In its latest U.S. fiscal outlook, the nonpartisan CBO said the
health law would lead some workers, particularly those with lower
incomes, to limit their hours to avoid losing federal subsidies that
Obamacare provides to help pay for health insurance and other
White House officials characterized reduced hours as a reflection of
new choices for workers. CBO officials pointed to older workers as
one example, saying some nearing retirement could decide to keep
their work hours shorter to maintain healthcare subsidies until they
qualified for Medicare.
But the report also referred to healthcare subsidies in less upbeat
terms, saying assistance would "reduce incentives to work" and pose
an "implicit tax on working" for those returning to a job with
The biggest impact would begin in 2017, CBO said, because major
provisions of the law, including an expansion of the Medicaid
program for the poor in half of the 50 U.S. states, will be well
under way by then. The CBO said there would be smaller declines in
work hours that would occur before then.
Work hours would be reduced by the equivalent of 2.5 million jobs in
2024, said the agency, which earlier predicted 800,000 fewer
full-time jobs by 2021. The bottom line would be a slower rate of
growth for employment and compensation in the coming decade,
according to the report.
The link that the CBO drew between the health law and slower
employment growth is likely to become fodder for partisan attacks in
this year's congressional election battle, which will determine who
controls Congress in the final years of the Obama presidency.
Obamacare was unpopular with many voters before its botched October
rollout. A month later, Obama weathered one of the biggest political
blowbacks of his presidency as millions of people received notice
that their health plans would be canceled because they did not meet
the law's new standards.
Republicans, who have already made Obama's Patient Protection and
Affordable Care Act (ACA) a top campaign issue for November, seized
on the CBO report to press their argument that Obamacare is putting
a damper on jobs growth and the economy.
"The president's healthcare law creates uncertainty for small
businesses, hurts take-home pay, and makes it harder to invest in
new workers. The middle class is getting squeezed in this economy,
and this CBO report confirms that Obamacare is making it worse,"
House of Representatives Speaker John Boehner said in a statement.
But the CBO report undercut a Republican claim that so-called risk
provisions that would compensate health insurers for unexpected
losses amount to a bailout and should be repealed. The report said
the provisions would actually net the federal government $8 billion
over three years.
The White House pushed back on the argument that Obama's signature
domestic policy achievement would mean an actual reduction in jobs.
"It's not that the businesses are cutting those jobs," said Jason
Furman, who chairs the White House Council of Economic Advisers. He
said the CBO report showed an impact on labor supply rather than
demand for workers from employers.
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The CBO report offered some bright spots on the broader fiscal
front, saying the U.S. budget deficit would be a smaller than
expected $514 billion in the fiscal 2014 year ended September 30.
That is down from a previous estimate of $560 billion and a fiscal
2013 deficit of $680 billion.
But sluggish economic growth and stubbornly high unemployment would
cause the improvement to be short-lived, it said.
Medicare, the huge government healthcare program for the elderly and
disabled that has become a target for deficit hawks in recent years,
will continue to grow at a slow rate 1.5 percent per beneficiary
over the next decade. But as the U.S. population ages, overall
Medicare spending will still top $1 trillion in 2024, versus $603
billion this year.
SIX MILLION ENROLLEES
The CBO said Obamacare would enroll 1 million fewer uninsured
Americans than initially expected as a result of technical glitches
that largely paralyzed the federal website HealthCare.gov in the
first two months of open enrollment.
In a fresh forecast for 2014, the CBO estimated that 6 million
people would sign up for private coverage through new health
insurance marketplaces, down from an earlier forecast of 7 million.
But the report predicted that the program would eventually overcome
the deficit, signing up 24 million people by 2017.
The Obama administration says the health insurance marketplaces now
operating in all 50 states and the District of Columbia have
enrolled about 3 million people in private coverage so far, with
volumes increasing following major fixes to HealthCare.gov.
Despite claims from Obamacare critics about the law's potential
effects on hiring, CBO said the expected drop in work hours between
2017 and 2024 would result largely from worker decisions not to
participate in the labor force, rather than from higher unemployment
or the inability of part-time workers to find full-time hours.
"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 businesses' demand for labor," CBO said.
According to the report, federal subsidies can be substantial,
particularly for lower-wage workers who receive more under the law's
sliding income scale. But that also means the benefits can be phased
out as a worker's income rises.
"The phaseout effectively raises people's marginal tax rates (the
tax rates applying to their last dollar of income), thus
discouraging work," CBO said.
But CBO Director Doug Elmendorf told reporters that the labor market
would adjust in time.
"It is analogous in some ways to raising the minimum wage, and that
effect will reduce the demand for labor in the short term," he said.
(Additional reporting by Roberta Rampton in Washington; editing by
Caren Bohan and Matthew Lewis)
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