Obamacare Stands in the Way of Growth

Donald Lambro
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Posted: Jan 05, 2011 12:01 AM
Obamacare Stands in the Way of Growth

WASHINGTON -- The No. 1 question for 2011 is whether the bullish economic forecasts for the new year will be justified or remain pie-in-the-sky exaggerations.

The answer will likely be based on how much President Obama's social and regulatory policies will slam the brakes on economic growth and kill jobs. The draconian health care cost mandates Obamacare will pile on businesses large and small have already led to casualties in the job market.

The cheerleaders for Obama's lackluster economy have been making over-the-top recovery forecasts that have been missing their mark by a mile. Last month, forecasters predicted a third-quarter growth rate of 3 percent or more, but the GDP came in at an anemic 2.6 percent. Estimates of 200,000 jobs in November similarly fell flat after the Labor Department reported the economy produced just 39,000 private-sector jobs.

Well, these same soothsayers are back this month, with the most exuberant among them (namely, Richard Berner of Morgan Stanley) predicting the economy will grow by roughly 4 percent this year, with the unemployment rate falling from near 10 percent to 8.6 percent by December.

One can never underestimate the power of the U.S. economy to do whatever it takes to innovate, survive and grow even in times of adversity, and the extension and expansion of the Bush tax cuts will temporarily alleviate problems in the business community.

But these optimistic forecasts are questionable when one looks at the larger obstacles Obama has placed in the path of the economic recovery, writes Washington Post economics analyst Robert J. Samuelson in a recent column. "The trouble is that Obama, having stabilized the economy, weakened the recovery," he says.

Businesses make their decisions about reinvesting and hiring by what they predict may happen in the future. And what they see coming at them is the iron fist of Obamacare sharply raising the costs of hiring by requiring firms of over 50 employees to provide each worker with health insurance or face costly fines.

"Will firms with, say, 47 workers eagerly expand beyond 50 if that imposes all the extra costs? It seems doubtful," Samuelson says.

It does indeed. Since Obamacare was passed in 2009, we have already seen businesses trim their sails by cutting jobs in anticipation of higher health care mandates. Common sense suggests that this is only the beginning of an exodus of employees unless the worst anti-growth provisions in the health care law are repealed.

But this is just the beginning of Obamacare's threatening rules, which basically tell the insurance industry how to spend its money.

One of the rules taking place this year will require health insurers to pay a minimum of 80 percent of all income to their customers in claims or for other benefits. That percentage is higher for insurance policies offered to large pools of beneficiaries; the minimum rises to 85 percent, with only 15 or 20 percent allowed for overhead costs, profit margins, salaries or reserve funds. Yet, incredibly, the administration dismisses critics who say that Obamacare is government-run health care when in fact the feds will effectively become the chief financial officers of the entire health care industry -- dictating what they must spend and what they can earn in profits.

The unprecedented federal requirement that everyone must buy health insurance -- declared unconstitutional by a federal judge on Dec. 13 -- faces additional Constitional challenges in Florida and elsewhere. If the law is struck down, its financing falls like a house of cards as the insurance business needs the larger pool of uninsured to pay for government health care mandates.

Insurance companies claim these and other regulations will force them to cut benefits or abandon states where costs will be higher. And insurance premiums will continue to rise to offset the costs of government-imposed benefits. Obama has attempted to make health insurance companies the arch-villain of the U.S. economy, responsible for much of its ills. By squeezing the health insurance industry with costly mandates on one side and rigid payment regulations on the other, Obamacare deliberately drives up premiums to escalate the attacks on "greedy" health insurance titans, which then justifies even broader government control of the industry.

Half a trillion dollars needed to pay for Obamacare was supposed to come out of the Medicare budget, but after seniors voted heavily Republican in the midterm elections, no one expects that to happen.

House Republicans, who made repeal and reform of the health care law a major plank in their campaign agenda, will bring Obama's plan up for a symbolic repeal vote this week that will likely pass.

Then comes the hard part to replace Obamacare with scaled-back, market-driven reforms that will slow the growth in medical care costs, expand choices by making insurance plans more affordable, and eliminate job-killing mandates.