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The report released yesterday by the Congressional Budget Office still continues to send shock waves throughout Washington.

CBO Director Douglas Elmendorf speaking before first Joint Deficit Reduction Committee hearing on Capitol Hill answered a question posed to him by Congressman Paul Ryan.  

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 supplying 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 a 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 Those subsidies are then withdrawn over time for people as their income rises.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. That just sounds like it’s missing something…This is an implicit tax, not the sort of 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.

This continued exchange between Congressman Ryan and CBO Director Elmendorf highlighted a section in the CBO’s report which reported 2 million jobs will be lost because of the Affordable Care Act.  This mention of loss of jobs because of “ObamaCare” has sent the administration and Democrats into damage control.

Rep. Chris Van Hollen, D-Md, leading Democrat on the committee, commented that the CBO report was being misinterpreted, and focused on more positive aspects of the report of lower costs of health premium.

The other aspect of the CBO report lost in the political discussion was the long term federal deficit would worsen at the end of this decade because of slower economic growth.

In the testimony by CBO Director Elmendorf, one issue which wasn’t discussed during the hearing is with fewer individuals in the labor force what impact does this have on the viability and solvency of Social Security?

Everyone must remember Social Security is a pay as you go system; with current workers paying for current retires.  With fewer workers paying into the system, what impact does it have on current and future retires?  

CBO Director Elmendorf, commented on their will be less individuals in the labor force, but he was never asked what impact it will have on Social Security?  

This question needs to be asked?

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