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

Partial transcript of Q&A with Rep. John Yarmuth 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. John Yarmuth (D-Kentucky):
…I want to dig a little deeper into the methodology that you used to assess the impact of the Affordable Care Act on hours worked.

And the Chairman, I think, was mentioning an example of a young person – at least that would be a shame if somebody couldn’t find his or her way up the economic ladder, starting to work and so forth.

My son is 30-years-old and single. He found insurance through the Kentucky exchange. Pretty good coverage for him at $180 a month. So, we’re talking about $2,200 a year premium. If he got 100% premium support – subsidy – what in the world kind of incentive would he have to not work?

Douglas Elmendorf, Director of the Congressional Budget Office:
Well, by working, of course, he would earn income to spend on many other things. So, health insurance is only one of the considerations…

Rep. John Yarmuth (D-Kentucky):
It seems to me there’s an impression out there that – you talked about a disincentive to work as a part of the impact. I’m just saying I’m trying to figure out the methodology, because I can understand why a 62-year-old under the Affordable Care Act might say, “I want to retire and now I can retire because I can find coverage that I can afford, whether or not I get a taxpayer subsidy or not.” I understand that example. I’m trying to figure out an example of somebody who’s at the lower end, where there would actually be an incentive not to work.

Douglas Elmendorf, Director of the Congressional Budget Office:
So, I guess I – so you’re certainly right, Congressman, that some of these people would be early retirees as you’ve described. But the other part of it is that it’s not so much an incentive not to work as less of an incentive to work. So under the law prior to the Affordable Care Act, if one worked or decided to work or decided to work more hours, then one would earn higher cash wages and would maybe receive health insurance but would give up some of those extra cash wages in the sense of paying some tax on them or losing some other benefits. By providing additional benefit to people who have very low income – a significant one in the form of subsidized health insurance – then the increase in the standard of living that those people would have by working or working more hours would be smaller than would be otherwise. They would still have a higher standard of living by working in almost all cases but the standard of living wouldn’t be as much higher relative to what they would have if they didn’t work or if they worked fewer hours. So by providing a somewhat smaller incentive to work, somewhat fewer people would work.

Rep. John Yarmuth (D-Kentucky):
All right. As I understand it, the subsidy was set up in a way that no one should have to pay more than about 9% of their income for health insurance. Could you give me – and I would accept on the spot – some kind of numerical example of someone who would have a disincentive to work because of the subsidy, whether it’s 90% or 50% or whatever it is? Because I’m having a hard time understanding how that could possibly make sense.

Douglas Elmendorf, Director of the Congressional Budget Office:
…It’s not that they have no incentive to work but they have a smaller incentive than they would have had otherwise.

Rep. John Yarmuth (D-Kentucky):
Moving on. As we look at the long-term repercussions of deficits…and the impacts of entitlements – Social Security, Medicare, and so forth – have you done analysis of what immigration reform would do to soften the impact of those expenditures?…To change the long-term impact of health care costs, Social Security benefits and also economic benefit?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congressman. So we did a very thorough analysis of the immigration bill that was passed by the Senate last year, and we found that that legislation would reduce budget deficits and lead to a larger economy and over time would lead to higher output per person in this country.

Rep. John Yarmuth (D-Kentucky):
And it does that because you would have a lot of younger people paying into Social Security and paying Medicare tax but not receiving benefits for 30 years or 40 years, isn’t that…?

Douglas Elmendorf, Director of the Congressional Budget Office:
…The age matters. It’s also the composition of the additional people who would be let into the country and given a chance to work under the Senate legislation. So a number of those people would, we think, receive some benefits but a number would be high-skilled, high-educated people who would be paying a lot in taxes.

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