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Schlocky Spin

The Obama team likes to argue that healthcare reform is needed to make business more “competitive.” This, of course, ignores a number of factors. First: it assumes employers will drop coverage, employees will be herded into government coverage or be required to purchase their own and that employers won’t have to make up the difference by increasing wages. But will that happen? An employee, for example, who used to get $40,000 and tax-free healthcare benefits likely will demand an increase of $3,000 if he now has to go buy coverage for $3,000. There is no net savings to business. And if the healthcare “reform” takes the shape of mandatory coverage by employers then we are making business less, not more competitive, with international competitors. (Give Christina Romer credit for refusing to make the competitiveness argument, dubbing it “schlocky.”)

And, as the Wall Street Journal editors point out, this new-found concern for American competitiveness would ring truer if the administration were not heaping new costs and regulations on U.S. employers:

If Democrats really want to increase U.S. competitiveness, they could look at the corporate income tax, which is the second highest in the industrialized world and a major impediment to U.S. job creation when global capital is so fluid. Or drop their proposals to raise personal income-tax rates, which affect thousands of small- and medium-size businesses that have fled the corporate tax regime as limited liability companies or Subchapter S corporations. Or cut capital gains rates, which deter risk taking and investment. Or rethink their plans to rig the rules in favor of organized labor by doing away with secret ballots in union elections.

The administration also might rethink its plans to hike taxes on foreign profits, which Microsoft’s Steven Ballmer explains “makes U.S. jobs more expensive.”

There are good reasons for real healthcare reform of the type that would lower coverage cost by increasing competition, de-link coverage from employment by providing tax credits to individuals, and address unnecessary costs from excessive litigation. And if, instead of a public option plan or some variation thereon, the administration were pursuing those sorts of reforms, the “competitiveness” argument might carry more weight.



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