Asshattery On McSameCare

The Atlantic's Ross Douthat believes in Magical Wage Goblins and stuff.

That McCain's plan will tax employer provided health insurance, which is worth roughly $12,000 for a typical family, which in turn will lead many employers to stop offering said health insurance; meanwhile, the plan will give the same family a tax credit worth only $5,000 to pay for the same plan they used to have through their employer. This makes the whole thing sound like a pretty rotten deal, but it also begs a pretty big question: What happened to that extra $7,000 that employers were spending on health care under the old dispensation? To hear Biden tell it, it'll just vanish into thin air. But that's just absurd. Right now, that $12,000 plan is part of your compensation; it's just that the current tax code incentivizes employers to pay you in health insurance rather than in cash, because the health insurance is tax free. But that doesn't mean that if health insurance stops being tax free and employers stop including it in your package of salary and benefits, they'll suddenly cut everyone's compensation by $12,000; they'll cut it by the cost of the tax deduction, presumably, and wages will rise to roughly where they would have been if employers had never been incentivized to pay their workers in health care. So the typical family will get their $5,000 credit from the government, and something like the remaining $7,000 they need to buy health insurance will show up in their paycheck. Except that a lot of Americans will actually come out ahead, rather than just breaking even, since McCain's plan offers a flat credit regardless of income, whereas under the current system the dollar value of your tax deduction - and thus the compensation your employer is incentivized to give you - goes up as your income rises.

In a world where the economy was improving, this might be true. Maybe. But right now our economy sucks balls.

And in a world where CEOs are making hundreds of times the wages of average workers, and unemployment is sharply on the rise, a company that suddenly has the option of labor costs on employees drop by $12,000 per head per year isn't going to give that money back to employees. That company will pocket the difference faster than you can say "mass layoffs." Shareholders will applaud the move. Stock prices will rise. What CFO wouldn't do this in a heartbeat in this economy?

Lay it out to the employees. If you're a big company with 100,000 employees, congrats, you just cut $1.2 billion off your yearly operating costs. You're a genius. If you're a small business owner with, say, 20 people, that's still a quarter million, the difference between life and death as far as payroll for a few months.

But this way, you at least get to avoid nasty headlines in the newspaper for having to lay off thousands of workers...and your employees do remain on the job. So you're doing your part for the economy, and can say you made the best of a regrettable choice between health care and layoffs. The great thing is here Russ that if your company really IS paying workers more than the average health care benefit, the company saves that much more money. Do you think GM or Ford is going to raise wages if given the offer to cut health care?

Nope. Easy way to cut costs for businesses across the country. Axe health care, make the employees try to fight for individual rates, where they can get half the benefits for what they were paying...if they can even get covered in the first place.

20 million people out of health care in a flash. Guaranteed.