Wednesday, December 28, 2011

Job Creation Is the Price We Pay for Obamacare: From "Hire-and-Grow" to "Cut-and-Survive"

Andrew Puzder, CEO of CKE Restaurants, writing in Bloomberg:

"Our company, CKE Restaurants Inc., employs about 21,000 people (our franchisees employ 49,000 more) in Carl’s Jr. and Hardee’s restaurants. For months, we have been working with Mercer Health & Benefits LLC, our health-care consultant, to identify Obamacare’s potential financial impact on CKE. Mercer estimated that when the law is fully implemented our health-care costs will increase about $18 million a year. That would put our total health-care costs at $29.8 million, a 150 percent increase from the roughly $12 million we spent last year.

The money to cover our increased expenses will have to come from somewhere. We are a profitable company and, after paying our obligations, we reinvest our earnings in the business. Reinvesting in the business is how we grow, create jobs and opportunity. This is true for most U.S. businesses.

The complexity of this legislation makes it hard to anticipate costs in the future. Our investments pay off -- when they are successful -- over the long term. Because we don’t know what our health-care expenses will be in two or three years, we are unable to determine with any certainty how much our investments will have to return for us to be profitable. All of that counsels in favor of holding off on new investments and saving our funds. We want to grow. But we are unable to do so knowing that large and undetermined liabilities will absorb funds we otherwise would invest for expansion. 

Washington needs to understand that legislation like the health-care law has costs as well as benefits, that the costs suppress job growth, and that when too much legislation kills too many jobs, everyone suffers. Chief executives have responsibilities to their existing employees, customers and shareholders. We simply cannot risk their jobs and their money by investing when we know that legislation like Obamacare will make it so much harder to earn a profit. The sooner both parties in Washington understand this, the sooner we can all begin looking for ways to strengthen the social safety net without hurting the economy."

HT: Newsalert

109 Comments:

At 12/28/2011 9:22 AM, Blogger Paul said...

Yeah, but on the upside Obama and Pelosi declared the unemployment check extension will create 600,000 jobs.

Clearly, we are in excellent hands.

 
At 12/28/2011 9:24 AM, Blogger Larry G said...

Let's say there is a small town of 1000 people and a local Burger Shack that has 5 employees and they sell 1500 burgers a week to the 1000 people.

Hardee's decides to open a new restaurant and hires 3 people (since they are more efficient/productive) and takes 1/2 of the burger sales away from the Burger Shack.

the Burger shack cuts back to 2 employees because they are no longer selling enough burgers to pay for 5 employees.

how is it that we say when this happens that "new" jobs are created if the town of 1000 does not have more discretionary money to spend or even if they did..they stuffed with burgers already and won't eat more even if Hardee's tempts them?

Scenario 2 -

ObamaCare comes to town and adds to the costs for Hardee AND Burger Shack and BOTH of them have to add a nickel to the price of a burger to pay for the increased health costs.

How does this put Hardees at a disadvantage in contemplating opening a new restaurant in that town of 1000.

How about a simple, civil discussion here sans the insults and mean-spirited behaviors?

 
At 12/28/2011 9:26 AM, Blogger Larry G said...

scenario 3 -

now that both Burger Shack and Hardee's have better health insurance, they can afford to go to the doctor or a retail clinic.

doesn't the new money for the insurance translated into more jobs also?

why? why not?

 
At 12/28/2011 9:47 AM, Blogger Evergreen Libertarian said...

Here’s what should have been done from this one libertarian’s perspective.

Repeal the McCarran-Ferguson Act. This one piece of legislation has balkanized the health insurance business. Each state has its own little insurance dictator and the industry loves it. It becomes difficult for new companies to enter the market.

Repeal the regulations that restrict Certified Professional Midwives. MDs, specifically OB/GYNs deliver most of the infant in the U.S. In Europe most, about 75%, are delivered by midwives at lower costs, with fewer interventions and healthier infants. Presently about 8% of U.S. infants are delivered by midwives. While getting hospital privileges may be difficult, Certified Nurse Midwives can practice in all states, but Certified Professional Midwives in only some 28 states. It is worth noting that 40% of births are paid for by Medicaid. These costs could be lowered significantly.

Repeal the regulations that restrict the practice of Advance Nurse Practitioners. These health care workers could do a lot to reduce the costs of medicine if they were allowed to set up solo practices, but can only do so in a few states. See: http://www.acnpweb.org/files/public/UCSF_Chart_2007.pdf

Repeal the corporate practice of medicine legislation. These laws restrict the development of free standing minute clinic as has been noted at various times here.

Repeal the certificate of need legislation. This is another barrier to the development of other providers.

Get rid of the state licensing boards. These do little or nothing to protect patients and instead have been overrun by MDs who have nothing more in mind than protecting their turf. A classic example of regulatory capture!

 
At 12/28/2011 9:52 AM, Blogger Jet Beagle said...

Larry G,

What are you asking with the Hardee's/Burger Shack fiction? What are you trying to imply with this unrealistic scenario?

Here's a more realistic example of how new competition increases job creation:

A small East Texas town is dominated by the specialty retailers on its town square. These include a hardware store, two dress shops, a 5 and Dime general store, a shoe store, and others. The town's consumers - including thousands of families from nearby villages, ranches, and farms - pay higher retail prices for all goods than do shoppers in the large cities of Tyler and Dallas. That's due to the near-monopoly power of the town square specialty retailers.

Then one day Walmart comes to town. Within a couple of years, the town square retailers have shut down. Walmart employs the same number of people as did the small specialty retailers.

So what has changed? The biggest change is that the thousands of consumers all now pay far less for shoes, for clothes, for small tools, for appliances, and for just about everything. And so all these farmers, ranchers, and every other household has more disposable income. Their standard of living has increased.

What happens when consumers spend less for shoes, clothing, appliances, etc? They spend more for services. They are able to eat out more, to pay for more hair stylings, to have their homes painted. And that's where the increased employment occurs.

My scenario is not fiction, Larry. That's exactly the impact Walmart had in hundreds of counties throughout the nation.

 
At 12/28/2011 10:30 AM, Blogger morganovich said...

larry-

that seems like a flawed analysis.

why would you put a hardees in an area that already had its demand served?

demand is not flat. if there is one food place at a highway rest station, the lines will be long, and many folks will decide it's not worth it to wait. add another, and demand goes up.

find a place without well served demand, and the same happens.

you seem to be making a zero sum assumption that is not how the world works. your scenarios are rooted in fallacy as opposed to the reality that competition reduces price and ups real income.

jet gave you a good example of how that works.

populations go up. you need more vendors to keep up with the increased demand.

 
At 12/28/2011 10:55 AM, Blogger Larry G said...

" What are you asking with the Hardee's/Burger Shack fiction? What are you trying to imply with this unrealistic scenario?"

"why would you put a hardees in an area that already had its demand served?"

I do not think it is an unrealistic scenario at all.

if you travel through small towns especially in the South where Hardee's often expands, you'll find small towns that are not growing...and dead burger shacks when Hardees came...and the burger shack employees now work at Hardees.

I tried to bound the scenario to show that if there is no increased aggregate demand.. no new industry or jobs.. that it then becomes a competition among multiple competitors to serve the same number of rooftops.

in that situation where there is no increased aggregate demand.. a new restaurant is not creating new jobs..just displacing existing ones.

is that true or not and why or why not - without introducing other variables such as growing population?

it seems to me that the only way you get NET NEW JOBS is there has to be increased aggregate demand - i.e. population growth or higher pay or new industry, etc.

but if there is none of them.. it does not prevent Hardees from moving into that town if Hardees thinks it will increase their sales and profits...even if it displaces an existing business.

the second part - about the costs of ObamaCare.

if that cost applies to all competitors how does that put any of them at a disadvantage with respect to fellow competitors?

If Hardees did not kill the local Burger Shack but cut it's business in half and then ObamaCare required BOTH of them to pay more health costs - how would that disadvantage one of them with respect to the other.

the increased costs would not keep Hardees from locating there.. it would just make their burgers costs more.. no more or less than if the price of raw meat went up or an increase in electricity prices.

why is ObamaCare any different than other costs - many of which..like meat and electricity are no more predictable?

 
At 12/28/2011 11:25 AM, Blogger Paul said...

"If Hardees did not kill the local Burger Shack but cut it's business in half and then ObamaCare required BOTH of them to pay more health costs - how would that disadvantage one of them with respect to the other."

For one thing, a larger enterprise like Hardees is more likely better able to absorb the new overhead imposed than the Burger Shack. On the margin, less mom and pop enterprises will be sustained or even start up = less choice in the market place. Further, the marginal cost increase means x many customers choose a cheaper alternative, or simply eat at home. Herman Cain, the phenomenally successful businessman you're so sure pales next to Obama, explained all thisto Bill Clinton back in 1994.

 
At 12/28/2011 11:30 AM, Blogger sethstorm said...

It's been over two years of shouting uncertainty while refusing to hire - seems to be an excuse that rings hollow. The only other retread that comes close to being as irrelevant and hollow is competitiveness - another word used to imply a nonexistent defect in an individual or group.


The language must become "Hire US citizens** and survive government scrutiny". Businesses have become disconnected with what it means to survive as a regular person.

** - Directly hired US citizens, in industries that are not temporary/consultancy/staffing agencies, that disregard the following criteria.

• Employment status/length

• All forms of post-secondary education

 
At 12/28/2011 11:30 AM, Blogger Paul said...

"doesn't the new money for the insurance translated into more jobs also?"

What new money? The consumer is paying more for the burger, but there is no new money in their pocket to pay for it. The clinic may have more business now, but other businesses lose out. Classic broken window fallacy.

 
At 12/28/2011 11:31 AM, Blogger PeakTrader said...

Obamacare is another step to drive-up the price even higher.

The government may finally reach its goal of taking over the health care industry.

 
At 12/28/2011 11:31 AM, Blogger mike k said...

Hardee's decides to open a new restaurant and hires 3 people (since they are more efficient/productive) and takes 1/2 of the burger sales away from the Burger Shack.

Since Hardee's is more efficient they most likely sell their burgers for less. Demand for burgers then goes up or demand remains the same and people spend less on burgers. More disposable income in the town means money to be invested in other businesses. I could be wrong, it has been many years since my university days, maybe Larry has found basic laws of economics as I was taught, to have been proven wrong.

 
At 12/28/2011 11:46 AM, Blogger Benjamin said...

I broadly agree with the thrust of this post.

What bothers me is that no one on the right-wing questions $4 trillion in outlays for Iraqistan, and the still uncertain nature of Afghanistan, and the open-ened financial commitments that entails. How is business to react to that?

Or how about taxing $3,333 seized from every man, woman and child in the USA to fund the $1 trillion in annual outlays for the Defense-Homeland Security-VA megaplex? When we confiscate that much money from productive people, it puts a huge dent in motivation to work---and that dent it gets worse every year.

Or how about a Federal Reserve Board that is Sphinx-like as to its plans, and so business never knows if a recession or depression looms in response to higher commodities prices? (The Fed sees gold go up and tightens a monetary noose around our economy).

I have reservations about Obamacare. It does not cap health outlays as a percent of GDP.

But Obamacare is just one of many worries.

 
At 12/28/2011 11:49 AM, Blogger Walt G. said...

If labor costs go up, it can decrease profits to a point that either the company will run out of profits and fail or the cost of labor will have to be reduced. That means the remaining successful companies will reduce hourly wages to pay for the other labor costs. Unless health care costs can be reduced with this legislation, there will probably be more losers than winners. TANSTAAFL

 
At 12/28/2011 12:01 PM, Blogger Paul said...

And of course, Benji feels compelled to chime in with one of his "hypocrisy of the GOP" off-topic nonsense comments.

 
At 12/28/2011 12:15 PM, Blogger Paul said...

I have reservations about Obamacare. It does not cap health outlays as a percent of GDP.

Benji's worry is Obamacare doesn't (yet)ration healthcare to his liking. This is the same douche always tut tutting the rest of us for not living up to Milton Friedman's holy scripture.

 
At 12/28/2011 12:23 PM, Blogger PeakTrader said...

When you tax something, you get less of it.

When government raises the price of something (e.g. health care), you also get less of it.

So, the U.S. government has been killing Americans by driving-up health care prices.

 
At 12/28/2011 12:37 PM, Blogger Seth said...

@Larry G: Re: scenario 1

You are assuming a zero sum scenario.

What if 60% of the population likes the Burger Shack and the other 40% doesn't go there much? Hardees might provide something some of the other 40% would prefer. That's one way they would increase overall burger restaurant demand and possibly add net jobs.

Does the Burger Shack offer breakfast or chicken wings like Hardees? Perhaps these offerings also fill an unmet demand and generate more jobs.

How about the quality of service, efficiency and cleanliness of the Burger Shack? Do you think it improves or declines when competition comes to town? Who benefits from this? Perhaps with better overall quality, more people decide to visit both more often.

Zero sum thinking lacks imagination.

 
At 12/28/2011 12:47 PM, Blogger Benjamin said...

Paul-

You are correct in today's critiques.

I should expand: I would prefer a free market in health care.

Since that is out of the question politically, I would prefer any federal outlays to health care be capped as a percent of GDP, around 10 percent.

Additionally, capping the defense-homeland security-VA megaplex down to 2 percent of GDP would be high beneficial as well.

These two actions would free up about 10 percent of GDP back into the productive, jobs- and wealth-creating private sector.

 
At 12/28/2011 12:50 PM, Blogger Larry G said...

" What if 60% of the population likes the Burger Shack and the other 40% doesn't go there much? Hardees might provide something some of the other 40% would prefer. That's one way they would increase overall burger restaurant demand and possibly add net jobs"


but if the town stays at 1000 and no one has more money..buying breakfast at Hardee's means spending less somewhere else, right?

and that's true if the hamburger goes up in price to pay for ObamaCare... means less money for ...lottery tickets...and more money for paying for the clinic - right?

I don't have an agenda here other than to more clearly understand HOW we get new jobs when the money stays the same.

And in Hardee's case verses the Burger Shack...harder is more efficient, more productive.. needs LESS employees....to sell the same value of burgers, right?

so when the burger shack closes and Hardee picks up their business, there are actually fewer jobs..not even not more..but less.

right?

 
At 12/28/2011 12:51 PM, Blogger Dr William J McKibbin said...

Last time I checked, "Obamacare" has not even started yet anywhere -- I have trouble blaming Obamacare for the lost jobs today -- again, Obamacare has not yet lifted off...

 
At 12/28/2011 12:57 PM, Blogger Paul said...

"Since that is out of the question politically, I would prefer any federal outlays to health care be capped as a percent of GDP, around 10 percent. "

It's only out of the question politically because people like you put people like Obama in office.

 
At 12/28/2011 1:14 PM, Blogger Larry G said...

" Last time I checked, "Obamacare" has not even started yet anywhere -- I have trouble blaming Obamacare for the lost jobs today -- again, Obamacare has not yet lifted off... "

the "theory" is that business cannot plan if they are unsure of future costs ..like ObamaCare... but that message is also conflated with the knownable increased costs.

but if all other hamburger businesses have the same issue why does that change anything anymore than other future "unpredictable" costs like electricity or meat or flour for buns, etc...

isn't that the nature of business in that you actually cannot predict with any great certainty that prices for commodities won't increase in price?

the increased cost for burgers is not lost down some black hole... it creates health care jobs.. right?

so people spend less on burger or less on lottery tickets and more on health care... themselves rather than MedicAid or Emtala (other taxpayers) paying for their health care.

the jobs ostensibly lost to Hardees are picked up by health care providers... no?

 
At 12/28/2011 1:28 PM, Blogger reprise8 said...

Larry G - in your scenario #2, you obviosly missed the point entirely. If only it was as easy as that - just add a nickel to the price. But the whole point of the CEO's letter was that no one knows what the costs will be. The 150% increase is just an estimate based on what we know now. The law has so many options - if this, then that..., or "the secretary will determine ...", that an actual number can not be determined. He said just that, and really could not have made it clearer.

 
At 12/28/2011 1:39 PM, Blogger Larry G said...

" whole point of the CEO's letter was that no one knows what the costs will be. The 150% increase is just an estimate based on what we know now. The law has so many options "

well I understood that..but why is that any different that costs for meat, flour, electricity, etc?

none of those things is guaranteed not to increase...much less be predictable...

I understand that no business want to have it's costs increased but how many costs not associated with the govt are any more predictable as to when or how much either?

we had a famous example locally of two Hardee's a few miles apart with different electricity providers and one of them increased rates substantially and made them higher for one of the Hardee's but not the other.

It had nothing to do with the govt ...it was that one provider got power from a provider who had to unexpectedly shut down a Nuke and had to buy power on the spot market and passed that increased cost down to it's customers while the other provider was getting power from coal plants..that did not go offline.

Neither Hardee's closed and the prices for burgers stayed about the same ...

my point is that unpredictable increased costs are not just caused by govt or things like ObamaCare.

they happen all the time and it's the nature of business.

When they have a crop failure for Kumquats... the price of Kumquats goes up ...unpredictably and without a govt role...

If there is a war in Iraq.. the oil wells go offline and supply is reduced and price goes up and the costs of delivering frozen burgers to Hardees - goes up...

if one of Hardee's supplies ends up with e-coli in their meat.. very unpredictable..very high costs result...

 
At 12/28/2011 1:42 PM, Blogger Emil said...

larry g:

ever heard of price elasticity?

 
At 12/28/2011 1:59 PM, Blogger Larry G said...

" ever heard of price elasticity? "

yup... and your point?

 
At 12/28/2011 2:45 PM, Blogger Benjamin said...

Paul, Paul, Paul--

And gee, was it President Bush jr. who got Medicare drugs passed? A $200 bil annual program?

How abut the $140 billion and rising rapidly we ladle on the VA?

Just who should I vote for to control federal spending on health care?

Are you telling me the GOP wants to wipe out the VSA for a voucher system and end Medicare Part B?

 
At 12/28/2011 2:49 PM, Blogger Unknown said...

So the argument is that Obamacare is not affecting the small town of 1000 people when both Hardees and Burgershack try to survive there. Let's look at this differently. Lets say that disposable income for the 1000 residents does not change, but that costs for Hardees and burgershack go up by 5%.

Does Hardees or Burgershack increase the cost of their product by 5% to maintain their profit margins and does that not act as a "tax" on the people directly and if they do not have more disposable income, does that not cause them to consume less burgers? If they consume less, then the healthcare costs are spread across a smaller amount of gross revenue and perhaps it amounts to a 6-7% increase in costs.

If you have ever owned and managed a restaurant, you realize that your variable costs of Food and Labor account for 55% of the total costs of business. Of the remaining 45% of gross, you have to pay all your fixed costs like rent, electricity, interest on any loans you have, management salaries, and finally the EVIL PROFIT if there is anything left.

In Phoenix, just this week, a chain of 54 Arby's franchises filed for Chapter 11 to close down unprofitable locations. And if only marginally profitable locations exist, Imagine a chain like Hardees just closing it down. And if the owner of Burgershack cannot make a large enough profit, he will close down too.

My contention is not only that Obamacare will cause owners to not expand, it will also force the closure of stores that underperform, but are still slightly profitable. If a store is at break even, you keep it open. If it operates at a loss and there is no end in sight, you close it and cut your loss. And if you cannot get a solid ROI on your money in the restaurant business, you stop investing money into restaurants.

Which business would you rather work for, the local Burgershack that has no advancement opportunities, 401k, management training, tuition reimbursement, dental insurance, disability insurance, etc., and the sole proprietor who lives locally manages and runs the business but lacks the ability to leverage his knowledge and expand to the next town over? Or would you rather work for a company that offers even modest advancement chances for the workers?

Why are franchise and corporate retailers the enemy?

 
At 12/28/2011 3:23 PM, Blogger Larry G said...

I don't think the franchisers and corporate retailers are the enemy ..at all....

they provide, for the most part, consistent, known quality for a reasonable price.

When you go into a Hardee's or a McDonalds you have a certain expectation that you do not have when you drop into a local burgershack.

what I am questioning is two things:

1. - that when Hardees shows up that it "creates" new jobs - instead of displacing existing jobs.

2. - that ObamaCare is no different in terms of increased meat or bun or transportation or electricity prices... in terms of predictability and higher costs.

it's not a welcome thing..no more than other increased costs and yes increased prices result - and either less burgers sold or customers with fixed incomes figure something else to cut so they can continue to buy burgers - perhaps only $3 in lottery tickets or one less porn rental a week..etc..

I'm denigrating the purchasing habits of the consumers..only pointing out that higher burger prices due to ObamaCare is no different than higher burger prices due to a whole lot of factors and that people who buy (assuming fixed incomes) basically make choices where to allocate that money.

the workers at Hardees will benefit if they have more/better health care than now...and there will be more jobs created to provide their health needs....

and another perhaps unseen benefit... Hardee workers with health care won't be getting sick and going to the ER as much as they might go to a doc-in-box because now they have that ability.

less Hardee employees and their kids will need MedicAid since their income no longer will decide if they get Medicaid or not..since they have it via ObamaCare.

I'm NOT singing the praises of ObamaCare. It's a long, long way from what would be optimal/ideal/etc.

I'm ONLY pointing out that ObamaCare is just one thing that plays into the volatile/unpredictable costs that Hardees has to deal with and I have serious doubts that if Hardee sees an opportunity in some small town to open a store and increase their revenues and profits that they are going to let ObamaCare stop them any more than they'd let increased meat or bun prices stop them.

People will still buy burgers.

 
At 12/28/2011 3:25 PM, Blogger juandos said...

larry g says: "Let'says: there is a small town of 1000 people and a local Burger Shack that has 5 employees and they sell 1500 burgers a week to the 1000 people"...

How about, "let's stick to reality"?

I'm not being 'mean-spirited' whatever the heck that supposedly means...

The reality from the article: Mercer estimated that when the law is fully implemented our health-care costs will increase about $18 million a year. That would put our total health-care costs at $29.8 million, a 150 percent increase from the roughly $12 million we spent last year...

Now what possible good can that company, its employees, and the stockholders derive from ths load laid on it by a collection of clueless, parasitic bureaucrats?

 
At 12/28/2011 3:26 PM, Blogger juandos said...

"How about the $140 billion and rising rapidly we ladle on the VA?"...

So now pseudo benny hates wounded soldiers?!?!

 
At 12/28/2011 3:30 PM, Blogger Paul said...

Benji,

"And gee, was it President Bush jr. who got Medicare drugs passed? A $200 bil annual program?"

Agreed, but it was a)something the public wanted, b) half the cost of what the Democrats were stumping for, and c)the opposition to more govt involvement in health care came from the GOP, individuals you would no doubt label with some stupid 50 cent word you looked up to try and impress everyone.

Bush also pushed for some free market oriented policies like HSA expansion and tort reform that mostly went nowhere due to Democrat opposition.

"Are you telling me the GOP wants to wipe out the VSA for a voucher system.."


Yeah. How about Obama and the Democrats? Just once I'd like to see one of your idiotic rants aimed at the party that openly professes their love for big government.

"..end Medicare Part B?"

You haven't heard your boyfriend and the Democrats accuse Paul Ryan of throwing Grandma overboard? Man, you are ignorant.

 
At 12/28/2011 3:48 PM, Blogger juandos said...

evergreen libertarian says: "Repeal the McCarran-Ferguson Act. This one piece of legislation has balkanized the health insurance business. Each state has its own little insurance dictator and the industry loves it. It becomes difficult for new companies to enter the market"...

How about repealing EMTALA?

Any ideas on how much money that could potentially save?

 
At 12/28/2011 4:16 PM, Blogger Evergreen Libertarian said...

How about repealing EMTALA?

I have no problem doing that which is why I suggested repealing the corporate practice of medicine laws. Numerous times Prof. Perry has posted information regarding the minute clinics on this blog which would reduce the need for all those emergency room visits, but the corporate practice of medicine laws make expanding them difficult in some states.

 
At 12/28/2011 4:18 PM, Blogger Larry G said...

just fyi:

"EMTALA applies to "participating hospitals." The statute defines "participating hospitals" as those that accept payment from the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) under the Medicare program.[3] However, in practical terms, EMTALA applies to virtually all hospitals in the U.S., with the exception of the Shriners Hospitals for Children, Indian Health Service hospitals, and Veterans Affairs hospitals.[citation needed] The combined payments of Medicare and Medicaid, $602 billion in 2004,[4] or roughly 44% of all medical expenditures in the U.S., make not participating in EMTALA impractical for nearly all hospitals. EMTALA's provisions apply to all patients, and not just to Medicare patients."

 
At 12/28/2011 4:42 PM, Blogger Bobby Caygeon said...

Benji you are nothing but a leftist partisan hack.

Your answer to any question/statement is to bring up the cost of funding the defense structure. No matter if it makes any sense to have that discussion in the context of the overall question but you are completely disingenuous to completely ignore the fact that entitlement spending is 2-3x that of defense spending.

No equation that solves our current fiscal insanity by focusing solely on defense cuts is intellectually honest. Yet you pitch it again and again all under the guise of being bipartisan when all you ever do is carry water for the cleptocrats.

 
At 12/28/2011 5:06 PM, Blogger Larry G said...

just FYI -

Medicare Part B = 210 billion
MedicAid = 500 billion
DOD = 700 billion
DOD + Homeland
Security and other National "Defense" = 1.3 trillion

entitlements and DOD are about equal in terms of their impact on the non-FICA budget.

we currently spend 1.3 trillion more than we have revenues.

 
At 12/28/2011 5:08 PM, Blogger juandos said...

"The combined payments of Medicare and Medicaid, $602 billion in 2004,[4] or roughly 44% of all medical expenditures in the U.S., make not participating in EMTALA impractical for nearly all hospitals"...

The extorted tax dollars going into this boondoggle doesn't bother a nanny stater, does it larry g?

 
At 12/28/2011 5:16 PM, Blogger bob wright said...

I'm with Juandos.

Rather than talk about fictional towns and fictional businesses, the discussion should be about the impact of $18M of additional cost for CKE Restaurants and other businesses just like them.

Where does CKE restaurants get the $18M?

Does CKE have to lay people off in order to come up with the $18M?

What capital equipment doesn't CKE buy or what building doesn't CKE build because they had to spend $18M more on healthcare?

How many employees does CKE replace with machines in order to save $18M in expenses?

 
At 12/28/2011 5:18 PM, Blogger Larry G said...

as long as CKE can sell burgers for whatever price they get set at - they will continue to sell burgers.

the "cost" to them for ObamaCare is no different than other costs that they have... that they also have no control over.

People who currently work at Hardees currently get subsidized health care from taxpayers - EMTALA and MedicAid.

that's also a cost...right?

 
At 12/28/2011 5:23 PM, Blogger Larry G said...

" The extorted tax dollars going into this boondoggle doesn't bother a nanny stater, does it larry g? "

actually it's a tremendous waste because the system currently operates by padding costs...

but the 602 is the reality that we pay for health care whether we think we do or not.. and we pay far more for it than we should because it is paid for through EMTALA and MedicAid.

but show me a candidate for office who will get elected by promising to do away with EMTALA and MedicAid.

got a solution that "works"?

 
At 12/28/2011 5:31 PM, Blogger juandos said...

Yet another very questionable line: "Security and other National "Defense" = 1.3 trillion"...

In 2010 federal spending on social programs was three times higher than defense spending...

More here...

 
At 12/28/2011 5:34 PM, Blogger juandos said...

"got a solution that "works"?"...

Yeah, elect people to Congress who actually take their 'Constitutional' oath seriously is a start...

 
At 12/28/2011 5:36 PM, Blogger Larry G said...

re: defense spending

you have to include ALL "defense" spending which should include ALL expenditures that are associated with National Defense.

it's MORE than the core DOD money.

it includes pensions, VA, homeland security, intelligence, satellites, arms - foreign "aid", and anti-terrorism costs.

surely you would not consider those costs as "entitlements" - right?

 
At 12/28/2011 5:37 PM, Blogger Larry G said...

" "got a solution that "works"?"...

Yeah, elect people to Congress who actually take their 'Constitutional' oath seriously is a start...


got a solution that "works'?

;-)

who is going to vote people into office who promise to let people die on the steps of the ERs?

got a solution that is acceptable to most people who vote?

 
At 12/28/2011 6:32 PM, Blogger Paul said...

"got a solution that "works'?"

Sure, less Obamneycare, more Perry.

 
At 12/28/2011 6:37 PM, Blogger Paul said...

"as long as CKE can sell burgers for whatever price they get set at - they will continue to sell burgers."

That's a nonsensical statement.

"the "cost" to them for ObamaCare is no different than other costs that they have... that they also have no control over."

Ah, well, let's just mandate they pay their line workers $100,000 a yr with 12 weeks vacation then. Just more costs they have no control over.

 
At 12/28/2011 6:46 PM, Blogger Larry G said...

http://www.washingtonpost.com/politics/for-gop-repeal-and-replace-has-been-nothing-but-a-mantra-on-health-care-law/2011/12/14/gIQApUB8FP_story_1.html

or

http://goo.gl/DUPT3

looks like the Republicans have govt solutions also, eh?

not a single 'non-govt" REPEAL solution proposed much less passed in the Republican Congress...and of course no repeal of EMTALA and MedicAid...

so the Republicans are FOR govt health care also?

 
At 12/28/2011 6:49 PM, Blogger Larry G said...

you'll note that the military does not pay soldiers a salary and tell them to go find insurance on the private market...nor does the VA.

they could just give them vouchers and send them off to the private market to find the best deals - right?

but why do even that?

why not just pay them a salary and tell them it's their business what they do about health care for their families instead of govt-run TRICARE and VA hospitals?

if Govt health care is the worst why does the military provide govt healthcare to it's employees and families?

 
At 12/28/2011 6:56 PM, Blogger Paul said...

"if Govt health care is the worst why does the military provide govt healthcare to it's employees and families"

You ever been in a VA, Larry? I had to occasionally help out when I was a medic in the reserves. It is the worst, no question.

 
At 12/28/2011 6:59 PM, Blogger Larry G said...

" It is the worst, no question."

worst that MedicAid, Medicare or EMTALA?

 
At 12/28/2011 7:05 PM, Blogger Paul said...

"not a single 'non-govt" REPEAL solution proposed much less passed in the Republican Congress...and of course no repeal of EMTALA and MedicAid..."

Do you even read your own links? From your aticle: "in January, when all 242 House Republicans and three Democrats voted to repeal the law. That repeal measure stalled, as expected, in the Democrat-held Senate. “

Get that? You think Obama and Reid are going to pass/sign any type of market-oriented health care reform while also repealing Obamacare? The Washington Post article gave a sample of proposals from Gingrich and Romney, both proposals are, as Tom Price said in the article you linked but didn't read, "a step in the right direction." The wrong direction is the centralized approach Obama and the Democrats shoved down our throats.

 
At 12/28/2011 7:06 PM, Blogger Paul said...

"worst that MedicAid, Medicare or EMTALA?"

Wrong question. It's the worst compared to regular hospital care. And I'll take that as a "no."

 
At 12/28/2011 7:11 PM, Blogger Larry G said...

" That repeal measure stalled, as expected, in the Democrat-held Senate. “

Get that? "

R E P L A C E

what REPLACE legislation has gone through the Republican House?

Got that?

 
At 12/28/2011 7:12 PM, Blogger Larry G said...

" Wrong question. It's the worst compared to regular hospital care. And I'll take that as a "no."

so you're saying that service people would get better care if they were on MedicAid or Medicare?

 
At 12/28/2011 7:21 PM, Blogger arbitrage789 said...

I am an opponent of Obamacare (mainly because I believe the costs are way understated). That being said, I am prepared to argue AGAINST those who believe that the legislation will cause a significant increase in unemployment.

Where the legislation will have a negative impact is in the area of low-wage jobs offered by companies that have more than 50 employees. Here, I do think that unemployment will increase, except for people employed at companies like McDonalds which got a waiver.

But I don’t really see a negative impact on unemployment besides that. If, for example, a person is earning $15/hour, the employer can simply reduce the wage by a sufficient amount to cover the cost of health insurance. That outcome may be “good”, or it may be “bad”, but the person is still employed.

Low-skilled workers seeking employment with small firms will have a more difficult time finding work. But the impact on the overall unemployment rate, I believe, will be modest.

 
At 12/28/2011 7:32 PM, Blogger arbitrage789 said...

Larry G @ 9:24

“ObamaCare comes to town and adds to the costs for Hardee AND Burger Shack and BOTH of them have to add a nickel to the price of a burger to pay for the increased health costs…. How does this put Hardees at a disadvantage in contemplating opening a new restaurant in that town of 1000..?”
______________________

I don’t know if $.05 per burger is the right number or not. But given that these are low-wage jobs, and that the employers cannot lower the wages enough to pay for the HC, the prices charged will have to rise sufficiently to cover the cost.

Changes in behavior have to be considered “at the margin”. People aren’t going to stop going to Burger Shack because of a nickel. But maybe the average bill will rise from e.g, $3.50 to $4.00, and that 50 cents will be enough to drive enough people away that Burger Shack has to reduce its hours, and cut back on staff.

The other complexity in this example is the issue of part-time versus full time jobs. I don’t know all the ins-and-outs of the legislation, but if Burger Shack can save money by getting rid of all the full-time employees, they will likely do so.

 
At 12/28/2011 7:38 PM, Blogger Hydra said...

why would you put a hardees in an area that already had its demand served?

++++++++++++++++

Why would Walmart go in where demand is already served?

Because they can compete by virtue of having a more efficient organization and national advertising.


Sure, all those Walmart customers save a few pennies on every purchase, but the need to sell their goods too. Those new Walmart employees will probably buy less stuff than the former business owners.

 
At 12/28/2011 7:45 PM, Blogger Larry G said...

" and that 50 cents will be enough to drive enough people away that Burger Shack has to reduce its hours, and cut back on staff."

maybe. more likely that the new Hardees will hurt them more..though

but again.. ANY price increase ...say for meat or buns.. or electricity or transportation ALSO will do the same thing...

to single out ObamaCare as somehow the defining difference just is not realistic... IMHO...

there are LOTs of things that do affect costs ... and if they affect ALL sellers of burgers...then it does not drive any of them out of business... unless they are already marginal..and vulnerable.

it certainly won't drive the Hardees out of business.

you'll just pay more for the burger and maybe in some people's case.. buy less lottery tickets or rent less Netflix videos...

"The other complexity in this example is the issue of part-time versus full time jobs. I don’t know all the ins-and-outs of the legislation, but if Burger Shack can save money by getting rid of all the full-time employees, they will likely do so."

agree but again.. all costs play into this not just one for health insurance.

to single out ObamaCare at the macro level like the CEO did got me to wondering why he did not translate it into increased costs for burgers...and the reason why I suspect is that we're talking a nickel or less anyhow.

it sounds like a lot at the macro corporate level but when you break into down to individual stores.. it's likely not anything that will cause much beyond taking on a nickel to the burger or coke.

In a single week...the price of gasoline could easily triple the price increase of the burgers..

 
At 12/28/2011 7:45 PM, Blogger Hydra said...

Not making an infinite growth assumption is not the same as assuming a zero growth assumption.

Regardless how cheap milk gets, I only use a gallon a week. Gross milk demand will go up some, as people who could not afford milk come on board. But there is a limit to this, being the lower bound at which people are willing to produce milk. Even Walmart can't beat that limit.

 
At 12/28/2011 7:53 PM, Blogger Hydra said...

Less mom and pops?

Wait a minute. We just agreed that the mom and pops are toast anyway. The new jobs will be at major employers lime Walmart, which can afford the overhead, as you point out.

Is this corporate class warfare? Claiming the rich ( corporations) can afford to pay more?

First you say it is good for the big guys to wipe out the mom and pops, and then you say it is bad for obamacare to wipe out the mom and pops.

Which is it?

 
At 12/28/2011 7:58 PM, Blogger Hydra said...

Paul has Mister used the broken window fallacy. Does not apply in this case since there is no deliberate damage.

 
At 12/28/2011 8:18 PM, Blogger Hydra said...

12 million divided by 21000 is $571 a year.

I should think that with 21000 employees a sufficient investment in the health of your human capital would be a major goal, not a major complaint.

You spend more than $500 a year in maintenance on your trucks.

Your PR Guy ought to slap you up beside the head for making a public statement that makes it appear that your humans aren't worth squat.

 
At 12/28/2011 8:34 PM, Blogger arbitrage789 said...

Larry G @ 7:45

I don’t want to get hung up on the question of whether Hardees will be driven out of business by Obamacare (I don’t think it will). I want to focus on the question of the effect of Obamacare on employment in the fast food industry.

I would start by making the simplifying assumption that HHS Secretary Sebelius did not issue any waivers (despite the fact that she has issued quite a few). Let’s also make the simplifying assumption that the fast food companies cannot circumvent the HC mandate by switching to part-time workers. What you would have then is small companies (fewer than 50 employees) having a cost advantage over larger companies (more than 50 employees).

So for a meal of a burger, fries and a drink, the price might go from $3.50 to $4.00 (at a company with more than 50 employees). This would tend to drive some additional business to the smaller companies. But the overall burger/fries consumption would decline (along with other fast food consumption).

Ultimately the cost for the HC at the fast-food companies will have to be shared by the customers and the employees. I’m not saying it’s 50/50, but it’ll be shared. For employees in low-wage jobs, the cost will be somewhat higher unemployment. For employees in higher-wage jobs, the salaries may be cut modestly.

There will be no “free lunch” here. (no pun intended).

As you can see from my 7:21 post, I’m not arguing that there’ll be a significant effect on the overall unemployment rate, just an increase in the unemployment rate in certain narrow categories.

 
At 12/28/2011 9:00 PM, Blogger Larry G said...

@arbitrage789

" focus on the question of the effect of Obamacare on employment in the fast food industry."

you did a good job of laying out the issues....

but let's assume for the sake of similar impact.. that the price of diesel fuel for the Hardee's supply chain goes up 25 cents a gallon.

would you then attribute impacts similarly?

for instance, would you say that the price of fuel forced Hardee's to go to part-time employees?

or that employees and customers would have to "share" the costs?

there is no benefit either to the price of fuel going up...

whereas with ObamaCare you will have both the employees and the unemployed having health care they did not have previously AND less use (in theory) of EMTALA and MedicAid AND newly-created health care jobs for people now able to pay for services. Almost half of health care entitlements currently are paid for by taxpayers already to this could not make it worse because when someone has health care - they visit the doctor sooner rather than later and earlier detection and treatment is much cheaper than late-stage heroic but often futile and expensive treatment.

I don't know if under ObamaCare that locally-owned burger shacks would be benefited or not compared to chains like Hardees.

Perhaps you do know and can explain it .... that would be helpful to me.

In the end.. people who have health care are (in my view) more likely to not view a job at Hardees as "temporary" anyhow or they may be just fine with part-time work while they also do other work... the pressure for them to find a job that offers health care benefits will subside.

 
At 12/28/2011 10:43 PM, Blogger Hydra said...

What you would have then is small companies (fewer than 50 employees) having a cost advantage over larger companies (more than 50 employees.

++++++++++++?++

No. You would have off setting advantages. The large firms would still have buying advantages, including more leverage with the insurors.

Small companies could avoid paying for the insurance, It would like have to provide a pay premium in order to get workers willing to forego insurance or pay for it on their own.

I don't see this as a slam dunk one way or the other. If the argument is that this is causing uncertainty, then you cannot then turn around and predict what will happen.

 
At 12/28/2011 11:07 PM, Blogger Hydra said...

It seems to me that if you are going to buy fried food, that you ought to be willing to pay enough for the food to cover the cost of the inevitable Burns for people fixing your food.

You ought to be unwilling, or unable, to enjoy cheaper food if it comes not at the cost of the vendor, but of his employees.

Lets remember how we got in this mess. Employers offered health insurance to attract employees. At that time it was an optional and therefore differential choice. Now that is no longer optional nor differentiating, employers are suddenly opposed to it: there is no competitive advantage.

Just as Larry has pointed out.


What is the difference here? If I, as an employer, can absolve myself of (the opportunity or the obligation) to provide health insurance, then I can equally absolve myself of the obligation to pay my employees sufficiently to buy insurance on the retail market ( if they would do so).

As an employer, am I better off to use my size to buy insurance in bulk and provide it to my employees, because it protects my ( other) investments in human
capital? Or am I better off to assume that people are like water, to be used and flushed down the drain as if it is an inexhaustible and near costless resource?

It seems to me it is hard to hold the second position, and at the same time claim that the jobs you provide are the engine of growth.

 
At 12/28/2011 11:14 PM, Blogger Hydra said...

Ultimately the cost for the HC at the fast-food companies will have to be shared by the customers and the employees. I’m not saying it’s 50/50, but it’ll be shared.

+++++++++++++++++++

That is probably correct.

It is also probably an improvement, in that the customer will pay at least some of the indirect costs his purchase incurs. As it stands now, the customer is a partial free rider, letting everyone else pay for emtala, while he enjoys a below true cost Burger.

 
At 12/28/2011 11:20 PM, Blogger Hydra said...

There will be no “free lunch” here. (no pun intended).

+++++++++++++++

Right. We are going to pay for health care ( or lack of it) anyway. Now we are searching for the cheapest way to pay.

 
At 12/28/2011 11:28 PM, Blogger Hydra said...

I want to focus on the question of the effect of Obamacare on employment in the fast food industry.

+++++++++++++++

Well, OK. But you cannot unlock this from considering the costs of no health care or inadequate health care in the industry. These were external costs no different from the cost of. Picking up and disposing of your ( or your customer's) fast food containers.

 
At 12/28/2011 11:43 PM, Blogger Hydra said...

The employers cannot lower the wages enough to pay for health care?

That is your opening premise?

Wouldn't this imply that employers are paying enough that their employees could currently afford health care?

What is wrong with this picture, considering the millions without healthcare now?

 
At 12/29/2011 12:04 AM, Blogger Hydra said...

Let's say tat we buy the Walmart argument that says such businesses make everyone better off. That the average welfare has moved upward even if the distribution of welfare is increasingly skewed.

If that average welfare is climbing anyway, what then, is the problem with periodically setting new minimums?

This does not hurt successful companies that are already raising the average by treating their people well.

The only firms it hurts are the bottom dwelling scumsuckers who seek an advantage by disadvantaging their employees.

One could easily argue that our economy is better off by simply eliminating such dodo companies.

 
At 12/29/2011 8:10 AM, Blogger Larry G said...

the narrative that ObamaCare will "hurt" businesses and "harm" job creation is IMHO more a political statement than a business statement.

there are many, many unpredictable costs associated with business but those other costs are seldom portrayed in the same way as ObamaCare is portrayed.

I've said before - that I agree that ObamaCare is obviously the product of a committee that was blocked on so many things that what finally emerged was tortured and convoluted.

but I've also said that the folks who oppose it on the basis that it's a bad law - have themselves had opportunities prior to ObamaCare - with a Republican-controlled government - President and both houses of Congress to provide a law that would have preempted the creation of ObamaCare from the start.

Even now, the folks who oppose ObamaCare have not put together a bill that will pass the Republican-controlled House of Representatives - in no small part because while Republicans claim to have "lots" of "ideas" about how to craft a better law than ObamaCare -cannot themselves agree on a specific proposal that has enough support to pass the House of Representatives - in effect - a "statement" more powerful than their largely symbolic vote to Repeal ObamaCare.

That Repeal Vote would have been much more powerful had it been a REPLACE vote - even if the Dems/Obama opposed it because it would have put the Republicans money where their proverbial mouth is on Health Care and delivered the goods of an alternative approach.

The biggest problem is that too many people think we do not already pay for those who do not have insurance.

We not only pay for them but we pay twice as much as it should cost.

We won't provide basic health care for them but we will pay for their end-stage diseases that could have been prevented had we been willing to pay for their basic care.

so we have this conundrum where we pretend we don't already pay and when confronted with the realities that we do (via EMTALA, MedicAid, Schips, etc) - then we grudgingly admit it but still dislike the idea of doing it that we refuse... in essence... to do it in a most cost-effective way....

so that's essentially what ObamaCare has tried to do - get access to health care to more people sooner when prevention can reduce costs -

and what we get in response to this is NOT a better alternative approach...

but instead a continuous litany about how bad ObamaCare is ... an opinion pieces from CEOs who obviously don't give a rat's behind about the plight of their own employees with regard to access to health care but instead talk about how one particular cost to their business - out of many - ObamaCare is a threat to their business.

forgive me for not shedding tears.

If that Hardee's CEO had an ounce of principle - he would have, at the same time he opposed ObamaCare, offer SOMETHING as a better approach instead of more of the same-old, same-old "bad bad ObamaCare".

this pretty much defines the Republican message about health care.

it's one of opposition - not solutions.

 
At 12/29/2011 9:20 AM, Blogger Hydra said...

What new money? The consumer is paying more for the burger, but there is no new money in their pocket to pay for it.

+++++++++++++++++

Wait a minute. If money is diverted from the pay that hamburger flippers make, and diverted through lower prices to other goods and services, that somehow counts as new money and new jobs. But if money is diverted from the icons of Burger buyers to pay for healthcare serviceas and insurance that does not count as new money?


Sure, demand is not static, but for the purposes of this conversation it is useful not to confuse the issue by introducing another variable. New demand, one way or another means new or additional consumption and new money or faster flow of money, not merely shifting it from one product to another.

It is not useful to complain about higher costs for health insurance without also considering that there will be more insurance.

Some will argue that excess insurance is a waste, and they would be correct. But they would be wrong to equate such waste with the decision by many to be free riders as long as they think they are healthy.

 
At 12/29/2011 10:38 AM, Blogger Paul said...

Larry,


"so you're saying that service people would get better care if they were on MedicAid or Medicare?"

I'm saying compared to regular hospital care.

 
At 12/29/2011 10:39 AM, Blogger Paul said...

Larry,

"what REPLACE legislation has gone through the Republican House?

Got that?"

What REPLACE legislation would get through Harry Reid's Senate and Obama's veto.

Got that?

 
At 12/29/2011 10:41 AM, Blogger Paul said...

Hydra,

"Paul has Mister used the broken window fallacy. Does not apply in this case since there is no deliberate damage."

I think you don't understand the principle of the broken window fallacy...

 
At 12/29/2011 11:03 AM, Blogger Paul said...

Larry,

"so that's essentially what ObamaCare has tried to do - get access to health care to more people sooner when prevention can reduce costs - "

All we need to do is look to Romneycare to see how that's nonsense. Massachusetts health care costs are exploding. All Obama's bullshit about "bending the cost curve down" are proving to be lies, just as the critics said at the time. No honest broker expects Obamacare to save money, even with the $500 billion in tax hikes set to kick in over the next 10 years.


"..and what we get in response to this is NOT a better alternative approach..."

This is the Larry and Benji m.o.: hold the out-of-power GOP to a very high standard, but no standard for Obama and the Democrats who have been running things into the ground for the past several years. Obama serves up a poisonous trojan horse designed to eventually herd Americans into the single-payer corral, and so Larry points fingers at the GOP. Doing nothing would have been a better approach.

 
At 12/29/2011 11:09 AM, Blogger Paul said...

"If that Hardee's CEO had an ounce of principle - he would have, at the same time he opposed ObamaCare, offer SOMETHING as a better approach instead of more of the same-old, same-old "bad bad ObamaCare".

So Larry has declared the CEO of Hardee's has no principles because he doesn't care for Obamacare, and hasn't devised a better plan even though he runs a fast food chain and therefore should of course be an expert on how to fix the health care system.

Hey, maybe the CEO of Hardee's preferred the current system to the pile of central planning dung the Democrats shoved down our throats. Maybe he thinks that's a better approach, without necessarily even being a good approach.

 
At 12/29/2011 11:11 AM, Blogger Seth said...

@Larry G: "but if the town stays at 1000 and no one has more money..buying breakfast at Hardee's means spending less somewhere else, right?"

"I don't have an agenda here other than to more clearly understand HOW we get new jobs when the money stays the same."

I appreciate that. I think what you're missing is that 'money' (or more accurately, wealth) does not stay the same.

Even if the Burger Shack goes out of business, wealth may have increased in your 1,000-person-economy. As long as those 1,000 people voted freely with their wallets on what they thought was the better value for them, then they came out ahead.

Let's say the Burger Shack, which employed 5 people, closes and Hardees only employs 4 people.
That means the 1,000 people are getting their fast food needs met with 1 less person. That's an efficiency gain.

Now they can afford to do something else. That's how 'money' (or wealth) is added.

Maybe a few of them decide to have that extra person mow their lawn, allowing them to use their previous lawn-mowing time on something more valuable -- so even more wealth is added.

What happened to the 70% of workers who use to work in agriculture to meet our caloric needs? Only 3% work there now. That allowed 67% to find something else to do. Did that lower the number of jobs, or create more wealth?

 
At 12/29/2011 12:20 PM, Blogger Larry G said...

" I'm saying compared to regular hospital care."

which is provide through MedicAid and EMTALA.. right?

 
At 12/29/2011 12:22 PM, Blogger Larry G said...

re: getting legislation through the Senate verses "making a statement".

Ok.. so tell me why the Republicans took the time to pass a REPEAL law when they ALSO KNEW it would not get past the Senate?

wouldn't it had been much more powerful if they actually passed a real alternative and the Dems sat on it?

wouldn't that have been even better than a "symbolic" "repeal" only?

 
At 12/29/2011 12:55 PM, Blogger Larry G said...

" I appreciate that. I think what you're missing is that 'money' (or more accurately, wealth) does not stay the same."

that's true but people don't/won't buy more if they do not have increased wealth and for a claim of "creating jobs" to be legitimate - you have to show where the increase spending actually comes from people people don't spend more if they don't have more ...


"Even if the Burger Shack goes out of business, wealth may have increased in your 1,000-person-economy. As long as those 1,000 people voted freely with their wallets on what they thought was the better value for them, then they came out ahead."

but in that town of 1000 there is no increased wealth.

they have the same amount of money they always had and no additional..

and Hardee's comes to town.

that's the premise.

the idea is to hold the variables constant to understand how "new jobs" are "created" when there is no additional wealth.

My assertion is that they are not "new jobs" but they merely are displaced jobs.

Hardee's just moved in and started competing for the same unchanging demand for burgers.

and they will do so by taking some or all of the demand away from the burger shack.

but when demand for the burger shack burgers goes down - they have to lay off people.

those same people then walk across the street and get jobs with Hardees.

no more burgers are sold because there is no increased demand for them because there is no population growth in town nor is anyone making more money than they did before.

the problem when trying to understand these concepts is that if you allow too many variables then you really cannot clearly understand the essence of the issue.

that's why I say.. keep the size of the town and the amount of money available the same..

and have Hardee's come to town.

if you do that - you'll see there are no increased jobs.. just replacement jobs.

this is the same thing that WalMart (or Home Depot or many national chains do).

they don't really "create" jobs as much as they displace them.

now there are legitimate new jobs but they come from things like more aggregate demand - population growth, people earning more money.

and you can also see in this example that when Hardee's comes to town they do not double the sales of hamburgers in the town (which if they did WOULD create new jobs).

people don't buy more burgers because more competitors start selling them... if that were true.. it would be easy just to open up two burger shacks or 3 or a dozen....



Let's say the Burger Shack, which employed 5 people, closes and Hardees only employs 4 people.
That means the 1,000 people are getting their fast food needs met with 1 less person. That's an efficiency gain.

Now they can afford to do something else. That's how 'money' (or wealth) is added.

Maybe a few of them decide to have that extra person mow their lawn, allowing them to use their previous lawn-mowing time on something more valuable -- so even more wealth is added.

What happened to the 70% of workers who use to work in agriculture to meet our caloric needs? Only 3% work there now. That allowed 67% to find something else to do. Did that lower the number of jobs, or create more wealth?

 
At 12/29/2011 12:59 PM, Blogger Larry G said...

" Maybe a few of them decide to have that extra person mow their lawn, allowing them to use their previous lawn-mowing time on something more valuable -- so even more wealth is added."

remember.. there is no additional money... the population is fixed and their wealth is static.

if someone pays you to mow their lawn - it means they stop spending that money on something else.

they can choose to have you mow the loan perhaps instead of buying lottery tickets or renting a netflix but they can't pay you IN ADDITION to what they are already spending money on - unless they have more money themselves.

this is the whole debate behind the payroll tax deduction and whether or not it really has a "stimulative" effect or not.

but if a local worker in that town ...gets more money in his paycheck (because of the reduction of payroll taxes) - then he WILL have MORE money to pay someone to mow his lawn OR for him to go buy more burgers or rent more netflix, etc.

 
At 12/29/2011 1:15 PM, Blogger juandos said...

larry g says: "surely you would not consider those costs as "entitlements" - right?"....

Ha! Ha! Ha! Ha! Ha! Ha!

Thanks for that larry g. its always good to get a chuckle...

 
At 12/29/2011 4:24 PM, Blogger Hydra said...

What REPLACE legislation would get through Harry Reid's Senate and Obama's veto.

Got that?

+++++++++++++++++++++++++++++

Well yes, but they had their chance when they had control and did nothing.

Just because an idea might not pass the presidents veto NOW is no reason not to raise and promote the idea.

There has been no such idea as far as I know, but I have heard the idea mentioned to repeal the idea that we have in place and which did pass the house and presidents veto.

Can the president veto a bill to repeal?

 
At 12/29/2011 4:30 PM, Blogger Hydra said...

Massachusetts health care costs are exploding.

================================

We can expect coststo go up if more people actually get health care. That does not mean that not having health care available is somehow cheaper.

 
At 12/29/2011 4:32 PM, Blogger Hydra said...

wouldn't it had been much more powerful if they actually passed a real alternative and the Dems sat on it?

wouldn't that have been even better than a "symbolic" "repeal" only?

===============================

Yes, undoubtedly. What the Republicans showed us is that their only goal is repeal.

Regardless of the cost.

 
At 12/29/2011 4:36 PM, Blogger Hydra said...

Bending the cost curve down.

That includes more than just health care costs. If you include the reduction in lost productivity and lost work days then the cost of health care looks a lot different.

You are making a bad argument by focusing on one aspect of cost.


Yes, I understand the broken window fallacy, and I believe you mis-used it.

 
At 12/29/2011 4:52 PM, Blogger Hydra said...

What happened to the 70% of workers who use to work in agriculture to meet our caloric needs? Only 3% work there now. That allowed 67% to find something else to do. Did that lower the number of jobs, or create more wealth?

===================================

Allowed them to find something else to do, or forced them to?

Up until the 1930s about 5/4 of crop land was used to feed the dreft animals that worked the other one quarter.

It was the draft animals that got put out of work by the tractor. It is not so much that we are producing more calories with fewer people (though that is true) as it is that we are producing fewer alories to feed the draft animals.

Those 67% of people found other jobs, so as far as they are concerned there were no new jobs, just different ones.

We have no knowledge as to whether they were better jobs or not, but if they wound up working for Pudzer, we can take a guess.

To be sure there were other advances in seed and fertilizer etc. There were also walmart style factory farms that put the mom and pops out of work, the same giant farms that pull down 95% plus of all the agricultural subsidies.

If you look at this as an entire system, it is not so clear that we are better off. Consider the enormous food recalls we have seen, for example, plus the growth organic farming in reaction to such problems.

 
At 12/29/2011 6:40 PM, Blogger Larry G said...

" What REPLACE legislation would get through Harry Reid's Senate and Obama's veto."

well.. it certainly did not keep the Republicans from passing a REPEAL vote, did it?

why not actually pass an alternative to ObamaCare and force Reid / Obama to vote in down?

that would be putting out a powerful statement - that Republicans had a "better" alternative to ObamaCare.

just being opposed - and having surrogates write anti-editorial like the CEO of Hardees did - does not move us forward... it's just more "anti" without any real alternatives.

Someone said that the CEO was not an expert on health care.

True - but he's allied with the Republicans and if they had a proposal he could support it - a much more powerful statement than just writing "anti" articles.

finally the phrase "job creation".

if more people have insurance - it will require MORE workers to provide the care - that's CREATING jobs - the opposite of what the CEO was saying.

the real issue is - who will pay for the additional health care workers....

and that would be people who buy burgers... true enough...

but those same people - right now - also pay hefty taxes for MedicAid and EMTALA and other tax-funded "entitlements".

so, in effect, we are trading taxes for entitlements for higher prices on burgers...

what would the Republicans do differently?

what would the CEO of Hardees support as an alternative ?

why not support something as opposed to appear to oppose everything?

I see the CEO of Hardees as part of the problem.

He apparently does not care that his employees get their health care from MedicAid and EMTALA even though in doing so it imposes hefty taxes on the very people whom he hopes to sell burgers to.

 
At 12/30/2011 9:34 AM, Blogger Jet Beagle said...

Hydra: "We have no knowledge as to whether they were better jobs or not .... If you look at this as an entire system, it is not so clear that we are better off."

How in the world can someone post such Luddite foolishness on an economics blog?

 
At 12/30/2011 12:30 PM, Blogger Seth said...

@Larry G

"remember.. there is no additional money... the population is fixed and their wealth is static."

Again, this IS your faulty assumption.

If wealth were static, we would still be cavemen.

 
At 12/30/2011 12:35 PM, Blogger Seth said...

@Larry G -

Just to follow that up, let's say you use to spend $100/year on hamburgers.

Hardee's comes to town and you find that you're now spending $90/year without a loss in quality.

Now you have $10 extra to spend on something else. Maybe you buy a 12-pack with it.

So, before $100 satisfied your hamburger fix. Now $100 does that and a 12-pack. You are now wealthier, even though your "money" didn't change.

 
At 12/30/2011 12:39 PM, Blogger Jet Beagle said...

Good explanation, Seth.

 
At 12/30/2011 12:43 PM, Blogger Larry G said...

" If wealth were static, we would still be cavemen"

that's true.

but you increase wealth, aggregate demand by higher levels of productivity and/or population growth and you don't get that way by one competitor replacing another in terms of the wealth/aggregate demand of those who buy from you.

the real system is dynamic but understanding the difference between a real new net job and one that replaces another one is important.

when you have an economy that is stagnate .. i.e. aggregate demand is not growing...

then you won't created new jobs by having one competitor selling something replacing another one selling the same thing - especially if there is no net increased demand.

you just go from one company selling burgers to another company selling burgers and the jobs just get displaced.

my assertion is - that in these kinds of situations - the interloping competitor is not really creating jobs.. just cannibalizing existing ones.

a good one to better understand this in a bigger system is to look at total burgers sold verses how that allocates out to the competitors that sell burgers.

If Hardees reports higher burger sales but overall burger sales are static then it's likely that Hardee took market share away from other competitors.

In that case - there were no new jobs as the competitors who gave up share to Hardees also had to shed jobs.

this is important when someone is claiming that a company is "creating" jobs.

you cannot really "create" jobs when aggregate demand is static.

people cannot spend more than they have.

if they got no increase in salary.. they're not going to buy "more".

they may be convinced to buy more burgers and less lottery tickets but it's not "new" spending.. it's just changed spending...

 
At 12/30/2011 12:49 PM, Blogger Larry G said...

" Just to follow that up, let's say you use to spend $100/year on hamburgers.

Hardee's comes to town and you find that you're now spending $90/year without a loss in quality.

Now you have $10 extra to spend on something else. Maybe you buy a 12-pack with it.

So, before $100 satisfied your hamburger fix. Now $100 does that and a 12-pack. You are now wealthier, even though your "money" didn't change."

that's correct. but you're not spending any more money so how does that create new or more jobs?

that's the paradox.. right?

so it looks like we AGREE that net new jobs are not created in that scenario...and in fact if you assume that Hardees replaces the Burger Shack AND is more productive.. there actually may even be LESS employees overall - a net decrease of jobs...

 
At 12/30/2011 1:15 PM, Blogger juandos said...

"If you include the reduction in lost productivity and lost work days then the cost of health care looks a lot different"...

Oh my hydra! Just where did you dig this stuff up?

 
At 1/09/2012 6:42 PM, Blogger OBloodyHell said...

>>> "why would you put a hardees in an area that already had its demand served?"

I do not think it is an unrealistic scenario at all.



A) My experience with Hardees is that they tend to also place themselves advantageously to also gain "bypass" business -- that is, they build near to interstates and major transport throughways that give them more than just local business.

b) Your presumption is that the Hardees does not gain by improvements in efficiency. The notion that a Hardees can't provide either cheaper prices or more options for the same price, than the one-off BurgerShack is itself doubtful.

In other words, competition is a Good Thing, for the most part. The people in the locale are better off -- their food costs go down or they get more food choices -- salads as well as burgers, baked potatoes as well as fries, and so forth. The quality level of the food, in most cases, is likely to be better. I've eated at "BurgerShack" type places. They're usually about as greasy as fast food gets.

Further, if you imagine the BurgerShack isn't going to get outright bankrupted by these kinds of requirements, you're living in a pipe dream.

 
At 1/09/2012 6:50 PM, Blogger OBloodyHell said...

>>> how would that disadvantage one of them with respect to the other.

What, you think economies of scale don't apply to companies with 50 employees vs. 21000, or 70000?

You actually imagine that BurgerShack Ltd., can get the same kind of rates as CKE, Inc.?

>>> why is ObamaCare any different than other costs - many of which..like meat and electricity are no more predictable?

OK, what drugs are you on that you don't grasp that ever-expanding coverage, with randomly-added mandates from year to year that are produced by Federal Diktat, rather than some kind of rational cost-benefit analysis, are not going to be open-ended and hence far less predictable than mean and electricity costs, which generally behave far more reliably than any kind of system where the main cost component derives purely from government fiat?

 
At 1/09/2012 6:57 PM, Blogger Larry G said...

" In other words, competition is a Good Thing, for the most part. The people in the locale are better off -- their food costs go down or they get more food choices -- salads as well as burgers, baked potatoes as well as fries, and so forth. The quality level of the food, in most cases, is likely to be better. I've eated at "BurgerShack" type places. They're usually about as greasy as fast food gets.k"

all true but at the end there are less total employees... because burger shack employees are gone and Hardees is more productive.

My observation is that a new Hardees does not necessarily bring more/new jobs... the replace jobs and they replace them with less jobs.

all of this does provide customers with cheaper food and more things to spend money on...but there are less people selling burgers also.

 
At 1/09/2012 6:58 PM, Blogger OBloodyHell said...

>>> The language must become "Hire US citizens** and survive government scrutiny".

a) Does that include illegal aliens, seth?

b) as usual, you show no grasp of any kind of how businesses work, even when the CEO of a corporation actually lays it out for you in straightforward, simple numbers.

>>> Businesses have become disconnected with what it means to survive as a regular person.

Seth reveals he doesn't live in the Real World, but some la-la-land where businesses don't have a goal, first and foremost, to actually MAKE MONEY for investors. Typically, 5-10% over time. Otherwise, those same investors will take out the money they have in the company and go find another company or industry... or locale which CAN offer them 5% to 10% over time.

If the business can't do THAT, then the business won't exist. Period.

Seth, Thomas Jefferson himself defined this:
Money, not Morality, is the principle commerce of civilized nations.
It is not the job of government to enforce your pretentious and utterly disconnected moral expectations of businesses.

Put much more clearly -- Seth has become disconnected with what it means to survive as a regular business owner... Not that he ever had any sort of vague connection to that at all.

 
At 1/09/2012 7:19 PM, Blogger OBloodyHell said...

>>> What bothers me is that no one on the right-wing questions $4 trillion in outlays for Iraqistan,

Benny, you're a broken parrot. Go find some daisies to push up.

You get shredded every time you bring this crap up, and you just re-parrot it any time you get the chance. You're a jackass and a troll.

Benny the Broken Parrot even brings this up in a thread about Gun Control, of all things:

Gun Permit Holders Substantially More Law Abiding

He gets rather thoroughly trashed there, along with the defenders of gun control.

 
At 1/09/2012 7:24 PM, Blogger OBloodyHell said...

>>> you'll just pay more for the burger and maybe in some people's case.. buy less lottery tickets or rent less Netflix videos...

Actually, this is generally ass-backwards from the usual behavior.

People will STAY HOME, make their own food, and rent a video.

And given that the buyers of Lotto tickets are generally idiots with no grasp of statistics, they'd mostly start eating cat food before they'd stop buying tickets. How else are they gonna get rich?

And from a local business perspective this is BAD. Because I don't think Netflix brings a lot of money and employment into most locales, and I'm petty sure the Lotto tickets don't either. It's mostly just one more BS task for convenience store workers to perform on their shift. It's highly unlikely Lotto sales are going to lead to a notable increase in local employment.

 
At 1/09/2012 7:27 PM, Blogger Larry G said...

"People will STAY HOME, make their own food, and rent a video."

but they gotta buy the burger and video.. right?

and both of them will have taxes on them also... right?

the guy working at the supermarket in the meat department might also get minimum wage...

:-)

 
At 1/09/2012 10:06 PM, Blogger OBloodyHell said...

>>> And gee, was it President Bush jr. who got Medicare drugs passed? A $200 bil annual program?

And he was resoundingly criticized for it.

In fact, it was argued as a bellwether issue for re-election for several cycles.

>> Just who should I vote for to control federal spending on health care?

At this point, data would suggest "Tea Party" candidates.

Certainly not Democrats.

 
At 1/09/2012 10:12 PM, Blogger OBloodyHell said...

>>> This is the same douche always tut tutting the rest of us for not living up to Milton Friedman's holy scripture.

Benny isn't a douche for arguing in favor of Friedman's viewpoint -- to date, Friedman is the only economist whose theories have been put to the test and found workable (This is as opposed to Keynes, whose ideas were put to the test, and found worthless, or von Mies, whose ideas haven't generally been put to the test and therefore MIGHT work).

No, Benny is a douche because the only things he seems to have a problem with are defense spending, which is at least a legitimate purpose of government, while he has nothing negative to say about entitlement spending, which is rather blatantly out of control and a major portion of the structural problems facing the USA in terms of its debts.

Note that ObamaCare doesn't exactly "not aggravate" those same problems, much less ameliorate them.

Of course, Benny the Parrot-Troll isn't interested in attacking THAT problem.

 
At 1/09/2012 10:16 PM, Blogger OBloodyHell said...

>>> but they gotta buy the burger and video.. right?

and both of them will have taxes on them also... right?

the guy working at the supermarket in the meat department might also get minimum wage...


1) Last I checked, netflix doesn't hire locally... unless you happen to live near one of their distro centers.

2) The cost of the burger at the supermarket is likely far less than that paid for the pre-prepared burger at either Burger Shack or Hardees... so the purchase puts both less into local coffers as well as into the local economy (at this point one may argue in favor of Broken Windows and the like, it's clearly got some applicability).

The chief point is, the place where people economize on isn't going to be the distant stuff, it's the local stuff. So the local stuff is what suffers and puts the economy into a death spiral.

 

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