CBO Director: Obamacare 'Creates a Disincentive for People to Work'

February 5, 2014 - 12:08 PM

CBO Director Douglas Elmendorf

CBO Director Douglas Elmendorf (AP photo)

(CNSNews.com) - The subsidies that help low-income people buy expensive health insurance are a 'disincentive for people to work," Douglas Elmendorf, director of the Congressional Budget Office, told Congress on Wednesday.

"What the Affordable Care Act does, is to provide subsidies focused on lower- and lower-middle-income people to buy health insurance. And in order to encourage a sufficient number of people to buy an expensive product like health  insurance, the subsidies are fairly large in dollar terms. Those subsidies are then withdrawn over time -- withdrawn from people as their income rises.

"And by providing heavily subsidized health insurance to people with very low income, and then withdrawing those subsidies as income rises, the (Affordable Care) Act creates a disincentive for people to work, relative to what would have been the case in the absence of that Act," Elmendorf told the House Budget Committee.

He added that the subsidies "make those lower-income people better off...but they do have less of an incentive to work."

Committee Chair Rep. Paul Ryan (R-Wis.) said those low-income people may be better off in terms of health care, but not when it comes to getting on the "ladder of life."

"[T]o begin working, getting the dignity of work, getting more opportunities, rising (sic) their income, joining the middle class -- this means fewer people will do that," Ryan said. "That's why I'm troubled by this."

Ryan also noted that as Baby Boomers retire in large numbers, "far fewer" people are following them into the workforce -- and combined with Obamacare's disincentive to work, it all has "jaw-dropping" implications for the economy and debt reduction.

"We're not prepared for the Boomers and their retirement. But what this (Obamacare subsidies) is doing, is it's adding insult to injury. You're saying, because of government policies, as the welfare state expands, the incentive to work declines -- meaning, grow the government and you shrink the economy. Fewer people are going to be working, and the economy will be slower as a result."

In response to a question by Rep. Ryan, Elmendorf said the Affordable Care Act "will reduce the total number of hours worked in the economy by between one-and-a-half and two percent from 2017 to 2024."

"It's not that employers are laying people off," Ryan clarified: "It's that people aren't working in the workforce -- aren't supplying labor (equivalent to 2.5 million jobs by 2024), and as a result, that lower workforce participation rate -- that less labor supply -- lowers economic growth."

"Yes, that's right, Mr. Chairman," Elmendorf responded.