Critical Condition

The Democrats’ Small-Business Policy: Keep Them Small

Freshman Rep. Mick Mulvaney (R., S.C.) made a good point in the House debate on H.R. 2, the Repeal the Job-Killing Health Care Law Act. Responding to Rep. Nydia Velazquez, last year’s chair of the House Small Business Committee, Mulvaney pointed out the tough spot in which congressional Democrats find themselves. They have contradictory intentions: Be tough on business, but be soft on small business.

On one hand, businesses that don’t provide health insurance are bad; they will face new penalties if they do not begin to provide health insurance. On the other hand, small businesses are good; no penalties on businesses that employ fewer than 50 workers.

The result: a policy to keep businesses small. Once a business reaches 50 employees, it will get a bill whenever an employee gets a government subsidy to buy health insurance. At 49 workers, small businesses will face a cliff. Only a business that is fairly confident it will blow way past 50 employees will add the 50th. The result will be small businesses that decide to stay small. The burden of a line drawn at 50 employees won’t be on the small firm that forever stays at about the same number of employees, plus or minus a few. The burden will be on “gazelles,” the small firms that are on their way to becoming bigger firms. And that is part of the story of how health-care reform, unless repealed and replaced, will cost jobs.

Hanns Kuttner is a visiting fellow at the Hudson Institute.


The Latest