Agency: Health law curbs work carrot

Tax credits, employer mandate seen paring job hours by up to 2% in 2017-24

White House press secretary Jay Carney said Tuesday at the White House that because of the Affordable Care Act, individuals, over time, “will be empowered to make choices” about how much they want to work and still be able to have health care.
White House press secretary Jay Carney said Tuesday at the White House that because of the Affordable Care Act, individuals, over time, “will be empowered to make choices” about how much they want to work and still be able to have health care.

WASHINGTON - The Patient Protection and Affordable Care Act will reduce the total number of hours Americans work by the equivalent of 2 million full-time jobs in 2017, the Congressional Budget Office said, sparking renewed Republican criticism of the law and a fresh defense from the White House.

The office also sees the budget deficit falling to $514 billion in fiscal 2014, or about 3 percent of economic output, from $1.4 trillion in 2009. Many economists consider deficits of that size to be sustainable in the long term. The budget office sees the deficit continuing to drop in fiscal 2015 before rising again as government spending picks up, absent congressional action.

The total number of hours worked will fall about 1.5 percent to 2 percent from 2017 to 2024 as a result of the healthcare overhaul, the budget office said Tuesday. The reduction, about twice the agency’s estimate in 2010, is due “almost entirely” to low-wage employees who may choose to give up extra hours of work to avoid losing subsidies or tax advantages under the law, the report said.

But it will also have an effect on businesses, the report said, including by encouraging them to reduce employee hours to avoid the so-called employer mandate. Employers with more than 50 full-time-equivalent employees face a potential tax if they do not provide health-insurance coverage.

Republicans said their warnings that the health law would discourage employment are proving correct. The report “is further evidence the president’s health-care law is destroying full-time jobs,” U.S. Rep. John Kline, a Minnesota Republican who is chairman of the House Education and the Workforce Committee, said in a statement.

“For years, Republicans have said that the president’s health-care law creates uncertainty for small businesses, hurts take-home pay, and makes it harder to invest in new workers,” said House Speaker John Boehner of Ohio. “The middle class is getting squeezed in this economy, and this CBO report confirms that Obamacare is making it worse.”

President Barack Obama’s advisers pushed back against Republican interpretations of the report and assertions that the law would cause employers to cut jobs and hours.

“Over the longer run, CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years, or choosing to spend more time with their families,” White House press secretary Jay Carney said in a statement.

The Affordable Care Act is expected to cover 6 million people through its insurance exchanges this year, according to the report. About 8 million people will enroll in an expansion of Medicaid, the state-run health plan for the poor, under the law.

Both figures represent reductions of 1 million from the agency’s estimates before the Obama administration’s faltering rollout of the insurance expansion that began in October.

The Affordable Care Act marks the largest U.S. expansion of health insurance in more than 40 years. The law was passed by a Democratically controlled Congress in 2010, and many of its major provisions took full effect Jan. 1. The law set up government-run insurance exchanges where Americans can buy private health plans with the help of federal tax credits. It also expanded eligibility in Medicaid.

About 3 million people signed up for the private plans from Oct. 1 to Jan. 24, the Department of Health and Human Services said last month.

The law’s first enrollment period ends March 31.

By 2017, from 24 million to 25 million are expected to obtain coverage each year, the budget office said.

The subsidies given to low wage earners to help them afford insurance under the law will total $20 billion in 2014, along with related spending, the report said. People earning as much as 400 percent of the federal poverty level, or about $94,200, are eligible for tax credits that discount premiums they pay in the exchanges.

The subsidies disappear at higher incomes, which may encourage people at the threshold of eligibility to cut back on work so they don’t lose the tax credits, the report said.

The new estimates also say that the health-care law will, in the short run, benefit the economy by boosting demand for goods and services because the lower-income people it helps will have more purchasing power. The report noted that the 2014 premiums that people pay for exchange coverage are coming in about 15 percent lower than projected, and the health-care law, on balance, still is expected to reduce the federal deficit.

DEFICIT TO FALL, THEN RISE

The budget office forecast Tuesday that the budget deficit this year will be the smallest as a share of the economy since 2007, as stronger growth boosts tax revenue. However, the budget experts see the long-term federal deficit picture worsening by about $100 billion a year through the end of the decade because of slower growth in the economy than they had previously predicted.

The projected shortfall of $514 billion, or 3 percent of gross domestic product, is down from 9.8 percent of GDP in 2009, the widest in records dating back to 1974, and is down from 4.1 percent last year.

It also is close to the average of the past four decades, the agency said. The budget was in surplus from 1998 to 2001.

The budget office sees the deficit continuing to drop in fiscal 2015, to $478 billion, or about 2.6 percent of GDP, which is the sum of all goods and services produced within a nation’s borders.

The office said it expects the jobless rate will be at 6.7 percent in the fourth quarter of 2014 and 6.3 percent in the fourth quarter of 2015. The unemployment rate fell to 6.7 percent in December, a five-year low, as people left the labor force.

“Economic activity will expand at a solid pace in 2014 and the next few years,” the nonpartisan agency said in the report. “Beyond 2017, CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades.”

Economic growth is forecast to accelerate this year and next as the Federal Reserve holds interest rates low until the second half of 2015, the budget office projected.

The Fed will end its program of buying long-term Treasury securities and mortgage-backed assets in the second half of this year, the agency predicted. The federal funds rate, which has been near zero since December 2008, will stay there until the second half of 2015 before rising “at a rapid clip,” reaching 3.9 percent by the end of 2017.

Annual deficits will exceed $1 trillion again starting in 2022 to reach $1.074trillion, or 4 percent of GDP, in 2024. That will push the publicly held debt to $21.3 trillion, or 79.2 percent of GDP, by 2024, it said.

The budget off ice attributed the long-term debt increase to an aging population and rising costs of health care.

A fight over rising debt contributed to a 16-day partial government shutdown in October.

House Republicans tried unsuccessfully to attach policy provisions curbing the health-care law and promoting the Keystone XL pipeline in exchange for raising the federal debt limit and funding the government.

A suspension of the federal debt limit, enacted by Congress in October, is scheduled to expire Friday. Treasury Secretary Jacob Lew has repeatedly urged Congress to act quickly to raise the cap, saying the government’s ability to meet its obligations will run out before the end of this month.

Meanwhile, a party aide said Tuesday that House Republican leaders haven’t ruled out a “clean” U.S.debt-limit increase, one without conditions, as a last resort to avoid default if lawmakers can’t agree on what conditions to seek in exchange. Several Republicans said Tuesday that they haven’t lined up enough votes to pair a debt-limit boost with a policy change such as rolling back part of the health law.

Boehner said his members have “a lot of opinions about how to deal with the debt limit,” though “no decisions have been made.”

Sen. John Thune of South Dakota, the third-ranking Republican, said his party probably will provide enough votes to pass a debt-limit increase in that chamber without conditions.

The White House and congressional Democrats have refused to negotiate over the debt ceiling.

“Just when we have the opportunity to make progress on investing in the future, some members of Congress are falling back into their old habits and planning to manufacture a crisis over the debt limit,” Sen. Patty Murray, D-Wash., said at a hearing Tuesday. “Just like last time, they can’t seem to agree on which ridiculous demand to make in exchange for ensuring the United States pays its bills.” Information for this article was contributed by Alex Wayne, Roger Runningen, Kasia Klimasinska, Kathleen Hunter, Derek Wallbank and James Rowley of Bloomberg News; by Annie Lowrey of The New York Times; and by Andrew Taylor and Ricardo Alonso-Zaldivar of The Associated Press.

Front Section, Pages 1 on 02/05/2014

Upcoming Events