Small-business argument that health care reform would cost jobs is untrue

WASHINGTON

One of the most enduring lies in American politics is the myth of small-business job creation.

You probably know it by heart: Small businesses create 60, 70, even 80 percent of all the new jobs in the United States.

By now, that analysis of net job creation has been repeated and embellished and oversimplified by so many lobbyists and politicians that it is only a matter of time before the magic number swells to 100 percent of job creation.

Suffice it to say that, in terms of new job creation, the data show that most of it happens in a small number of very fast-growing companies that are no longer what most of us would consider small.

The dirty little secret is that a lot of small-business job growth has also been driven by the decision of big businesses to outsource many tasks that they used to do in-house. In an economic sense, jobs haven't been so much "destroyed" and "created" as they have been shifted from one company to another.

All of which brings us to health care reform.

From the start, President Barack Obama and congressional leaders have said they want to pursue a reform agenda that builds on the existing employer-based health insurance system. One glaring problem with that employer-based system, however, is that every year more employers — mostly small and midsized businesses — offer no health insurance. The result is that about 35 million American workers and their families have no health insurance.

To fix that problem, most health reform proposals envision a new government-sponsored insurance "exchange" in each region through which all insurers would offer a basic health policy at the same price to all employers, regardless of size, and all workers, regardless of pre-existing health conditions. For the exchanges to succeed in lowering the cost of insurance, all employers must be required to offer coverage and all employees must be required to purchase it.

The small-business lobby, however, remains stubbornly opposed to an "employer mandate." And since small business, as we all know, accounts for virtually all job creation, an employer mandate will stop the U.S. economy dead in its tracks.

This argument, of course, is 100 percent Grade A hooey, beginning with the myth of small-business job creation.

After all, one reason small businesses "created" all those jobs in the first place is that they enabled big companies with generous health plans to outsource work to small companies that had lower cost structures because they offered no insurance at all.

Most likely, those small businesses today aren't competing with big companies, but with other small firms with similar cost structures. Requiring all of them to offer health insurance wouldn't put any firm at a competitive disadvantage — it would simply raise costs for all of them. Requiring them to provide health insurance should result in no job loss at all.

In the coming weeks, we'll find out if political mythology will continue to trump sound economic logic. After all, small businesses would be the big winners from those new health insurance exchanges, and Democrats in both the House and Senate have agreed to sweeten the proposal by exempting the smallest firms from any health insurance mandate. Still, the small-business lobby remains firmly opposed.

Small-business argument that health care reform would cost jobs is untrue 07/09/09 [Last modified: Thursday, July 9, 2009 10:02pm]

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