Is Obamacare Smoot-Hawley II?
After the stock market crash of 1929 the government was pressed to act and one result was the infamous Smoot-Hawley Tariff passed in 1930. This law raised tariffs on 20,000 items to record levels to protect American jobs. The retaliation from our trading partners caused such a huge drop in our exports that our unemployment rose rapidly.
Over a thousand economists wrote to President Hoover to veto the bill and Hoover, while initially opposed yielded to pressure from his party. FDR also opposed the bill and ran against it.
This was the first of much legislation that made the Crash of 1929 into a full blown depression that lasted longer than any other in history... thus far.
In the midst of record unemployment we are passing the destructive equivalent of the Smoot Hawley Bill in the Health Bill. Caterpillar has already noted that this bill will increase their employment costs by $100 million. Employers, especially those with strong overseas competition, will more likely move jobs overseas. Other employers will delay hiring, forestall expansion projects, and look for ways to shed employees to avoid the higher insurance costs.
Regardless of what the CBO says we all know this bill will increase costs. It may shift costs from the old to the young, the uncovered to the covered, and the rich to the poor. It may raise the price of procedures to cover the costs of the new tax on devices, and it will certainly decrease the quality and service as doctors retire early rather than face the cuts in revenue with no relief in insurance liability or other costs to run a practice. It doesn't take much of an economist to figure out what happens when you dramatically increase the demand for health services (mandatory insurance, no pre-existing conditions, and pricing limits) while you reduce the supply of providers. We are once again ignoring the sound advice of economists warning of the outcome of bad legislation.
But increasing the risks and costs for a company to hire employees while unemployment is so high is as shortsighted as the proponents of the Smoot Hawley Tariff 80 years ago. Expect the employment to respond accordingly.
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