All of those conclusions come from the nonpartisan agency’s latest data-packed rundown of the nation’s economic and fiscal health. The CBO released the report on Tuesday, and in addition to its usual budgetary and economic projections, the office updated its outlook on Obamacare, finding that the new health care law will reduce the total number of hours worked in the U.S. by as much as 2 percent from 2017 to 2024. That’s the equivalent of about 2 million fewer full-time workers by 2017, and 2.5 million fewer by 2024.But it’s not that workers will be laid off; instead, the report says the labor market effects will come “almost entirely because workers will choose to supply less labor – given the new taxes and other incentives they will face and the financial benefits.” In other words, subsidies for purchasing insurance – combined with the ability to get insurance outside of work – could mean fewer hours worked.
The office and Congress’ Joint Committee on Taxation also updated their projections of the number of people who would enroll in insurance through the Affordable Care Act exchanges. Due to the widely publicized technical glitches the exchanges experienced in their fall rollouts, enrollment for 2014 is now estimated to hit 6 million, rather than 7 million as previously projected.
However, the CBO also notes that enrollment could pick up considerably as March 31 – the end of the enrollment period – approaches. Ultimately, the CBO and JCT predict enrollment of 22 million by 2016.
The jobs impact of Obamacare will come alongside a slowly healing labor market. The unemployment rate will average 6.8 percent in 2014, up slightly from its current level of 6.7 percent, before continuing its slow march downward to 6.5 percent in 2014, 6.1 percent in 2016 and 5.9 percent in 2017.
Budget deficits also are expected to shrink, but then will start growing again. The CBO predicts the deficit will shrink to $514 billion in fiscal year 2014, or 3 percent of gross domestic product. That’s down from $680 billion in 2013 and would mark the lowest deficit since Obama first took office. The figure is also a decline from the office’s last projection of a $560 billion deficit for fiscal year 2014.
Deficits will continue to shrink to $478 billion – or 2.6 percent of GDP – in 2015, representing a marked decline in deficits since the start of the Obama administration. In 2009, the deficit climbed to nearly 10 percent of GDP.
The smaller deficit is in part a function of expiring tax provisions, as well as a healing economy. Government spending, meanwhile, will increase at its average rate. That growth rate is projected to be faster than the economy’s growth rate, meaning deficits will eventually pick back up again. By 2022, the deficit will be above 4.2 percent of GDP.A slowing economy is one reason for those larger deficits.
“Most of the increase in projected deficits results from lower projections for the growth of real GDP and for inflation, which have reduced projected revenues between 2014 and 2023 by $1.4 trillion,” the report says.
Economic output, meanwhile, is expected to grow by 2.7 percent in calendar year 2014 and accelerate to grow by 3.3 percent the next year. GDP growth would remain at or above 3 percent through 2017, but after that the rate would be only 2.2 percent from 2018 through 2024. This represents an improvement as well: By the end of 2013, the economy was growing at about 4 percent below its potential.
By 2017, the economy should be just below potential output. But while the job market and GDP are projected to improve, the CBO also notes that “the economy will continue to have considerable unused labor and capital resources – or ‘slack’ – for the next few years.”
Corrected on Feb. 6, 2014:
This article originally stated that the Affordable Care Act would mean fewer jobs, while it would actually mean fewer hours worked.