Obamacare stands in the way of growth
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 healthcare 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.
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 healthcare mandates. Common sense suggests that this is only the beginning of an exodus of employees unless the worst anti-growth provisions in the healthcare law are repealed.
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 healthcare when in fact the feds will effectively become the chief financial officers of the entire healthcare industry.