Kevin Short over at the Huffington Post produced a wrongheaded post this week titled, “Obamacare Just Made Americans Richer Without Anyone Noticing”. Citing a report issued by the Commerce Department’s Bureau of Economic Analysis and calculations made by the Wall Street Journal, Short claims Obama’s so-called Affordable Care Act (ACA), better known as Obamacare, was responsible for three-quarters of the rise in Americans’ spending and income growth in January. Thus, according to Short, the ACA in its first month of operation has already made Americans richer.
The problem with Short’s analysis and the reason why Americans didn’t notice they were richer is because they aren’t. Short’s claim is nothing more than typical Keynesian bunk.
So, how did the ACA make Americans’ richer in January according to Short? Well, the expansion of Medicaid funding to the tune of about $19 billion and $15 billion in subsidies received by Obamacare enrollees did the trick. The logic goes, because some Americans received a combined $34 billion in federal largess, that money will be spent in the economy providing new jobs for countless Americans.
Of course, what Short fails to mention is where the money for those welfare benefits (Medicaid and subsidies) came from. Did they come from an increase in worker productivity? Did they come from an expansion of business and employment? No. In fact, according to the Institute for Supply Management its employment gauge in February declined for the first time in 25 months and currently stands at its lowest reading since March 2010.
Obviously, the money came from taxpayers, either through direct tax payments or debt monetization by the Federal Reserve. Neither approach represents an expansion of the economy or wealth production. What has happened is akin to taking money from one pocket and transferring it to the other. Only in Short’s world and the world of Keynesians everywhere is this considered prosperity.
But, what is even more troublesome is how that $34 billion was spent in January. Again, according to the Bureau of Economic Analysis, Obamacare handouts may have been responsible for a $29 billion increase in health care services. Besides utilities, all other spending categories experienced a decline.
What this means is if Obamacare further increases government spending on health care, then the cost of health care will rise even higher. All of that new money entering the health care industry will bid up prices to heights never seen before. This is precisely the reason health care costs have been on the rise for the last 50 years.
Over the last few years, there have been many false claims made about Obamacare. From “you can keep your coverage and doctor” to health care costs will decrease to more Americans will have health care coverage, there has been no shortage of mistruths. And now we have the outrageous claim that the ACA is making Americans richer. Not only does taking from one citizen and giving to another not make us richer, increased government spending on health care will surely make us poorer.