- The CBO updated its budget and economic outlook; many in the media got it wrong
- Aaron Carroll: The claim that CBO projects millions of jobs lost because of Obamacare is false
- He says CBO says there will be a reduction in supply of labor; this is actually a good thing
- Carroll: Because Obamacare would provide benefits, people can choose to stop working
On Tuesday, the CBO released its update to the budget and economic outlook. Many in the media got it wrong. This isn't the first time that's happened.
In early 2011, after winning a decisive victory in the House of Representatives, the newly Republican Congress brought H.R.2 -- a legislation that would repeal Obamacare -- up for a vote. It was called "Repealing the Job-Killing Health-Care Law Act." It was named under the notion that the Affordable Care Act would result in the loss of millions of jobs. The claim was based on a CBO report on the Budget and Economic Outlook published in summer 2010.
But the words "job killing" never appeared in the report. What was said (on page 48 for those interested), was that the ACA would reduce the amount of labor used in the economy by about one-half of 1%, mostly "by reducing the amount of labor that workers choose to supply." The fact that there would be a reduction in the supply of labor was because the ACA would provide benefits to people.
Giving some people Medicaid and others subsidies to help them pay for insurance would leave some people more flush with resources. They might choose to work fewer hours, or not at all. A number of people just under age 65 might have liked to retire before the ACA, but they knew they couldn't get insurance without a job. Since the ACA now would guarantee them more affordable options, they might choose to retire earlier. Also, a number of would-be entrepreneurs might have liked to have struck out on their own, but feared they wouldn't be able to get insurance for the same reason. The ACA would protect them. They might leave their jobs to start businesses.
All these projections are considered by most people to be good things. But they all result in people voluntarily leaving the work force. They constitute a reduction in labor, caused by the ACA. And that's what the CBO was talking about.
But opponents of the ACA spun this into something bad. And so the "job-killing" meme was born.
Flash forward to February 4, 2014. The CBO updated its Budget and Economic Outlook for 2014 through 2024. Once again, the CBO reported that there would be a reduction in the labor force because workers will choose to work less because of the benefits they receive. In fact, the CBO thinks that these choices will result in a reduction in the labor force of about 2 million fewer full time positions in 2017. This time the key passage is on page 117-8:
"The estimated reduction stems almost entirely from a net decline in the amount of labor that workers will choose to supply, rather than from a net drop in businesses' demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would 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)."
Again, for many people this is a good thing. The ACA is letting some people who would rather stay at home -- perhaps to raise their children -- do so because benefits are improving. It's letting people who want to retire early do so because they don't have to wait for Medicare. These things are consequences the people who wrote the law intended, and the CBO reports them as such.
I understand why opponents of the ACA have long tried to twist these facts to support a position that declares the ACA is hurting the economy and increasing unemployment. But I'm baffled as to why the media failed to see that the key piece of evidence, the CBO report, didn't uphold their claims.
There's a big difference between a reduction in the supply of labor and a reduction in the demand for labor. It's time we all learned the difference.
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