Demoralizing people as they struggle is not a good thing

It’s amazing to watch as President Obama and his Democrat allies spin the disastrous analysis by the nonpartisan Congressional Budget Office that their health care “reform” will discourage work. Rep. Nancy Pelosi gushed that we will become a nation of writers and poets instead of having to do jobs that other people are actually willing to pay for. Rep. Mark Pocan of Madison claimed that those of you still working hard would be subsidizing the reading of bedtime stories to children.

The reality isn’t so artistic. Remember what the CBO wrote: “The health insurance subsidies that the (Affordable Care Act) provides to some people will be phased out as their income rises – creating an implicit tax on additional earnings – whereas for other people, the act imposes higher taxes on labor income directly.”

It isn’t that Obamacare frees people to work less. It is that Obamacare punishes low-income people struggling to get ahead. It makes work less rewarding for the working poor.

Economist Casey Mulligan pointed out the severity of this punishment in the New York Times. The demoralizing message that Obamacare sends and that Democrats are celebrating is that, literally, some people would be better off not taking a full-time job at all:

“The Affordable Care Act … has created a system of health assistance that withholds its benefits on the basis of income and, in most cases, on the basis of full-time employment. A part-time worker may actually have less to spend if he takes on a full-time position. This kind of situation will occur at least a million times under the new law.”

Mulligan has a two-minute video that runs through the numbers. For some of the working poor, advancing from a part-time job to a full-time job literally will mean less money in pocket. Mulligan points out that Democrats correctly used to deplore this:

“It used to be that economists agreed that such stark disincentives — known as 100 percent tax rates — were a serious problem that needed immediate attention. As James Tobin, a John F. Kennedy adviser, Nobel laureate and leading Keynesian economist of his day, said in a 1965 article, a 100 percent tax rate causes ‘needless waste and demoralization,’ adding:

“ ‘This application of the means test is bad economics as well as bad sociology. It is almost as if our present programs of public assistance had been consciously contrived to perpetuate the conditions they are supposed to alleviate.’

“Professor Tobin called the 100 percent tax situation demoralizing because the affected people find that all the benefits of their hard work and success go to the government in the form of more tax receipts and fewer benefit payments. The unintended result would be less work and more families earning less than the poverty line, which is why Professor Tobin described such policies as perpetuating poverty.”

What has changed since then? Nothing about the economics. Nothing about the morality, either. It isn’t liberation to tell a worker struggling to get ahead that if he works harder, he’ll be worse off. It’s just cruel.