How Obamacare Is Constricting the Economy

Posted: Jul 06, 2014 3:07 PM

While the Bureau of Labor Statistics' jobs report this week contained mostly good news, our economic statistics have been shaky over the past few months. A major downward revision to economic gowth has a report showing that the economy contracted by almost 3% last quarter.

It's possible that Obamacare is holding back the economy. Jared Meyer, policy analyst at Economics 21, wrote about how Obamacare's hurting economic growth:

The Employer Mandate. The Act originally required businesses with over 49 full-time equivalent employees to offer insurance that met government requirements by January 1, 2014, but President Obama has delayed the mandate. Once implemented, if employers decide not to offer coverage, they will face fines of $2,000 per worker (the first 30 workers are exempt). This penalty is effectively over $3,000 since it is not tax deductible. Going from 49 to 50 workers will cost a business an additional $60,000.

Disincentives to Work. Because of the maze of subsidies and penalties under Obamacare, University of Chicago economist Casey Mulligan finds up to 11 million low- and middle-income Americans lose money by taking a job or working more. These penalties and losses of subsidies act as effective taxes on full-time employment.

Declining Labor Force Participation. In February, CBO released a report that projected Obamacare will reduce U.S. employment by 2 million full-time workers by 2017. This number is expected to increase 2.5 million by 2024. Supporters of the law touted this decrease as beneficial but, as Charles Blahous pointed out on Economics21, this is terrible news for the economy.

This last point is backed up by this week's mostly-good jobs report: despite strong job growth, the labor force participation rate was mostly unchanged - and still very far off where we were before the 2008 recession. Obamacare disincentivizes work.