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

Partial transcript of Q&A with Rep. Bill Pascrell 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 Pascrell (D-New Jersey):
…Director Elmendorf, do you believe that when Social Security was passed, it had an impact on labor supply since we are distinguishing between labor supply and demand?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, absolutely.

Rep. Bill Pascrell (D-New Jersey):
…In a similar way that you would project Obamacare will have?

Douglas Elmendorf, Director of the Congressional Budget Office:
I mean, the specifics would be different but the basic point is the same, Congressman, which is the provision of income to people over age 62 or 65 has allowed some of them to choose not to work who otherwise would have felt compelled to work.

Rep. Bill Pascrell (D-New Jersey):
I wonder if there was a headline back then in 1936 and 37 about what was going to happen to demand.

If it were repealed – let me ask you this question – or if the benefits were cut due to privatization…that would have an impact on labor supply, wouldn’t it?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes.

Rep. Bill Pascrell (D-New Jersey):
How?

Douglas Elmendorf, Director of the Congressional Budget Office:
It would push up labor supply. In fact, we’ve done estimates of the effect of raising the eligibility age for Social Security. We think that would increase the amount of work that people do primarily in their 60s.

Rep. Bill Pascrell (D-New Jersey):
Particularly seniors – more of them would work beyond what they could be working, is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Work longer than they would under current law.

Rep. Bill Pascrell (D-New Jersey):
The fact that Americans won’t be tied to a job they don’t want or need solely because of it is the only way for them to get affordable health care is a feature of Obamacare…as I look at it.

Director Elmendorf, if your assumptions prove correct, and 2.3 million Americans remove themselves from the labor supply, what effect would that have on the unemployment rate and on wages?

Douglas Elmendorf, Director of the Congressional Budget Office:
So, Congressman, we think that people choosing not to work because of the incentives provided by the Affordable Care Act would have essentially no effect on the unemployment rate. We said that very clearly in our report. The effect on wages we did not analyze formally. It’s complicated. It depends on how the capital investment responds to changes in work and we have not tried to model that or estimate that specifically.

Rep. Bill Pascrell (D-New Jersey):
So what you’re saying is that because of the security of Obamacare, that it provides a 60-year-old – let’s take that as an example – who might decide to retire early.

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes.

Rep. Bill Pascrell (D-New Jersey):
And open up a job for someone who was unemployed today. Is that correct?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right, Congressman.

Rep. Bill Pascrell (D-New Jersey):
This is an example of the drop in the labor supply.

Now, in fact, the CBO’s report – you specifically state “the estimated reductions stem almost entirely from a net decline in the amount of labor that workers choose to supply rather than from a net drop in business’s demand for labor.” I didn’t see this in any of the announcement about this yesterday. I just wonder why. Very curious about that.

You said it. I didn’t.

So in other words, this isn’t employers cutting jobs. It’s newly empowered workers choosing to go a different path.

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes.

Rep. Bill Pascrell (D-New Jersey):
I think that’s a good thing.

Chairman Ryan, my good friend, you said in 2009 when we were debating Obamacare [overlapping audio]…we want to address job lock. This is what you said, “So the key question that ought to be addressed in any health care reform legislation is are we going to continue job lock or are we going to allow individuals more choice and portability to fit a 21st century workforce.” I agree with you 100%. I think the answer is yes.

Giving workers more choice is not unique to Obamacare. Other federal programs have reduced the amount of labor that workers choose to supply just like Social Security, right, Mr. Chairman?

Rep. Paul Ryan (R-Wisconsin):
I will take the rest of your 39 seconds to respond.

A couple of points. Social Security – the purpose then was to help produce a system so that older workers could not be destitute and compete for younger workers for jobs. So, it’s sort of the opposite attempt, which was to bring younger workers into the workforce by providing Social Security benefit back during those days.

This is the opposite. This is saying younger workers – the very people we want to go into the workforce to work – are being disincentivized to do that. So it’s sort of the opposite of what you’re trying to suggest.

Rep. Bill Pascrell (D-New Jersey):
Can I take my time back?

Rep. Paul Ryan (R-Wisconsin):
…Job lock in this case is a subsidy that ends and it’s a cliff that traps. What we’ve always said is it should be structured differently so that you don’t produce this kind of effect. So we have literally a very different idea on how to address this issue so that you always encourage a person to go into the workforce, so that you always encourage a person to work. And Obamacare is structured the opposite of what we intended.

Rep. Bill Pascrell (D-New Jersey):
Well, that’s your opinion. That’s your – I mean, you’re still going to have the demand and we’re still basically talking about older workers – [cut off]

Rep. Paul Ryan (R-Wisconsin):
My point to my friend on the other side of the aisle [overlapping audio] – if you want to ask a Republican their position, ask a Republican. If you want to ask a Democrat their position, ask a Democrat. Don’t ask one to give the position of the other because you won’t get a straight shot.

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