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CBO Report (I) – CBO Says ACA Is Good for US Economy, Really

Posted by John McDonough  February 6, 2014 08:08 PM

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This week, the Congressional Budget Office (CBO) released its annual Budget and Economic Outlook for 2014-2024. If you have never viewed one of the reports, I recommend looking at this one.  It's fascinating on many levels.

I can't recall CBO's Outlook ever getting this much attention as this one, specifically because of CBO Budget Outlook-cropped-proto-custom_5-thumb-195xauto-6062.jpgnew estimates of the numbers of Americans who will stop working or reduce their hours of work between now and 2014 because they can now get health insurance coverage outside of their jobs thanks to the Affordable Care Act.

Two things: First, the oversized reaction to the estimate is one further example of the ACA insanity that continues to grip the nation's political class. Second, the CBO report contains a lot of compelling analysis about the nation's health system over the next 10 years that has been completely ignored.

Let's consider both of these, the second in a companion post following this one.

First, the insanity. Here is what the Report says:

"The ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period 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 ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017-2024 period ... 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. ... some people not being employed at all and other people working fewer hours ... 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 ... ACA will lead to a net reduction in the supply of labor" (pgs. 117-8)

"On balance, CBO estimates that the ACA will boost overall demand for goods and services over the next few years because the people who will benefit from the expansion of Medicaid and from access to the exchange subsidies are predominantly in lower-income households and thus are likely to spend a considerable fraction of their additional resources on goods and services ... The net increase in demand for goods and services will in turn boost demand for labor over the next few years, CBO estimates." (page 125)

That's it. People who were staying in their jobs for the sole reason to qualify for employer health insurance no longer need to do so as of January 1, 2014. Over the next 10 years, some of them will voluntarily leave their jobs or reduce their numbers of hours worked by their own free choice. No lost jobs, no layoffs. Social Security did the same thing; many seniors stopped working when Social Security began because their SS benefits allowed them to do so. That also reduced the number of hours worked. Heck, same thing with outlawing child labor; fewer hours worked because of that, for sure.

Right now, Republicans are deliberately misrepresenting the CBO finding to claim that people will be losing their jobs. Their claims are both untrue and dishonest.
This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »


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