CBO: Obamacare Creates “Disincentive” To Work

On Tuesday, the Congressional Budget Office reported that the Affordable Care Act (aka Obamacare) is causing Americans to work less or not at all. This was a surprising turnabout for the non-partisan budget agency that Democrats cited repeatedly when selling Obamacare. Now the CBO says the economy will lose the equivalent of two million full-time workers by 2017and 2.5 million over the next decade, a threefold increase over its prior estimate.

The CBO’s latest analysis is rooted in Obamacare’s complex design that includes new subsidies, taxes and mandates. For lower-wage, lower-skilled or discouraged workers in particular, Obamacare offers incentives that can influence them to trade jobs for entitlement benefits.

The CBO’s conclusion now is that Obamacare will encourage people not to take a job or by working fewer hours. Here’s why. The healthcare law’s insurance subsidies are gradually taken away as one’s income rises, “creating an implicit tax on additional earnings,” the CBO states.

Put differently, as lower-paid workers advance to making more money, the subsidy they receive for buying healthcare insurance declines and may disappear altogether. If they advance to higher paying jobs, or even if they work more hours at the same job, they could lose their healthcare subsidy. In essence, it’s a tax increase.

droppingoutAccording to the CBO, these effective marginal tax rates as a result of Obamacare reduce the rewards for work – whether it be overtime, accepting a promotion or training in the hope of higher future earnings. The CBO has now figured out that many workers, especially the lower paid, will decide that it’s economically better for them to simply drop out of the workforce – which is already at a 38-year low – in the next few years and over the next decade.

The CBO’s job-loss prediction is all the more remarkable because it doesn’t include the impact of Obamacare’s “employer mandate,” which requires businesses with 50 or more full-time employees to offer health insurance or pay a $2,000 penalty for each worker beyond 30 employees. The CBO didn’t go there because President Obama delayed the mandate for a year and the changes would be hard to analyze. Maybe they will address it next year.

The bottom line is that the CBO is probably underestimating job losses because common sense says that the Obamacare mandates raise hiring costs and induce businesses to hire fewer workers, or pay lower wages, or slash hours – or all three.

The latest CBO report set off a furious debate in Washington. The White House argued that the reduction is positive because it means Americans will forgo jobs or extra work to stay home with their children or strike out on their own as entrepreneurs. The White House said, Individuals will be empowered to make choices about their own lives and livelihoods and have the opportunity to pursue their dreams.” Like what? The dream of not working?

Republicans said the report amounted to an “I told you so” moment and that subtracting the equivalent of 2 – 2.5 million workers will be bad for the economy. No kidding! The new CBO report linking Obamacare to the loss of jobs will almost certainly become fodder for this year’s congressional elections.

Obamacare is unpopular with many voters and its botched October rollout was accompanied by a public outcry by millions of people who saw their healthcare plans cancelled as a result of its implementation. Republicans have already made Obamacare a top campaign issue for the election, and the latest CBO report gives them even more ammunition.

All of this is one more contradiction of the arguments that were used to sell ObamaCare. The president told us repeatedly that the law would: 1) reduce health-care costs and shrink the deficit; 2) allow you to keep your health plan and your doctor; and 3) encourage businesses to hire more workers and be more competitive.

All of this is turning out to be false, and now we learn that the law is a job destroyer that will cost 2 – 2.5 million jobs in the years ahead, according to the Congressional Budget Office. And remember that this does not even include job losses as a result of the employer mandate that kicks-in in 2015.

Finally, you will see some arguments to the contrary. The logic most Obamacare supporters use is that if you decide to leave your job for personal reasons (ie – to keep your healthcare subsidy), you didn’t “lose” your job – you simply decided not to work. That logic falls flat when you look at our declining labor force participation rate, now at a 38-year low.

Posted 02-06-2014 12:49 PM by Gary D. Halbert
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