KA-POW! #6 - Staib

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to student Eric M. Staib for “Obamacare is a Devastating Tax on the Working Class” :

The implication of this increased cost is that workers [with individual coverage] whose revenue productivity is less than $300 [or nearly $700 for those with family coverage] per month higher than their wages will be laid off, or have their hours cut to the level that will classify them as part-time. Ignoring established labor law, the bill leaves the definition of part-time and full-time to the discretion of the Commissioner of Obama's massive new health bureaucracy. The lower the new "Health Choices Commissioner" sets the threshold in an attempt to maximize the number of people receiving the employer contribution, the more hours of production employers will have to shave off to push their employees under the threshold, and the less those workers will take home in wages each week.

Unfortunately, the bill also requires employers to cover a ... percentage of the premium of the same minimum plan for part-time workers. The effects here are even worse than above, because they weaken the ability of an employer to escape the labor tax by employing his workers for fewer hours. Instead, with a labor tax on part-time workers as well, some low-productivity workers who are currently only working a few hours per week will be forced out of work entirely.

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Predictably, though, the Democrats fully intend to "protect" workers from the choice to save their jobs by working for less. Page 273 of the bill stipulates that any amount pledged for the minimum-health-insurance plan that corresponds to a fall in salary or wage will not be considered a contribution at all. Page 310 establishes a $100 per day, per case fine for any privately negotiated fall in wages. Thus, salaries will be locked in at current rates, with any cuts being considered an attempt to subvert the labor tax, and thus being subject to financial penalties.

In reality, this clause is no favor to workers, and instead acts as a wage floor to ensure that the unemployment effect will be immitigable and widespread. Because any drop in wages during the months following the bill's enactment would be considered a violation of the employer-contribution mandate and therefore would carry heavy fines, literally all wages will be prevented from falling below their current levels.

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In a dynamic market — that is, any market in which people are free to change their minds — different workers' wages must rise and fall every day to accommodate changing consumer preferences. To prevent this process from taking place is to prevent the structure of production from being corrected.

These wage floors will also hasten the decline of industries that are less valuable to consumers than they were at an earlier time, but that may still be a productive use of resources at a lower price. Businesses in these industries will be unable to legally cut their labor costs to lower their prices and satisfy consumers who are less eager to buy their goods. Without this option, such firms will need to either lay off part of their labor force, or simply go out of business entirely.

Honorable mention goes to Bill Bonner for “Berlin Wall Street” :

In 1949, the Soviets and the Allies divided Germany into two parts. One part followed a traditional capitalistic path to reconstruction. The other part took the socialist road. Remarkably, they kept this test going for 40 years.

Of course it was misery for many of the test subjects. People were so eager to get out of the East German control group, they risked their lives jumping over the barbed wire. ...

But it was a great experiment for economists. Too bad they didn’t learn anything.

What they should have learned is that when it comes to making people materially better off, government spending is a poor way to do it. It’s great for the few favored firms who help Washington raise and spend its trillions. ...

But what if you don’t have an inside track with the government? Well, you’re out of luck. You get to stand in line to buy inferior goods and services – produced by government-owned industries and protected monopolies. That was what the East Germans did. And, of course, you get government bureaucrats telling you what to do…and preventing you from improving the quality of your life.

That’s what they did in East Germany. And that’s what they’re doing, now, in the United States of America – in a less obvious, less heavy-handed fashion. Who owns the biggest auto company in the US? Who provides the finance for the finance industry? Who controls the health care and education industries? Who’s the biggest employer? Who finances our houses? Who runs our banks?