Last week’s report from the Congressional Budget Office “The Economic Outlook: 2014 – 2024” (which I discussed in my last post) caused a big stir with its prediction that ObamaCare will cause a loss of 2,000,000 mostly low wage jobs by 2017 and 2,500,000 such jobs by 2024.  The lost jobs aren’t necessarily from workers being fired or fewer workers being hired but rather the overall decreased incentive for individuals to find work.  The CBO analysis is based on the research of the economist Casey Mulligan featured in yesterday’s Wall Street Journal as “The Economist Who Exposed ObamaCare”.
The above chart of Mr. Mulligan interprets several recent government subsidy programs as a new marginal tax rate, i.e. the “extra taxes paid and government benefits foregone as a result of earning an extra dollar of income.”  The 2009 stimulus, the Recovery and Reinvestment Act, had an effect like this but it was temporary.  The marginal tax increase of the Affordable Care Act will last as long as it remains in effect.
The above chart from the same CBO report, showing the steady decline in the Labor Force Participation Rate from the year 2000 onward, demonstrates the critical nature of this problem.  Lower labor force participation means lower growth in overall labor productivity which in turn means slower economic growth.  Since the Great Recession ended in June 2009, GDP growth has averaged only about 2% annually.
Slow GDP growth means, in addition to a higher unemployment rate, that America’s standard of living will not increase very rapidly if at all.  But the problem is really much worse than this.  We have an enormous debt problem which is only getting worse every year that we continue to have large deficits.  The CBO report predicts increasing growth in the size of our national debt.  By far the least painful way of shrinking our debt (relative to the size of the economy) is to grow the economy as fast as we reasonably can.  But our economy is actually slowing down, not speeding up!
This is a very serious problem which many of our national leaders are much too complacent about!