The coming ObamaCare recession

The iniquity of the law, in that it places a much higher burden, as a percentage of payroll costs, on companies in lower-skilled/lower-wage industries versus companies in relatively higher-skilled/higher-wage industries, is one argument against Obamacare. But there is no question that the law delivers pain to almost everyone. Unions, for instance, are now complaining that the requirement to eliminate annual and lifetime benefit caps, a feature in many policies, including many administered by unions, by itself will, by the estimate of one Atlanta area Sheet Metal Workers Union representative interviewed by the Wall Street Journal, push the price of union labor up by $0.50 to $1.00 per hour to cover the extra costs associated with eliminating those caps. Perhaps unions, being friends and supporters of the Obama administration, will be successful in obtaining federal subsidies or further waivers from the law (equality under the law has not been a hallmark of this administration), but the cost will just be shifted somewhere else, such as on to employers or taxpayers, with the same depressing effect on economic activity.

How the economy performs will be determined by more than just Obamacare. There will be other negative factors, such as Europe, which will continue to have bouts of economic turmoil. But there will be positives, as well. The U.S. economy is fundamentally sound and dynamic. It is poised to grow, and has been for years. American corporations, on the whole, are sitting on large cash reserves, looking for opportunities to put that cash to productive use. It will be Obamacare, however, that I fear will be the weight that will matter most. The consensus among economists is that GDP will rebound in the first quarter of 2013 and that GDP growth for the year will be about 2.0%. Unfortunately, I believe that even that dreary prediction will prove too optimistic, and 2013 is more likely to be the year of the Obamacare recession.