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When the Odd One Out Makes the Rules

July 26, 2009

The Democrats health care plan is bound to include penalties for businesses which don’t offer health insurance to their employees (with exception of very small businesses, the definition of which is still varying):

A proposal in the House calls for employers with a total payroll above $250,000 to offer health insurance to their workers or face a surtax of as much as 8 percent. A Senate committee version would require all businesses, except those with fewer than 25 employees, to provide health coverage or pay a $750 fine per year for each worker.

Leaving aside for now the questionable benefit from such penalties, the French Cowboy is wondering: Why a tax or a fine paid to government? Why not simply have the money be paid to the employees in lieu of health coverage? This way the company would get penalised for not offering health coverage, but the employees will be compensated directly instead of indirectly at best and not at all at worst. If the money goes to the government it will be used to finance a huge bureaucracy and only once that is paid for will the remaining funds be spent on something the health-coverage-free employees of those businesses might actually benefit from. If the money goes directly to the employees, though, it will be much more effective to attain the alleged goal of getting everybody covered. The employees can buy their own insurance with the extra money from their employer. Or they can choose to spend the money elsewhere.

Ahh, c’est ça le problème! The employees would actually get to decide whether to use their money for health care or to finance a new car. Government, though, will spend the funds much more wisely than a private individual would – if you believe in that kind of thing. But even if you wanted to prevent people from using extra cash on anything else than health care, those fines wouldn’t have to be paid to government. It would be enough to make the reception of the fine by employees depend on them using it for health insurance. To make sure that private households aren’t forced to buy something they can’t afford, government could add means-tested financial help. This would in all likelihood still be a more efficient way to get those people covered than to have their employees pay extra taxes to the federal government, end of story.

Of course, this solution doesn’t appeal to friends of Big Government for a simple reason: government is left out of this scheme. It would be reduced to overseeing money go from one private entity to another private entity. (If any, then the only cashflow that will involve Treasury will be away from it going to the private sector.) And, as we can testify from what we learn everyday about President Obama’s worldview, such a passive role for government is inacceptable for the Central-Planner-in-Chief. For Monsieur Obama, government just standing by while the private sector goes its own way is the path to the apocalypse. So, no matter what we are talking about, a system in which government is not taking up the lead role in private sector activity is automatically deemed a bad system.

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