Is Obamacare Boosting the Economy? Color Me Skeptical.

This is interesting:

Alec Phillips, economic researcher at Goldman Sachs, said in a note issued late last week to clients that subsidies from the Affordable Care Act boosted gross domestic product during the first quarter and are likely to do the same during the second quarter.

….Spending in the health-care industry was up 9.9% in the first quarter….But the health-care industry won’t be the only one to benefit, Phillips says, as subsidies will free up income for those who had no coverage before, as well as those who had insurance but were paying for it themselves.

“Overall, around 40% of the subsidies should find their way to non-health consumption this year,” he wrote.

I don’t have access to the full Goldman Sachs report, but I’m dubious about this for two reasons. First, Obamacare is roughly revenue neutral, which means federal subsidies are all paid for via tax revenue. Obamacare really shouldn’t have any first-order net stimulative effect on personal income or GDP. Second, although subsidies will reduce health insurance bills for people who were previously covered—thus freeing up income for other purposes—the individual mandate will force previously uncovered people to buy insurance they didn’t have before. This will reduce the income they have for other purposes. I don’t know how this nets out, but I’d be surprised if it was favorable to sectors other than health care.

Maybe Phillips has carefully run the numbers on all these things, and the effects are bigger than I think. There may be second-order distributional impacts, for example. For now, though, I’d be pretty cautious about assuming that Obamacare is having any substantial effect on the economy one way or the other.

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