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The AHCA’s drag on potential job growth

Report • By Josh Bivens • March 24, 2017  

Press release

Summary

The report provides a rough estimate of the potential drag on job growth that will occur if Congress enacts the American Health Care Act (AHCA), which repeals the Affordable Care Act (ACA). Specifically, it estimates where we would be on jobs if the AHCA is enacted and everything else stays the same (the “all-else-equal effect”) relative to the jobs picture under the ACA in coming years, by state and congressional district (CD). Our methodology and rationale were explained in detail in a report (Bivens 2017) released in January that estimated the drag on aggregate demand, and hence on job growth, that would have resulted from a partial repeal of the Affordable Care Act. Our current methodology adjusts for the specific provisions in the AHCA but the overall forces remain the same. In short, by repealing the ACA and enacting the AHCA, Congress would impose a large spending cut as subsidies to purchase health care under the ACA give way to smaller tax credits under the AHCA. The benefit cuts would come mostly out of the pockets of cash-constrained households that will be likely to significantly cut back their spending in response to lower disposable income, while the tax cuts in the ACA repeal would disproportionately go to high-income households who tend to save a significant portion of increases in disposable income. On net, the shortfall in spending (or aggregate demand) would translate into slower job growth. Our full results are provided in Figures A and B.

Key findings are:

• Nationally, all-else-equal, the AHCA could slow job growth by 409,000 in 2019, by 1.1 million in 2020, by 1.6 million in 2021, and by 1.8 million in 2022.
• The 15 states with the largest reductions in job growth, ranked by jobs-reduced expressed as a share of the total employed population in 2015 are: New Mexico, Kentucky, Montana, Oregon, West Virginia, Rhode Island, Louisiana, New Jersey, Arizona, Washington, Colorado, Nevada, Vermont, Michigan, and Ohio.
• The degree to which the AHCA drags on job growth varies dramatically by congressional district. On average, congressional districts experience a potential drag on jobs of 4,000 in 2022, but in a couple of districts there were essentially zero job-growth reductions and in at least one district the job-growth reduction reached 20,000.
• As a general rule, states and congressional districts with large Medicaid spending fare the worst under the AHCA replacement of the ACA, while states with a high share of rich households do better. This is because the Medicaid cuts drag the most on growth, while the only countervailing stimulus provided by the AHCA is tax cuts that disproportionately boost the incomes for the richest households.