Lawmakers had an entire 182-page report on the future of the economy to discuss with Congressional Budget Officer Director Douglas Elmendorf Wednesday morning, but it was a 17-page appendix dealing with the Affordable Care Act’s effects on the labor market that got all the attention during a House Budget Committee hearing.
The report, released Tuesday caused a media firestorm, with its finding that the ACA would eventually cause a reduction in the labor force for two reasons:
- Some workers are choosing to work fewer hours.
- Some employees who were working primarily for the health benefits provided by their companies and who can now be insured under Obamacare have quit working altogether by choice.
The net effect would be as though 2.5 million workers left full-time employment, the report found. Many media outlets jumped to report that the CBO had confirmed that the healthcare law was, as Republicans have repeatedly claimed, a “job killer,” only to later revise headlines, as the report’s meaning was explained.
Democrats’ frustration with the coverage of the report was palpable. Rep. Chris Van Hollen of Maryland, the ranking Democrat on the committee said, “This is an example of when one misinterpretation gets out of the box early and goes around the world. It takes the truth an awful long time to catch up.”
The report, it turned out, actually found that Obamacare will cause a net increase in the number of jobs available in the U.S. economy. The 2.5 million figure cited in the report was not predicting jobs that would disappear, but workers who would voluntarily work less. In fact, the report very specifically said that “the estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor.”
It was a point that Elmendorf had to repeat multiple times during the hearing Wednesday as Democrats took turns asking him to clarify the meaning of the report.
“The reason that we don’t use the term ‘lost jobs’ is that there is a critical difference between people who would like to work and can’t find a job, or have a job that is lost for reasons beyond their control, and people who choose not to work,” Elmendorf said.
An editorial in The Wall Street Journal argues, “CBO's conclusion is that Obamacare will encourage people to supply less labor by deciding not to take a job or by working fewer hours. The law's insurance subsidies are gradually taken away as income rises, ‘creating an implicit tax on additional earnings,’ the CBO observes. These effective marginal tax rates reduce the rewards for work—whether it be overtime, accepting a promotion, or training in the hope of higher future earnings.”
The Journal also points out that CBO’s prediction does not score the impact of the employer mandate, which was delayed for a year. That mandate requires companies with 50 or more employees to offer healthcare to employees or pay steep fines.
Chairman Paul Ryan (R-WI) took criticized the health care law, saying he was concerned that the law creates disincentives to work, and therefore deprives people of the dignity of a job, and prevents them from taking steps toward joining the middle class.
This led to a testy exchange between the chairman and New Jersey Democrat Bill Pascrell, who noted that the existence of the Social Security program could be seen as creating disincentives for the elderly to work, and then quoted Ryan at length praising a Republican health care plan from 2008 for freeing people from remaining in jobs they didn’t want for fear of losing their healthcare coverage.
Democrats repeatedly walked Elmendorf through sections of the report that undermine Republican talking points against the health care law, including the finding that Obamacare will result in a net increase in jobs, and a will reduce the federal deficit.
They were rebuffed, however, when they suggested that the 2.5 million jobs worth of labor being withheld from the market might actually reduce unemployment as other workers step up to take up the slack. Elmendorf said that the CBO analysts did not believe that element of the law’s effect would have a significant impact on unemployment. He also said that the CBO had not studied whether the reduction in the supply of labor might lead to upward pressure on wages.
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