Monday, November 16, 2009

Mandates and Reform

Supporters of “health care reform” are outraged, simply outraged, by the suggestion that requiring employers to provide health insurance to their employees or pay a “head tax” is going to affect job creation or the reduction of unemployment. If you suggest such a thing, they say, you are a heinous person who believes that corporate profits are more important than people’s lives because people die when they don’t have insurance.

I don’t have a dog in this hunt, because I am neither an employer nor a prospective employee, but how can it be possible that adding to the cost of having employees does not adversely affect the process of increasing employment? How, in fact, can raising the cost of employment fail to reduce the number of jobs?

Let’s postulate an employer with 50 employees; not currently providing health insurance because he cannot afford to. He is breaking even and barely getting by personally on what he is making from the company. He has cut costs in every way that he can, and the market is shrinking rather than expanding. He gets told that he must pay an 8% tax on his payroll. What can he do? He really has no choice but to release four employees as a result of that 8% tax.

So 46 people get health insurance, but 4 people lose their jobs.

Is that a fair trade? I guess that can be argued, but I know that there will be four people who will say that it is not. Probably some 17.5% of the people in this nation will say that it is not; the people who are unemployed or underemployed. I don’t think you will convince them that by making it more costly to add jobs you are not reducing the pace at which jobs will be added.

Politicians talked about how auto manufacturers had to be bailed out because they had the “unfair burden” of providing health care for their employers; a burden that foreign manufacturers did not bear. They talked about the burden of high health care costs that Americans bear. And then where do they put the burden of paying for reform? They create an “individual mandate” and an “employer mandate” to pay for reform.

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