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Obamacare: The Cause of Economic Slowdown?

Obamacare: The Cause of Economic Slowdown?

President’s signature healthcare law may be a drag on US economy

The third revision of first quarter 2014 U.S. Gross Domestic Product (GDP) came in yesterday at a shocking negative 2.9%.

Gross domestic product fell at a 2.9 percent annualized rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1 percent drop, the Commerce Department said today in Washington. It marked the biggest downward revision from the agency’s second GDP estimate since records began in 1976. The revision reflected a slowdown in health care spending.

However, when the initial estimate projected minimal growth in the economy,the Obama Administration claimed it was the Affordable Care Act that prevented a contraction in GDP.

After digesting the initial report Wednesday morning, a serious discussion has begun suggesting that it was the Obamacare law itself that created the Q1 2014 economic drag.

Basically, consumption was much weaker than it first appeared. Personal consumption growth was revised down to just 1% in the just-released numbers, from 3.1% previously.

Why? The US Bureau of Economic Analysis had assumed that the rollout of the Affordable Care Act—known colloquially as Obamacare—would prompt a big boost in usage of medical services, and they baked that assumption into the previous GDP estimates. But recently released quarterly survey data showed that those estimates were too optimistic. (The previous BEA estimate pegged consumption of medical care growth at 9.1%. Today’s number put it at -1.4%.)

It is too bad that no one saw this coming — except someone did: Casey Mulligan, an economics professor at the University of Chicago.

A new wave of redistribution will arrive in America on Jan. 1, primarily thanks to the Affordable Care Act. The president’s health-insurance plan forces those who hire, work and produce to pay full price for health care, while creating generous discounts for practically everyone else.

This second redistributionist wave of the Obama era will follow a first wave of tax hikes, additional unemployment benefits, food-stamp expansions, waived work requirements for welfare benefits, etc. These measures were supposed to be temporary, intended to help people cope with the recession. The recession officially ended in mid-2009, but many of the administration’s measures continue.

Regardless of whether redistribution is achieved by collecting more taxes from families with high incomes, levying employment taxes on businesses, providing more subsidies to families with low incomes, or all of the above, an essential consequence is the same: a reduction in the reward for working.

Mulligan ended his October 2013 column with what turns out to be an accurate warning about the impact of the Obamacare implementation — an economic contraction.

America absolutely must have taxes and safety-net programs, even though they reduce the reward for working. But advocates for the recent program expansions have failed to acknowledge that redistribution necessarily increases marginal tax rates and contracts the labor market.

Don’t be surprised if the second redistribution wave coincides with a recessionary double-dip.

With Q1 2014 on the negative side, Q2 2014 GDP will be the key to know how much of a soothsayer Professor Mulligan really is.


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Obama/Obamacare is like the Ebola virus attacking the American worker…who IS the American economy.

“On average, low-wage employees work one hour less per week than they did in 2007, forgoing $500 per year in income. This trend has significantly affected several industries and occupations. Obamacare will further reduce hours by increasing the costs of hiring full-time employees while discouraging workers from working full-time. Fewer work hours will impede income mobility for low-wage workers.”

From the abstract Shrinking Workweeks: A Sign of Unequal Recovery from the Great Recession

Income inequality, created by a combination of Obama’s Keynes/Krugman fiscal policies, Obamacare, wage price controls, refusal to use American coal and oil, ad hoc bailouts and the FED’s monetary polices that include discouraging saving accounts means that the Obamas and the Clintons and Sorosites will survive the coming double dip recession but for the middle class, the outlook is disastrous.

Uncle Samuel | June 26, 2014 at 9:32 am

It’s not JUST Obamacare, it’s the cumulative effect of all of Obama’s ruinous, toxic economic and social policies at once.

This administration is intentionally toxic to America’s present and future through their illegal power grabbing and unconstitutional actions.

They are trying to revise our past through history textbooks.

They are even trying to change reality by ignoring the evidence about pansexuality and the weather and promoting their toxic agenda man-made myths and theories of global warming and sexuality/orientation anyway.

Their socialism/communism is really oligarchical totalitarianism – power and luxury for a few elite at the expense of everyone else.

Their lies grow more brazen by the minute.

    Estragon in reply to Uncle Samuel. | June 26, 2014 at 3:05 pm


    ObamaCare accounts for most of the difference in the government estimate, but the reasons for the contraction are more broad-based.

    The MiMi index of the housing market still points down, and durable goods orders also contracted in May. Hiring is tepid at best, and government spending accounts for a good bit of reported GDP – and that contributes nothing at all to growth. Companies are sitting on profits or using them to buy back stock instead of for expansion.

    So yes, OC is bad, but no, it’s not the main part of the problem.

    The big problem is Obama, period.

      JackRussellTerrierist in reply to Estragon. | June 26, 2014 at 8:41 pm

      If the economy hadn’t been struggling to begin with and unemployment wasn’t so high, the obastardcare impact would have landed in a much more vibrant and optimistic environment and been more easily absorbed.

      Stagflation is here. Unemployment increasing, worker’s hours decreasing, prices rising quickly, consumer spending, durable goods and construction materials production plummeting. Investment down and Wall Street headed for a crash, the border being overrun with a growing tax and social burden. A new assault on the financial industry and big business looming in the appointment of the new DOJ criminal division prosecutor…….

      Taken altogether, we have achieved obamullah’s dream of a fundamentally transformed America. His and his father’s dream of an impoverished America is here.

      Look ahead to more as Hitlery worms her way into the WH in a landslide manufactured through voter fraud. I am reluctantly concluding we are in a permanent decline.

Taking 300-900 dollars of discretionary income out of the pockets of middle class consumers to pay more for something they already had created a drag on the economy.

No shit.

In other news, socialism is expensive and doesn’t work.

    Ann in L.A. in reply to Andy. | June 26, 2014 at 1:26 pm

    Exactly. Decrease the money in people’s pockets dramatically and replace it with crap insurance they can’t use, and you get a reduction in overall spending.

      Estragon in reply to Ann in L.A.. | June 26, 2014 at 3:06 pm

      AND when they find out how high their deductibles are, they don’t use the services as much – which Obama’s toadies then claim is a good thing.

For those paying attention to WS. There is almost no premium on covered calls deep in the money right now.

You don’t need an economics professor to figure that out. Beside aren’t economics professors in even worse repute than the average professor? Mulligan is in the same profession as Krugman, Stiglitz, Piketty, and Ben Bernanke.

Higher premiums, co-pays, deductibles, and then Obama decreed caps in the law postponed. Result – thousands of dollars out of the discretionary income of millions of families. Throw in rapidly rising food, energy, transportation, housing, and incidental costs (my local newspaper subscription just went from $20 monthly to $27 monthly, a 35% increase) and the result of government policies is no money to spend.

    Estragon in reply to Viator. | June 26, 2014 at 3:08 pm

    Real professors like Tyler Cowen and Greg Mankiw are very good.

    But the “economists” that consult the media are all just Obama lapdogs.

Nothing like our “betters”! The public said NO to the ACA and our “betters” decided that we were going to get it anyway. It shouldn’t be a surprise that their “predictions” would fall flat. It’s not as if any FACTS were considered.

Destroying America was Obama’s goal. He wanted to “remake” America in his graven image. It’s all going according to his plan.

Obama’s coherent economic plan was on a hard drive that crashed last quarter after running very slow during Recovery Summer-s I, II, III and IV.

    JackRussellTerrierist in reply to Neo. | June 26, 2014 at 8:53 pm

    …..and then the hard drive somehow malfunctioned and was destroyed through the normal destruction disposal process.

JackRussellTerrierist | June 26, 2014 at 8:52 pm

It’s not as simplistic as claiming this is ALL the result of obastardcare. I agree it’s a meaningful factor, but there is more at play than that.

If people believe the GDP crash is only a result of obastardcare, they will be heartened when obastard’s lying lackies and media lapdog dumbshits report that medical care expenditures are resuming normal levels and the GDP crash was just a transitory reflection – a hiccup or growing pain – of Americans adjusingt to the new law.