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Obamacare: Designed to Fail?

Friday September 27th, 2013   •   Posted by Burt Abrams at 1:54pm PDT   •  


There are so many problems raised by Obamacare that one wonders if it was designed deliberately to fail. You don’t need a course in economics to have predicted two of the biggest problems: 1) the provision requiring any employer with 50 or more employees to provide healthcare. This has spawned an epidemic of companies called “49ers” with 49 or fewer employees; and, 2) the provision requiring that any employee working more than 30 hours be given employer-provided health insurance. This has made part-time employment the new norm. Last month fully 70 percent of all new jobs created were part-time jobs.

Other problems are perhaps less obvious, but will become more evident with time. One of the more disturbing provisions is the extent to which Obamacare subsidizes the purchase of health insurance and the effect this will have on the tax base. As one illustration, I plugged into the Kaiser Family Foundation’s subsidy calculator the following information: family of four without employer-provided health insurance, two adults aged 50, and a family income of $70,000. This is a relatively affluent family with income substantially above the median family income of about $51,000.

I went to an income tax calculator and assumed the family took the standard deductions. This family would owe $4,608 in income tax. However, if this family buys health insurance through one of the insurance exchanges, it would qualify for a $5,681 subsidy paid to it in the form of a cashable tax credit. In other words, this family has gone from a net income tax payer to a net subsidy receiver. Truth is that no one really knows how many such families exist and how big the tax-credit bill is going to be.

Approximately half of all families now pay no income tax. This percentage of non-income-tax-paying families is sure to grow under Obamacare, and the burden of shouldering the costs of government will fall on a shrinking number of citizens.

Several of my liberal economist colleagues have responded to the criticisms of Obamacare by suggesting that many of the problems can be eliminated by extending Medicare to everyone. Could liberals have been so smart and so diabolical as to have designed Obamacare to fail?

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September 2013