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Source link: http://archive.mises.org/11021/obamacare-is-a-devastating-tax-on-the-working-class/

Obamacare is a Devastating Tax on the Working Class

November 12, 2009 by

Depending on the specific plan and other variables such as location, the healthcare plan amounts to a direct labor tax of approximately $300 per month for an individual, or nearly $700 for family coverage.FULL ARTICLE by Eric M. Staib

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{ 53 comments }

Mike November 12, 2009 at 8:26 am

Wow, they’ve really stacked the deck on this one. What a disaster it’s going to be. There’s a sick part of me that says “I can’t wait”.

Adam November 12, 2009 at 9:19 am

I would really like to read a liberal rebuttal to this article.

Bogart November 12, 2009 at 9:32 am

Call this the “Mexican/Chinese/Indian/Brazilian/Chilean/Insert South American/Asian Country Employment Act” Employers will simply stop allocating capital to businesses in the USA and allocate that capital to places that do not have these burdens. Those are most likely China and India but certainly not limited to them.

Mrhuh November 12, 2009 at 9:52 am

I stayed up late watching the debates in the Senate on C-SPAN and it was tragic. The debates could’ve been separated into two kinds:

One, debates that were rational and looked at cost-benefit analysis, pointing out the skyrocketing national debt, some of the onerous regulations in the bill, including one on forcing people who don’t support the Public Option to pay a massive fine or face imprisonment for five years, which could’ve only been described as police-state fascism.

Two, emotionally-loaded demagoguery with constant appeals to “being one’s brother’s keeper” and insuring that everyone has access to adequate health-care (without any real talk of how).

Sadly, the second one won out.

htran November 12, 2009 at 9:57 am

Mike:

I can’t wait either.

The greatest impression that Atlas Shrugged left on me was that contradictions can’t exist within an objective reality. It will inevitably destroy itself. We can cheat reality for only so long…

Shay November 12, 2009 at 10:01 am

Nice. I don’t currently work and don’t get any government handouds, but manage to get by. But if I have to start spending hundreds of dollars a month on health insurance or face even higher fines/prison, I’m going to have to apply for government welfare programs and other aid

Mike November 12, 2009 at 10:15 am

Yup. Every artificial disadvantage placed upon wealth producers will make welfare mooching look like a better idea for those in the margins.

Mike November 12, 2009 at 10:16 am

[My response was to Shay]

Ohhh Henry November 12, 2009 at 10:57 am

“if I have to start spending hundreds of dollars a month on health insurance or face even higher fines/prison, I’m going to have to apply for government welfare programs and other aid”

This is true purpose of the new legislation. Ruining the economy enhances the position of legislators, bureaucrats, police, army, etc. because more hardship means more opportunities to make government bigger, in order to fix the problems that they created. Those kicked off the bottom of the ladder will either become welfare recipients who will support the activists and lobbyists for “nice” government assistance, following the ACORN pattern, or they will become outlaws whose illegal actions will be the stimulus for “nasty” government attention. Whether you choose to be nasty or nice, only two forks in the road will be allowed to exist and they both lead into the arms of Big Brother.

This is the fatal flaw of well-meaning advocates for greater government intervention. They fail to realize that government actors have the same amount of self-interest as any private worker or investor. Whereas the private actor who faces competition for his services can only expand his revenue opportunities by working harder and smarter, the government actor, since he controls a monopoly without competition, can only expand his revenue opportunities by making his services more costly and more inefficient.

Wealth November 12, 2009 at 11:16 am

@Worst Muhlmann,

Obama is not practicing what he preaches, he is a fake.

Do as I say, not as I do.

I hate liberals with a passion, they are the scum of earth !

Sorry Horst, I couldn’t resist a bad pun, LOL !

Ribald November 12, 2009 at 11:44 am

I think this is a bit misleading on one point. The vast majority of people who have health insurance get it through their employer. If their employers are already giving them health benefits above the level required by the bill, the effects of these provisions will be necessarily less, perhaps far less than Staib has assumed.

Still, much of the rest is both true and tragic. If the employee gets no subsidy to offset the costs, then he’ll end up paying for it or going without (if he qualifies for an exemption to the mandate). If he doesn’t qualify for an exemption and can’t afford a policy, he gets taxed an extra 2.5%, a ridiculous punishment given that the public option was eviscerated. “We screwed up and you should suffer for it.” is the subtle message.

There’s still a lot of legislative work before the final bill gets done, but I doubt it will improve. The Democrats decided that giving the insurance industry a boost was priority 1. We’re left with a bill that will likely hurt more than it helps. It’s another reminder that the entire political system is in shambles.

Dick Fox November 12, 2009 at 12:13 pm

Oh Eric, oh Eric,

I was so excited as I read your article. It is well thought out and strong on the truth of the impact of the House health care plan on employment and especially the poor. Then right at the end you stuck this in there.

The effect of Obamacare on the prices of produced goods is obviously inflationary. Increasing the cost of employing every single laborer by $300 a piece is certain to increase the price of all produced goods. Combining price increases with rising unemployment is hardly a laudable strategy for improving the lives of poor citizens.

No, No, a thousand times no!! This is so far from Mises on inflation that it cause me to change your grade from an A+ to a C-.

First, increases in cost do not automatically mean an increase in price. As you note in your article cost may be cut by reducing employment keeping prices the same.

Second, if prices are increased it will probably mean a reduction in unit sales that could even translate into reduced total sales and profits. This would cause businesses to reduce prices to sell off there growing inventories.

Third, additional unemployment would mean less disposible income and so overall consumption would decline. This could also create increased inventories resulting in decreasing sales.

But finally, the reason I lowered your grade, you reason from Keynesian cost-push inflation theory. Mises points out that we cannot even talk about inflation anymore in analysis because it is so distorted. Inflation is not an increase in prices but a debasement of the currencies purchasing power. Increased cost of business does not alter the purchasing power of money. Please understand the difference and why I take such issue with your statement. Increased costs do not create inflation. Debasement of the currency creates inflation.

EconAndre November 12, 2009 at 12:59 pm

Lee Ohanian of UCLA has conducted research on the Great Depression showing that part of the cause (even before the banking crisis) was due to “high wage policies” promoted by President Hoover and continued by Roosevelt. Wages were not allowed to fall as production fell.

The effect of this case of violating the labor tax and establishing a wage floor could be quite similar to the the effect in the Great Depression.

Hank Reardon November 12, 2009 at 1:01 pm

The bill will not automatically produce inflation. I believe it will just cut margins for the producers… which means less to tax. With less profits to tax the administration will make up the difference in 2 ways: 1.) raise tax rates (let Bush’s tax cuts expire) 2.) call the law to fund employee health expenses something other than a tax

T. Ralph Kays November 12, 2009 at 1:04 pm

Dick Fox

Good for you, I was going to make the same comment but you beat me to it and frankly said it better than I think I could have.

WY_Not November 12, 2009 at 1:09 pm

Below is what I’ve been faxing to my “representatives”. Regardless of how this bill will affect the economy, in the end it amounts to ownership of you by the government. It is just flat out wrong.

****************************
For the moment I have health care. I am a responsible American. I have an HSA. I am paying for the health care I need through a voluntary exchange of payment for services. If you pass ObamaCare in any form, that will end. I will shrug. I will close my HSA account. I will cancel my policy. I will NOT participate in or support ObamaCare in any way, shape, or form. I will not sign up. I will not sign my children up. I will not pay any additional taxes for it. I will not pay any fines you try to impose on me for not participating.

YOU will have to send your jack-booted thugs to my home in attempt to force my participation. In the end you will fail. I will not capitulate. I will not be caged. YOU will have to put the gun to my head and pull the trigger. If this is what YOU want then I invite YOU to my home to have the courage of your convictions, to come to my home and pull the trigger yourself. You won’t. You are a coward, like every other tyrant through history you will not get your hands dirty, you will send others to do your dirty work.

Un-American? You think I am un-american? You, who have trampled upon the US Constitution? You, who have used the force of arms in order to take over entire industries? You, who think that the People should serve the government? I have served my country in the USAF. I have served my country by being a productive member of society, by paying my own way. I continue to serve my country by teaching my children the history that founded this country, by teaching them to be independent, by teaching them to not bow down before tyrants, by teaching them how to put tyrants in their place through force of arms.

An angry mob? You have not seen anything yet. If this ObamaCare is passed in any way, shape, or form, you WILL see an angry mob. You will have rioting in the streets as people finally get fed up with the tyrants in DC.
****************************

Wealth November 12, 2009 at 1:11 pm

It’s not the dollar cost that is the worst of this Obamacare, it’s the opportunity costs and freedom costs that will litterally KILL individuals.

But yet, T. Ralph Kays thinks that Obamacare is not an evil bill by itself and that I should justify why it’s wrong and that I should define non-agression.

How can you argue with somebody like that ?

Wealth November 12, 2009 at 1:18 pm

“The implication of this increased cost is that workers whose revenue productivity is less than $300 per month higher than their wages will be laid off, or have their hours cut to the level that will classify them as part-time.”

Can I apply as an illegal immigrant ?

Illegal immigrants are undocumented and so would not qualify for health care premiums because they are basically undeclared workers. Maybe if I tan my skin and let my moustache and hair grow and learn spanish, I could pretend I’m an illegal and I will then be entitled to a full paycheck and a full-time job.

What do you think ?

I wonder if there are jobs for Americans in Mexico since the mexican government places much less restrictions on hiring than America.

I guess we will soon see Americans jumping the mexican border to get a job in Mexico.

I’m sure that the drug cartels would enthousiastically hire an expert gunsmith. Time to earn a better wage and a better life in Mexico, the USA is the turd world (not third, turd).

Russ November 12, 2009 at 1:22 pm

Mrhuh wrote:

“…emotionally-loaded demagoguery with constant appeals to “being one’s brother’s keeper” and insuring that everyone has access to adequate health-care…”

The catch there is the word “adequate”. Obamacare will ensure that everyone has *inadequate* health care, just like gas price ceilings in the ’70s ensured that everybody had trouble getting gasoline, no matter how wealthy they were.

Churchill said “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” It appears that Obama and his ilk would rather that everyone suffers equally.

Wealth November 12, 2009 at 1:27 pm

“Because any drop in wages during the months following the bill’s enactment would be considered a violation of the employer-contribution mandate and therefore would carry heavy fines, literally all wages will be prevented from falling below their current levels.”

1929 all over again ! Way to go Obama.

Liberals are STUPID because they keep making the same mistakes while expecting different results.

Watch out Obama, Igor Panarin is coming.

T. Ralph Kays November 12, 2009 at 1:35 pm

Wealth

I am a little tired of you telling me what I believe when you refuse to read what I have said. You frankly are the biggest idiot I have ever encountered.

Wealth November 12, 2009 at 1:37 pm

WY_Not,

“Regardless of how this bill will affect the economy, in the end it amounts to ownership of you by the government. It is just flat out wrong.”

Please justify to T. Ralph Kays why it is wrong.

T. Ralph Kays requires you to justify or else you are are tyrant trying to impose his morality on us all.

Also, please define ownership for T. Ralph Kays because if you don’t define nor justify, for T. Ralph Kays you can’t say it’s wrong.

And, as per T. Ralph Kays’s own requirements, you can’t use the word relative or relativity.

Wealth November 12, 2009 at 1:45 pm

Don’t we have a 2nd Amendment for situations like this health care reform bill ?

They say they will fine, arrest and jail you if you refuse to obey their mandate to buy health insurance.

They will also shoot and kill you if you resist arrest.

So the government wants to save your life with this health care reform but will kill you if you refuse its help. Where’s the logic ?

This is tyranny, the requirement for the use of the 2nd Amendment is met.

Everybody should refuse to buy forced health insurance and let them have it if they come for you.

How can it be “criminal” for not buying a product the government tells you to buy ?

If I’m a “criminal” for peacefully managing my own private money and my own wages, then I might as well be a criminal all the way and pay the taxmen and their henchmen with lead.

What do you think ?

Wealth November 12, 2009 at 1:48 pm

T. Ralph Kays,

“You frankly are the biggest idiot I have ever encountered.”

Ad hominems surely make good arguments, don’t they. Have you tought of this last argument all by yourself or did your mother help you ?

Wealth November 12, 2009 at 1:50 pm

T. Ralph Kays,

“I am a little tired of you telling me what I believe when you refuse to read what I have said.”

But then again, you can’t shut up can’t you.

You must have the last word and you resort to ad hominems.

I guess this proves that you only want to argue and you are being dishonest about having to justify and define everything to say it’s wrong or right.

Call me an idiot all you want, keep up with trying to have the last word.

Wealth November 12, 2009 at 1:53 pm

T. Ralph Kays,

“Dick Fox

Good for you, I was going to make the same comment but you beat me to it and frankly said it better than I think I could have.

Mr. modesty couldn’t just shut up and let Dick Fox have the first Idea, couldn’t he.

If Dick Fox made the same comment than you and said it better than you then why didn’t you just shut up.

Nothing in your comment about Dick Fox’s comments was useful.

You are a narcissistic jerk.

T. Ralph Kays November 12, 2009 at 1:56 pm

Wealth

Are you for real? Seriously, can you be as stupid as it appears? Look at your last post and tell me that you are not guilty of what you accuse me of.
One last question, how do you breathe in that position?

Wealth November 12, 2009 at 1:57 pm

We should tax T. Ralph Kays’s ego, there’s enough hot air in his inflated head to fund the entire nation’s liabilities.

Okay, okay, I’ll shut up from now on.

Go ahead T. Ralph Kays, have the last word, win this argument, be my guest.

Wealth November 12, 2009 at 2:00 pm

T. Ralph Kays,

“Seriously, can you be as stupid as it appears? Look at your last post and tell me that you are not guilty of what you accuse me of.”

I will take that as a guilty plea from your part. case closed.

Wealth November 12, 2009 at 2:01 pm

“One last question, how do you breathe in that position?”

You should know, you’re the one with the head fill with hot air.

Mike November 12, 2009 at 2:40 pm

Um, since when is online discussion a cutthroat competition to see who can make the good points first? (rhetorical… I know, I know)

I don’t see anything wrong with offering encouragement to someone who made a good post. I for one do not typically take offense when someone tells me “You beat me to it.”

Shay November 12, 2009 at 2:42 pm

OK, I’ve really had it with Wealth and all his variosly-named incarnations. Moderators, please decide between people like him and people like me. Mises.org is a private space and there is nothing gained by allowing this sort of drivel.

T. Ralph Kays November 12, 2009 at 2:49 pm

Shay

I should apologise, I am new at the whole blog thing, only a couple weeks of experience. I heard reference to “trolls” early on and didn’t understand what it was about. I fear that I have been guilty of feeding the trolls, I am really sorry.

Wealth November 12, 2009 at 3:39 pm

Ralph,

As if you didn’t act like a troll yourself.

Mitch November 12, 2009 at 4:44 pm

I second that Shay.

Mr. Staib has written a great article here.

Some commentors have made great additions to the discussion, but this thread has gone rotten.

Lately it seems more and more people chiming in are of the “liberals suck,” “I love my country / quit stealing my jobs, Mexicans” or “I don’t reed much, but Obamma’s a socialist!” type.

Thanks to all who continue to act with class in this environment, even as Mises.org rises in popularity and attracts opinions of all kinds.

Walt D November 12, 2009 at 7:05 pm

Why should employers be responsible for providing healthcare insurance coverage in the first place? Why not require employers to cover car repairs?

Bala November 12, 2009 at 7:31 pm

Walt D,

” Why should employers be responsible for providing healthcare insurance coverage in the first place? ”

Aaahhh!! Good question. That’s where the discussion actually starts :)

The history of health insurance suggests that it is a relic of Great Depression era interventionist approaches. Forcing employers to include “health insurance” in employment contracts is the beginning of the violation of all individual Liberties in the name of “healthcare for all”.

Ned Netterville November 12, 2009 at 9:07 pm

SHAY opened with this: “Nice. I don’t currently work and don’t get any government handouds, but manage to get by. But if I have to start spending hundreds of dollars a month on health insurance or face even higher fines/prison, I’m going to have to apply for government welfare programs and other aid.”

Shay, my friend, rather than condemn yourself to permanent government dependency–few who get hooked on OPM (sounds like opium, is equally addicting, stands for other-people’s money) are able to get off and recover their integrity and self-responsibility–why not do what W_Y NOT proposes, which is much more satisfying than kissing a bureaucrat’s southern exposure, which is the primary purpose of Obamacare.

W_Y NOT: “YOU will have to send your jack-booted thugs to my home in attempt to force my participation. In the end you will fail.” I said much the same thing in an essay (…Over My Dead Body) you can read it here: http://www.jesus-on-taxes.com/MANDATORY_INSURANCE–OVER_M.html

Russ November 12, 2009 at 11:21 pm

Walt D wrote:

“Why should employers be responsible for providing healthcare insurance coverage in the first place? Why not require employers to cover car repairs?”

The answer to you above question, Walt, is that the socialists *don’t* want the companies to be responsible for health care. They want to control health care themselves. And they know that Obamacare will eventually destroy the free market insurance system. That is what they want and intend. The Obamacare “solution” is just an intermediate step on the way to the complete socialization of medicine. And when the government controls the health care of the masses, they control the masses. Then, if you badmouth the government, or oppose them politically, you better not ever get sick again. This may sound extreme and conspiracy-theory-ish to some, but mark my words, it will happen if Obamacare happens. Controlling somebody’s access to health care is a kind of political weapon, and there is no such thing as a weapon which is not eventually used.

T November 12, 2009 at 11:21 pm

Wow thank you for providing logical and factual, sound analysis
We need more writers like you all over the net.

http://patriotsquestion911.com

antiip November 13, 2009 at 4:32 am
Enjoy Every Sandwich November 13, 2009 at 7:25 am

And when the government controls the health care of the masses, they control the masses. Then, if you badmouth the government, or oppose them politically, you better not ever get sick again. This may sound extreme and conspiracy-theory-ish to some, but mark my words, it will happen if Obamacare happens. Controlling somebody’s access to health care is a kind of political weapon, and there is no such thing as a weapon which is not eventually used.

I don’t think this is conspiracy theory-ish at all. Once the government is controlling healthcare, they will be able to justify restrictions on liberty on the basis that they’re just acting on behalf of the taxpayers who are footing the bills. This has already been brought up on the subject of gun control; gun owners are a “menace to the public health”, responsible for the costs of treating gunshot victims, etc.

Mike November 13, 2009 at 8:15 am

Too bad there’s no longer any “beacon of liberty” out there to which we can flee. The entire world is rushing headlong into totalitarian statism, and there’s nowhere to run because all the land in the world is used up.

3rd Party Observer November 13, 2009 at 4:54 pm

@Dick Fox – You may be right about the inflation point, but you didn’t have to be such a prick about it. Try harder not to, next time.

Gerry Flaychy November 13, 2009 at 8:51 pm

To Eric M. Staib.

According to the new law, if an employer lay off an employee and hire a new one at 300 $ less to do the same job, will he be fined ?

freedom lost November 13, 2009 at 9:43 pm

“I don’t think this is conspiracy theory-ish at all. ”

No, it is surely not a conspiracy theory: It is real here in Europe for example.

You would not believe what laws and regulations there are. :(

There even was a discussion for obligatory helmet for skiing!

For the greater health… ahh good!

Or banning smoking or alcohol!

For the greater health… ahh good!

Everything must bow down before the greater good!

You want some medicine? You have to go to the doctor first. If someone sells you medicine, he will be punished if caught.

And so on.

Is time running backwards now? When will we reach 1984?

George November 14, 2009 at 12:43 am

wy not, ned, wealth… If you guys walk the walk and not simply talk the talk, then I commend you… it won’t be pretty and you will be tarred with every brush possible.

Mike: take a look at seasteading and let a thousand nations bloom. Some countries suc as South Korea also have a strong work ethic and market economy along with low regulation and a high level of investment. Why not go there, teach some English, and experience a change of scenery? Saving south korea was one goos thing the us did, along with the berlin airlift.

Paul Stephens November 14, 2009 at 3:12 am

I’m going to copy this to some of my Green and Social Justice friends. The only thing I would have done or said differently is to emphasize how all the people supporting this bill (so-called “Keynesian” or “liberal” Democrats) shouldn’t have been doing so at all. Single-payer national health insurance was the preferred consensus policy. Or 28 different foreign systems, all of them superior to ours. Mix and match.
Even the social Darwinist Republicans who have been responsible for these kinds of oppression of the working class in past decades wouldn’t dare to take something like this to the voters.
Do the Democrats really think they’ll get “points” for this kind of policy? If so, just wait until the next election. However, the Republicans are now in the position that they can’t afford to get elected, either, and then be held responsible for ever-worse economic collapse.
Maybe it’s the time for the forces of reason, Left and Right, to unite and insist on some sound policy – while we still have anything left to manage or protect.

Blissex November 14, 2009 at 6:54 am

But the analysis above is comically incorrect, because it is based on two obviously wrong assumptions:

* A lot of people generate only a few hundred dollars/year of raw profit for their employers.

* The pricing leverage of the employer stays constant even if the labor costs of *all* employers rise.

Assuming that an expansion of health care spending has effects only on costs and not on revenues is simply ridiculous, even in a “general equilibrium” framework.

The overall effect of a (small) increase in purchases of health care services is not as easily determined as in the above juvenile misreasoning, and it is likely to be a wash.

If one looks at the experience of other places, while public compulsory health care has made places like Canada, the UK, France, Germany, become tyrannical soviet hellholes :-), it does not seem to have affected their employment or unemployment rate much over the cycle.

Gerry Flaychy November 14, 2009 at 8:39 am

To Eric M. Staib.

Concerning the 300 $, you seems to say that it is impossible in U.S. to find an health-insurance plan that will cost the employer less than 300 $ a month: is it what you are really saying ?

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