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Face it, liberals: Obamacare will increase the federal deficit

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Opinion,Op-Eds,Barack Obama,Obamacare,Budgets and Deficits,CBO

Liberals have accepted that Obamacare will increase the federal deficit. They just don’t know it yet.

When the Congressional Budget Office released its Budget and Economic Outlook on Feb. 4, which was quite devastating for Obamacare, liberal commentators were desperate to find the pony in it. Many of them touted claims that the report shows that Obamacare will reduce the deficit.

What the report actually did was refer to a previous CBO report showing that, from 2013-2022, Obamacare reduces the deficit by a cumulative $109 billion. That's true in the “balance sheet” method that CBO must use to evaluate Obamacare or any other piece of legislation. In other words, the CBO can only count the revenues Obamacare raises against the benefits it must pay out.

Yet Obamacare has impacts beyond those that appear on a balance sheet. If it influences the economy negatively, it can also affect the budget. And that is exactly what the CBO found.

Obamacare’s Medicaid expansion and exchange subsidies will encourage some employees to work fewer hours. Because Medicaid and exchange subsidies are based on income and decline as one’s income rises, the CBO anticipates workers will reduce their hours in order to maintain their Obamacare benefits. By 2024, those reduced hours will reach the equivalent of 2.5 million jobs.

If employees reduce their hours worked then they will, of course, earn less income and pay fewer income taxes and Medicare and Social Security taxes to the federal government. That was a large part of the reason the CBO forecast that overall deficits will be $1 trillion more than what it forecast in its 2013 outlook.

Comparing the two years shows a decline of nearly $1 trillion in projected taxes between 2013 and 2022, the same time period during which Obamacare will reduce the deficit by $109 billion. But the 2014 outlook notes that the biggest impact from Obamacare on worker hours won’t occur until 2017. From 2017-2022, projected taxes decline $993 billion, while, on the balance sheet, Obamacare reduces the deficit by $71 billion.

The CBO notes that some of the decline in projected income tax receipts is due to new estimates of the impact of the recession and the weak recovery. But even if the health care law is responsible for only half the lost income tax revenues, the negative economic impact of Obamacare still easily outstrips whatever deficit reduction shows up on the balance sheet.

Liberal commentators could continue to claim that Obamacare reduces the deficit if they had challenged the CBO’s analysis that Obamacare gives employees an incentive to work less. Rather, they celebrated it.

Steve Benen, producer for MSNBC's "The Rachel Maddow show," spun the CBO report by saying it shows Obamacare “will empower more than 2 million Americans to leave the workforce if they want to, no longer feeling forced to stay at a job in order to have benefits for them and their family.”

The Los Angeles Times’ Michael Hiltzik approvingly quoted liberal economist Dean Baker, noting that "this is, in fact, a beneficial effect of the law, and a sign that it will achieve an important goal."

Liberals Jonathan Chait, Paul Krugman, Kevin Drum and Jonathan Cohn, to name a few, expressed similar opinions.

The problem for these pundits is they can’t admit that Obamacare will induce people to work fewer hours without also acknowledging that people working less results in less income and lower FICA tax revenues. One follows the other. And since that lost revenue exceeds whatever deficit reduction Obamacare achieves on its balance sheet, liberals must accept that Obamacare increases the deficit.

Even if they don’t admit it out loud.

David Hogberg is a health care policy analyst for the National Center for Public Policy Research Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
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