Friday, February 07, 2014

The new lucky duckies

In 2002, the Wall Street Journal editorial page uncorked the phrase "lucky duckies" to refer to people whose  income was too low to incur federal income tax. The editorial set off a meme that has mutated several times since, including Mitt Romney's 47 percent speech, and the original phrase is constantly used on liberal blogs to ridicule conservatives who think those on low incomes somehow have it good.

Well, 12 years after the phrase was first used, there's a new set of lucky duckies, and this time it's been created by liberal scribes, with Paul Krugman in the lead. Today's there's joint posturing by Krugman and David Weigel at Slate over what they label "CBOghazi," a supposed botching by the media of the Congressional Budget Office (CBO) estimate that the Affordable Care Act ("Obamacare") will reduce the labour force by the equivalent of 2 million full time workers.

But why is this self-satisfaction warranted? By Krugman's own admission, the reduction in employment comes disproportionately from the lower paid, who will choose to work less because of the incentives created by the health insurance subsidies. As he tells it, these people henceforth become lucky duckies, free to spend time with their kids or pursue their dreams. But actual economists who have studied employment and poverty would have a different set of questions:

  • How will these families replace the income lost from reduced hours of employment?
  • Will anyone in the household have a job after labour supply has been reduced?
  • If the person is not in work, what are they doing? Education, training? What are their opportunities for upward mobility since they are no longer in employment?
  • Besides being tucked in at night, are the children in the house better off in terms of current and future prospects when there's less paid employment in the household?
In short, serious respect for expertise -- which Krugman is always demanding when it comes to macroeconomics -- would require that the CBO estimates be embedded in a deep understanding of the economics of employment and poverty. But a lot of people who think they know better have simply bought into a narrative that presents this employment shift as an unalloyed good thing -- a new class of lucky duckies -- and want everyone to shut up already.

UPDATE: One final word on this. In Krugman's many posts on the CBO estimates, which are marked by repeated declarations of victory, he never once acknowledges that the CBO methodology is based on the work of Casey Mulligan, who uses precisely the same techniques for analyzing incentives in healthcare as he does for other government policies -- which Krugman has previously ridiculed.

FINAL UPDATE (15 February): If you were relying solely on Krugman for an understanding of what is going with the CBO estimates, you'd be mystified by this post attacking Casey Mulligan, since as noted above, he has never previously discussed any role that Mulligan's methodology had in the CBO estimates. Now he's being acknowledged, but only in a backhanded way disputing how much of a role he had.