President Barack Obama’s healthcare overhaul will remove an estimated 2.3 million Americans from the workforce by 2021, according to a report released by the Congressional Budget Office this week.
The bottom line of the CBO report is that the negative economic consequences of Obamacare are “substantially larger” than previously predicted.
The nonpartisan budget watchdog reports that Obamacare “will raise effective tax rates on earnings from labor,” while also creating incentive for some Americans to sign up for government benefits instead of seeking employment.
“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 to 2 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive,” CBO analysts said in their economic outlook.
“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 business’ demand for labor,” the CBO report said.
Obamacare proponents have already begun spinning the CBO findings as a positive, saying that the Americans leaving the workforce are people who shouldn’t be working in the first place.
Via the Los Angeles Times:
The CBO projects that the act will reduce the supply of labor, not the availability of jobs. There’s a big difference. In fact, it suggests that aggregate demand for labor (that is, the number of jobs) will increase, not decrease; but that many workers or would-be workers will be prompted by the ACA to leave the labor force, many of them voluntarily.
As economist Dean Baker points out, this is, in fact, a beneficial effect of the law, and a sign that it will achieve an important goal. It helps “older workers with serious health conditions who are working now because this is the only way to get health insurance. And (one for the family-values crowd) many young mothers who return to work earlier than they would like because they need health insurance. This is a huge plus.”
And White House press secretary Jay Carney said that under Obamacare, “individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families.”
Of course, Obamacare supporters fail to acknowledge the CBO’s prediction that a shrinking workforce will have on the economy as a whole. The agency indicates that the workforce is already 6 million jobs short of where it should be.
By 2018, following some modest recovery, the CBO predicts that the economy will slow to a pace of expansion of 2.2 percent. As a result, government deficits will snowball to $7.3 trillion between 2014 and 2024 as tax revenues plummet because of the shrinking workforce. According to the CBO, the gross debt of the United States will rise to $27 trillion by 2025.