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Yesterday, Washington’s official non-partisan bean-counter, the Congressional Budget Office, dropped a bomb. By 2024, says the CBO, Obamacare will reduce the size of the U.S. labor force by 2.5 million full-time-equivalent workers. That’s roughly triple what the CBO had estimated three years ago. Such a sizeable decline in the labor force will have substantial detrimental effects on the U.S. economic and fiscal picture. But the CBO wasn’t responsible for the most amazing thing that happened yesterday.
That title belongs to the Obama White House, where Press Secretary Jay Carney claimed that 2.5 million Americans leaving the workforce was a good thing, because they would no longer be “trapped in a job.”
Statement by the Press Secretary on Today’s CBO Report and the Affordable Care Act
Since the Affordable Care Act passed into law in March 2010 the private sector has added 8.1 million jobs. That is the strongest 45 month job growth since the late 1990s and contrasts with the 3.8 million private sector jobs lost in the decade before the Affordable Care Act passed.
Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report. CBO’s findings are not driven by an assumption that ACA will lead employers to eliminate jobs or reduce hours, in fact, the report itself says that there is “no compelling evidence that part-time employment has increased as a result of the ACA.”
While many factors affect job growth, the actual performance of businesses refutes those who predicted that the Affordable Care Act would dramatically hurt the economy.
What the CBO report does find is one key immediate effect of the Affordable Care Act is to “induce some employers to hire more workers or to increase the hours of current employees” during the 2014-16 period. Over the longer run, CBO finds that because of this law, 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. At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams. This CBO report bears that out, and the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity.
In addition, the CBO itself confirms that this analysis of the implications of the ACA on the labor force is incomplete, does not take into account the impact that ACA’s slowing health care cost growth which experts have estimated that slower growth in health costs due to the ACA will cause the economy to add an additional 250,000 to 400,000 jobs per year by the end of the decade. Moreover, CBO does not take into account positive impacts on worker productivity due to the ACA’s role in improving workers’ health, including reduced absenteeism.
Finally, as it has since the enactment of the ACA, CBO continues to confirm that the ACA is projected to reduce the deficit by more than $1 trillion over the next two decades.
Here’s what happened. In its annual, 182-page Budget and Economic Outlook, the CBO undertook an overhaul of the way it analyzes the effect of Obamacare on the job market. The new, larger estimate of the law’s negative impact on the labor force derives from three factors: (1) Obamacare’s employer mandate, which will discourage hiring and reduce wages offered by employers; (2) Obamacare’s $1 trillion in tax increases, which will discourage work and depress economic growth; and (3) the law’s $2 trillion in subsidies for low-income individuals, which will discourage many from remaining in the labor force.