Friday, February 7, 2014

CBO's Latest on Obamacare

The non-partisan Congressional Budget Office (CBO) recently issued a new report with updated figures on Obamacare and the effect it will have on employment and the federal government generally.

The CBO says that Obamacare will cause a cumulative loss in the workforce equivalent to 2.3 million full-time jobs.  Previously, the CBO had indicated that Obamacare would shrink the workforce by 800,000 workers.

It also indicated that the Debt will rise to 100% of GDP by 2038.

Remember, in 2009, when you were told that Obamacare was worth it's then $848 billion price tag because 31 million people would be insured?  Totally off.  New estimates suggest that Obamacare will cost $2 trillion and will only insure 25 million people.  So, not only does Obamacare cover less than promised, it cost more than promised as well.  A lot more.  $848 billion to insure 31 million people is approximately $27,000 per person.  $2 trillion to insure 25 million people is about $80,000 per person...the kind of "savings" only the progressives in the federal government could produce.

Republicans are framing this as Obamacare killing 2.3 million jobs, Democrats are saying this is giving people a choice to work or not and positing that more people will simply chose not to work.

Regardless of which assertion is correct, no one is really talking about the effect this will have on revenue collected by the federal government.

Because the federal government doesn't have a requirement to balance its budget (like the Commonwealth of Pennsylvania and every municipality therein does,) it is allowed to continue profligate spending.  The debt is higher now than it has ever been.  Given that, as a country, we cannot stop spending money we do not have and given that, regardless of the motivation for leaving the workforce, this law will produce 2.3 million less workers, what do you think the effect will be on the federal budget?

Think about it, if 2.3 million people aren't working 40 hours a week, that means 2.3 million people aren't paying taxes on the income they derived from working 40 hours a week.  Will Democrats agree to cut the budget by the lesser tax revenue?  Unlikely, but they should since they are the largest advocates for this law.

If 2.3 million people aren't working 40 hours a week, they aren't paying Social Security and Medicare taxes (FICA) in their paychecks.  Given that Medicare is set to run out of cash in 2024 and Social Security in 2033, what effect will it have on these already overly strained programs?

Oh, and don't forget about all those baby boomers that will be flocking to Social Security and Medicare in a few years, further draining the reserves.

Whether Obamacare destroys over 2 million jobs or subsidizes people to the extent that over 2 million full-time workers can exit the workforce, the reality is that this law will create a financial crisis.  Its costs have nearly tripled in five years, it contributes to our debt to GDP ratio rising to 1:1, and it forces or allows (depending on your perspective) the loss of over 2 million full time taxpayers from the workforce.  To resolve this entirely predictable crisis, it's hard to see how the Federal Government can avoid vastly reducing spending and entitlement programs, massively increase taxes on the remaining workers, or a combination of the two in order to be anywhere near solvent in the near future.

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