Back in March, in the runup to the final ObamaCare vote in the House, the establishment press was thrilled when the Congressional Budget Office issued a report estimating that ObamaCare would, in the CBO's words, "produce a net reduction in federal deficits of $138 billion over the 2010–2019 period as result of changes in direct spending and revenue." At the time, NB's Brent Baker noted how positively giddy Katie Couric at CBS News was over the CBO's estimate. Couric even claimed: "The price tag certified."
If only. It turns out that the key word in the CBO statement was "direct."
On Friday, CBO head Doug Elmendorf made a presentation (HT Jed Graham at IBD) at the Schaeffer Center of the University of Southern California entitled "Economic Effects of the March Health Legislation." In it, as shown below, he revealed a pesky and significant indirect effect of the legislation. In the process, he also introduced us to a new economic disease (my name) -- ObamaCare Withdrawn Labor Syndrome, or "OWL":
"Small"? Given that about 140 million people are working, "roughly half a percent" amounts to about 700,000 jobs (somewhat higher than the number Graham used in his column).
Gee Doug, if there's any evidence of the negatively dynamic effect of ObamaCare on the job market and the economy as a whole in the your "certified" March report (I know, that's not your word), I'm not seeing it. (My guess is that Congress specifically directed CBO to ignore dynamic effects, and the CBO's hands were tied.)
When priced out, Elmendorf's estimate of the effect of OWL Syndrome negates a large percentage of the March CBO report's alleged deficit reduction. If 700,000 workers with average earnings of about $35,000 a year acquire OWL Syndrome and no longer choose to work, the lost earnings to the economy will amount to about $25 billion. As a result, payments into Social Security and Medicare will go down by about $3.8 billion, and federal income tax collections will fall by $6 billion or so. That's almost $10 billion a year. If these negative effects don't kick in until 2014 (they will probably occur gradually until then), reduced tax collections alone will wipe out about $59 billion (6 years at $9.8 billion each year) of the CBO's projected 2010-2019 savings.
This is before attempting to quantify the increased unemployment, food stamp, welfare and other entitlement payouts which will surely occur, and which will surely be significant. States and localities will also probably lose another $2 billion in income and sale tax revenue. Piling on, all of this is before considering the negative multiplier effects Keynesians so love to positively cite when discussing the supposed benefits of government economic stimulus.
Does anyone think the establishment press will take an interest in the effects of OWL Syndrome? My guess is that they won't give a hoot.
Cross-posted at BizzyBlog.com.