A historically high number of people will be locked out of the workforce by 2021, according to a report by the Congressional Budget Office released Tuesday.
President Barack Obama‘s signature health-care law will contribute to this phenomenon, the CBO said, citing new estimates that the Affordable Care Act will cause a larger than-expected reduction in working hours—eliminating the equivalent of about 2.3 million workers in 2021.
In 2011 the CBO estimated the law would cause a reduction of about 800,000 full-time equivalent workers.
“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 to 2 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive,” said the report.
The CBO estimated last year that 7 million people would sign up for health insurance through Obamacare in 2014, but computer problems have now lowered their estimate by a million, the Wall Street Journal reported.
The CBO also estimated the deficit will fall to $514 billion in the fiscal 2014 year ended Sept. 30, down from its previous estimate of $560 billion and a fiscal 2013 deficit of $680 billion.
The deficit will decline to $478 billion in fiscal 2015, any reductions will be short-lived. It start to grow thereafter as the economy continues to struggle with an unemployment rate that fails to fall below 6.0 percent until late 2016.
Additionally, the CBO sharply cut its projections of U.S. GDP growth in 2015 by a full percentage point to 3.4 percent, where it also stays for 2016, down nearly a full point from the CBO’s previous estimates.
“CBO estimates that the economy will continue to have considerable unused labor and capital resources, or ‘slack’ for the next few years,” the agency said in the report.
—By CNBC.com with wires.