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Middle-Class Obamacare Anger Elected Trump

Updated: Feb 21, 2020

Obamacare lowered the every-day standard of living for millions of middle-class Americans. In their anger, they elected Donald Trump.

Make no mistake: Obamacare, otherwise known as the Affordable Care Act, expanded health insurance, and the statistics prove that, in the long run, health insurance will make individuals who did not have it healthier and happier. In the short-run, however, it cost middle-class Americans without health insurance money they did not have and threatened their survival.

Before Obamacare, many uninsured workers skated by on a wing and a prayer without health insurance.

Obamacare’s individual mandate required middle-class workers to internalize the risks of their health care costs—if they had no insurance through their jobs. In other words, it required them to pay for the expected value of their health care costs. Whether they got sick or not, it forced them to buy insurance and stopped them from risking their health.

Until Obamacare, many uninsured workers gambled with their health. Except for daredevils and adrenaline junkies, catastrophic health care costs strike like lightning: it rarely happens, but it devastates its targets. The rare, unlucky, uninsured Americans fell deep into debt or declared bankruptcy. The rest hoped they didn’t bust as the dealer continued dealing cards.

Insurance protects against those risks of an unexpected, costly, health-care emergency. Only middle-class, uninsured Americans could choose whether to purchase health insurance. Lower middle-class uninsured Americans could not afford to choose to buy health care. Upper middle-class uninsured Americans could absorb the costs of health care or the costs of a dire illness that struck them. Middle-class, uninsured Americans had to decide whether to risk that huge loss or to buy health care to take a smaller, guaranteed loss.

Uninsured, middle-class Americans floated by on a wing and a prayer. To be clear, those workers had no extra money with which to buy health insurance. In a capitalist economy, competition reduces price to marginal cost: the cost of one additional unit of production. One company is always undercutting the next company until no one can sell the commodity any cheaper. Competition reducing price works very well when producing corn or steel or bricks. Then, everyone can buy more corn or steel or bricks at a cheaper price. But that price-reduction works less well for workers’ salaries.

Before Obamacare, middle-class workers were living on survival wages.

When workers compete, they reduce their wages to marginal cost because someone next door is always willing to work for just a bit less. Among workers, “marginal cost” reflects survival wages. In 1821, David Ricardo developed a principle some call the “iron law of wages.” By definition, then, survival wages means having just enough money to survive and no more. Competition thus reduces wages to survival wages.

When Obamacare’s individual mandate compelled millions of Americans to buy health insurance, they were already working for survival wages. They did not have extra money to afford health insurance. Sure, when a worker applied for her next job, her next-door neighbor would have a harder time undercutting her wages because both of them would have to pay for health care.

And sure, survival wages increased simultaneously across the board, so, eventually, survival wages would rise to pay for that additional survival cost. No one would take a job that did not even pay survival wages. Post-Obamacare, those survival wages included money to pay for health insurance. But in the meantime, the individual mandate added a new survival cost. Because the cost of living increased as salaries remained constant, the individual mandate tipped millions of Americans’ salaries to below survival wages.

Obamacare threatened middle-class American’s survival.

Lower middle-class Americans already live paycheck-to-paycheck. They did not pay for health insurance before or after Obamacare because they went to the emergency room, or Obamacare heavily subsidized their health insurance so much that it did not affect them. Upper middle-class Americans may have paid some money for health insurance. Some of them even recognized the benefits from accessible insurance regardless of preconditions. But the individual mandate did not threaten their survival.

That left the middle-class Americans working below survival wages at the same jobs while wages continued to stagnate as they have since the Great Recession. Obamacare threatened their very survival. When you are working hard just to get by, and the government takes that away from you, how angry are you going to feel?

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