• With: Joe Rago, Kim Strassel, James Freeman, Allysia Finley

    This is a rush transcript from "Journal Editorial Report," February 8, 2014. This copy may not be in its final form and may be updated.

    PAUL GIGOT, FOX HOST: This week on "Journal Editorial Report," the CBO's new report shows ObamaCare will cost millions of American jobs. But the White House says this is good. We'll explain.

    Plus, the president said there wasn't a smidgen of corruption in the IRS. But does this explanation of the targeting scandal add up?

    And with California in the worst drought in years, could Democratic

    inaction turn the tide for the GOP in the Golden State?

    (BEGIN VIDEO CLIP)

    DOUGLAS ELMENDORF, DIRECTOR, CONGRESSIONAL BUDGET OFFICE: By providing heavily subsidized health insurance to people with very low income and then withdrawing those subsidies as income rises, the act creates a disincentive for people to work relative to what would have been the case in the absence of that act.

    (END VIDEO CLIP)

    GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

    That was Congressional Budget Office director, Douglas Elmendorf, telling Capitol Hill lawmakers that President Obama's Affordable Care Act is a disincentive for people to work, adding fuel to Republican arguments that ObamaCare will hurt the economy. But the White House vehemently disagrees.

    Here is the chairman of the Council of Economic Advisors, Jason Furman.

    (BEGIN VIDEO CLIP)

    JASON FURMAN, CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS: Doesn't say "losing jobs." It says FTEs. This might be somebody who used to work 60 hours because they needed health insurance and that was the only job that offered it. Now they can get a different job at 35 hours that doesn't offer health insurance but they are getting it through this, and they are switching from one to the other, and that is a better choice for that person. This has given them that option that they didn't used to have.

    (END VIDEO CLIP)

    GIGOT: So which is it? A disincentive to work or catalyst to give people the freedom to choose where they want to work?

    Let's ask Wall Street Journal editorial board member, Joe Rago; Washington columnist, Kim Strassel; and assistant editorial page editor, James Freeman.

    Joe, a little background. Congressional Budget Office isn't some right wing outfit. This is the group that was cited many, many times by the White House when it was promoting the Affordable Care Act as an authority on the law.

    JOE RAGO, EDITORIAL BOARD MEMBER: Right. Nonpartisan official budget scorekeeper is its Washington image.

    GIGOT: The reason this report got so much attention was because they had tripled their estimate of the potential reduction in work under the bill. They first said it was going to be 800,000 jobs, equivalents. Now,

    2.5 million, potentially. This is a huge revision.

    RAGO: Huge revision. About 1.5 percent to 2 percent reduction in the number of hours worked. This is going to be a big hit to economic growth and productivity over time.

    GIGOT: What did they find? Explain that. Summarize what they found.

    RAGO: Right. Because the subsidies -- ObamaCare subsidies phase out as your cash income rises, it gives people an incentive to stay poor and say I'm not going to work as many hours, I'm not going to accept a promotion, I'm not going to go after a different job because I want to keep getting those subsidies.

    GIGOT: This is sometimes called by economists the "subsidy cliff." If you make an additional dollar of income, suddenly your subsidy falls dramatically or, in some cases, goes away. You have to make that calculation when you're deciding should I take that better job? Should I take that promotion if it means I'm losing health care subsidy.

    RAGO: Right. This is the marginal tax rate on an additional dollar of income, the implicit marginal tax rate. In some cases, if you earn that extra dollar, you lose everything. In some case, it's over 100 percent.

    You are worse off if you earn that extra dollar.

    GIGOT: Until you make a lot more money, you'll be worse off.

    RAGO: Right. Economists call this a poverty trap.

    GIGOT: The poverty trap.

    RAGO: You're stuck in that lower-income position.

    GIGOT: ObamaCare deepens that poverty trap, James?

    JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: That's why there are going to be a lot of personal tragedies behind the numbers here. ObamaCare is officially doing -- exacerbating the problem the president talks so much about, is the ability of people to rise from the bottom of the income ladder to the top. Now you have a huge disincentive to keep working or to work more.

    For the record, I think I speak for all the staff when I say, if you say us you're cutting all our hours down to 35, I don't think any of us would look at that as progress --

    (LAUGHTER)

    -- something we want to occur. Sort of an odd formulation there. But I think the significance of the CBO critique this week is this is a group that was pro-ObamaCare, helped it get enacted with its rosy economic forecast, now saying the economics of ObamaCare are negative for the U.S.

    economy.

    GIGOT: So, Kim, why is the White House pushing back so much as this and even saying, redefining this and saying this is a good thing, this gives people an opportunity not to work if they don't want to work?

    KIM STRASSEL, WASHINGTON COLUMNIST: Because they have no choice. If you pass a law that the entire country hates and that is getting slammed with headlines about how people are losing their health plans and their doctors and paying more, and now you also get hit with a report saying this is undermining the engine of the economy, you basically have no choice but to send out your economists and come up with a bizarro explanation somehow suggesting underemployment is awesome. Because that is basically what they said this week. So this is a political way of trying to extricate themselves from this poll. It's still a problem for them, especially with midterms coming up because this report adds yet another amount of fuel that Republicans will hit them on.

    GIGOT: What about this point the White House brings up, Joe, which is that this actually liberates people from job lock. Where you feel you can't take a new job because you lose your health insurance if you do, that because of ObamaCare, that will no longer be a concern. So this is a net benefit.