Politics & Policy

Repealing Obamacare: Not a Waste of Time

The president should stop complaining about Republicans’ strategies and do something about jobs.

Speaking at a campaign-style rally last month at an Amazon plant in Chattanooga, Tenn., President Obama ridiculed Republicans’ economic agenda, claiming that “wasting the country’s time by taking something like 40 meaningless votes to repeal Obamacare is not a jobs plan.”

The president has a bit of a point about the futility of those 40 votes. Given the unwillingness of the Senate to even consider changes to the health-care law, continued repeal votes are more an exercise in political theater than in policy. However, by that measure, the president’s giving countless speeches calling for higher taxes and more government spending would seem to be equally lacking in substance.

But plenty of those anti-Obamacare efforts — such as the proposal by Senators Ted Cruz and Mike Lee to defund Obamacare — actually would help create jobs, and the president has hardly rushed to embrace them.

On average, it costs an American employer $4,644 to provide health insurance to a worker. For a worker earning the U.S. median annual wage of $40,300, that amounts to an 11.5 percent hike in the cost of employing him. Alternatively, the employer could pay a penalty of $2,000 per worker. That would hike the cost of employing a median-wage worker by only roughly 5 percent, but that money has to come from somewhere, too. (The president recently delayed enforcement of this mandate for a year, but this probably won’t change the decisions of most employers, since they’ll have to come into compliance soon enough anyway.)

While most businesses with 50 or more workers currently provide their workers with insurance, that doesn’t mean that they won’t see their costs pushed up by the mandate. That’s because in order to avoid the penalty, the business must provide insurance that meets the “minimum essential benefits” requirements, which may be more comprehensive and more expensive than what the business provides today. A business’s current insurance plan is “grandfathered” under the Affordable Care Act, but the business must come into full compliance if it makes any adjustment to the plan, such as changing deductibles or benefits. Moreover, noncompliant plans themselves are closed from adding new members (other than new employees at businesses with grandfathered plans). That means over time, most noncompliant plans will become unsustainable, because their insurance pools will shrink. Eventually almost all businesses will be forced to change their insurance to the more expensive Obamacare-compliant plans.

At the same time, outside a handful of states with exceptionally dysfunctional insurance markets, Obamacare will likely drive up the cost of whatever insurance employers do provide, making it more expensive to compensate even current workers.

And none of this even begins to take into account the impact of the roughly $1.2 trillion in new taxes and fees that Obamacare imposes over the next ten years.

It shouldn’t be a surprise, then, when employers are reluctant to hire new workers or when they shift to part-time workers (who are not subject to that mandate). According to a Gallup poll, 41 percent of small businesses have already held off on plans to hire new employees, and 38 percent have pulled back on plans to expand their businesses in other ways. Worse, 19 percent indicate that they have already laid off workers, and a similar number say they have cut back their hours.

And we have seen a dramatic increase in part-time workers. Since President Obama took office in January 2009, the country has added 1.9 million part-time jobs but just a net total of 270,000 full-time jobs. That means that 88 percent of all jobs added during President Obama’s time in office have been part-time.

No doubt, some of this can be chalked up to the recession, which meant job losses and slow growth early in the president’s term. But the trend has continued into the recovery and can be blamed at least in part on employers’ attempting to keep workers below Obamacare’s 30-hour cut-off for the insurance mandate.

For example, during the second quarter of this year, the number of Americans working 25–29 hours per week in their primary job rose by 119,000, or 2.7 percent. At the same time, the number of those working 30 to 34 hours fell by a monthly average of 146,500, a 1.4 percent decline. Of course, some part-time work is by choice — students working their way through school, retirees looking for a little extra money, or mothers juggling work and children. But more than 30 percent of part-time workers say they would rather be working full time. That’s considerably more than the 21 percent average over the past two decades.

Employers are also increasingly resorting to temporary workers as an alternative to permanent full-time employees. According to the Labor Department, a record 2.7 million people held temporary jobs in July — 200,000 more than a year before.

If President Obama really cares about creating more and better jobs, perhaps he should stop wasting the country’s time giving another speech about wasting the country’s time. He could do something that would actually help create jobs: Repeal Obamacare.

— Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Michael TannerMr. Tanner is the director of the Cato Institute’s Project on Poverty and Inequality in California and the author of The Inclusive Economy: How to Bring Wealth to America’s Poor.


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