution to the problem is universal healthcare.

“If he is saying the solution is to then do nothing for these people, then that is morally wrong,” Jost said. “The solution is to do what we do mostly with Medicare and provide insurance regardless of income. Then, you don’t have these crazy incentives.”