Is ObamaCare Causing the Jobless Recovery?
Take a look at the chart below. Public uncertainty about federal economic policy under the Obama presidency is higher than it has been in 30 years.
Economists at Stanford University and the University of Chicago have actually discovered a way of measuring how uncertain people are. They find that their measure of uncertainty correlates with such economic activities as deciding to invest, deciding how much to produce and deciding whether to hire more workers.
One source of uncertainty is what will happen next January when American taxpayers will be hit with a large tax increase (mainly the expiration of the Bush tax cuts) and a major decrease in government spending (the result of last year’s budget deal). Will President Obama and the Congress agree to put off the tax increases? Will they agree to delay the spending cuts? Not knowing the answers to those questions appears to have more impact on the decisions of businesses and consumers than if everyone simply agreed to go ahead and let the bad things happen.
Some causes of uncertainty (such as the crisis with in the Eurozone) are not under President Obama’s control. But in other areas, he is directly responsible for creating anxiety for the business community and the public. Three policies jump out: Dodd-Frank financial regulation, an unhealthy desire to tax capital, and ObamaCare.
Overall, the economists calculate public policy uncertainty is the apparent cause of a 3.2% drop in real gross domestic product, a 16% decline in private investment and the loss of 2.3 million jobs over the past five years.
Uncertainty is one of the reasons employers are not hiring like they have at the end of past recessions. When an employer hires a full-time worker, the employer thinks of the relationship as long term. During an initial training and learning period, the employer probably pays out more in wages and benefits than the company gets back in production. But over a longer period, the hope is to turn that around and make a profit.
When employers hire new employees, they are making a gamble. They are betting that, over time, the economics of the relationship will pan out.
The problem in the current economy is that hiring new workers and committing to new production has become risky. An employer who hires workers today has no way of knowing the company’s future labor costs; its building and facility costs; its cost of capital; or its taxes.
Take the cost of ObamaCare. The Congressional Budget Office (CBO) estimates the average annual cost of a minimum benefit package at $4,500 to $5,000 for individuals and $12,000 to $12,500 for families in 2016. That translates into a minimum health benefit of $2.28 an hour for individual coverage and $5.89 an hour for family coverage.
In another year and a half, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year. You can see already that few firms are going to want to hire low-wage workers with families.
Employers could decide to drop their health insurance altogether; and if they do so they must pay a fine of $2,000 per employee per year. Yet if a lot of employers do this (and apparently a lot of them are thinking about it), it is likely the federal government will respond by making the fine a lot higher.
The jobs numbers tell two different stories, as the second graph shows. In terms of hours worked, the labor market has recovered. But in terms of the actual number of people working, we haven’t even started to recover. People with jobs are working just as many hours as they did before the recession began. This is consistent with the incentives under ObamaCare: Nothing happens to the employers’ health care costs if people work additional hours. However, there is a substantial increase in health care costs, if the employer hires one more worker. This may be the reason for the jobless recovery.
I testified this week at a House Oversight and Government Reform Committee hearing on this subject of economic uncertainty and the role ObamaCare plays. In addition, my new book, Priceless, explains how to dismantle and replace ObamaCare.
Fascinating. Very good post.
And yet we were told the recession would be short…
The increase in health care costs for employers is undoubtedly a factor.
We are seeing the same picture in France but on a chronic basis…
Excellent analysis!
http://thegap-cosmosophy.blogspot.fr/2012/07/bastiat-was-right-obamacare-versus-jobs.html
As long as we rely on employer sponsorship of health plans, increasing costs will remain a problem, regardless of the impact of the Affordable Care Act. But those higher costs are being paid by the employees in the form of forgone wage increases.
Also, economic uncertainly is not due to future health care costs – that’s a known quantity. It is due to suppression of demand because of lack of income due to unemployment and underemployment and because of depletion of family reserves. A market cannot function well if consumers do not have the funds to make purchases of products and services. This economic uncertainty will persist until our policymakers are willing to intervene with solutions that will correct the imbalance between supply (now more than adequate) and demand (the need to restore purchasing power to the masses).
Joseph Stiglitz’s new book, “The Price of Inequality,” defines the problems and offers solutions. Even those with very different ideological perspectives could benefit by understanding better the views of those of us who have little faith that the market alone can solve all of our economic problems.
John
To me, as an economist, what you’re saying is rudimentary. So far as Obama’s economic advisors
are concerned, they seem to have “deja vu all over again” [Yogi Berra]. Maybe they fell asleep in the early 1960s and (mixing metaphors) only woke up when Obama took office -Rip Van Winkle style.
Al
Answer to your question: yes.
“Give me Liberty, or Give me Death!” – Patrick Henry
What a brilliant ruling by the United States Supreme Court on the affordable health care act (Obamacare). Stunningly brilliant in my humble opinion. I could not have ask for a better ruling on a potentially catastrophic healthcare act than We The People Of The United States received from our Supreme Court.
If the court had upheld the constitutionality of the individual mandate under the commerce clause it would have meant the catastrophic loss of the most precious thing we own. Our individual liberty. Thank you! Thank you! Thank you! Supreme Court.
There is no mandate to buy private for-profit health insurance. There is only a nominal tax on income eligible individuals who don’t have health insurance. This is a HUGE! difference. And I suspect that tax may be subject to constitutional challenge as it ripens.
This is a critically important distinction. Because under the commerce clause individuals would have been compelled to support the most costly, dangerous, unethical, morally repugnant, and defective type of health insurance you can have. For-profit health insurance, and the for-profit proxies called private non-profits and co-ops.
Equally impressive in the courts ruling was the majorities willingness to throw out the whole law if the court could not find a way to sever the individual mandate under the commerce clause from the rest of the act. Bravo! Supreme Court.
Thanks to the Supreme Court we now have an opportunity to fix our healthcare crisis the right way. Without the obscene delusion that Washington can get away with forcing Americans to buy a costly, dangerous and highly defective private product (for-profit health insurance).
During the passage of ACA/Obamacare some politicians said that the ACA was better than nothing. But the truth was that until the Supreme Court fixed it the ACA/Obamacare was worse than nothing at all. It would have meant the catastrophic loss of your precious liberty for the false promise and illusion of healthcare security under the deadly and costly for-profit healthcare system that dominates American healthcare.
As everyone knows now. The fix for our healthcare crisis is a single payer system (Medicare for all) like the rest of the developed world has. Or a robust Public Option choice available to everyone on day one that can quickly lead to a single payer system.
We still have a healthcare crisis in America. With hundreds of thousands dieing needlessly every year in America. And a for-profit medical industrial complex that threatens the security and health of the entire world. The ACA/Obamacare will not fix that.
The for-profit medical industrial complex has already attacked the world with H1N1 killing thousands, and injuring millions. And more attacks are planned for profit, and to feed their greed.
To all of you who have fought so hard to do the kind and right thing for your fellow human beings at a time of our greatest needs I applaud you. Be proud of your-self.
God Bless You my fellow human beings. I’m proud to be one of you. You did good.
See you on the battle field.
Sincerely
jacksmith – WorkingClass 🙂
Uncertainty is in stark opposition to optimism. Optimists start companies and invest their life savings into new ventures. They beg, borrow or just about steal to get investors to support their vision. Most go under; but many do well. Uncertainty might seem like a benign concept. To many it is akin to an unjustified worry or anxiety that has no basis. But uncertainly inhibits many of the activities that economist want to occur in this recovery. Competition will whittle away the profit margin as firms see less risk. Companies and investors will often accept lower rates of return if it is safe and secure. But uncertainty creates and environment where firms take a wait and see attitude or demand a higher risk premium before they invest.
Whenever I contemplate an issue that is so convoluted and twisted as to defy analysis I tell myself “just follow the money”. And there you have it. It’s just all about money, isn’t it? Treatment is denied to those who cannot pay (have-nots) and doctors, hospitals and clinics now cater to those who can (haves). Those are the two distinct groups of people that now exist in our money-based global econcomy: The haves and the have-nots. Whoever coined the adage “money is the root of all evil” was surely referring to this polarity.
If economies were resource rather than money based healthcare would become a resource, like food, water and shelter and would be managed accordingly so that it was available to all, and not just those with the lion’s share of money. Money ensures debt and inflation, resulting in indentured servitude for most people on this planet. Employer-based benefit packages are a type of extortion, a way to procure labor that is tedious, mind-numbing, stressful and an exercise in hopelessness, futility and insecurity for many who just want to provide for themselves and their families.
So the question is, are we willing to revise our habits of consumption and relentless pursuit of wealth and power by moving away from money? Are we willing to manage our precious resources rather than exploit them for profit so that there are no haves and have-nots? It’s a beautiful vision, but will it ever happen? I really, really hope so.
Regarding JackSmith, We have destroyed our health care system by creating the monopolistic third party payer system. We do not have a free market health care system!! If we could buy health care insurance like we buy any other insurance we would not be in the desparate situation that we find oueselves today. The pie in the sky Medicare system you seem to promote would push this country over the edge financially. We would look economically like the Social Big Gov. Wealfare European style economy you seem to want. We would be like Greece in 10 years. Then only the rich would have health care if there were any doctors still practicing health care. people like you are just do not under stand simple math.
As for Ms. Fiedler, what kind of world do you think you live in? I persume you never read or at least never understood the Aesops Fable, The Grosshopper and the Ant? It is about the virtues of hard work and taking personal responsibility for your actions. You probably are like Obama and do not think that Darwin’s law of survival apply to the human speices? Resorces like air and water are scarse. That requires people to understand the intricate nature to the management of these resorces. And that requires hard work and inteligence that some have and are willing to do while other do not and are not willing to work for. The Grosshopper and the Ant. If you drink to excess, eat to excess, smoke, do not take care of your self phisically and want health care at the same price and same avalibility as some one who does follow reasonable health management rules. You then have no ability to manage this precious resorce. Weither it is money or barter or what ever, the management of our resorces requires hard work and intelligence. If you do not reward hard work, street smarts and personal responsibility you end up with nothing like you want. You end up with chaos!!
Well, i’m late posting because my staff cannot keep up with me but from where i sit with $ in the bank and a rosy outlook for my business, i’m not hiring. This is not because of economic uncertainty, ObamaCare or for any other reason than the quality of employees is so crappy in my neck of the woods that i shudder to have to add more to my plate to deal with. They do not show up for work, even when they claim they want to work. They want more money for doing less; they do what they do incorrectly and feel i am unfair if i even point it out to them. They cannot write complete, grammatically correct sentences and sometimes cannot even alphabetize. They have no control over their emotions. i could go on but i try not to dwell on it. This seems to be a major public health issue. What is going on?!
Greetings Friends,
The combination of price uncertainty and regulatory uncertainty is crippling health care. The government is using all of its power to drive the largest reorganization in health care history–indeed, in raw dollars, the largest capital reorganization since the Industrial Revolution. But for what return?
Prudent providers have no choice but to sit on the sidelines and wait and see. As a result, 18% of our GDP is in a state of suspended animation, and innovation is stifled and adrift in a sea of wait-and-see.
Instead of sound economic alignments and reconfigurations, the country is witnessing Brownian motion in health care. Physicians are running willy-nilly into the bosoms of hospitals. Hospitals are cutting deals with each other and with payors that continue irrational and unsustainable pricing patterns that turn health care accounting into Hollywood accounting. The center will not hold.
And where in this swirl of activity is the patient? And just who is looking out for that person’s well-being. My experience, sadly, is that we have lost the single central unifying force in health care—the good of the patient, and instead are treating the pocketbook of the industry. It is time for the voice of common sense to speak up and demand not only certainty in the course of health care policy, but principled dedication to patients and the public.
Cheers,,
Charlie Bond
Amen, Charlie!!!