October 24, 2010

CBO Director ‘Discovers’ New Disease: ObamaCare Withdrawn Labor Syndrome (OWL)

Douglas_ElmendorfBack in March, in the runup to the final ObamaCare vote in the House, the establishment press was thrilled when the Congressional Budget Office issued a report estimating that ObamaCare would, in the CBO’s words, “produce a net reduction in federal deficits of $138 billion over the 2010–2019 period as result of changes in direct spending and revenue.” At the time, Brent Baker at NewsBusters noted how positively giddy Katie Couric at CBS News was over the CBO’s estimate. Couric even claimed: “The price tag certified.”

If only. It turns out that the key word in the CBO statement was “direct.”

On Friday, CBO head Doug Elmendorf made a presentation (HT Jed Graham at IBD) at the Schaeffer Center of the University of Southern California entitled “Economic Effects of the March Health Legislation.” In it, as shown below, he revealed a pesky and significant indirect effect of the legislation. In the process, he also introduced us to a new economic disease (my name) — ObamaCare Withdrawn Labor Syndrome, or “OWL”:


“Small”? Given that about 140 million people are working, “roughly half a percent” amounts to about 700,000 jobs (somewhat higher than the number Graham used in his column).

Gee Doug, if there’s any evidence of the negatively dynamic effect of ObamaCare on the job market and the economy as a whole in the your “certified” March report (I know, that’s not your word), I’m not seeing it. (My guess is that Congress specifically directed CBO to ignore dynamic effects, and the CBO’s hands were tied.)

When priced out, Elmendorf’s estimate of the effect of OWL Syndrome negates a large percentage of the March CBO report’s alleged deficit reduction. If 700,000 workers with average earnings of about $35,000 a year acquire OWL Syndrome and no longer choose to work, the lost earnings to the economy will amount to about $25 billion. As a result, payments into Social Security and Medicare will go down by about $3.8 billion, and federal income tax collections will fall by $6 billion or so. That’s almost $10 billion a year. If these negative effects don’t kick in until 2014 (they will probably occur gradually until then), reduced tax collections alone will wipe out about $59 billion (6 years at $9.8 billion each year) of the CBO’s projected 2010-2019 savings.

This is before attempting to quantify the increased unemployment, food stamp, welfare and other entitlement payouts which will surely occur, and which will surely be significant. States and localities will also probably lose another $2 billion in income and sale tax revenue. Piling on, all of this is before considering the negative multiplier effects Keynesians so love to positively cite when discussing the supposed benefits of government economic stimulus.

Does anyone think the establishment press will take an interest in the effects of OWL Syndrome? My guess is that they won’t give a hoot.

Cross-posted at NewsBusters.org.



  1. It’s been pointed out by many, but I think it bears repeating: the “certified” CBO report claiming a “net reduction” was based on the assumptions, data and tricks fed to it by Pelosi and other ObamaCare supporters. And within their very narrow parameters, the CBO have to accept those assumptions, tricks and data as gospel in their calculations. As Coulter put it, the CBO report is “worth about as much as a report card filled out by the student himself.” Add in their fidelity to static scoring and voila! A trillion dollar health care takeover miraculously becomes “deficit neutral.”

    Speaking of the CBO, you always hear about how “non-partisan” they are. Maybe strictly they are not (at least outwardly), but the CBO for all that is still a bunch of bureaucrats ensconced within the government system, and their methodology and position give them an inherent pro-government/bureaucracy outlook, which aligns them with the Democrats who are also pro-government/bureaucracy. So, I am a bit tired of hearing libs claim how we just have to accept everything the CBO says (including their recent asinine declaration that tax cuts give “the least amount of bang for the buck” of all the ideas for increasing tax revenue/reducing our deficit that are on the table (which utterly ignores reality and history) because they are “non-partisan.” They are not, they are biased.

    Thus, it’s not surprising that when people at the CBO get away from the rigid methodology/ideology of that office, the more they acknowledge the realities of ObamaCare, however reluctantly and hesitantly.

    Comment by zf — October 24, 2010 @ 2:10 pm

  2. I think this is all minor when it compares to the ultimate deceit of eliminating “waste, fraud, and abuse” in Medicare to offset the spending increases. If there is WFA, it should be eliminated. That is separate. The expense of the reforms themselves should stand on their own. The CBO estimate makes people think there is something for nothing. Many cannot articulate the details of the bill, but they can smell that is not right.

    Comment by Jim — October 24, 2010 @ 4:17 pm

  3. #2, Good point. I didn’t even bring that part up because the idea the government will suddenly be able to reduce (let alone eliminate) Medicare fraud and abuse when they have failed to do so for several decades is so outwardly ridiculous. And consider this, are we supposed to believe that they can prevent all the fraud and waste that will inevitably crop up in all the various new ObamaCare schemes at the same time they are taking on Medicare? Again, absurd.

    And doesn’t any attempt to eliminate waste and fraud require spending in of itself?

    Comment by zf — October 24, 2010 @ 6:29 pm

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    Pingback by The Anchoress | A First Things Blog — October 25, 2010 @ 12:38 pm

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