Freedom Line Blog

An article at the website Accounting Today starts with the headline, “ObamaCare Weighing Less on Hiring Plans.” In it, the author analyzes new poll results asking accountants who work with small businesses how the health law is impacting their hiring practices.

Last year, an identical poll found that 66 percent of small businesses said ObamaCare made it less likely they would hire new employees. This year’s survey reported a drop to 54 percent.

This is great news, according to the firm that commissioned the poll. “[W]hile planning for the Affordable Care Act is still impacting many businesses’ plans for hiring, it is causing significantly fewer businesses to slow hiring in the coming year in comparison to last year, which is positive.”

It would be more accurate to say, “less negative.”

Imagine the euphoria if ObamaCare wasn’t a factor at all. That would allow 54 percent of small businesses to base hiring decisions on opportunities to win market share. Instead, a stout majority are holding tight on their headcount because they can’t afford ObamaCare’s increased compliance costs.

Going forward, we’re likely to see more poll numbers and reporting like this that makes it seem like ObamaCare’s influence on economic growth is diminishing, when in fact businesses have already absorbed the initial hit that comes with ObamaCare, and have fundamentally changed their operations.

There is a ‘new normal’ of less full-time jobs, more part-timers and an increasing reliance on independent contractors. Dramatic year-to-year changes are likely to diminish over time as employers factor in ObamaCare’s increased labor costs and staff accordingly.

The real story here isn’t how many businesses will hire less people because of ObamaCare; it is how many jobs are not being created because of ObamaCare.

“According to a new report from S&P Capital IQ, 90 percent of American workers who receive health insurance from large companies will instead get coverage through ObamaCare’s exchanges by 2020,” writes Sally Pipes of the Pacific Research Institute.

Large companies are those that employ 10,000 workers or more. They cover 59 percent of the American workforce.

ObamaCare’s escalating barrage of mandates, fees and fines are estimated to extract “about $163 million to $200 million in additional cost per employer – or $4,800 to $5,900 per employee,” says Pipes. Compared to the $2,000 per employee fine for not offering health insurance, large employers will in effect be forced to dump workers on ObamaCare exchanges to stay profitable.

There are many aspects of ObamaCare that defy easy explanation, but this much is clear – Forcing large employers who want to provide health insurance to their employees to pay more than twice the price of compliance just doesn’t pencil.

The only financially sensible thing to do – from a company’s perspective – is to shove workers onto taxpayer-funded exchanges. That may keep the firm afloat, but it will only add to the federal government’s fiscal problems.

In this week’s Freedom Minute, CFIF’’ Renee Giachino discusses the special interest-driven politics that is to blame for the ongoing delays preventing construction of the Keystone XL Pipeline.

Toyota is moving its U.S. headquarters from Torrance, CA to Plano, TX. The move is estimated to generate a combined $140 million annually in local property and sales taxes for the Dallas suburb.

The announcement comes on the heels of at least 250 other California-based companies heading to the Lone Star State, according the Dallas Morning News.

Industry icons include Occidental Petroleum Corp. moving some of its facilities from Los Angeles to Houston; Raytheon Co. transferring aerospace units to McKinney from Southern California; and Trend Micro Inc. changing its corporate address from Silicon Valley to Irving.

For his part, California Governor Jerry Brown isn’t concerned. “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it [in the state],” he said at an event when asked about Toyota.

Then again, maybe smart people will opt for pro-business locations that don’t inflict “lots of little burdens and regulations and taxes.”

If President Barack Obama wants to improve income inequality he could start by removing ObamaCare’s barriers to working more hours.

“The savings from restricting hours worked can be enormous,” explains the Wall Street Journal. “If a company with 50 employees hires a new worker for $12 an hour for 29 hours a week, there is no health insurance requirement. But suppose that worker moves to 30 hours a week. This triggers the $2,000 federal penalty. So to get 50 more hours of work a year from that employee, the extra cost to the employer rises to about $52 an hour – the $12 salary and the ObamaCare tax of what works out to be $40 an hour.”

Liberals thought themselves clever by dropping full-time status to 30 hours per week from the traditional 40. What they didn’t count on was that the actual result would be an 11 hour per week pay cut.

April 1 marked an important milestone in America.  Not because it was April Fools’ Day, but because it marked the second anniversary of the United States claiming the inglorious title of the developed world’s highest corporate tax rate.

The U.S. hasn’t achieved comprehensive tax reform since 1986.  Ronald Reagan was early in his second term as President, Michael Jordan was still five years away from his first NBA title and Pixar animation studios first opened.  Over the ensuing three decades, however, our international trading partners and competitors have accomplished reform, particularly in their corporate tax codes.  As a result, America’s 39% rate unfortunately stands as the world’s highest.

Americans can rightfully claim, “We’re number one” in many areas, but it’s simply unacceptable that the highest corporate tax rate remains one of them.  It constitutes a continuing drag on business growth, job creation and wage increases.  And as yet another disappointing jobs report today confirms, we cannot afford to maintain the status quo.  Numerous studies show that a lower corporate tax rate creates jobs and economic growth, so we must shift our current strategy away from government bailouts, welfare and unemployment checks, and more toward restructuring the tax code and empowering the private sector to hire.  Our world becomes increasingly interconnected each day, and we simply cannot cede competitiveness to other nations whose tax codes are far more appealing to new businesses.  The U.S. spent the 20^th century building an economy that was the strongest and most powerful in the world, but lack of action on tax reform jeopardizes that global standing.

Moreover, this isn’t a partisan issue.  Republicans and Democrats, including Barack Obama himself, agree that it has been too long since we have undertaken comprehensive tax reform.  Accordingly, there’s no excuse for further delay.

Let’s not let another three decades pass us by without corporate tax reform.  Let’s instead achieve a code that actually encourages businesses to grow and hire workers.

The road to underemployment is paved with (so-called) good intentions.

In case you missed it, the Obama Labor Department is trying to raise the compensation threshold so that managers making at least $50,000 annually will qualify for overtime pay. The current threshold is $24,000.

To the liberal mind this policy change can only benefit workers by putting more money into their pockets. But to actual business owners like Andy Puzder, the real world consequences will mean less money and less work for the very people the Obama administration is trying to help.

Writing in the Wall Street Journal, Puzder – the CEO of several quick service restaurant chains like Carl’s Jr. and Hardee’s – notes that current managers are eligible for performance bonuses of up to 28 percent of their salary. But if the new overtime rules go into effect, many of these will lose their managerial status and go back to hourly employment. Along with being demoted, they will very likely be assigned less hours to work to avoid triggering more expensive overtime pay. And for those that do qualify, their raise will translate into less money for the store’s operating budget, meaning less hours for someone else.

In a very tangible way, the Obama Labor Department’s new overtime rule seems destined to exacerbate the underemployment crisis in the American economy. How is is that the people proposing this can be so short-sighted?

That is the interesting idea being floated by commentators looking for ways to halt Russia’s military adventurism in Ukraine.

If direct military intervention is off the table – and at this point it’s hard to imagine the Obama administration going that route – then exporting America’s vast new reservoir of liquefied natural gas to Europe could be a way to deter Russian aggression in the region while at the same time strengthening our allies.

Gazprom, a huge state-controlled gas provider in Russia, supplies much of Europe. Hesitancy on the part of some European governments to respond to Russia’s invasion of Ukraine is tied to Russia’s use of Gazprom to raise prices or restrict access when confronted with political situations it does not like. Increasing United States exports of its natural gas stock to Europe would diminish this threat substantially, allowing America’s European allies to take a more assertive stance against further Russian force.

In order to wean Europe off of Russian gas, President Barack Obama “should order the Energy Department to expedite authorization for roughly 25 liquefied natural gas export facilities. Demand all decisions within six weeks. And express major U.S. support for a southern-route pipeline to export Caspian Sea gas to Europe without traversing Russia or Ukraine,” writes Charles Krauthammer.

This solution puts an abundant natural resource to work for America’s national security interests, and also increases the number of domestic production and manufacturing jobs. The only hitch is that it requires President Obama to commit his administration to an energy policy opposed by liberal environmentalists. That alone probably dooms an otherwise win-win alternative to direct military intervention or sitting pat while Russia reconstitutes the Soviet Union. If so, it’s more confirmation that current Oval Office decisions are based more on pleasing special interest groups than helping domestic workers or our foreign allies.

Up to 38% of people who qualify for Obamacare exchange subsidies may have to pay some or all of the money back to the IRS. That’s because the amount of subsidy dispensed is based on a sliding scale. As income rises, the amount of subsidy decreases. In practice, many people who currently qualify for a subsidy could wind up paying back the amount if they earn just a little bit more in income.

“At biggest risk are people who annual household income put them near the thresholds where the Obamacare subsidies make steep declines,” explains AEI expert Scott Gottlieb. “These cliffs are steepest for those people who earn 150% of the federal poverty level (family of four earning $35,000 in annual household income); 250% (a family of four earning about $55,000 annually); and 400% (a family of four earning about $95,000 annually).”

The upshot of this is that people may become much more sensitive to family budgeting since their financial stability depends on which side of the subsidy wall they fall. The downside of course is that we’re likely to start seeing people decline job promotions and salary hikes to avoid becoming a net loser at tax time.

As I’ve noted before, Obamacare’s War on Work is just beginning.

“There is absolutely no evidence – and every economist will tell you this – that there is any job loss related to the Affordable Care Act [i.e. Obamacare],” Kathleen Sebelius said earlier this week.

The Health and Human Services Secretary was responding in part to a report by the Congressional Budget Office estimating that President Barack Obama’s signature domestic policy will result in 2.5 million job losses by 2024.

The only explanation that renders Sebelius’ statement (barely) plausible is her phrasing in the present tense: “no evidence… that there is any job loss related to” Obamacare. Sebelius is talking about the present, while the economists at the CBO are projecting into the future.

But even this generous reading won’t survive the fact that Obamacare has already killed 33,000 jobs in the medical device industry, according to the Advanced Medical Technology Association.

Thanks to a 2.3 percent excise tax on each medical device sold since January 2013, industry members report shedding 14,000 jobs, with an additional 19,000 openings left vacant.

The biggest losers were research and development branches, and manufacturing. Regarding the latter, 10 percent of companies surveyed said they moved their plants overseas.

These numbers show just how democratic is Obamacare’s impact on jobs. R&D positions are some of the highest paid in a firm, while manufacturing jobs can range from low- to middle-income.

On the bright side, to date the medical device tax has netted the federal government a cool $3.8 billion, so at least Secretary Sebelius has some extra money to funnel through Medicaid and Obamacare exchange subsidies.

Somehow though, decreasing the number of jobs and increasing the amount of tax revenue doesn’t seem like a long-term formula for success.

Maybe an economist should tell Madame Secretary.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Talk about a New York state of mind.

In the run-up to the 2014 election, U.S. Senator Chuck Schumer (D-NY) “charts an agenda for Congress that includes extending unemployment benefits, raising the minimum wage, making college more affordable and investing in infrastructure,” according to the L.A. Times.

“Times are now ripe for a renewed and robust defense of government,” Schumer said in a speech to the liberal Center for American Progress Action Fund. And he clearly doesn’t fear any potential downside. “The best way to deal with the tea party’s obsessive anti-government mania is to confront it directly, by showing the people the need for government to help them out of their morass.”

Those who live in glass houses shouldn’t throw stones. The real maniacs in Washington, D.C. are liberals like Schumer who think Americans are eager to be told how government will meddle even more in the economy. Raising the minimum wage in an anemic employment market is a sure way to increase joblessness. But maybe that’s the point. The result is more people directly dependent on government outlays for their daily needs.

And then there is the inflationary effect of government spending on the price of college tuition, as well as the fact that ‘infrastructure investment’ is really code for pork barrel projects channeled to public employee unions.

Schumer’s call for a full-throated defense of government may get cheers in the liberal salons of the NYC-DC corridor, but echoing it would bring swift electoral defeat for his colleagues in more conservative states.

Nearly half a decade has passed since the last recession ended in June 2009.  Unfortunately, this morning’s monthly jobs report from the Labor Department sent another alarming signal that the worst recovery in recorded U.S. history continues.  That is directly attributable to the destructive economic policies of the Obama Administration, and changes must be made, lest we stall into an entirely new recession.

According to the Labor Department, the economy added a shockingly low 74,000 jobs in December.  That is the lowest total in three years, and it fell 126,000 jobs short of the consensus expectation of 200,000 or more (which was economists’ highest predicted number in several months).  Nobody foresaw that tiny job creation number.  Even more alarming, the labor participation rate (meaning the percentage of all Americans actually choosing to participate in the workforce) fell again to 62.8%, the lowest number since 1978.  That is significant because that was before women had more fully entered the workforce.

The Obama Administration and its apologists may attempt to cite the decline in the overall unemployment rate to 6.7%, but that is not the result of an improving economy or labor market, but rather because some 374,000 additional Americans simply dropped out of the workforce and stopped searching for jobs.  Moreover, the Administration assured us back in January 2009 that the rate would be down to its pre-recession level of 5% by now under its wasteful trillion-dollar “stimulus.”

This sharp slowdown is simply the latest evidence that we haven’t “turned the corner” as Obama has been telling us since as far back as 2010.  Rather, we’re going in circles.  Until we return to the policies of lower taxes, less regulation and smaller government that create jobs and economic growth, that will continue.  The numbers prove that beyond any rational doubt at this point.  The answer isn’t more unemployment checks, but putting America back to work.

Sarah Kliff, a liberal health policy blogger at Wonkblog, explains why the Obama administration won’t delay the individual mandate like it has other elements of ObamaCare.

“…all the delays so have one thing in common: They erased political headaches for the law while barely denting the number of people that the health overhaul will cover in 2014,” writes Kilff. “The delays Republicans are asking for now would cause major political and substantive headaches for the law while sharply reducing the number of people it covers.”

The political headaches Kliff alluded to include vociferous opposition by businesses to the employer mandate. That’s because, once implemented, the employer mandate – the requirement to provide government-approved health insurance on any firm employing 50 or more full-time workers or pay a fine – will very likely result in shedding jobs to avoid compliance costs.

“This predictable employer response is a very good reason to want to postpone the mandate until after the midterm,” wrote Walter Russell Mead said when the employer mandate delay was announced this summer. “Nobody wants to run as an ally of the job-killing President whose policies led your voters’ employers to dump their health insurance.”

It’s both refreshing and appalling to see an ObamaCare cheerleader like Kliff admit that the only kind of acceptable delays are the ones that politically advantage the Obama administration.

No wonder opponents see the only real solution to ObamaCare’s metastasizing problems as repealing and starting over.

In this fifth year of the worst economic recovery in our recorded history under Obama, the situation just isn’t improving like it should, or like it has in every previous recovery.  The latest manifestation of that fact came yesterday, when the Department of Labor announced that the unemployment rate rose in 28 states plus the District of Columbia last month, and only fell in 8 states.

As we noted earlier this month, 240,000 people dropped out of the labor force last month while only 160,000 jobs were created.  Moreover, today there are 2 million fewer Americans working than in 2008, even though our overall population has increased by 13 million during that period.  The last recession ended over four years ago in June 2009, which is more than enough time to conclusively demonstrate the failure of the Obama-Reid-Pelosi economic agenda of higher taxes, more regulation, wasteful spending and record deficits.

In my column this week, I detail how U.S. economic growth has hit stalling speed.  Today’s jobs report from the Labor Department demonstrates that the same is true of the nation’s employment situation in the fifth year of Obama’s economic program.

Only 162,000 jobs were added in July, which was significantly below analysts’ expectation of 190,000.   Even worse, and putting that number in context, 240,000 people dropped out of the workforce last month, while the labor participation rate fell again to 63.4%.  That dropoff explains why the headline unemployment rate declined a bit to 7.4%, which is the number the Obama Administration and sympathetic media will highlight.  But that number only counts people who are actually looking for a job, so those hundreds of thousands who continue to drop out make the surface unemployment rate look better than it actually is.  Moreover, keep in mind that Obama promised at the outset of his administration in February 2009 that his economic policies and trillion-dollar spending “stimulus” would have the unemployment rate down to 5% by now.

The number of part-time workers also amounted to 174,000, showing once again that the approaching ObamaCare mandates are forcing employers to make those they do decide to hire part-time.  All in all, yet another lackluster Obama era jobs report.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Texas Republican Governor Rick Perry is once again visiting Democratic strongholds in an attempt to lure businesses to relocate to the Lone Star State.

Perry is set to meet with business groups in New York and Connecticut, reports National Public Radio. Previously, Perry extolled his state’s low-tax, light-regulation approach in California and Illinois.

But Perry’s initiative is more than just a series of speeches and photo-ops. His moves are coordinated with the work of TexasOne, a coalition of chambers of commerce and corporations funding a $1 million advertising campaign in the targeted states.

YouTube ads like “Texas is Calling” tout the state’s nine consecutive years ranked #1 for business, hosting the world’s largest medical center and welcoming 1,400 new residents a day.

With states like California, Illinois, New York and Connecticut ranking near the bottom in business-friendly taxes and regulations, it’s no wonder Perry sees an opportunity to let wealth creators in those states know there is an alternative.

In this week’s Liberty Update, we mark the fourth anniversary of the end of the last recession in June 2009, noting that the subsequent years have been the most dismal recovery since we began keeping records after World War II.  Today’s unemployment report only served to confirm that reality, as unemployment rose to 7.6% and we only added 175,000 net jobs, which is just treading water.

In an excellent commentary entitled “These Are the Most Important Numbers from the Latest Jobs Report,” American Enterprise Institute’s Michael Strain brilliantly captures the lackluster nature of today’s release.  Setting aside the headline 7.6% and 175,000 numbers, he says, “I encourage you to pay attention to three other numbers which, to my mind, are much more important than 7.6 and 175,000.  They are 2.4, 4.4., and 0.4.”

“We still have 2.4 million fewer jobs than when the recession officially began 66 months ago. Relative to previous downturns, this performance is quite bad.

We still have 4.4 million workers who have been unemployed for six months or longer. This is a very large number. Outside this downturn, the previous post-war record was under 3 million, back in the 1980s. Over 37% of the total unemployed are long-term unemployed. The previous post-war record, also back in the 1980s, was a comparatively low 26%.

When the Great Recession began in December 2007, 62.7% of the working-age population was employed; today it is a staggeringly lower 58.6%. The share of the working-age population with jobs has increased by only 0.4 percentage points since its low point in the official recovery. Though it doesn’t get much attention, many labor economists prefer the employment-to-population ratio as the best measure of the broad health of the labor market. That this measure has improved so little indicates that the economy is creating just a few more jobs than are needed to keep up with population growth. But this is not enough. We need to create enough jobs to handle the growth of the working-age population and to recover the jobs lost in the Great Recession. To put it simply, we are not succeeding.”

So more of the same.  The Obama Administration and its dwindling number of defenders will attempt to characterize today’s numbers in a positive light, but that’s simply not accurate.  A broad economic policy change toward the free-market principles that we know work is necessary, the sooner the better.