ISSA: Job creators brace for Obamacare impact

Companies plan to pay for health care mandate by shedding workers

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This week, the Oversight and Government Reform Committee issued a report, “Impact of President Obama’s Health Care Law on Jobs,” detailing the negative impact that President Obama’s health care law has already had and will continue to have on job creation. The report highlights congressional testimony from many businesses about the health care law’s negative impact on their company and their ability to hire.

The reality is that the president’s partisan health care overhaul, passed without any Republican votes, is directly contributing to the nation’s unemployment problem. As regulators busily codify rules, employers are scrambling to figure out how to survive the plethora of mandates and taxes sprinkled throughout the nearly 3,000-page law. And its worst provisions have yet to be enacted.

The most egregious provision is a tax penalty on businesses with at least 50 workers who fail to offer adequate, government-approved health insurance. Depending on circumstances, these firms will face a tax penalty of either $2,000 or $3,000 per worker. Common sense and data show that the burden of paying this tax will fall on consumers in the form of higher prices, on shareholders in the form of lower profits and on workers in the form of lower wages and fewer jobs.

The explanation is simple: The president’s health care law makes it more expensive to hire people, so businesses will hire fewer people. This is painfully clear for businesses with about 50 workers. Many of these businesses will avoid growing their labor force or cut it under 50 workers to avoid all the new federal rules and penalties.

Gail Johnson, the president and founder of a preschool chain, testified that “small employers will be faced with decisions such as cutting back wages, forgoing new hiring and raising prices for services. These measures will further stunt any economic recovery and curtail future job growth.”

The law’s authors included a provision that excludes part-time employees, defined in the law as those who work fewer than 30 hours per week, from the firms’ penalty. It is not rocket science to figure out how businesses will react. Andrew Puzder, the CEO of CKE Restaurants (including Hardee’s and Carl’s Jr.) testified: “We would undoubtedly increase the number of part-time employees; decrease the number of full-time employees and attempt to automate positions (such as replacing cashier positions with ordering kiosks). These are not actions we would choose to take. They are actions the [law] will all but compel us to take.”

In order to finance the new government spending, many new taxes were created. Michael Fredrich, president of a manufacturing company in Wisconsin, stated before Congress that the law’s new 3.8 percent tax on all investment income and additional Medicare payroll tax “is a tax increase on small business. It raises our regulatory burden and takes away more of my capital that can be used for investment, pay increases or new jobs.”

Mr. Obama’s health care law also singled out several successful American industries, including drug and medical device manufacturers, for additional tax burdens to finance the overhaul. Drug manufacturers and medical device manufacturers are among the most successful industries in the United States, and taxing their success to finance new spending in the health care law will directly destroy good-paying American jobs.

Stryker Corporation, an orthopedic-device business based in Michigan, announced plans to cut 5 percent of its workforce over concerns about the medical device tax. Denis Johnson of Boston Scientific, a medical device manufacturer, testified that this tax “will cost Boston Scientific alone more than $100 million a year in additional taxes. Such a severe increase in tax liability will undoubtedly force us to cut critical R&D funding and inhibit job creation and retention. … It will inevitably stifle innovation, destroy jobs and thwart patient access to breakthrough technologies that have saved and enhanced millions of lives.”

While the employer mandate and numerous taxes will be gradually implemented over the next few years, the regulatory power given to federal departments and agencies has already increased uncertainty. Larry Schuler, a restaurant owner, testified that ” egulatory implementation is moving ahead at full-steam and it seems like a new requirement comes to light every day that is even more burdensome than the last.” Added uncertainty discourages business owners considering expansion and entrepreneurs considering new projects from making those investments.

If the president is serious about job creation, he would acknowledge the failure of his health care law and advocate its replacement with market-based solutions that reduce government mandates and lower the cost of health insurance to businesses. According to the nonpartisan Congressional Budget Office, this action would add nearly 1 million jobs to the economy over the next decade with the added bonus of dramatically reducing future government spending.

Rep. Darrell E. Issa is chairman of the House Committee on Oversight and Government Reform.

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