By Stephen C. Webster on Feb 6, 2014
The Congressional Budget Office (CBO) issued a new report on the Affordable Care Act (PDF) this week that, for better or worse, immediately became fodder for the Republican Party’s leading voices and the conservative propaganda machine.
“This costly law is not only pushing government spending to new heights; it is disrupting coverage and leaving millions of Americans worse off,” Rep. Paul Ryan (R-WI) declared in a media advisory issued mere hours after the 182-page document was released. Fox News also chimed in, telling readers that “ObamaCare could lead to the loss of nearly 2.3 million US jobs.” House Speaker John Boehner (R-OH) added his two cents as well, claiming "the middle class is getting squeezed in this economy, and this CBO report confirms that Obamacare is making it worse.”
However, Ryan, Boehner and Fox News completely missed the point in their haste to boil the report down to sound bytes. The CBO did not say that the Affordable Care Act will cause 2.3 million people to lose their jobs. In fact, the report says quite the opposite.
Republicans base their doom-and-gloom pronouncements on a single paragraph in the CBO report, which reads:
The reduction in CBO's projections of hours worked represents 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. Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA. The decline in fulltime-equivalent employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours; however, CBO has not tried to quantify those two components of the overall effect.
Shocking, right? It sounds as if the CBO is confirming Republican rhetoric about Obama’s job-killing health care law. Except, that’s not it at all.
The report continues:
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 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).
In other words, the Affordable Care Act is not expected to cause much of a dip in the demand for labor. Instead, it will reduce the supply. The CBO says this explicitly -- noting that a reduction in total hours worked will happen “almost entirely because workers will choose to supply less labor” -- which makes it even harder to understand the GOP spin.
Dean Baker, an economist with the Center for Economic and Policy Research, explains that the reduction in labor supply is “a feature, not a bug.” By his reading, the CBO’s report says that people like new mothers and ailing retirees won’t have to work as much, or at all in some cases, because the Affordable Care Act made their health care costs much more manageable. “Is this an awful story?” he asks. “You be the judge.”
Baker delivers a coup de grâce to the GOP’s talking points by explaining how Obamacare will actually drive wages up. “If hours fall by 1.5 to 2.0 percent, but compensation falls by 1.0 percent, then compensation per hour rises by 0.5-1.0 percent due to the ACA,” he writes. “If this is bad news for workers then someone must have been enjoying the new found freedoms in Colorado or Washington State too much.”
Considering these facts, it’s hard to imagine how Republican rhetoric could be any more wrong than it is in this instance. They are either lying about the report, or they do not understand the difference between supply and demand.
No matter which of these conclusions you choose, it doesn’t look good for the GOP.