Report: Private sector job creation ground to a halt almost instantly after Obamacare passed

posted at 2:30 pm on July 20, 2011 by Tina Korbe

A new report out yesterday from The Heritage Foundation shows private sector job creation dropped dramatically almost immediately after President Barack Obama signed the Patient Protection and Affordable Care Act (a.k.a. Obamacare) into law.

From the recession’s low point in January 2009 until April 2010, when Obamacare went into effect, the private sector created about 67,600 jobs a month. After the president signed PPACA into law, that number slowed to a meager 6,400 jobs a month — a more than 90 percent decrease or less than one-tenth the previous rate.

As the report states, correlation cannot prove causation — but the change in course is statistically measurable and testing reveals a structural break between April and May of 2010. Moreover, small-business owners have said Obamacare is a deterrent to hiring. Take Scott Womack, the owner of 12 IHOP restaurants in Indiana and Ohio, as just one example. Before Obamacare became law, he had development plans in Ohio. Now, he’s worried he won’t be able to carry out his original plans unless Obamacare is repealed. Those restaurants he planned to open would provide jobs not only for his future employees, but also for everyone involved in the construction of the restaurant buildings themselves.

As the Heritage report explains, Obamacare discourages hiring in three important ways:

  • Businesses with fewer than 50 workers have a strong incentive to maintain this size, which allows them to avoid the mandate to provide government-approved health coverage or face a penalty;
  • Businesses with more than 50 workers will see their costs for health coverage rise—they must purchase more expensive government-approved insurance or pay a penalty; and
  • Employers face considerable uncertainty about what constitutes qualifying health coverage and what it will cost. They also do not know what the health care market or their health care costs will look like in four years. This makes planning for the future difficult.

Democrats once touted that Obamacare would create jobs, but the data underscore the reality that that’s not true for the private sector. The only jobs Obamacare created were within the new agencies and layers of bureaucracy the law added to the federal government.

The Heritage report recommends repeal — and comes as a welcome reminder that the health care law can’t be ignored as the president and Congress attempt to address the debt and deficit or as the nation attempts to right the still-struggling economy. Nor can it be ignored in the upcoming presidential election. Likely U.S. voters have said jobs and the economy are their No. 1 issue. That means the repeal of Obamacare should be a top priority, too.

One of the first acts of the new House at the beginning of this year was to pass a repeal bill, but, of course, that bill was blocked in the Senate and definitely didn’t receive the president’s signature. Still, repeal is possible — but it will require the election of a president who will sign a repeal bill in 2012. That puts all the GOP presidential contenders in perspective. Even Mitt Romney, the architect of Obamneycare (Tim Pawlenty’s one pitch-perfect zing), has said he’d support repeal — and, whatever skeptics might say, he’s surely more likely to sign his name to repeal than Obama is. When the GOP does pick its candidate, voters concerned about Obamacare’s impact on jobs and the economy surely can get behind whoever the candidate is.

Otherwise, the country faces more of the same. Another Heritage report out recently showed jobs recovery will take far longer than most expect under any circumstances. According to that report, unemployment wouldn’t return to its natural rate of 5.2 percent until 2014 even if the economy immediately started adding jobs at the rate it did during the tech bubble, which was about 265,000 jobs a month. At a more realistic rate of 176,000 jobs a month, the unemployment rate wouldn’t drop to 5.2 percent until about 2018.


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