Tag Archives: Congressional Budget Office

“Obamacare” Not Such a Disaster After All; Republicans Reconsider Opposition

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The Congressional Budget Office (CBO) has issued a document entitled “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014”.

I quote (some posts are easier to write than others):

Relative to their previous projections, CBO and JCT [Joint Committee on Taxation] now estimate that the ACA’s coverage provisions will result in lower net costs to the federal government: The agencies now project a net cost of $36 billion for 2014, $5 billion less than the previous projection for the year; and $1,383 billion for the 2015–2024 period, $104 billion less than the previous projection….

CBO and JCT estimate that the insurance coverage provisions of the ACA will increase the proportion of the non-elderly population with insurance from roughly 80 percent in the absence of the ACA to about 84 percent in 2014 and to about 89 percent in 2016 and beyond… CBO and JCT project that 12 million more non-elderly people will have health insurance in 2014 than would have had it in the absence of the ACA. They also project that 19 million more people will be insured in 2015, 25 million more will be insured in 2016, and 26 million more will be insured each year from 2017 through 2024 than would have been the case without the ACA.

In other words, the Affordable Care Act will cost less and result in more people having health insurance than previously estimated. Given these very encouraging new estimates, leading Republicans are reconsidering their short-sighted, hypocritical opposition to “Obamacare”. (I made up that last part.)

The Usual Fear Mongering Baloney

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Fox News headline: “ObamaCare could lead to loss of nearly 2.3 million US jobs, report says”.

Speaker of the House John Boehner tweets: “Pres. Obama’s [health care law] expected to destroy 2.3 million jobs”.

What the Congressional Budget Office really said:

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 largest declines in labor supply will probably occur among lower-wage workers….

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 business’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking, but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week)….

In other words, some people, especially low-wage workers, will decide to work less because of the ACA, mostly because of the benefits they’ll receive.

I don’t know why those who wrote the report believe this will result in fewer hours being worked. In the case of anyone but the self-employed, employers will presumably still want someone to work those hours. As the supply of labor declines, the demand for labor should increase, resulting in rising wages for some workers and job openings for others (and, of course, low wages and unemployment are still two of our major problems). 

You might even argue (incorrectly) that everybody should work as much as possible, because that’s the capitalist way. That’s very different, however, from saying the ACA is going to destroy millions of jobs. 

As usual, Paul Krugman offers thoughtful commentary on the economics and the social impact here and here.