CBO: Obamacare Will 'Reduce Incentives to Work;' WH Spins It As 'Choice'

February 5, 2014 - 7:32 AM
Health Overhaul Jobs

President Barack Obama signs the Affordable Care Act on March 23, 2010. (AP Photo/Charles Dharapak, File)

(CNSNews.com) - For some Americans, Obamacare's subsidies will "reduce incentives to work," the Congressional Budget Office reported on Tuesday.

That's partly because as incomes rise, Obamacare's subsidies will decline -- "thus making work less attractive" for people on the lower end of the wage scale. "As a result, some people will choose not to work or will work less -- thus substituting other activities for work," the report said.

The Obama White House -- trying to turn a negative (less work, more entitlements) into a positive -- has seized on the word "choice."

"This is a choice on the part of workers," Jason Furman, the chairman of the President's Council of Economic Advisers, told reporters at the White House on Tuesday.

According to Furman, the CBO reported "that workers will choose (to) supply less labor." It's not that businesses are cutting jobs, he insisted. It's that workers will choose to work less, or not at all. (This puts a greater burden on full-time workers, whose taxes subsidize those who choose to work less.)

"So to some degree this might be somebody who used to work 60 hours because they needed health insurance, and that was the only job that offered it, and now they can get a different job at 35 hours that doesn't offer health insurance, but they're getting it through this (Obamacare exchanges) and they're switching from one to the other, and that's a better choice for that person, and this has given them that option that they didn't used to have," Furman said.

CBO said Obamacare's largest impact on labor markets will probably happen after 2016, once the law's major provisions have taken full effect.

The report (Appendix C) says: "CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 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.

"The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024." (In other words, the economy will lose the equivalent of 2 million full-time workers by 2017 and 2.5 million by 2024.) "Although CBO projects that total employment...will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA."

Furman said, "[T]here is no dispute that the Affordable Care Act provides people with new options, and that people who today are doing a set of things because they don't have options and choices, will be able to do new things that they would not have otherwise chosen to do, in many cases not have been able to do."

To further illustrate the concept of choice, Furman offered the example of someone enrolled in Medicaid:

"There's some evidence that if you have just a single person, Medicaid is not going to impact their choice about working, and that's because if you are the only breadwinner in your family because you're the only person in your family, you're going to need to have a job; you're going to need to work. There have been studies that have found that if two people are married and they get Medicaid that that might lead a spouse who otherwise would have gotten a job and worked really hard to buy health care for the whole family -- might not need to get a full-time job, might get a part-time job and have more time to spend with their children as a result of the new option they have for health care.

"That is one of the types of choices that people would have now that they wouldn't necessarily have had before. And that's one of the choices in the types of studies that CBO's relying on in making this finding."

Asked if Obamacare's subsidies will "incentivize" some people to work less, Furman said it could be an incentive for them to "do more."  "There's an incentive for more entrepreneurship, because they're not locked into a job, there's an incentive for ... employers to be able to hire more people, because the cost of health care is lower. There's an incentive to hire workers who are going to be absentees less.

"So I think there's a whole bunch of puts and takes here that we need to take into account."

Furman also insisted that the CBO's findings are not an argument to get rid of Obamacare:

"And I have no doubt that if, for example, we got rid of Social Security and Medicare, there are many 95-year-olds that would choose to work more to avoid, you know, potentially starving or to give themselves an opportunity to get health care. I don't think anyone would say that was a compelling argument to eliminate Social Security and Medicare. Similarly, here CBO's analysis itself is about the choices that workers are making in the face of new options afforded to them by the Affordable Care Act, not something about firms destroying jobs."

Furman said he thinks the CBO "does excellent work," but -- "No matter how excellent any organization's work is, number one, it's subject to be misinterpreted, and a lot of what I've been talking about here is the way that this has been interpreted." He also said the report "doesn't take into account every factor, and there's uncertainty and debate around it."

The business and economic reporting of CNSNews.com is funded in part with a gift made in memory of Dr. Keith C. Wold.