Shutdown and Obamacare

by Federico Fernandez and Raoul Kirschbichler The Patient Protection and […]

Serious doctors talking togetherby Federico Fernandez and Raoul Kirschbichler

The Patient Protection and Affordable Care Act requires all Americans to have health insurance. This translates into forcing employers to pay full price for health care and overreaches the size of the Federal Government. What is more, this follows a first wave of tax hikes, additional unemployment benefits, food-stamp expansions, waived work requirements for welfare benefits which were supposed to be temporary.

These two waves of redistribution –Obamacare and the expansion of welfare– put a heavy burden on the labor market. Before the 2008 crisis and the subsequent measures to tackle it, a worker received 60% of the total compensation for their work. The other 40% went to the public treasury. But by 2015 this will be reduced to only 50% for full-time workers with median incomes. This means an appalling 17% reduction in reward for working.

The expansion of both welfare and healthcare under Mr Obama is resulting in a marginal tax rate hike which places a heavy weight on the shoulders of those who work and produce. Advocates of redistribution fail to acknowledge the logical –and unfortunate- consequence of their policies: it is going to be a contraction in the labor market and a very likely double-dip recession.

Therefore, what Republican members of congress are doing is trying to defund Obamacare in order to avoid its dangerous economic consequences. They have won both the 2010 and the 2012 elections campaigning against the health care reform. By opposing to this bill, they are being true to their constituencies and their mandate. The US has a republican system of division of power. In such a system, tensions between its different branches may occur. It is the system natural way of limiting absolute power.

This is why Republican Representative Jeb Hensarling enjoys an approval rating of over 70% in his election district. Also Senator Ted Cruz is a rising star in the Republican Party. Like Mr Hensarling, he is fully committed to the defense of individual freedom and limited government.

The only way of ending this crisis is negotiating. President Obama should realize that he does not have unlimited powers and that it is his obligation to negotiate with Congress. When he comes to the table, the crisis will pass.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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