Congressional Budget Office director Douglas Elmendorf told a House committee why his office’s new report predicts 2.3 million people will leave the workforce due to Obamacare, explaining that healthcare subsidies “create a disincentive for people to work.”
Elmendorf testified before the House budget committee Wednesday about the new report, which set Washington abuzz and forced the White House into damage-control mode. This morning, Republican Budget chairman Paul Ryan sought further clarification of the CBO’s analysis.
“So who are these workers?” Ryan pressed. “I mean, I know this is the statistical realm, but who are the people typically in this category? What kind of worker, from an income-scale side, are being affected by this?”
“The effect is principally on the labor supply of lower-wage workers,” Elmendorf replied. “And the reason is that, 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, those subsidies are fairly large in dollar terms.
“Those subsidies are then withdrawn for people as their income rises,” he explained. “And by providing heavily-subisided health insurance to people with very low income, and then withdrawing those subsidies as income rises, the Act creates a disincentive for people to work, relative to what would’ve been the case in the absence of that Act.”
Elmendorf noted that the disincentive isn’t the same as a tax — which can also discourage work by pushing people to avoid higher income tax brackets — because this is something that leaves them “better off.”
Ryan pushed back. “I guess I understand the ‘better off’ in the context of healthcare,” he said. “But ‘better off’ in inducing a person not to work who is on the low-income scale, not to get on the ladder of life, to begin working, getting the dignity of work, getting more opportunities, raising their income, joining the middle class — this means fewer people will do that! That’s why I’m troubled by this.”
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