CBO Says ObamaCare to Reduce Work Force by 2 Million Full-Time Jobs

A report released this week by the Congressional Budget Office (CBO) estimated that ObamaCare would reduce the work force in the United States by the equivalent of 2 million full-time jobs by 2017.

The reduction in work hours is expected to come primarily from low-income wage earners, who rely on subsidies provided by ObamaCare to pay for their health insurance.  Those low-income wage earners are expected to reduce the number of hours they work to ensure they continue to qualify for those insurance subsidies.  The decision to work fewer hours will be especially felt in 2017 when ObamaCare expands Medicaid coverage.

In summary, the report from the CBO said ObamaCare would “reduce incentives to work” and was effectively an “implicit tax on working,” because those who work too many hours will lose the insurance subsidies provided by ObamaCare, effectively reducing their overall income.

“The phaseout effectively raises people’s marginal tax rates, thus discouraging work,” noted the CBO report.

“It is analogous in some ways to raising the minimum wage, and that effect will reduce the demand for labor in the short term,” added Doug Elmendorf, Director of the CBO.

CBO Report on ObamaCare Provides Further Ammunition Against Health Care Law

Republican lawmakers were quick to seize the report as one more piece of evidence that ObamaCare is overall a bad thing for the American worker 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,” noted John Boehner, the Speaker of the House of Representatives.  “The middle class is getting squeezed in this economy, and this CBO report confirms that ObamaCare is making it worse.”

A representative of the White House claimed the CBO report and Republican lawmakers were mischaracterizing the reduction of jobs.  According to Jason Furman, the Chairman of the Council of Economic Advisers, ObamaCare is not causing businesses to cut actual jobs, but rather it is giving workers more to consider when deciding how much they work.

While Furman’s point of view can make the impact of ObamaCare sound like a positive one, because millions of workers may now choose to work less, the reality is that fewer hours worked will slow the growth of employment and the overall economy.  In addition, it means income tax dollars paid by those who do work will have to be used to offset the lost income tax dollars from those who opt to work less.

Republicans are expected to use the CBO’s report and other issues encountered with the rollout of ObamaCare to improve their position in Congress in the November 2014 elections.

Purpose of the CBO

The CBO is a federal agency that was created in 1974 to provide an independent analysis of the economy and the economic impact decisions made by Congress and the President will have.  To maintain the office’s independence, the office employees individuals based on their experience and competence in financial matters, not based on political affiliation.

Congress uses the economic analysis provided by the CBO in making decisions on the federal budget.  Reports from the office are also made available to the public.

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by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.