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"What the Affordable Care Act does, is to provide subsidies focused on lower- and lower-middle-income people to buy health insurance. And in order to encourage a sufficient number of people to buy an expensive product like health insurance, the subsidies are fairly large in dollar terms. Those subsidies are then withdrawn over time -- withdrawn from people as their income rises. "And by providing heavily subsidized health insurance to people with very low income, and then withdrawing those subsidies as income rises, the (Affordable Care) Act creates a disincentive for people to work, relative to what would have been the case in the absence of that Act," Elmendorf told the House Budget Committee. He added that the subsidies "make those lower-income people better off...but they do have less of an incentive to work."
Committee Chair Rep. Paul Ryan (R-Wis.) said those low-income people may be better off in terms of health care, but not when it comes to getting on the "ladder of life." "[T]o begin working, getting the dignity of work, getting more opportunities, rising (sic) their income, joining the middle class -- this means fewer people will do that," Ryan said. "That's why I'm troubled by this."
Ryan also noted that as Baby Boomers retire in large numbers, "far fewer" people are following them into the workforce -- and combined with Obamacare's disincentive to work, it all has "jaw-dropping" implications for the economy and debt reduction. "We're not prepared for the Boomers and their retirement. But what this (Obamacare subsidies) is doing, is it's adding insult to injury. You're saying, because of government policies, as the welfare state expands, the incentive to work declines -- meaning, grow the government and you shrink the economy. Fewer people are going to be working, and the economy will be slower as a result."
In response to a question by Rep. Ryan, Elmendorf said the Affordable Care Act "will reduce the total number of hours worked in the economy by between one-and-a-half and two percent from 2017 to 2024." "It's not that employers are laying people off," Ryan clarified: "It's that people aren't working in the workforce -- aren't supplying labor (equivalent to 2.5 million jobs by 2024), and as a result, that lower workforce participation rate -- that less labor supply -- lowers economic growth." "Yes, that's right, Mr. Chairman," Elmendorf responded.
CBO Director: Obamacare 'Creates a Disincentive for People to Work' | CNS News
But economist Art Laffer disagrees. "It's such la-la land stuff. I've never heard such nonsense in my life," Laffer, a former Reagan adviser, told Fox News on Wednesday. "It's amazing how these people don't understand budgets or economics." A report released Tuesday by the Congressional Budget Office says Obamacare will cost the economy the equivalent of 2 million full-time workers by 2017 and 2.5 million by 2024, as taxpayer-subsidized health insurance makes work more of a choice than a necessity, particularly for low-wage workers. Laffer compared the subsidies to a smorgasbord, where people overeat because the food is free: "You can't give away very valuable resources for free and expect people not to overuse them and to have the system go bankrupt. That's the very simple truth," Laffer said.
The solution, Laffer said, is to repeal the Affordable Care Act. "If this law is allowed to continue for the next decade, it will be a catastrophe for the U.S. economy." Laffer said people do need to work to provide for their families. "That's what work's all about," he said. "Now hopefully, you love your work as well. But if you don't love your work, it doesn't mean you should be paid not to work so you can sit at home and dream. That's just silly. "And we need to keep production going to provide for the standards of living that we have in this country...We need to get America going and growing again, to lift people out of poverty with good, high-paying jobs, even if they are a little unpleasant."
Appendix C of the CBO report released on Tuesday notes that "subsidies clearly alter recipients incentives to work." It further says that Obamacare subsidies "will reduce incentives to work" because those subsidies decline as incomes rise -- "thus making work less attractive." "As a result," the report said, "some people will choose not to work or will work less -- thus substituting other activities for work."
The law's employer penalty may also discourage workers, CBO said. Under the Affordable Care Act, employers with 50 or more full-time-equivalent employees will face a penalty starting in 2015 if they do not offer insurance -- or if the insurance they offer doesn't meet federal requirements. "In CBOs judgment, the costs of the penalty eventually will be borne primarily by workers in the form of reductions in wages or other compensation." And -- "because the supply of labor is responsive to changes in compensation, the employer penalty will ultimately induce some workers to supply less labor" -- work less, in other words.
White House Defense of Obamacare Is 'Such La-La-Land Stuff,' Economist Says | CNS News