With a bill this complex extending the federal government’s groping fingers around a system that is one-sixth of the U.S. economy, it would take at least a full book to even begin to assess the overall impact of this bill on jobs and the overall American economy.
That said, there are several economic effects of this bill that we can look at and get a basic understanding of.
Let’s start with the fact that since insurance companies now cannot deny coverage to individuals for pre-existing conditions (not entirely a bad thing, but the way it’s done in this bill will have some serious consequences, as we shall see), and since the federal government will now decide upon a list of things insurance companies will be required to cover, insurance companies, in order not to go bankrupt, will have to raise premiums and other direct costs to individuals they cover. The CBO estimate is 10-15% increase in costs on average. I will be surprised if it is not significantly higher than that.
Next, take the fact that the costs of this bill are approximately $1 trillion over 10 years. As we’ve noted in brief, accounting tricks and sleight-of-hand along with tax increases allowed Congress to claim that this will be more than paid for and thereby actually lessen the federal deficit by a little bit. This, to me, is a laughable claim, but there it is. Regardless, the hard costs described in the bill (the obligation being laid on us, our children, and grandchildren) is about $1 trillion.
That $1 trillion has to come from somewhere. But where? We will go into this more in another section, but for now realize that a large chunk of it will come from tax increases. Bear with me for a moment as we look at this.
The tax increase I want to focus on here is the tax on employers (businesses). Many businesses in recent years have really struggled to be able to afford health insurance for their employees. Now these costs will be [at least] 10-15% higher, and likely go up from there. These businesses then would have a choice to make. They could (a) just suck it up and pay the extra - assuming their business is making sufficient profit to cover those added costs; or (b) they could cover it but may need to cut pay or cut jobs or other cost-cutting measures to be able to afford the added costs for remaining employees; or (c) they could decide they simply can’t afford the added costs, and they can decide not to give health insurance as a benefit to their employees. The health care bill in this case would then slap a tax on companies that decide to do this. The result compared with pre-health-care-bill would be a group of individuals who used to have health insurance as a benefit from their employer who now do not - and would then have to go to either an exchange system to get their own individual plan or go to a public plan. And the business? Well they’ve just been saddled with a significant tax increase. Where does that money come from? Same options as above: from profits if the company is lucky enough to be flush with cash, or else from employee compensation, or cutting jobs, or other cost cutting measures...or if the company is able to they can increase the price of their products, and guess who pays that? Right on. Us. That wouldn’t be technically called a ‘tax’ but it’s another cost to you and I because of this whole thing in any case.
And for the individual employees in this situation, you will indeed be required to either buy a plan from the health insurance exchange or see if you qualify for a public plan...or else you can get fined and/or imprisoned if you don’t sign up for a new plan. Listen, DO NOT mess with the federal government, OK? If they say you will have health insurance, then by golly you WILL have it.
In the final analysis, although there are some potential economic positives that could come from this bill, the big elephant in the room to me is simply the $1 trillion obligation it lays on us, added on top of the $1 trillion bail out program on top of the previous $1 trillion dollar bail out program. All of these obligations must be paid in full (and with interest) at the end of the day, and ultimately the only place that can come from is from you, and me, our children, our grandchildren, and future generations.
And because government uses money inefficiently and is very poor at reigning in costs, this ties up money that would otherwise be applied to additional economic activity of working, buying, and selling. Translation? It will hinder our rate of economic growth for years to come.
Just another ‘feather in the cap’ for this awful bill.
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