Earlier today, the non-partisan Congressional Budget Office released the Budget and Economic Outlook: 2014-2024. Unfortunately, the news contained in this analysis does not paint a very bright economic picture for the near future. The most striking bit of news that surfaces in this report is the projection that 2.5 million additional jobs will be lost due to the implementation of Obamacare, or the Affordable Healthcare Act. As outlined in the report:
CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive. CBO estimates that the reduction in the numbers of hours worked will lead to the equivalent of 2 million fewer workers in the labor force in 2017. That number will rise 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 federal yearly budget deficit has decreased during the past few years, and it is on a path to decline further this year and next year, CBO estimates that under current law, the deficit will total $514 billion in fiscal year 2014, as compared to $1.4 trillion in 2009. Normally, a decreasing deficit would be a good sign for the economy, however, because the large budget deficits incurred in recent years,the national debt has been significantly increased. Now, the amount of debt, relative to the size of the economy, is very high by historical standards. “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. 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).”
Based on these new projections, it appears that the effects of the Affordable Healthcare Act are going to be more detrimental to the economy overall than originally projected. It is also hard to predict the effects of the ACA employer mandate, which kicks in next year. The effect of the ACA stunting employment and compensation, coupled with the increasing amount of debt to GDP, and continued market uncertainty could lead to a Greece-like economic meltdown. The good news is, this Administration and Congress do have the power to enact new policies that will create jobs, replace or repeal the parts of the ACA that aren’t working, and interject some certainty into the economy for employers and employees. Will this non-partisan report by the CBO be a wake-up call for politicians in Washington D.C. or will they continue down the road of partisan gridlock, to our county’s own detriment?