By Julian Pecquet - 08/19/10 07:39 PM EDT
Republicans on Thursday used new figures regarding unemployment and the deficit to argue that the healthcare reform law is bad for the economy.
Sen. Judd Gregg (R-N.H.), the ranking member on the Senate Budget Committee, said the Congressional Budget Office's mid-year budget outlook forecasts years of red ink despite the new law.
"Today’s CBO outlook only underscores what we already know — the current pace of U.S. spending is unaffordable and unsustainable, and without a change in direction, this country is headed for fiscal calamity," Gregg said in a statement. "Democrats argued that their massive health care plan would get the deficit under control, but we can see now that was simply smoke and mirrors."
The latest figures forecast a $1.3 trillion deficit in FY 2010 and a nearly $1.1 trillion deficit in FY 2011, Gregg said — "$71 billion higher than projected in March due to newly enacted legislation."
"Over the next 10 years," he adds, "Congress' spending spree will drive the cumulative deficit to more than $6 trillion, $250 billion more than was projected just six months ago."
Congressional Democrats and the White House say they never claimed that healthcare reform by itself would turn the government's fiscal situation around.
"The fact that more action must be taken on the deficit even after enactment of the Affordable Care Act [...] is a distinct question from whether the health legislation helps to improve our fiscal course — which it does," former White House Budget Director Peter Orszag said in June.
Sen. Mike Enzi (R-Wyo.), ranking member of the Senate health panel, for his part focused his attention on a two-page analysis in the Congressional Budget Office mid-year outlook that considers the effects of the new law on labor markets.
"This week the number of unemployed Americans reached 500,000, the highest level seen in the past nine months. Unfortunately, the new health care law makes a bad job market even worse," Enzi said. "The CBO report confirms that the health care law will increase labor costs, and will discourage employers from expanding their businesses and investing in their workers."
The report does say that firms with 50 or more employees will likely pass on the penalties they will pay if they fail to provide healthcare to workers, likely in the form of lower wages and other compensation. Since firms can't pay below minimum wage, the CBO says, they may also end up hiring fewer low-wage workers or shifting to part-time and seasonal employees.
However, CBO adds, the law makes it easier for people to buy insurance on their own so they won't be tied down by their employer's health benefits, "thereby enabling workers to take jobs that better match their skills." The law may make the U.S. workforce healthier and more productive, some have argued.
But the bigger effect, the CBO says, will be on labor supply rather than demand. Since more people will have access to Medicaid or subsidized private insurance, according to the CBO, they'll be richer and therefore less motivated to work.
The report forecasts that the law could reduce the amount of labor used in the economy by "roughly half a percent."