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The Public Policy
Obamacare vs. Jobs
Creating new jobs will only put small companies out of business.
Now that Obamacare has been enacted, we definitely won’t be knocking any new archways through the wall at our restaurant and expanding into the empty storefront next door.
With a waiting line on weekends, we could use the additional seats. The adjacent space could also be turned into a party room with seating for 50, perfect for communions, business meetings, and showers.
But there will be no sawing and hammering or reducing the neighborhood’s unemployment rate because we already have 42 employees and it’s at 50 workers that the hefty new fines, mandates and penalties kick in under Obamacare.
As the National Federation of Independent Business explains: “Businesses with 50 or more workers will now have to pay a penalty of $2,000 per worker if they do not offer health-care coverage and have workers who access the exchanges. This penalty has nothing to do with affordability and everything to do with punishing businesses for something the government has decided businesses should be forced to provide. Worse, with new mandates like these, what incentive is there for a firm to grow any bigger than 49 employees when it means employers may face such stiff fines? This approach is the exact opposite of a recipe for incentivizing job growth.”
In our case, we already offer a health insurance program to our current employees. I don’t know if that program meets the requirements of Obamacare, or if it will meet the requirements of future upgrades that might be mandated by politicians who enjoy playing Santa Claus with other people’s money. But none of that matters if we forget about expansion and stay under 50 workers.
I also don’t know if the workers in the added space could generate enough revenue to provide the level of health coverage for themselves that Obamacare demands. The average profit in the U.S. restaurant industry on $1 million in sales is $47,000 — so even if we did an extra million dollars in annual sales in the new room, it’s unlikely that there’d be enough new revenue to provide full health-care coverage for the additional staff.
In the above scenario, what we get from the government for our additional risk-taking, investing, expansion and job creation is more bureaucratic interference, higher levels of regulation and a good chance of being fined.
Our reward, more specifically, for creating 12 new jobs might well turn out to be a fine of $2,000 for each of 54 employees, or $108,000, if we don’t jump well enough through all the new hoops that the central planners in D.C. come up with for firms with 50 employees or more.
The spin on the White House’s website paints a different picture, one that’s simultaneously simple and false. Under the “I am a small business owner” and “Find out what health insurance reform would mean for you” sections, there’s this question and answer: “Question: Will I be required to provide coverage that I can’t afford? The President’s answer: No.”
It’s like going to the website of Kim Jong Il.
It shouldn’t be surprising that Barack Obama, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, none of whom ever ran anything in the private sector as complicated as a good lemonade stand, would come up with a top-down plan during a recession that delivers penalties for job creation.
Obama might say that his priority is “jobs, jobs,” but what he’s largely delivered is an anti-business, anti-jobs climate of uncertainty and the statist idea that job creation is defined as ten guys standing around a pothole instead of six. As Investor’s Business Daily reports: “Since the start of last year, the federal government added 81,000 jobs. By contrast, private-sector payrolls have shed 4.71 million.”
Over jobs the past decade, small businesses created three-quarters of the nation’s net new jobs. They do that the best when they’re not tied up in red tape or drained of capital via excessive taxation, fines and political intrusions.
Obama’s call for the unionization of these small firms via card check represents a clear attack on the nation’s most successful job creators and a fundamental disrespect for the very essence of the nation’s independent businesses. “Independent” means that we didn’t go into business to please politicians or to meet with grievance chairs the first thing in the morning.
The death tax, additionally, returns next year with only a $1 million exemption and a full 55 percent rate of confiscating assets, creating further disincentives to growth. Why knock through the dining room wall if the IRS is just going to increase the business value by $1 million and come after my kids at the funeral for $550,000?
Rep. Henry Waxman, seemingly unable to tolerate this kind of talk, wants to haul CEOs into hearings to defend their public comments regarding the price of Obamacare to their firms. Maybe he should call me in too, because I’m saying that Obamacare killed a dozen or so jobs that I could easily have created and that Obama and Waxman can multiply that by the millions of small business firms in order to get some idea of the real price of their flawed health care reform.
About the Author
Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.
Letter to the Editor View all comments (41) | Leave a comment
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Pecos Pete| 4.5.10 @ 7:28AM
Question:
"Businesses with 50 or more workers will now have to pay a penalty of $2,000 per worker if they do not offer health-care coverage and have workers who access the exchanges. "
Not sure if the penalty kicks in if a business provides health insurance AND just one employee accesses a health exchange?
ThamasD| 4.7.10 @ 8:34PM
Pecos Pete,
Yes, the penalty will kick in if even ONE employee is partaking of the health insurance enchanges.
ThamasD
Jim O'Brien| 4.5.10 @ 8:25AM
"Question: Will I be required to provide coverage that I can't afford? The President's answer: No."
It's like going to the website of Kim Jong Il.
EXACTLY. I get the same kind of propaganda from Senator Bill Nelson (D-FL). The Democrats would fit right in with Joseph Stalin. Tell a big enough lie, and people will believe it. In fact, the Demo-Socialists are trying to resurrect the USSR here in the USA.
Mark MacInnis| 4.5.10 @ 9:19AM
A good friend of mine has started a spreadsheet tracking the number and dollar value of loss reserves which big public companies like John Deere and AT&T are announcing they must take for the Obama-care fiasco. So far, it is $1.5 Billion dollars. Think of how many jobs, how much capital expansion, how much R&D, how much churn through are ecomomy that really is. Now think of the small business owners, who bear the BRUNT of this mess, who don't have to report it, but are like the author of this piece who are just shrugging their shoulders, sighing, and moving on....
victor| 4.5.10 @ 10:01AM
Nothing has beenn said about Mandatory Health Insurance Coverages.
See what your state makes your insurance policy contain:
http://www.cahi.org/cahi_conte.....es2009.pdf
Sometimes unnecessary, most times unneeded and ofttimes unused.
martin j smith| 4.5.10 @ 10:24AM
There is a lot of mateial out of the mout of BHO et al. to use in the coming campaign. What is needed is that information that will have the most power of the punch to get thru to ignorant voters the consequences of not only Obama care but other proposed legislation such as cap and trade and so called immigration reform and others.
Basically Obama has to be called a liar--but one needs to keep it short, simple ( but not untruthful)
and to the point. Going thru every point in HC legislation is not productive. Here are just a few examples:
Keep your own coverage ? No so
No death panels ? Not so
Decrease costs of premiums? Not so
No rationing of health care ? Not so.
etc. These are issues the average voter want to know about.
Griff| 4.5.10 @ 10:44AM
Martin,
How does the summary below work for you?
1. You are young and don’t want health insurance? You are starting up a small business and need to minimize expenses, and one way to do that is to forego health insurance? Tough. You have to pay $750 annually for the “privilege.” (Section 1501)
2. You are young and healthy and want to pay for insurance that reflects that status? Tough. You’ll have to pay for premiums that cover not only you, but also the guy who smokes three packs a day, drink a gallon of whiskey and eats chicken fat off the floor. That’s because insurance companies will no longer be able to underwrite on the basis of a person’s health status. (Section 2701).
3. You would like to pay less in premiums by buying insurance with lifetime or annual limits on coverage? Tough. Health insurers will no longer be able to offer such policies, even if that is what customers prefer. (Section 2711).
4. Think you’d like a policy that is cheaper because it doesn’t cover preventive care or requires cost-sharing for such care? Tough. Health insurers will no longer be able to offer policies that do not cover preventive services or offer them with cost-sharing, even if that’s what the customer wants. (Section 2712).
5. You are an employer and you would like to offer coverage that doesn’t allow your employers’ slacker children to stay on the policy until age 26? Tough. (Section 2714).
6. You must buy a policy that covers ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; chronic disease management; and pediatric services, including oral and vision care.
You’re a single guy without children? Tough, your policy must cover pediatric services. You’re a woman who can’t have children? Tough, your policy must cover maternity services. You’re a teetotaler? Tough, your policy must cover substance abuse treatment. (Add your own violation of personal freedom here.) (Section 1302).
7. Do you want a plan with lots of cost-sharing and low premiums? Well, the best you can do is a “Bronze plan,” which has benefits that are actuarially equivalent to 60% of the full actuarial value of the benefits provided under the plan. Anything lower than that, tough. (Section 1302 (d)(1)(A))
8. You are an employer in the small-group insurance market and you’d like to offer policies with deductibles higher than $2,000 for individuals and $4,000 for families? Tough. (Section 1302 (c) (2) (A).
9. If you are a large employer (defined as at least 101 employees) and you do not want to provide health insurance to your employee, then you will pay a $750 fine per employee (It could be $2,000 to $3,000 under the reconciliation changes). Think you know how to better spend that money? Tough. (Section 1513).
10. You are an employer who offers health flexible spending arrangements and your employees want to deduct more than $2,500 from their salaries for it? Sorry, can’t do that. (Section 9005 (i)).
11. If you are a physician and you don’t want the government looking over your shoulder? Tough. The Secretary of Health and Human Services is authorized to use your claims data to issue you reports that measure the resources you use, provide information on the quality of care you provide, and compare the resources you use to those used by other physicians. Of course, this will all be just for informational purposes. It’s not like the government will ever use it to intervene in your practice and patients’ care. Of course not. (Section 3003 (i))
12. If you are a physician and you want to own your own hospital, you must be an owner and have a “Medicare provider agreement” by Feb. 1, 2010. (Dec. 31, 2010 in the reconciliation changes.) If you didn’t have those by then, you are out of luck. (Section 6001 (i) (1) (A)).
13. If you are a physician owner and you want to expand your hospital? Well, you can’t (Section 6001 (i) (1) (B). Unless, it is located in a county where, over the last five years, population growth has been 150% of what it has been in the state (Section 6601 (i) (3) ( E)). And then you cannot increase your capacity by more than 200% (Section 6001 (i) (3) (C)).
14. You are a health insurer and you want to raise premiums to meet costs? Well, if that increase is deemed “unreasonable” by the Secretary of Health and Human Services it will be subject to review and can be denied. (Section 1003)
15. The government will extract a fee of $2.3 billion annually from the pharmaceutical industry. If you are a pharmaceutical company what you will pay depends on the ratio of the number of brand-name drugs you sell to the total number of brand-name drugs sold in the U.S. So, if you sell 10% of the brand-name drugs in the U.S., what you pay will be 10% multiplied by $2.3 billion, or $230,000,000. (Under reconciliation, it starts at $2.55 billion, jumps to $3 billion in 2012, then to $3.5 billion in 2017 and $4.2 billion in 2018, before settling at $2.8 billion in 2019 (Section 1404)). Think you, as a pharmaceutical executive, know how to better use that money, say for research and development? Tough. (Section 9008 (b)).
16. The government will extract a fee of $2 billion annually from medical device makers. If you are a medical device maker what you will pay depends on your share of medical device sales in the U.S. So, if you sell 10% of the medical devices in the U.S., what you pay will be 10% multiplied by $2 billion, or $200,000,000. Think you, as a medical device maker, know how to better use that money, say for R&D? Tough. (Section 9009 (b)).
The reconciliation package turns that into a 2.9% excise tax for medical device makers. Think you, as a medical device maker, know how to better use that money, say for research and development? Tough. (Section 1405).
17. The government will extract a fee of $6.7 billion annually from insurance companies. If you are an insurer, what you will pay depends on your share of net premiums plus 200% of your administrative costs. So, if your net premiums and administrative costs are equal to 10% of the total, you will pay 10% of $6.7 billion, or $670,000,000. In the reconciliation bill, the fee will start at $8 billion in 2014, $11.3 billion in 2015, $1.9 billion in 2017, and $14.3 billion in 2018 (Section 1406).Think you, as an insurance executive, know how to better spend that money? Tough.(Section 9010 (b) (1) (A and B).)
18. If an insurance company board or its stockholders think the CEO is worth more than $500,000 in deferred compensation? Tough. (Section 9014).
19. You will have to pay an additional 0.5% payroll tax on any dollar you make over $250,000 if you file a joint return and $200,000 if you file an individual return. What? You think you know how to spend the money you earned better than the government? Tough. (Section 9015).
That amount will rise to a 3.8% tax if reconciliation passes. It will also apply to investment income, estates, and trusts. You think you know how to spend the money you earned better than the government? Like you need to ask. (Section 1402).
20. If you go for cosmetic surgery, you will pay an additional 5% tax on the cost of the procedure. Think you know how to spend that money you earned better than the government? Tough. (Section 9017).
purpleguy| 4.5.10 @ 10:27PM
Since the new HCR bill is LAW, I see no reason in your diatribe... you cannot change it, so make the best of it, like Americans always do ... it's easier on your nerves and America will be just fine ... a little healthier and with less debt ... you'll see.
Radegunda| 4.6.10 @ 3:01AM
How does specifying some of the actual content of a law qualify as a "diatribe"?
Apparently you're fully on board with the notion that citizens should best be kept in the dark about the regulations imposed forcibly on them by colossally arrogant politicians. We can't have the peasants actually knowing anything about how their overlords intend to control their lives.
Even though said politicians know almost nothing about medicine or economics, we just need to trust they'll take good care of us.
Have some warm milk and don't forget you Teddy bear, purpleguy.
fbom| 4.5.10 @ 10:55AM
I know of a small business that used to exist in Maryland. A small bakery that supplied excellent food, custom cakes, business catering etc. Just a nice place you want to visit and support the local community. It is no longer in business - no you can't blame it on George Bush. This all took place thanks recently and Obamacare was the straw that broke the camel's back. A lot of small businesses operate on slim margins and it takes talented people to keep the open. But between a State Goverment that is unknowing and uncaring and a Federal Government that spends money before the ink is dry - why bother. They want to take what little is left and demand more.
The well is dry - suckers.
Johnb| 4.5.10 @ 1:55PM
My town is full of abandoned store fronts. Why work when it just gets given to those who do not.
Oregon has such an anti business climate when coupled with the Obama-Care you just cannot make it.
David| 4.5.10 @ 1:43PM
Governments, especially ones run by dems, don't know squat about running a business. Why? The primary reason is that the vast majority of politicians, again, especially dems, are lawyers.
I recall working as a cook for a full-service, 24-hour restaurant chain in Texas, similar to a Denny's, when I was 18. ALL of the other cook were significantly older than me with most of them having wives, children, and mortgage payments. I and the other 9+ cooks on the schedules for all 3 shifts worked 60 hours per week. There was no overtime required for restaurant employees in Texas at the time.
All of those cooks were making 2 - 3 times the minimum wage, which was probably close to $2.00 an hour at the time. They were happy to work 6 -1o hour days a week. They were able to drive decent cars (certainly not new), fix them when needed, pay their mortgages, and provide food, clothing, and other necessities for their families. Neither they nor I was rich, but I was single and living at home, and didn't like the 60 hour weeks. Again, they were happy to work the sixty.
Enter Jimmy Carter and the feel-good, mess-it-up dems. They passed a federal law that required all restaurants to begin paying overtime. It was phased in over 3 years: first year employers had to pay overtime after 48 hours, second year after 44 hours, the third years after 40 hours.
So what do you think happened. Well, the managers of the restaurants while they tries to give the cooks a couple hours of OT simple could not justify paying cooks 2 -- 3 times the minimum wage (PLUS ANOTHER HALF FOR OT) for doing prep work such a chopping salad, breading fish and shrimp, laying out bacon and sausage on sheet pans to blanche. So, they hired minimum wage folks to come in and do the menial work that the managers and company were willing to pay 5 -6 to the cooks, but refused to pay 7.50 to 9.00 for the same work when they could get a guy to now come in at 2:00 or 2.25 to do the work. What is an employer to do.
So thank you federal government do-gooders. I watched as those men sunk in mood, spirit, and became depressed because they had trouble paying their bills. I watched their cars and homes and even the way they dressed deteriorate. I watched them go out to look for part-time jobs to supplement their incomes, which jobs usually paid them minimum wage when ALL ALONG THEY COULD HAVE BEEN WORKING 60 HOURS A WEEK AT 2 - 3 TIMESs THE MIN WAGE WITOUT OT.
Pingback| 4.5.10 @ 3:12PM
Obama’s opening pitch almost thrown away (at least he didn’t wear his mom jeans) « Ji links to this page. Here’s an excerpt:
JP| 4.5.10 @ 3:43PM
One business analyst wrote this weekend that we may be seeing a "norming" of 9.5-10.5% unemployment by the Obama Administration. The President and his allies are now down playing any positive news, and according to this analyst the WH realizes that these short term positive fluxuations are not indicative of the long term trends.
The analyst didn't seem unusually upset by this news, and treated it just a normal step in the Obama transformation process. The problem with this thinking is rather obvious. The President and Congress continue to borrow very large quantities of money, as well as add on huge new entitlements. Something has got to give, and there is not enough wealth in this nation to support $3-$5 trillion spending sprees.
Businesses that can are accelerating their outsourcing (including health insurance firms, which are looking to move most of thier customer support centers, IT, and financial offices to India). Even in the realm of the President's green jobs programs, much if not most of these new manufacturing jobs will go to India, Vietnam, China, and Signapore.
martin j smith| 4.5.10 @ 4:07PM
Griff: You got to keep it short. The average American voter has the concentration level of a hyperactive teen ager--and that is on a good day. They are working have at least one job or more, kids and other things to juggle. If I were a campaign writer I would choose for advertisements soundbites that reverberate with
the voter. Any one of those points you wrote could be an ad in intself. But If I were to guess what issues really get people mad they would include:
1) A regime that does things behind your back
2)A regime that lies about what is in the bill
3)A regime that goes against the will of the majority of voters
4) A regime that is currupt
5) A regime that defames the voter who disagrees.
Those are the kinds of things that get people mad, among others
Howard| 4.5.10 @ 5:49PM
I am starting a new non-medical in-home care business. Because of BHO and his ilk, I will limit the size of the business. Plus, with confiscatory taxes around the corner; I'll just flip him the bird.
David| 4.5.10 @ 6:03PM
Martin Smith, how about this for an irritant: Congress constantly exempts itself from the very laws under which the rest of us have to live; or they get special favors that the remainder of us don't get.
Blackwatch| 4.5.10 @ 7:24PM
I'm not hiring a new marketing assistant/administrative assistant this year or next year either. I won't get serious about expanding my business until the conservatives are in charge. I won't hire the assistants I need.
I am going to get two or three college student interns and pay them a stipend for piece work. They won't be my hourly employees.
Thank you Democrat Congress and The Kenyan for screwing up thousands of small businesses like mine. I can't wait to vote you back to hell or wherever you spawned from.
Joel Hassman, MD| 4.5.10 @ 7:50PM
Nice piece! I wish Waxman would haul me in to comment on how this garbage legislation I have been calling "health care deform" will either do one of three things to me: end my profession as the legislation will deem psychiatry irrelevant and just have PCPs and family docs and Nurse Pract's just prescribe meds in what will amount to 5 minute med checks; motivate me to find another profession as it will end my opportunity to be independent and make a reasonable income; or, just quit being a doctor entirely and work in something out of health care , something I have been trained and doing for 25 years of my life.
Thank you, Pelosi, Reid, and Obama. The three amigos, or really, the three amorals.
Yosemeti Sam| 4.6.10 @ 1:21AM
When will it be open season on kiosk posters?
And parenthetically - I've not forgotten about
that Mao Zedong White House Christmas tree
ornament: where is it at?
Sam Deakins| 4.6.10 @ 6:58AM
That Mao ornament..why it's sitting where the Churchill bust used to be.
Sam Deakins| 4.6.10 @ 6:56AM
I bet a lot of folks are hoping to get a job real soon so they can get sick or injured and have their medical bills paid for free. That Obama is just so wonderful.
Stan Redmond| 4.6.10 @ 9:53AM
I saw the writing on the wall a long time ago. I moved all my production overseas. Not only are the regulations and taxes lower, but the employees are not the whiny liberal high school dopes that are a huge pain in the rear. Aside from the usual liberal that chastises me for outsourcing I am even confronted by the liberals in my own family that think businesses should be punished for moving jobs overseas. My response, as always, is "rather than punish companies for moving jobs to friendlier climates, make business more attractive to run here on US soil and businesses will flock to US soil."
Tom Crawford| 4.6.10 @ 11:52AM
If I save $2000 on my insurance but pay $5000 more in taxes how much do I save? How many more jobs should I create? How long can this go on?