Health Care Costs are going up. Job creation will go down.

Employee of the month

Who knows if the health care bill passed by congress will improve health care. That remains to be seen. What is clear is that costs for everyone will not go down as promised. No one believes that.

The vast majority of Americans already have fine health care, but is in many ways care that is needlessly expensive. A huge part of that needless expense is due to massive transfer payments to American lawyers. This bill does not change that. In fact, it will make it worse.

Massive legislative change provides great opportunity for legal mischief-making by American lawyers. Along with the changes will come additional costs and obligations of doing business. Each additional employee will add a new legal and economic burden for an employer. This bill will incentivize employers to resist hiring new workers.

In the short run, business will be cautious and reluctant to hire until they understand the impact of the bill. Furthermore, employers will be watching to see if the Obama Administration and the Democrats will be emboldened by this victory and go on to other expensive and counter-productive legislation. This bill and others in the planning stage are a whole new tax on wealth creation and growth. Ironically it will be similar to government action against the tobacco industry.

Government decided, rightly so, that smoking was a bad thing and used legislation and taxes to discourage tobacco use.

Legislation and taxes discourage most economic activity. Government knows that. So what do we have with this new health bill? The lawyers will still be there. New taxes will be required to pay for it and massive rules, regulation and reporting will be imposed on employers. All predictable reason not to hire new employees.


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Big Business Not Investing

Posted by Chris Edwards CATO

In a recent post, I argued that while third-quarter GDP was positive, the underlying data revealed that U.S. private investment was still in the toilet. While government spending might be providing a short-term “sugar high” for the economy, U.S. business investment remains in recession. I speculated that Obama’s anti-business agenda is likely one cause of the problem.

For those observations, economist Brad DeLong called me an “utter fool.”

Let me draw your attention to an article in the Washington Post today entitled “Corporate giants sit on piles of cash.” Nucor Steel is sitting on piles of cash that it is unwilling to invest. Nucor’s chief executive Daniel Dimicco explains:

Everything is still on hold because we don’t have a lot of confidence that the right things are being done in Washington to reinvigorate the economy.

The story goes on:

Nucor isn’t alone. The balance sheets of large U.S. corporations are for the most part in good shape. Many big companies have piles of cash on hand and credit markets have thawed so that they can raise new funds… But most U.S. executives lack enough confidence in the economy to expand their businesses.

The article explains how big businesses are “jittery” for various reasons, such as memories of last year’s credit crunch. It doesn’t mention President Obama’s policies, but at this point in the economic cycle when world growth is returning, the lack of excitement by U.S. businesses regarding domestic investment is very curious.

Unfortunately, the Obama administration is giving them nothing to get excited about. The President is promising them higher health care costs, higher corporate taxes, more labor regulations, higher energy costs with cap-and-trade, and a lack of interest in further trade agreements.

The Post article says that some U.S. multinationals are using their hoards of cash to invest abroad, allowing them to avoid punitive treatment under the high-rate U.S. corporate income tax.

How do we get U.S. multinationals to start investing their “piles of cash” in the United States? Cut the U.S. corporate rate permanently to 15 percent, as I’ve described in Global Tax Revolution. With just about every other advanced economy having slashed their corporate rate in recent years, we are “utter fools” for not following suit, especially with the unemployment rate now topping 10 percent.