The new healthcare law will slow economic growth over the next decade, costing the nation about 2.5 million jobs and contributing to a $1 trillion increase in projected deficits, the Congressional Budget Office said in a report released Tuesday.
The non-partisan group’s report found that the healthcare law’s negative effects on the economy will be “substantially larger†than what it had previously anticipated.
The CBO is now estimating that the law will reduce labor force compensation by 1 percent from 2017 to 2024, twice the reduction it previously had projected.
This will decrease the number of full-time equivalent jobs in 2021 by 2.3 million, it said. It had previously estimated the decrease would be 800,000.
It said this decrease would be caused partly be people leaving the workforce in response to lower jobs offered by employers, and increased insurance coverage through the healthcare law.
It also said employer penalties in the law will decrease wages, and that part-year workers will be slower to return to the work force because they will seek to retain ObamaCare insurance subsidies.
The healthcare law isn’t the only reason the CBO is projecting slower economic growth between 2014 and 2023, however. It also cited inflation and lower productivity as reasons why it was lowering its projections.
The slower growth will mean less tax revenue, which will add to the deficit. Instead of adding $6.3 trillion in deficits from 2014 to 2023, the government will add $7.3 trillion, CBO now projects.
By 2023, the gross debt of the United States will be $26 trillion, up from a projected $25 trillion. A year later the debt will rise to $27 trillion as the $1.074 trillion deficit for fiscal 2024 is added in.
“Most of the increase in projected deficits results from lower projections for the growth of real GDP and for inflation, which have resulted in projected revenues between 2014 and 2023 by $1.4 trillion,†CBO explained.
CBO now thinks the economy will grow at 3.1 percent in this fiscal year, which ends in October, rather than the 3.4 percent growth it predicted last year.
The unemployment rate is projected to fall to 6.7 percent by the end of the year, much lower than the 7.6 percent CBO saw for 2014 previously. The budget office does not see unemployment falling below 6 percent for the rest of President Obama’s term, however.
In the near term, the CBO is projecting smaller deficits.
The budget office says that legislation enacted since last May has reduced deficits by $400 billion.
For 2014, the deficit is slated to be $514 billion, an improvement of $46 billion from last year’s projection.
In 2015, the deficit falls to $478 billion. That is still higher than the last full year of the Bush administration when the deficit was $458 billion, but it is a steep drop from the $1 trillion deficits of most of the Obama years.
Source: The Hill
