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Obamacare and That Q-Easy Feeling

Quantitative easing may never end, especially if worker-demoralizing Obamacare stays.

by
Tom Blumer

Bio

September 20, 2013 - 9:36 am
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For now, stocks remain one of the few places an investor can go, outside of volatile commodities, in pursuit of returns greater than inflation. Apparently, the market’s major players all seem to believe that they’ll know when to get out before calamity strikes. Logic dictates that all of them can’t be right.

This government-induced economic tragedy and its reverse Robin Hood nature is beginning to wear on the can-do American psyche. Amazingly, 8.4% of Americans now describe themselves as “lower class,” which is “more than at any other time in the four decades that the question has been asked.”

Now here comes Obamacare. If it isn’t stopped, we many never see the end of the Fed’s QE. That’s because, when it comes to demoralizing the population, to quote an old Bachman-Turner Overdrive song, “you ain’t seen nothin’ yet.”

Beyond the confusion, the cost increases, the layoffs, the lower quality of care, and the deliberately skewed part-time workforce it will create, Obamacare will, as I noted in March 2010, virtually destroy almost all motivation for financial self-improvement while deeply discouraging marriage.

A table I used 3-1/2 years ago, based on information originally prepared by Robert Rector at the Heritage Foundation in January of that year, drives home this point. It shows how Obamacare’s exchange subsidies change at different income levels. The table remains essentially correct except for relatively small changes due to inflation and revised poverty lines.

Brace yourself:

subsidies_under_obamacare_blumer_9-19-13-1

My original explanation (bolds are mine):

The orange boxes represent examples where the subsidy decrease amounts to almost 80% or more than 80% of a couple’s $5,000 increase in combined or joint income. After adding another 7.65% for Social Security and Medicare taxes on top of the typical 15% (or higher) marginal federal income tax rate, the extra $5,000 earned will cost the couple more than $5,000 — even before considering state and local income taxes.

Then there are the purple boxes, where subsidy loss alone amounts to more than $5,000, including one case where it’s more than double that, before considering any other taxes.

Even the supposedly “not so bad” incremental changes not boxed in above, which show roughly $500-$1,000 subsidy reductions for each additional $5,000 in income, are hugely discouraging. As I wrote 3-1/2 years ago:

.. many and probably most lower- and middle-income Americans will conclude that there’s no point in accepting promotions, working overtime, getting a second job, or attempting any other form of financial self-improvement (except perhaps under the table). They will thus end up stuck where they are.

As to the incentive to get or stay married, to cite just one example in the table: A married couple where both spouses are 60 years old and each earns $30,000 per year ($60,000 combined) would move from receiving no subsidy if they stay married to $10,425 in annual subsidies if they choose to cohabit.

There’s a word for when the government, as shown above, takes all of the fruits of your incremental labor and in certain instances even more than that. It’s not socialism. It’s far more than that. Financially at the margins involved, it’s de facto slavery, in that the fruits of all of one’s work are taken by the master, in this case the government, in return for nothing.

Republicans appear to have acquired a bit of a spine Wednesday, as the John Boehner-led House of Representatives passed a continuing resolution which does not fund Obamacare.

If the real-world impacts seen in the above table aren’t enough to stiffen Republicans’ and conservatives’ resolve to stay their current course, what will be?

(Artwork atop post based on a modified Shutterstock.com image.)

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Along with having a decades-long career in accounting, finance, training and development, Tom Blumer has written for several national online publications primarily on business, economics, politics and media bias. He has had his own blog, BizzyBlog.com, since 2005, and has been a PJM contributor since 2008.

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Top Rated Comments   
QE makes a Nigerian pyramid scheme look respectable. But that's what passes for "fiscal policy" in 21st century America. $85 billion a MONTH in fresh, new Monopoly money. What could go wrong?
51 weeks ago
51 weeks ago Link To Comment
All Comments   (14)
All Comments   (14)
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Why doesn't Bernanke just print the money for Obamacare?

Eliminate all the taxes and 95% of the opposition would vanish.

You're welcome.
51 weeks ago
51 weeks ago Link To Comment
Yancey, someday you'll thank Obama for giving you piles of worthless $100 bills to cook any squirrels you catch.
51 weeks ago
51 weeks ago Link To Comment
Ah, but for the brilliance of the Obama economic plan, we would all be eating squirrels and and living in caves as the banks foreclosed on us.
51 weeks ago
51 weeks ago Link To Comment
If, instead of putting the money into the hands of bankers and other money people, the Fed would put the $85 billion per month into the hands of the American people - about $265 per month - on a per capita basis, the results to the economy would be dramatic. A family of 4 would receive about $1,060 in disposable income. The poor would spend it, resulting in a boon to business. The middle class - those left - would either spend it or use it to pay down debt. If the Fed HAS to create money out of thin air, better to share the wealth than make the wealthy wealthier.
51 weeks ago
51 weeks ago Link To Comment
Here is a graph of the velocity of money. What it shows is that the velocity of money has been going straight down since 2007. (and before that as well.)
Basically this is a measure of how much lending is going on.
http://research.stlouisfed.org/fred2/series/M2V
What this means is that lending is steadily shrinking.

The QE's are meant to try to pump more money in the system.
On the other hand 90% of the QE's never make it into the system. What does mostly goes into the stock market--which capital gains the government taxes readily...That has lead to 100 billion gain in tax receipts and most of the income gains by the top 10% of the population.

However, if the supreme court declares obamacare unconstitutional, then everything changes. Why? because obamacare has been the single greatest impediment to business. velocity of money will rise and the fed will be forced off the QE's.

51 weeks ago
51 weeks ago Link To Comment
@Harmless handle: "... of course QE will end; the Fed's bubble will burst..."

Yes, but it won't burst soon enough to effect the 2014 elections. When it does burst, the Democrats, as usual (and with the help of mass media), will find ways to put all the blame on Republicans. Even worse, many of those blame claims will be correct. When the government's financial holes were deepening, the Republicans were digging almost as fast as the Democrats.
51 weeks ago
51 weeks ago Link To Comment
The date of the Great Bursting is unknown and unpredictable. Probably somewhere between next month and 2016, but it could be Monday. The catalyst could be anything.
Rather more worrying is the level of self-pity and self-doubt among those who claim to oppose Obama. Whining is not good.
51 weeks ago
51 weeks ago Link To Comment
Don't be silly, of course QE will end; the Fed's bubble will burst, as always. The internal pressures build until explosion is inevitable. One explanation here : http://tinyurl.com/mtk4355
There are lots of other reasons, too.

The good people of the land get the shaft and the media get to walk, as always.
Had enough yet?
51 weeks ago
51 weeks ago Link To Comment
Once you get on the tiger's back, how do you get off again without being eaten?
51 weeks ago
51 weeks ago Link To Comment
To say the economy is fixed as it manages to muddle along with a trillion a year in basically counterfeit money would be like saying a patient's anemia is fixed because he manages to walk around the block without passing out when he has to get a blood transfusion every few days to be able to manage that.
51 weeks ago
51 weeks ago Link To Comment
What does Barry care if he is entirely wrong about everything and does immense damage? First of all he'll deny it, and second, he's got his.
51 weeks ago
51 weeks ago Link To Comment
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