PPACA and the Jobless Recovery

Small-business owners are deeply concerned that the 2010 health care law (PPACA) will prolong what has been described as America’s “jobless recovery.” Recent Congressional testimony and a new study by the NFIB Research Foundation (my employer) shed some additional light on this concern. It is worth noting that small businesses normally create around 65 percent of the country’s net new jobs, but the sector has been shedding jobs almost continuously since early 2007.

Obviously, job-creation anemia did not begin with PPACA. But if small-business owners are correct, PPACA could prolong a situation that, in August 2011, is dire. For context: In June, the overall unemployment rate was 9.2 percent; add in discouraged and underemployed workers and the real rate is 16.2 percent. Since the second quarter of 2007, the small-business sector – normally the engine of job creation – has lost, not added, jobs in all but one quarter. Pre-PPACA, we can cite at least three contributory factors: weak economic growth stripped businesses of the incentive to expand or hire. (The latest official data show 0.4 percent in the first quarter of 2011 and 1.3 percent in the second quarter.) Uncertainty over tax rates made it difficult for businesses to do even relatively short-term business planning. (2011’s marginal income tax rates and estate tax rates were not known, after all, until days before the year began.) And the real estate collapse obliterated the collateral that many small businesses would have used to fund expansion and hiring. (Business owners own a lot of homes, offices, and investment properties.)

But recent information adds to the perception that PPACA has joined these other three anchors in discouraging growth and job creation. In late July, a panel of business owners expressed their fears before a subcommittee of the U.S. House Oversight Committee. One of the panelists, with 450 mostly blue-collar employees, was an NFIB member whose written and oral testimony walked members of Congress through the mechanics of his business and the options PPACA imposes on it in 2014. In his words, “this law will cost our company $1,000,000 or more no matter which option we choose. … Today, these estimates are more than the company makes. … These forecasts do not even consider the significant additional administrative costs we are incurring and will continue to incur managing the program, preparing mandated government reports, and tracking all [employees’] household dependents and earnings.” He added, “[O]ur 30-year business and the jobs of 450 employees are at risk of being legislated out of existence.  … Our goals turn from ‘hire-and-grow’ to ‘cut-and-survive.’ ” Other panelists expressed similar fears about the impact on their businesses. For those interested in a flesh-and-bones look at the law, their testimony is worth reading.

The panelists’ testimony accorded with the new NFIB Research Foundation. In the study, by William J. Dennis, Jr., majorities of business owners familiar with the law said PPACA:

• won’t reduce paperwork or simplify the provision of health care (79 percent);
• will increase taxes (77 percent);
• will increase federal budget deficits (71 percent);
• will infringe on the rights of Americans (65 percent);
• won’t slow the rate of health insurance cost increases (65 percent;
• won’t improve the overall health of the American public (59 percent);
• will lead to a government takeover of health care (58 percent); and
• will separate doctors and patients (50 percent).

In general, the negative sentiments were more widely held by those businesses currently offering insurance than by those who do not offer it– similar to the findings in the McKinsey and Company report that made headlines recently by predicting that, “Overall, 30 percent of employers will definitely or probably stop offering insurance coverage in the years after 2014.”

The Foundation study was based on a survey of 750 small businesses, chosen at random from Dun and Bradstreet. The survey of these companies was conducted by the nonpartisan Mason-Dixon polling organization.

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Columnist Robert Graboyes is senior fellow for health and economics at the NFIB Research Foundation. His column for the Health Policy Forum considers the intersection of health policy, politics, and small business interests. Columnists are regular contributors to the Health Policy Forum who pose their own opinions and policy positions in the realm of health care and health policy. As a leading nonprofit health care research and consulting institute dedicated to improving human health, Altarum encourages open discussion and debate about the many challenges in health care today. All postings to the Health Policy Forum (whether from employees or those outside the Institute) represent the views of the individual authors and/or organizations and do not necessarily represent the position, interests, strategy, or opinions of Altarum Institute. Altarum is a nonprofit, nonpartisan organization. No posting should be considered an endorsement by Altarum of individual candidates, political parties, opinions, or policy positions.