The ACA and CBO – Even Worse Than the Hype

Posted on February 5, 2014 by Kathy Hoekstra

A closer reading of the latest CBO shows why it's important to look past the headlines

The Congressional Budget Office yesterday released its latest analysis, “The Budget and Economic Outlook: 2014 to 2024”.

The ominous headlines quickly followed, effectively declaring that the Affordable Care Act would be responsible for 2.3 million job losses:

CBO nearly triples estimate of working hours lost by 2021 due to Affordable Care Act

Obamacare to cut work hours by equivalent of 2 million jobs: CBO

Obamacare will push 2 million workers out of labor market: CBO

Opponents of the health care law were very quick to condemn it – and it should be condemned – but based on a proper reading of the CBO report, not hype.

Government reports are not always easy reading, nor, understandably, do most people have the time to pore through its 181 pages.

In its analysis, The CBO does state that the ACA will impact the equivalent of 2.3 million full time jobs by 2021. While the news outlets are correct in both the number and the cause, there’s a very important nuance spelled out in the report that needs to be considered when we hear the health care law itself is pushing people out of the job market. That nuance is personal choice:

“The reduction in full-time-equivalent employment that CBO expects will arise from the ACA  includes some people choosing not to work at all and other people choosing to work fewer hours than they would have in the absence of the law”

In short, the workers – not employers – will choose to reduce their work hours or quit their jobs altogether, because the availability of the ACA exchange subsidies gets higher as income gets lower, making work “less attractive” for lower-income earners:

“However, 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.”

Simply put, because the ACA makes the subsidies more generous for those who earn less, they’re the ones most likely to conclude they’re better off quitting their jobs or cutting their hours.

For instance: Consider a low-wage employee who works because the job provides health insurance. Give that worker the insurance without needing a job, and that person is more likely to quit or cut back on work hours.

This may be of benefit to the individual who is now able to spend his or her time doing something else, but this is no way to grow an economy.  

Instead, this leads to fewer bodies in the overall workforce, grows the welfare state, drives up the deficit and reduces the number of people paying taxes.

And the fact that the ACA now creates an optimal choice for people to not want to work is even worse than if it were employers forcing them off the job. It is killing the very drive that built this great nation of entrepreneurs and business leaders.

The ACA continues to have a devastating effect on job creation and our American system of free enterprise, and the government itself predicts it will get much worse – by choice.