The CBO Budget Outlook (2014-24) is out today, and much of the focus is on their revised estimate of the ACA’s impact on the labor market (Appendix C, pp. 118-27). CBO is projecting that “the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017-2024 period, compared with what it would have been otherwise” (p. 117). This is basically CBO’s estimate of the impact of the marginal tax rate on labor income created by the various policy structures of the ACA that Casey Mulligan has written about. As I wrote in this post, you get less of something if you tax it, so if that is not your goal (it is with tobacco taxes, for example) then you are left to decide whether the reduction is worth achieving an alternative goal(s). That can be a difficult question to answer, because you are trading off important things–labor market participation, rates of uninsured, and the system reform provisions of the ACA.
Is reduced labor market participation a sign that we should move away from the structure of the ACA? If yes, to where? Continue reading “Employment, Health Insurance and Means Testing”