And the CBO Report is Supposed To Be Good News?

In a rather bizarre White House press briefing yesterday, Chairman of the Council of Economic Advisers Jason Furman told reporters that the latest estimate that the Affordable Care Act will cause the loss of some 2.5 million jobs over the next 10 years is apparently a good thing.  He responded to a question about the Congressional Budget Office’s damning report on the Affordable Care Act by saying,

“The report finds that there will be less — that workers will choose to supply less labor, correct.  It describes it as a choice.  Again, it’s not that the businesses are cutting those jobs.”

When the reporter asks if this might be considered a negative thing, choice or not, Mr. Furman replies,

“Two things.  One, just a small, picky thing.  It doesn’t say “losing jobs.”  It says FTEs.  So to some degree, this might be somebody who used to work 60 hours because they needed health insurance and that was the only job that offered it, and now they can get a different job at 35 hours that doesn’t offer health insurance, but they’re getting it through this and they’re switching from one to the other.  And that’s a better choice for that person, and this is giving them that option that they didn’t used to have.”

Um…I haven’t heard this much spin in a Laundromat.   Even in today’s lackadaisical society, most people view disincentives to work as a bad thing.  Just ask the top 1 percent.  It’s bad enough that they get so much grief for working and being successful, but for the very few who inherited their money and didn’t have to lift a finger; there is a stigma attached to ready-made wealth as an incentive not to work.

But Mr. Furman seems to glorify the flip side of the coin, those who are not wealthy but who choose not to work in order to receive an ObamaCare subsidy.  The CBO report is not quite as rosy about this so-called “choice.”

  • On the effects of the employer penalty (for not providing insurance) on the demand for labor:

    The penalty will be borne primarily by workers in the form of reduced wages or other compensation..

  • On the effects on labor incentive:

The decline in fulltime-equivalent employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours…Subsidies that help lower income people purchase an expensive product like health insurance must be relatively large to encourage a significant proportion of eligible people to enroll. If those subsidies are phased out with rising income in order to limit their total costs, the phaseout effectively raises people’s marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work. In addition, if the subsidies are financed at least in part by higher taxes, those taxes will further discourage work or create other economic distortions, depending on how the taxes are designed. Alternatively, if subsidies are not phased out or eliminated with rising income, then the increase in taxes required to finance the subsidies would be much larger.

But on the bright side, the CBO says health care subsidies will allow lower-income people to spend money that would have gone toward health care on other goods and services, thereby increasing demand.  The question I have is, if people stop working in order to receive the subsidy, where are they going to find the money to pay for other goods and services?  Or, is that going to come from other government subsidies payed for by taxpayers?

Is the CBO report good news or bad?  You be the judge.




Comments (7)

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  1. PJ says:

    “there is a stigma attached to ready-made wealth as an incentive not to work. But Mr. Furman seems glorify the flip side of the coin, those who are not wealthy but who choose not to work in order to receive an ObamaCare subsidy.”

    This is a really great point — I hadn’t thought of comparing the two. It really is ridiculous.

  2. Brian Williams. says:

    This extraordinary argument leaves me speechless. Liberals say there are essentially 2 million people who would rather not work. Obamacare frees them from their jobs. How do you answer that? Speechless.

  3. Jesse W. says:

    These are the problems of a wealth-fare state. People love to get thing for free. Especially if they believe that they deserve to get them because “that is the reason government is for”. If more people quit their jobs because the government will provide things that they no longer can afford, we cannot state that as a positive. The CBO report is dire. The economy will be hurt by Obamacare, it is obvious and imminent. Sadly the administration tries to hide it, by distorting reality to seem as if this was not true. It doesn’t matter which side of the market is impacted, there will be higher unemployment and less spending as a result of Obamacare.

  4. Martin E. says:

    Obamacare gives insurance to everyone. If everyone has insurance, those who work solely to get covered will quit their jobs. If workers quit their job because they don’t need insurance, unemployment will increase. If unemployment increases, spending decreases. If spending decreases, companies sell less. If companies sell less, they hire fewer workers. If companies don’t hire workers, unemployment will rise. And so on. In addition to that, the unemployed will receive their benefits for being unemployed. More benefits will mean more government spending in these subsidies. As the government spends more, there will be higher taxes (or a larger deficit). Higher taxes place a burden on the employed which in turn affects the whole economy. A larger deficit harms the economy even more. If a weak economy is harmed, there might be dire consequences. Let’s prevent dire consequences please? Do something before it is too late.

  5. Jordan G. says:

    Mr. Furman’s remarks were absolutely disastrous. It seems as if he didn’t know what he was talking about. He didn’t seemed confidence in front of the press. It was as if he was improvising his remarks. I would expect the official trying to deliver the response to one of the major blows towards Obamacare to be more confident, knowledgeable about the topic and that sounded convincing. Yet, he was not. The chance of the administration to defend themselves passed. Let us hope that this leads into the Democrats opening themselves to discussions and finding ways to solve this mess.

  6. Paula Y, says:

    Every time it seems as if Obama didn’t care about the consequences. He just acts. He forces things to happen and then defend them as much as possible. The CBO’s report is an example of this behavior. When the project was being discussed, several experts stated that ACA will lead to a higher unemployment and would hurt the economy. Yet, these consequences were disregarded. Now, the program is being implemented, and is a question of time when will start to see the issues ACA brought.

  7. Joe Barnett says:

    The effect of the Affordable Care Act on inventives to work — the penalty it imposes — is greatest at the margin — that is, each additional dollar earned in certain income range (between poverty and 400 percent of the poverty level) will reduce the subsidy an individual or family receives. Thus, its greatest effect is on the inventive to work more, rather than on the incentive to work at all. (Other people will lose jobs because the cost to the employer for health benefits is increasing.)

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