Thursday, November 20, 2014

The ACA and the white working class

When Bill Gardner this morning pointed out, as many have, that Americans approve of the core components of the ACA but disapprove of the law, I expected the corollary to be "slander works," or"it's really hard to communicate how these moving parts fit together," or some combination of the two.

Instead, I was confronted with this chart from a paper by Henry Aaron and Gary Burtless:

Redistributive effects of the ACA (from Aaron & Burtless, 2014).
(Redistributive effects of the ACA (from Aaron & Burtless, 2014).
There's a lot of factors packed into that chart - taxes (including the individual mandate), the employer mandate, Medicare payment cuts. I would have thought that the income transfers reach deeper into the middle class. Assuming that it's accurate in broad outline, though, it calls to mind this political diagnosis from Kevin Drum last week:
.. why does the WWC (white working class) continue to loathe Democrats so badly? I think the answer is as old as the discussion itself: They hate welfare... There was a hope among some Democrats that Bill Clinton's 1996 welfare reform would remove this millstone from around Democrats' necks, and for a few years during the dotcom boom it probably did...

But when the economy stagnates and life gets harder, people get meaner. That's just human nature. And the economy has been stagnating for the working class for well over a decade—and then practically collapsing ever since 2008.

So who does the WWC take out its anger on? Largely, the answer is the poor. In particular, the undeserving poor. Liberals may hate this distinction, but it doesn't matter if we hate it. Lots of ordinary people make this distinction as a matter of simple common sense, and the WWC makes it more than any. That's because they're closer to it. For them, the poor aren't merely a set of statistics or a cause to be championed. They're the folks next door who don't do a lick of work but somehow keep getting government checks paid for by their tax dollars. For a lot of members of the WWC, this is personal in a way it just isn't for the kind of people who read this blog.

And who is it that's responsible for this infuriating flow of government money to the shiftless? Democrats. We fight to save food stamps. We fight for WIC. We fight for Medicaid expansion. We fight for Obamacare. We fight to move poor families into nearby housing.

This is a big problem because these are all things that benefit the poor but barely touch the working class. Does it matter that the working class barely pays for most of these programs in the first place, since their federal income taxes tend to be pretty low? Nope. They're still paying taxes, and it seems like they never get anything for it. It's always someone else.

It's pointless to argue that this perception is wrong. Maybe it is, maybe it's not. But it's there. 
There is a racial component to this resentment -- though as someone pointed out to me on Twitter, it's also a force where the poor neighbors are all white. Awareness of it is central to Obama's politics. The speech that rescued his candidacy in 2008 put it front and center in his quest for national unity:
Most working- and middle-class white Americans don't feel that they have been particularly privileged by their race. Their experience is the immigrant experience - as far as they're concerned, no one's handed them anything, they've built it from scratch. They've worked hard all their lives, many times only to see their jobs shipped overseas or their pension dumped after a lifetime of labor. They are anxious about their futures, and feel their dreams slipping away; in an era of stagnant wages and global competition, opportunity comes to be seen as a zero sum game, in which your dreams come at my expense. So when they are told to bus their children to a school across town; when they hear that an African American is getting an advantage in landing a good job or a spot in a good college because of an injustice that they themselves never committed; when they're told that their fears about crime in urban neighborhoods are somehow prejudiced, resentment builds over time.

Like the anger within the black community, these resentments aren't always expressed in polite company. But they have helped shape the political landscape for at least a generation. Anger over welfare and affirmative action helped forge the Reagan Coalition. Politicians routinely exploited fears of crime for their own electoral ends. Talk show hosts and conservative commentators built entire careers unmasking bogus claims of racism while dismissing legitimate discussions of racial injustice and inequality as mere political correctness or reverse racism.

Just as black anger often proved counterproductive, so have these white resentments distracted attention from the real culprits of the middle class squeeze - a corporate culture rife with inside dealing, questionable accounting practices, and short-term greed; a Washington dominated by lobbyists and special interests; economic policies that favor the few over the many. And yet, to wish away the resentments of white Americans, to label them as misguided or even racist, without recognizing they are grounded in legitimate concerns - this too widens the racial divide, and blocks the path to understanding.  
More broadly, Democrats have continuously struggled with the tension between the policy imperative to fight poverty and the political imperative (also a policy imperative) to help the middle class. That's why Obama has adhered to his own taboo against raising taxes on the middle class, broadly defined to the point of absurdity (up to a household income of $250k).

Notwithstanding that the ACA does not directly tax individuals in the lower 98%, however, Gardner's stat shot illustrates that there's a sliver of truth in Jonathan Gruber's allegations of stealth in the ACA's construction. Of course there is. There's stealth with regard to the non-headline consequences of every piece of legislation. The law primarily helps the lower 20-25% -- and the middle class to the extent that an awful lot of Americans temporarily cycle into the lower 20% at some period in their lives. (The Aaron/Burtless paper does not attempt to account for the possible effects of the ACA slowing healthcare inflation. The slowdown in healthcare spending growth that we are currently experiencing, for whatever cause, could if sustained free up tremendous resources for public investments of every kind.)

The ACA is not "Obamacare," it's Democratcare -- a consensus policy of the party as a whole, the most sustained expression of how Democrats forge policy in the post-Reagan political environment.  If its benefits are really that concentrated in the lower 20%, that does constitute a political challenge.


  1. The Aaron chart must use a definition of income that I do not comprehend. The ACA itself increases no one's income.
    It brings some persons into Medicaid, and helps others get cheaper insurance due to subsidies, but are those things really income?
    Not in my book

    But more importantly, the white worker hostility that you mention has something to do with the harsh cutoffs in Medicaid. If you earn under the limit, you get free health insurance with no copays or deductible. If you earn one dollar over the limit, you might get a crappy plan that costs over ten per cent of your take home pay. Or nothing at all.
    Even the ACA can ding you for up to 8-10 per cent of pretax income, which feels like a lot when you are living on the edge.
    The answer of course is a sliding scale where subsidies go down gradually. The ACA has a little of that to offer, but we need to do the same in Medicaid.

    1. Bob, if you earned $1 over Medicaid eligibility, you'd pay 2% of your income for the second cheapest silver plan with cost sharing reduction subsidies raising the actuarial value to 94%, comparable to the best employer-provided plans. If the cheapest silver plan is significantly cheaper than the 2nd cheapest, you'd pay less than 2%. Admittedly, even 2% can be steep -- and tempt people into bronze plans with premiums near zero but sky-high deductibles -- but it's not as bad as you're thinking. Subsidies do slide, from 9.5% down to 2%.