Transcript: Q&A w/ Sen. Kelly Ayotte on the CBO’s 2014-2024 budget & economic outlook

Partial transcript of Q&A with Sen. Kelly Ayotte (R-New Hampshire) on the Congressional Budget Office’s (CBO) 2014-2024 federal budget and economic outlook. The Senate Budget Committee hearing was held on Feb. 11, 2014:

Sen. Kelly Ayotte (R-New Hampshire):
…Yesterday, the administration announced another delay in the implementation of the Affordable Care Act for the business community. Businesses with 50 to 99 employees were given an additional year to comply with the law, and businesses with 100 or more employees are now able to phase in their compliance with the law. Is this something you have looked at and has the CBO had an opportunity to review this most recent change and budgetary impact? And do you think it will have a difference? I mean, in your report, you basically put off some of the conclusions based on the original date of the employer mandate going into 2015 in terms of what the impact will be on, for example, part-time employment, other employment issues. Where do we stand with all of these changes made essentially unilaterally by executive order to this law in terms of CBO’s analysis on the overall impact on the workforce?

Douglas Elmendorf, Director of the Congressional Budget Office:
So the analysis in this report – the report was released last week – both in terms of the budgetary effects and the economic effects of the Affordable Care Act are based on our view of how the Affordable Care Act would unfold as of early December. So, these analyses that we do are very complicated and we need to stop taking onboard changes in what’s happening and focus on the analysis in order to get these reports done.

We are already at work on our next baseline projections. Every year, as you know, we do projections in the spring that are the basis for our cost estimates for the rest of the year. And so we’re already working to update our projections for the Affordable Care Act and other aspects of the budget.

Yesterday’s announcement was, of course, as much of a surprise to us as you. These things are complicated so people have started to look at it. But we have reached no conclusion yet but our spring baseline projections will incorporate the effects of all of the changes in policy that we can get in as well as all that we’ve learned about what’s happening in the insurance exchanges and the Medicaid program in terms of states and so on. That’s why we label these updates that we released last week as both “partial and preliminary.”

Sen. Kelly Ayotte (R-New Hampshire):
Well, at the rate the administration is changing this law unilaterally, I think your people are going to have to be working overtime because it seems like it’s a moving target. So I think this could be a real challenge for you.

Douglas Elmendorf, Director of the Congressional Budget Office:
I assure you, Senator, people who work in health care are working overtime.

Sen. Kelly Ayotte (R-New Hampshire):
I bet they are. I can only imagine.

I wanted to ask you about the issue that Sen. Toomey asked you in the conclusion of the report about the reduction essentially in the labor participation rate that you’ve predicted as a result of the Affordable Care Act. Are you concerned at all when you look at this reduction in the labor force in terms of the impact on the subsidies that will cause some people to either leave the workforce or work less hours, as I understand your report? Did I understand it correctly?

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

Sen. Kelly Ayotte (R-New Hampshire):
Okay. Who will that have a more disproportionate effect on – lower-wage workers or higher-wage workers?

Douglas Elmendorf, Director of the Congressional Budget Office:
The change in labor supply will be primarily by lower wage workers because they are the people who are facing the largest change in incentives under the Affordable Care Act.

Sen. Kelly Ayotte (R-New Hampshire):
So, are you worried at all that the incentives could have discouragement also on upward mobility? Because if there’s a relationship between the amount of subsidy that you receive and whether or not you will continue working or perhaps seek higher employment, could that be a discouragement to upward mobility? In other words, do I take that promotion or don’t I for lower-wage workers? We want to encourage more upward mobility.

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Senator. I think the provisions of the Affordable Care Act that we studied reduce the incentive to provide more labor and that can be reduced incentive to work more hours or reduce the incentive to work harder in those hours or to do other things that would advance one’s labor earnings.

Sen. Kelly Ayotte (R-New Hampshire):
So is it fair to say one of the concerns we should be keeping an eye on here is that the structure of the law could reduce some incentives for upward mobility? In other words, people seeking to go sort of up, higher in the workforce based on the structure of the subsidies? That’s what I’m trying to understand.

Douglas Elmendorf, Director of the Congressional Budget Office:
So I think Senator that the particular provisions that I’ve talked about would, as you’re suggesting, reduce upper mobility in that way, but I want to be very careful not to make that conclusion of the Affordable Care Act as a whole because we’ve not done that particular analysis, and the provision of health insurance to lower-income people may also affect their upward mobility and we simply haven’t analyzed that. So I think these particular provisions that we’re talking about that reduce the amount of labor supply do reduce the incentive for people to move up the earnings ladder but I don’t want to suggest that we’ve drawn that conclusion for the Affordable Care Act as a whole because other aspects of the provision could have different effects that we haven’t studied.

Sen. Kelly Ayotte (R-New Hampshire):
And I understand that. I wouldn’t ask you to draw that as a whole because we don’t really know yet with the changing landscape with the executive orders exactly when things will be implemented on the whole, so I can understand why you’d want to qualify your answer…

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