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

Partial transcript of Q&A with Sen. Patty Murray (D-Washington) 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. Patty Murray (D-Washington):
…Let me start off by asking you a question about the role of the overall economy plays in our efforts to address the deficit. Last week, CBO report describes how “lingering effects from the Great Recession and the subsequent slow recovery continue to dampen our economic potential.” Relatedly, your report contains some very significant downward revisions to your expectations about the strengths of our economy over the next decade and the direct fiscal consequences of those revisions were pretty dramatic – about $1.2 trillion in added debt by 2024. That added debt is not from new spending programs or new tax cuts; it’s purely because CBO now expects the economy to be weaker than it previously thought, correct?

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

Sen. Patty Murray (D-Washington):
Okay, so my question is about the importance of economic growth and building a stronger economy and tackling our deficits and our debt. Certainly, we’ve got to continue to work to reform spending programs in the tax code. But do you believe given the large negative impact your economic revision has on the budget projections that fiscal responsibility also requires that we take measure that ensure we have a strong economy?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Senator. Any action that the Congress can take to boost economic growth can have a very powerful effect on the future budget outlook. There are no plausible changes in economic growth that would make the long-term budget pressure go away. When we did our long-term budget outlook last fall, we looked at a range of alternative possible growth rates of the economy, in interest rates, and health care costs and so on, and the fundamental problem will remain but the magnitude of the problem – the extent of the changes that would be needed in tax policy or spending policy or both – would be smaller if the economy were to grow more rapidly.

Sen. Patty Murray (D-Washington):
Last week, a rippling effect of the CBO report was the wide confusion about the section dealing with the impact of the Affordable Care Act on the workforce. That confusion was actually bad enough that the Washington Post fact checker examined the claim three days ago. Don’t know if you all saw it. But he called them “out of context”, “deliberately misleading” and gave them three Pinochios.

Now, as Chairman Ryan noted in the hearing last week when you were before them, your report doesn’t say that the Affordable Care Act is causing employers to lay off workers. In fact, the ACA is making it possible for people to be innovative and start new companies without being locked into a job or keeping longer hours just so they can have health insurance.

So, can you please clarify this part of your outlook and specifically tell us are you saying that the ACA will cause 2.5 million people to lose their jobs as some are claiming you said?

Douglas Elmendorf, Director of the Congressional Budget Office:
No, Senator, we’ve not characterized our result as saying that 2 or 2.5 million people would lose their jobs. I’ve not, to be honest, read all of the coverage that sprouted last week but we took pains in a blog posting yesterday to emphasize the point we made in the appendix to the outlook last week that almost the entire effect that we’re projecting comes not from people losing their jobs but people choosing to work not at all or to work shorter hours.

Sen. Patty Murray (D-Washington):
Stay home and take care of their kids, start a new business, other things that families have that kind of choice.

Douglas Elmendorf, Director of the Congressional Budget Office:
A range of other activities, Senator, yes.

Sen. Patty Murray (D-Washington):
Can you talk a bit about how increased accessibility and affordability and availability in health insurance helps workers and specifically prevents what is known as job lock?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Senator. So, the subsidized health insurance coverage that would be provided under the Affordable Care Act through both the expansion of Medicaid and through the initiation of tax credits to be provided for insurance bought through insurance exchanges, those subsidies make the people who receive them better off by providing health insurance coverage at reduced costs to them. Some of them will respond to being better off by not working or working less.

In addition – and this is intrinsic to some extent in any program that provides benefits to lower-income people – those benefits are withdrawn under the Affordable Care Act as income rises. Lower-income people receive them and higher-income people do not. And that withdrawal of benefits creates an implicit tax that also reduces the incentive to work to some extent.

As you noted, the health insurance system as it existed prior to the Affordable Care Act also distorted some people’s labor market behavior relative to some ideal system in which health insurance was not related to work, and in particular there’s been a substantial amount of research showing that people who have jobs and have particular health problems or concerns about the risk of health problems will them be unwilling to leave those jobs and take other jobs they might be more productive in if they thought they would lose their health insurance. That’s the phenomenon known as job lock, and that is a phenomenon that is under the Affordable Care Act wouldn’t be there because people would be able to obtain health insurance through exchanges and possibly obtain subsidies for health insurance coverage.

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