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Congress should do no harm to the economy when it changes Obamacare

Parked cars surround the U.S. Capitol as the lights burn into the night on the House of Representives’ side on Thursday, March 23, as last-minute negotiations continued over the GOP’s legislation to repeal and replace “Obamacare.”
Parked cars surround the U.S. Capitol as the lights burn into the night on the House of Representives’ side on Thursday, March 23, as last-minute negotiations continued over the GOP’s legislation to repeal and replace “Obamacare.” AP

When it comes to making economic policy, complications are often ignored or simply left unseen.

Nineteenth century French economist Frédéric Bastiat distinguished between the “seen” and the “unseen” in any action. Most everyone knows the obvious and visible consequences of our choices. But the unseen consequences are many. They are not only less obvious but potentially more harmful.

Bastiat’s idea is now known as the law of unintended consequences. Actions have effects that are often unanticipated or unintended. Economic policy should guard against unwanted results.

Many government programs, even those widely thought to be desperately needed, have negative unintended consequences. One popular program enacted in the 1930s, Social Security, has had one strong consequence for many decades now. Economic research has shown that because of Social Security, workers save less for retirement. This lowers overall savings and investment, which in turn lowers the economy’s potential growth.

The anticipated effects of the 2009 Affordable Care Act have been seen: More people have health insurance. However, the unintended consequences are what is making health insurance less and less affordable. Such consequences include fewer insurance-company offerings and fewer providers accepting government-sponsored insurance.

Economist Casey Mulligan predicted other negative effects in his 2014 book “Side Effects: The Economic Consequences of the Health Reform.” Mulligan showed that the ACA was essentially a tax on work. That meant that the law would have the unintended consequence of slowing job growth and the overall economy.

The lesson here is that the goal of any new economic policy should be, first and foremost, to do no harm. As lawmakers consider the repeal of, or a replacement for, the ACA, they should meet this criterion by freeing up the markets for health-care services, not by mandating more insurance coverage.

Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. prcrabb@nnu.edu. This column appears in the March 15-April 18, 2017, edition of the Idaho Statesman’s Business Insider magazine as part of a special section on the business of health. Click here for the Statesman’s e-edition, which includes Business Insider (subscription required).

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