Affordable Care Act helps our economy

Republicans assert that the Affordable Care Act will hurt the American economy and kill jobs. To the contrary, the economy has continued to grow and businesses have continued to create jobs since health reform was enacted in March 2010. Economic analysis indicates that this reform will continue to support growth of the labor market and the broader recovery in 2011 and beyond. Repealing health reform would represent a step backwards for our labor market at a moment when we need to be focusing all our energies on moving our economy forward.

Since the Affordable Care Act was enacted in March 2010, the economy has continued to grow and create jobs, signaling a stronger recovery.

Since the enactment of Health Reform, the economy has created 935,000 private sector jobs. The economy has seen eleven straight months of private sector job growth, for a total of more than a million private sector jobs created in 2010. Many economists expect further improvement in the labor market through 2011.

Since the enactment of Health Reform, the economy has seen average job creation in the private sector of 117,000 jobs per month. That compares to an average job loss in the private sector of 7,000 jobs per month during the Bush Administration, when our health care system was in a downward spiral and insurers had free rein to raise premiums on families and small businesses by double digits and deny or limit coverage with no accountability or recourse.

During the first three quarters of 2010 – the period during and after the enactment of Health Reform – the economy grew at an average annual rate of 2.7%. During the same period a year earlier, the economy contracted at an average annual rate of 1.3%. Real GDP rose 2.6% at an annual rate in the third quarter of 2010 and most projections for 2011 signal stronger growth. Enacting health reform shows a commitment to addressing the deficit and rising health costs, therefore removing barriers to future growth.

Several predictors of future economic growth- including consumer confidence, retail sales, and auto sales have been on an upward trajectory since the enactment of Health Reform. The National Federation of Independent Business (NFIB) small
business optimism index reached the highest level since December 2007 in November. From the enactment of health reform in March to November 2010, total retail and food service sales increased 4% and auto sales increased 7%. Retail sales from the recent holiday season suggest it was the strongest since 2006, before the recession, signaling a recovery that is gaining momentum. Further, economic activity in the manufacturing sector has expanded every month since March according to the Institute for Supply Management survey.

Health reform will continue to contribute to economic growth and facilitate job creation.  The Affordable Care Act will make America more competitive. Slowing the growth rate of health care costs by increasing efficiency will free up resources that can be used to produce other things that people value, increasing economic activity. By making health care more affordable, Health Reform will lessen the burdens on firms and on households. The legislation will improve the economic well-being of individuals, families, employers, and governments at every level.

The Affordable Care Act will lower the deficit and reduce our long-term fiscal imbalances. According to the Congressional Budget Office, the ACA will reduce the deficit by $124 billion through 2019 and by more than $1 trillion in the subsequent
decade. The Financial Report of the United States Government states that non-interest deficits over the next 75 years, which had been projected to average 5.5 percent of GDP, are now projected to average a far lower 1.9 percent of GDP, with the improvement “largely attributable to enactment of the ACA.” Repealing of the ACA would hurt our economy by not only increasing deficits in the coming decade, but dramatically worsening the long-term fiscal imbalance.

Health reform will slow private-sector health care cost growth, which will drive broad benefits for the economy: The Council of Economic Advisors has estimated that health reform will result in a reduction in private sector health care cost growth of approximately 1.0 percentage point per year. Some of the many benefits of reducing the growth rate of health care costs by an average of 1.0 percentage point per year are: 

Creating more than 300,000 additional jobs. Reducing the growth rate of health care costs will reduce growth in firms’ non-wage compensation costs. As a result, the amount that firms raise their prices for a given growth rate of their workers’ wages is lower—that is, inflation is lower. What this means is that, as long as the slower growth of health care costs is not fully reflected in workers’ view of normal wage growth, the economy can operate at a lower level of unemployment for a period of time without triggering inflation.

Increasing families’ economic security by making premiums more affordable and reducing the $1,000 hidden tax of covering the uninsured. Before health reform, the typical family with health insurance was being hit with a hidden tax of
more than $1,000 imposed by the cost of providing health care to the uninsured. Health reform will significantly reduce this tax by covering more than 30 million uninsured Americans by 2019. In addition, by making health care more affordable and accessible, health reform will increase families’ economic security by reducing the risk of going bankrupt because of a health emergency.

Health Reform will likely increase labor supply. Increased insurance coverage and, hence, improved health care, is likely to increase labor supply by reducing disability and absenteeism in the work place. This increase in labor supply would tend to increase GDP and reduce the budget deficit.

Health Reform will help small businesses and promote entrepreneurship. By reducing small businesses’ health insurance premiums, Health Reform will level the playing field for small businesses and entrepreneurs. By increasing the incentives for talented Americans to launch their own companies, Health Reform will also help spur entrepreneurial activity, and could increase the pool of workers willing to work at small firms.

Health Reform will improve the functioning of the labor market. Coverage expansion that eliminates restrictions on pre-existing conditions improves the efficiency of labor markets by removing an important limitation on job-switching. Creating a well functioning insurance market also prevents an inefficient allocation of labor away from small firms by leveling the playing field among firms of all sizes in competing fortalented workers in the labor market.

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