« Goldblum corrects Goldblum death rumor | Main | Obama's approval drop not surprising »

July 20, 2009


Your point is a fair one, but it overlooks the fact that small businesses that are considering expanding their workforces will probably take into account costs they know will attach in 2013 and thereafter. You're familiar with universities (which are of course not small businesses). Do they expand the faculty with the idea that in three years they can simply contract it again once additional costs kick in? God, I hope they're more intelligently managed than that.

The truth is, over recent decades we've made it increasingly disadvantageous to hire permanent employees. Hiring, promotion and firing decisions all carry the risk and expense of EEO complaints and civil actions under evolving employment law standards. Activities on the job can be a basis for harassment claims. A reliable workforce is more difficult to maintain because of mandated pregnancy and family leaves. Employees subject the employer to administrative and regulatory recordkeeping and reporting requirements. Add to these disincentives to hire employees the proposed health care law.

In recent years politicians and others have expressed concern over the trend of companies (1) to use independent contractors rather than to hire permanent employees, and (2) to send jobs overseas. But this is the natural consequence of policies that impose costs and burdens on employers that they're able to avoid entirely by simply contracting for services or outsourcing. To pretend that the proposed health care law will not add to this trend is either naive or disingenuous.

There's not much that can be added to Rob's post, but here are a couple of other considerations:

-- In the long run this provision will put an additional burden on small business going forward. Small businesspersons are right to be concerned, as are those who might hope to work for a small business, or to buy products or services from a small business, or sell products or services to one.

-- Brendan has no guarantee that the current recession will be over by 2013. In fact, the Democratic health care proposal makes more likely that it will last that long.

-- We can't necessarily count on an inception date of 2013. The bill could be changed during the legislative process. Or the new tax might be moved up after this bill is passed, particularly if the plan turns out to be under-funded (a safe bet). Also, over time the 8% assessment rate might be increased (another safe bet).

Granted these are hypothetical possibilities. Nevertheless, if they are to be avoided, the bill has to be defeated now. Once Congress passes health care it will be too late to avoid all the new taxes that will eventually be needed to pay for it.

Because it won't go into affect for 4 years, it shouldn't be considered to have any negative impact today?

So Brendan, if you have an adjustable rate mortagage - and assume it's the only kind of mortgage available - that will suddenly cost significantly more in four years, you won't make any economic decisions to deal with this future event?

You won't spend less and save more to cover the future cost?

Or you won't decide to move into a smaller house with with a smaller payment to lessen the impact?

Hmm, if others are faced with the same decisons, could the actions incentived by the structure of the future penalties have broad economic consequences? What if spending is more stimilating economically than saving? What if everyone wants to sell larger homes and buy smaller ones? Would that have no affect on the economy?

The comments to this entry are closed.