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White House

Truth and Consequences of Obamacare Distortion

The CBO report was misinterpreted by the GOP for political gain as the White House deflects the big issue.

(NICHOLAS KAMM/AFP/Getty Images)

photo of Ron Fournier
February 5, 2014

The Congressional Budget Office report predicting that Obamacare will shrink the U.S. workforce by the equivalent of 2 million full-time jobs is a test for the political system. Is there still room for truth and fair debate? Or is Washington only capable of hypocrisy, demonization, and short-term thinking?

Don't put your money on the truth. Both Republicans and Democrats are vastly oversimplifying the CBO report and the effects of the Affordable Care Act, the GOP most egregiously.

The nonpartisan budget office's analysis produced a raft of misleading headlines. "The CBO Just Nuked Obamacare""Obamacare's Scorekeepers Deliver a Game-Changer""CBO: Obamacare to Cost 2.3 million Jobs Over 10 years."

 

Knowing better, Republicans called the analysis "devastating," "terrible," and proof that President Obama's signature initiative was a jobs killer. As Annie Lowrey and Jonathan Weisman wrote in The New York Times:

The report did say that the law would reduce hours worked and full-time employment, but not because of a crippling impact on private-sector job creation. With the expansion of insurance coverage, the budget office predicted, more people will choose not to work, and others will choose to work fewer hours than they might have otherwise to obtain employer-provided insurance. The cumulative reduction of hours is large: the equivalent of 2.5 million fewer full-time positions by 2024, the budget office said.

People will choose to leave the workforce entirely, or shift to part-time work, for two reasons, according to CBO. First, their access to health care is no longer linked to their employer. They're not locked into stifling jobs or career paths by a health care system built for the 20th century. Second, the ACA subsidies are based on income, which means it will be cheaper for some workers to leave work or go part time.

In other words, Obmacare will give workers choice. It will free millions from bureaucratic restraints and open opportunities to create small businesses (Sam Stein of The Huffington Post has a good example here), seek training for postindustrial employment, or spend more time raising their children. Family values and individual freedom are supposed to be GOP hallmarks. Why are they cherry-picking from the CBO report?

Because it's great politics. In 2012, the Republican Party hammered Democrats with CBO estimates that the ACA would reduce the workforce by 800,000. With that estimate more than doubled, and midterm elections looming, the GOP hopes to replicate their success in demonizing Obamacare during the 2010 congressional contests.

The shame of the GOP simplification strategy is that it glosses over some serious, generational questions.

Do we want to reduce the workforce participation rate? Some economists say it's already a major concern as the baby-boom generation leaves the workforce, and the ACA appears to hasten that trend. Others see the merits in nudging out older workers to make room for rising millennials, a generation stifled by war and recession.

Will the budget be hurt by the loss of taxes from 2.3 million workers? As Glenn Kessler writes in The Washington Post, the budget implications are real. Others might argue that near-universal health care is a decent social trade-off.

Will employees be encouraged to invest less in their workers? CBO says yes, noting that businesses will be less likely to spend money on training, for instance, if they expect big workforce turnover.

Should public policy encourage people to work less or not at all in hopes of maximizing their government subsidy? One reader spoke for many by tweeting under the handle @liberrocky, "From welfare queens to healthcare queens, heck of a job Obama."

All fair questions, lost in the septic spew we call debate. For me, the big story in the CBO report got little coverage:

CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024 (the end of the current 10-year projection period). Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government's debt).

I'll address this more deeply in a separate column, but CBO estimates that the nation's debt will be 100 percent of GDP (that's correct, 100 percent!) by 2038 unless we change course. That means wrenching entitlement cuts and/or significant tax increases, the former opposed by most Democrats and the latter rejected by most Republicans. Here's where the White House oversimplifies things.

Knowingly deceiving the public, Obama and his allies dismiss the debt crisis by noting that the deficit (annual levels of red ink) is lower than it has been. It's a false victory. CBO expects annual deficits to start climbing again in 2016 as the population ages further, and neither party has addressed the causes of durable debt that threaten the nation's fiscal strength and solvency.

That is the hard truth. Don't expect to hear much of it.

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