CBO Director: Obamacare "Creates A Disincentive For People To Work"

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REP. PAUL RYAN: Just to understand this, it is not that employers are laying people off, but that people aren't working in the work force, aren't supply labor to the equivalent of 2.5 million jobs in 2024, and as a result work force participation rate, less labor supply lowers economic growth.

DOUG ELMENDORF, CBO: That is right, Mr. Chairman.

RYAN: So, who are these workers? Who are the people typically in this category? What kind of worker from an income scale side are being affected by this?

ELMENDORF: The effect is principally on the labor supply of lower wage workers. The reason is what the Affordable Care Act does is provide subsidies focused on lower and more middle income people to buy health insurance, and in order to encourage sufficient number of people to buy an insurance like health insurance the subsidies are fairly large in dollar terms. Those subsidies are then withdrawn over time for people as their income rises. By providing heavily subsidized health-insurance to people with very low income and withdrawing those subsidies as income rises, creates a disincentive for people to work, relative to what would have been the case in the absence of that act. The subsidies are, of course, make those lower income people better off. This is an implicit tax, not the sort fo tax we normally think about, where if the government raises taxes we are worse off and face a disincentive to work more, but providing a subsidy people are better off, but they have less incentive to work.

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