CBO: Obamacare Will Cost Economy 2.5 Million Workers by 2017

Tuesday, 04 Feb 2014 01:30 PM

By Newsmax Wires

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In devastating new estimates on the economic effects of Obamacare, the Congressional Budget Office said Tuesday that President Barack Obama's signature health insurance law will result in a bigger reduction in working hours than previously anticipated.

The report said that by 2017, due partly to smaller companies reducing worker hours to avoid requirements that full-time workers be offered health insurance, there will be the equivalent of 2 million fewer full-time equivalent workers. By 2021, there will be 2.3 million full-time workers.

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Simply put, the new analysis from the nonpartisan agency suggests the 2010 Affordable Care Act is driving businesses and people to choose government-sponsored benefits rather than work. Some workers who obtain coverage through the healthcare law may forgo employment, the CBO reasoned, while others may reduce hours. Many low-wage workers are may even drop out of the workforce as a result of the law, it said.

That conclusion, coming from one of the most respected analytical institutions in the country, is likely to rock the political landscape for Democrats, many of whom are already fleeing from the law as the 2014 midterm elections approach.

Republicans immediately blasted the Obama administration, saying the report confirms what they have been saying for years.

"This latest diagnosis from the nonpartisan CBO confirms what we have been saying all along – that the president’s health law is bad medicine for jobs and the economy,” commented Energy and Commerce Committee Chairman Fred Upton, R-MI.

“Obamacare is only making things worse,” Rep. Paul D. Ryan of Wisconsin said in a statement. “This costly law is not only pushing government spending to new heights, it is disrupting coverage and leaving millions of Americans worse off.”

House Speaker John Boehner said the blow inflicted on the economy will make recovery even that much harder.

“For years, Republicans have said that the president’s health care law creates uncertainty for small businesses, hurts take-home pay, and makes it harder to invest in new workers,” the Ohio Republican told reporters. “The middle class is getting squeezed in this economy, and this C.B.O. report confirms that Obamacare is making it worse.”

The White House and Democratic leaders have consistently dismissed suggestions that the healthcare law is reducing full-time employment.

"I would say broadly that if you look at the economic data, the suggestion that the ACA is reducing full-time employment is belied by the facts," White House spokesman Jay Carney told reporters in July.

In 2011, the CBO had estimated the law would cause a reduction of only 800,000 full-time equivalent workers. Those figures largely represented Americans who would choose not to work rather than those who would lose their jobs or have their work weeks reduced because of the law.

In all, the rolling impact of the law will lead to 2 million fewer workers in 2017, 2.3 million fewer in 2021, and 2.5 million fewer through 2024, according to the CBO. This represents a 1.5 to 2 percent reduction in the numbers of hours worked, The Wall Street Journal reported.

"CBO has increased its estimate of the effect of a given reduction in aggregate compensation under the ACA on hours worked," the report stated. "CBO’s earlier estimate was based on a simplifying assumption that affected workers would have average earnings — in which case the percentage reductions in compensation and hours worked would be roughly the same."

"However," the report continued, "people whose employment or hours worked will be most affected by the ACA are expected to have below-average earnings because the effects of the subsidies that are available through exchanges and of expanded Medicaid eligibility on the amount of labor supplied by lower-income people are likely to be greater than the effects of increased taxes on the amount of labor supplied by higher-income people."

In another estimate, the CBO lowered its estimate of the number of people who would enroll for health insurance through healthcare exchanges in 2014. That estimate had been 7 million. But on Tuesday it said technical problems that plagued the program's rollout forced it to lower that estimate by 1 million to 6 million people.

"Those changes primarily reflect the significant technical problems that have been encountered in the initial phases of implementing the [law]," the CBO said. It said it couldn't yet revise estimates for future years. CBO also projected 8 million new people would qualify for Medicaid and other expanded coverage this year, down from a 2013 estimate of 9 million people.

The healthcare law's open enrollment process began in October and runs through March, and CBO estimated "the number of [people who sign up [for coverage] will increase sharply toward the end of the period," The Wall Street Journal reported.

In another finding, the CBO estimated that the government would collect a net of $8 billion through "risk corridor payments" from health insurers from 2015 through 2017. Previously, these payments between the government and insurers had been estimated to offset each other.

The CBO also reduced its estimate of the U.S. budget deficit for the current fiscal year and said sluggish economic growth and stubbornly high unemployment will cause the improvement to be short-lived.

The CBO said the deficit will fall to $514 billion in the fiscal 2014 year ended Sept. 30, down from its previous estimate of $560 billion and a fiscal 2013 deficit of $680 billion.

The deficit will decline to $478 billion in fiscal 2015, but the gap for that year will be $100 billion larger than previously estimated. The deficits will start to grow steadily thereafter as the economy struggles with an unemployment rate that fails to fall below 6.0 percent until late 2016, the non-partisan budget referee agency said.

The report may take some immediate pressure off of Congress for further deficit reduction, but makes clear that there are still major fiscal challenges ahead associated with the cost of caring for the fast-retiring Baby Boom generation and a chronically low participation in the labor force among Americans.

The CBO sharply cut its projections of U.S. GDP growth in 2015 by a full percentage point to 3.4 percent, where it also stays for 2016, down nearly a full point from the CBO's previous estimates.

"CBO estimates that the economy will continue to have considerable unused labor and capital resources, or 'slack' for the next few years," the agency said in the report.

This will hold down revenue gains, causing cumulative deficits through 2023 to be $1 trillion higher than previously projected. The deficit will top $1 trillion again in 2022, a level roughly equivalent to last year's deficit as a percentage of economic output.

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