Transcript: Q&A w/ Rep. Bill Flores on the CBO’s 2014 budget & economic outlook

Partial transcript of Q&A with Rep. Bill Flores (R-Texas) on the Congressional Budget Office’s (CBO) 2014 federal budget and economic outlook. The House Budget Committee hearing was held on Feb. 5, 2014:

Rep. Bill Flores (R-Texas):
…I’m sure that real world Americans that are watching today’s testimony, their eyes are glazing over. So for them, I would summarize –

Douglas Elmendorf, Director of the Congressional Budget Office:
I’m offended, Congressman.

Rep. Bill Flores (R-Texas):
What’s that?

Douglas Elmendorf, Director of the Congressional Budget Office:
I’m offended.

Rep. Bill Flores (R-Texas):
Uh, no, there’s no offense meant to you. [Laughter] But I would like to summarize that the economics is essentially the mathematical expression of aggregate human and business behavior. In that vein, I’d say that this latest CBO report, I think, is a better reflection of aggregate human employee and employer behavior over time as a result of government policy.

You know, Obamacare is one policy that has been enacted by the federal government. In addition to that, there are several other policies that have been enacted over the last five years that have affected our economy.

In your report, you’ve talked about the impact of the Affordable Care Act or Obamacare on the supply side of the equation in terms of what employees or prospective employees do, and you said the equivalent of 2.3 million jobs would be lost due to…Let me rephrase that. Millions of hours of labor less would be offered and the expressed in job loss would be 2.3 million. So not to say that 2.3 million jobs would be lost.

Have you looked at the demand side of the equation? The Affordable Care Act or Obamacare has a huge impact on employers, and they are making economic decisions to determine how many employees they hire and what sort of hours that they ask these employees to work. Can you tell me in a short amount of time what impact that’s had?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congressman. We looked and report in our outlook on the effects of the Affordable Care Act on the demand for labor. We highlighted two channels. One that Congressman Van Hollen spoke about earlier, which is the overall demand for goods and services in the economy and thus on employment. The other is the effects of the employer penalty on the demand for labor. In the very short run for given level of wages, requiring employers to pay some penalty amount for each of their employees in some circumstances amounts to raising the cost for those employees and would lead employers to reduce the number of people they hire.

But we expect, as other analysts believe, that over time costs that employers bear for their employees end up being borne by the employees in the form of lower wages. Health insurance cost is one example, and this mandate would be another. So we think after a few years, the cost of employer mandate would basically be showing up in wages and, thus, are ultimately affecting worker supply of labor but no longer employers’ demand for the most part.

Rep. Bill Flores (R-Texas):
Just to summarize that. You have essentially took the potential negative impact on labor demand and translated it further into labor supply.

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, because of the way we think wages will adjust.

Rep. Bill Flores (R-Texas):
Okay. I can live with that. I mean, I don’t like the fact that we’re hurting labor supply or labor demand or either one. I think that that’s bad policy, and that we as Republicans in the House are going to put forward our replacement that doesn’t do that, that encourages labor supply and labor demand.

The CBO routinely analyzes administrative actions and tries to determine the impact on the economy. That process isn’t terribly transparent at this point. But when you take Obamacare and EPA actions and Department of Labor actions and Fish and Wildlife actions – you go down through every agency and they have issued tens of thousands of regulations over the last five years, what has been the impact?

And I ask you from this frame of reference – as a person who has helped created hundreds of jobs in the real world, I know first-hand the impact of bad government policy, and I was wondering if you have a cumulative number of potential jobs lost because of Obamacare and all the government policies that have been enacted over the last five years?

Douglas Elmendorf, Director of the Congressional Budget Office:
I’m sorry, Congressman, we do not. Our focus, as you know, is estimating effects of legislation that Congress is considering. We do have to go back and look at how laws are being administered in order to do our baseline projections and that’s part of why we looked at the Affordable Care Act again this time. But we don’t do any sort of comprehensive analysis on regulatory policy.

Rep. Bill Flores (R-Texas):
I think that would be well-served. Because I think one of the reasons labor force participation is so low is because employers have decided that they can’t hire those types of employees where they stand, so the employee base has given up here – prospective employees base has given up.

I’d just say the government policy has happened the last five years is expanding the poverty trap. It’s trapping – it’s pushing families out of the middle-class and hurting opportunities…

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