The Sovereign Mind

Continuing my series I began a few days ago, here’s another little gem within the health care bill. The plan imposes a penalty on companies that don’t contribute to health care for their employees. But don’t worry, small businesses. The Democrats are fully committed to engaging in rhetoric to ensure that you don’t think this is going to affect you. From the summary, in a section ironically entitled “Assistance for small employers”:

Recognizing the special needs of small businesses, the smallest businesses (payroll that does not exceed $250,000) are exempt from the employer responsibility requirement. The payroll penalty would then phase in starting at 2% for firms with annual payrolls over $250,000 rising to the full 8 percent penalty for firms with annual payrolls above $400,000.

Democrats know that they must continue the charade of appearing to be on the side of small business. They argue that it will only be big business that will be penalized. You know those businesses with those big pockets. (On a side note, having big pockets doesn’t always mean they have anything in them, but that’s a matter for a different day.)

But now we learn that businesses with a payroll of as little as $250,000 would be hit by a tax. Now we know that Obama means it literally when he says he wants to help the “mom and pop” businesses. Just don’t hire the uncle and a few cousins–that might put you over the limit into evil big business territory. I know that isn’t a fair representation of Obama’s position–he probably does care about helping small business. But, as is common lately, his rhetoric doesn’t match the bill. Unfortunately, congress will not be voting on the president’s speeches. They will be voting on the bill before them that they (hopefully) have read.

But I’ll ask a more fundamental question: why should it be the employers’ responsibility to contribute to health care coverage? I don’t think you can argue that employers have a responsibility to do anything except fulfill the agreement they have made with the employee when he is hired. If I’m an employer looking to hire someone, and I put out the conditions of employment, and someone looking for a job agrees with those conditions, why should the government tell us we can’t make that arrangement, or punish us for doing so.

Those who support the tax on business will argue that businesses should pay for health care because they have the deep pockets. Those who make this argument don’t understand economics. The amount that the employer has to pay for health care is approximately the amount by which they will decrease their employees’ salaries. If it were not so, then I think we should mandate businesses to pay for my groceries and mortgage also. If the money that my employer pays comes out of thin air, we could easily solve our housing crisis that way. Of course that’s ridiculous. If my employer has to pay my mortgage, my salary would decrease.

There are several problems with employer-based health coverage:

1) If I lose or change jobs, I lose my coverage. Plans aren’t portable. This contributes to the problem of the uninsured, and also makes people stay in jobs they don’t like, rather than looking for greener pastures. That is detrimental to the labor market, as it means that employers don’t have to work so hard to keep their employees happy.

2) When employers offer health care plans, they offer limited choices. Choice is essential in a free market. If I don’t like my insurance provider, I ought to be able to easily switch to another. This keeps the insurance companies honest because they would know if they do not provide good service and a reasonable price, I’d go elsewhere.

So, considering those disadvantages, why is it that we have a employer-based health system?

1) Employers are offered a tax break to give health coverage to their employees. It still costs them money, of course, but it costs them less money then it would cost their employees to buy the plan themselves, since they would not qualify for the tax break. So, employers can provide something to their employees which is of high value to them, but costs the business less. This could be solved by equalizing the tax structure so that individuals who buy health insurance benefit just as much as businesses. Businesses that want to attract the best and brightest would still be able to contribute to the health care plans for their employees, but they would not get any additional benefit from the government for doing so. In addition, those who don’t have jobs or work for companies that don’t provide health care would not be disadvantaged in the insurance market.

2) Employees like the fact that when they sign up for a health care plan through their employer, they are part of a pool. That means their cost doesn’t depend on their health status, but rather the health status of the entire work force. It means that healthy employees subsidize the health care of the less healthy. Many people see this as a good thing, but a pool is just a crutch since we don’t have a better way to charge people. A better way would be to charge people based on their behavior, which eliminates the need for pools because everyone pays what they should pay, and everyone is equally able to lower their costs by making healthy choices, regardless of pre-existing conditions.

But even if the “charge on behavior” philosophy is not palatable to some who prefer the more tried-and-true mechanism of pools, we could set up such pools at the state level, instead of putting that responsibility on the employers.

But wouldn’t taking away the incentive to provide health care (or the punishment for not doing so) from businesses cause people to lose their health insurance? It might cause some businesses to drop coverage, but it would also add revenue to the system to provide tax credits to help individuals buy coverage, as well as more help for those with lower incomes.

What I’ve outlined is true change–way more than Obama wants to take on since he is determined to build on the current system. At the very least, that proves he is wrong to suggest that the only alternative to this bill is to do nothing. One alternative is to do more. But, really it’s not about less or more. It’s about what’s right. And pinning the responsibility of health care on “big” business is wrong, costs jobs, and leads to less choice in the marketplace.

David Axerlrod on Meet the Press (my emphasis added):

MR. GREGORY: All right, so how was [the Republican party's] influence felt [in the stimulus bill]?

MR. AXELROD: Well, I think in tax–in terms of tax cuts. I think the tax cuts reflect some of their, their thinking. I mean, we agreed with them in terms of tax cuts to help small businesses get through this. They–their–the AMT is now added. The AMT fix is now added to this. The, the, the Web site recovery.gov was suggested by Representative Cantor, the leader of the opposition in the House.

Maybe I’m reading too much into this, but I don’t think so. Notice the words he struggles with. He wants to portray the tax cuts as concessions to Republicans, but at the same time does not way to give away the credit for their inclusion from the Democrats. The worst thing Democrats could do right now is concede the point that Republicans have been making for a long time: that Democrats are against tax cuts. But at the same time they want to be able to point to the tax cuts as evidence of concessions to the Republicans. They’re walking a fine line and getting away with it for the most part.

My impression of the Democratic view of bipartisanship: “We welcome ideas from across the isle, as long as they are also our ideas.”

I don’t blame Democrats for wanting to limit the Republican influence on this bill. Let’s face it: they won that right in November. But don’t try to portray it as bipartisan because a Republican suggested a website. Because, you know, clearly the success or failure of the stimulus package hinges on recovery.gov.

I am always impressed with independent thinkers, which is what I strive to be, if you haven’t figured that out by the title of my blog.  This is probably why I was very impressed with Colin Powell’s endorsement of Barack Obama.  It wasn’t just the fact that Powell endorsed a Democrat, but I thought his explanation was extremely well thought-out, and showed that he had made the decision for the right reasons, without relying on any partisan talking-points (although some disagree with me on that).

Today my attention was drawn to an article by another independent thinker: Orson Scott Card. Although a Democrat, he has written articles before criticizing his own party. But this one’s a doozy:

This housing crisis didn’t come out of nowhere. It was not a vague emanation of the evil Bush administration.

It was a direct result of the political decision, back in the late 1990s, to loosen the rules of lending so that home loans would be more accessible to poor people. Fannie Mae and Freddie Mac were authorized to approve risky loans.

What is a risky loan? It’s a loan that the recipient is likely not to be able to repay.

The goal of this rule change was to help the poor — which especially would help members of minority groups. But how does it help these people to give them a loan that they can’t repay? They get into a house, yes, but when they can’t make the payments, they lose the house — along with their credit rating.

They end up worse off than before.

This was completely foreseeable and in fact many people did foresee it. One political party, in Congress and in the executive branch, tried repeatedly to tighten up the rules. The other party blocked every such attempt and tried to loosen them.

He goes on in his scathing criticism of both the Democratic party, as well as the media for failing to report on the facts of the story.

I believe he is right as far as the media goes. Journalists have, for the most part, gotten lazy. It seems most prefer to regurgitate what some other news story said, rather than do real research. That’s no more apparent than in the current election, where the news only reports the horse race, rather than talking about real issues.

However, as far as the Democratic party goes, I think he goes a bit too far. I do agree with him that McCain and Bush did try to pass stricter regulation on Fannie and Freddie. But I don’t think it’s 100% accurate to say that the failure to do so was all the Democrats’ fault. After all, Republicans were in charge of Congress at the time. The bill passed the committee vote 9 to 11 (down party lines, with Republicans favoring the bill to add more regulation), but the Republican leadership did not bring it up for a full vote, despite McCain’s attempt to revive it by becoming a co-sponsor. You could argue that Republicans didn’t because they knew it would fail since no Democrats supported it. So there’s room for debate, but at least I don’t think it’s as cut-and-dry and Card suggests.

Additionally, his column points out that all of this started under Clinton. That is true, but Republicans had six years to correct it, and failed to do so. It seems there is plenty of blame to go around.

Still, I credit him for at least thinking for himself and holding his own party accountable. We could use a lot more of that.