Kennedy Bill (health insurance, transaction, analysis, profit)

[Sandpointian]

Kiss even more jobs good-bye.

Kennedy bill would make employers provide care - Yahoo! News (http://news.yahoo.com/s/ap/20090606/ap_on_go_co/us_health_overhaul - broken link)

This is what happens when wealthy career politicians with no experience in directly creating jobs or building businesses from scratch think they are helping the little guy. Forcing employers to pay for health care...Hmmm....let's see...Outsource the bill payment system...the telemarketing...the coding...the manufacturing...the web admin...

My goodness, what a boob. Unless this type of program is coupled with some plan to keep jobs in-country (which would mean aggressive efforts to reduce free flow of goods and capital--unlikely), this type of policy is tantamount to shoveling jobs overseas.

Look at Detroit...or rather what was once there...Anybody with a junior high school background in arithmetic and economics would have been able to predict based on wage differentials that either Detroit had to get lean and mean or that it would go under. Based on Kennedy acolytes, including Mssr. Moore, the latter was ultimately its fate.

And think those jobs are coming back? Please. they will be gone forever. Only when the manufacturing of radios, TV's and plastic toys return to American soil, should anyone in their right economic mind think otherwise.

Please America, reach back in your memories of economic growth and use common sense. The minute this bill passes, businesses will implement cost cutting procedures that will transfer jobs overseas.

A much better move would be to make healthcare in the US more flexible, more accessible, and free from the unbelievable expenses of high end procedures. And if there is political will for that, then by golly push forward universal health care and let the Singaporeans run it. Singapore's system is the optimal blend of competition and socialized medicine. Not the first best solution, mind you, but a practical system for 98% of the population and 95% of common ailments.

Once again, the American ingenuity of many being stifled by American idiocracy of the few.

S.

[Traderx]

This is a tough one. As someone who is self-employed I am so sick of insurance companies that part of me wishes they would all fail. The whole system is so screwed up it's not even funny.

And I have to wonder what it says about us as a country when 50 million people don't have insurance. If one of those people gets in an accident and is taken to the emergency room they're going to be treated. I mean we're not just letting people die. And who's paying for that?

If you ask me the system is broken and needs a better solution than the one we've got right now. Since most every large employer already offers insurance I'm not so sure your concern about losing jobs is all that valid since they would be the one's most likely to outsource overseas. But it seems the how it's going to be paid for quesyion is yet to be determined so we'll have to see how that shakes out.

The insurance companies should have solved this on their own though instead of essentially forcing Washington to come up with a solution, so I have no sympathy for them.

[Sandpointian]

I understand the feeling, but imagine if you had to hire 5-10 employees. Chances are you have to hire them part-time, via temp agencies or you simply outsource. Taking on 5-10 full time employees under these fiscal burdens is simply too much to bear.

Large companies, not black and white, but a sliding scale. This adds yet another reason to sent operations off shore. These things are not monolithic decisions but piece meal. Outsourcing is accelerating. This is simply fuel.

That companies have insurance does not really matter. The costs of this bill simply means already high insurance premiums will increase further.

As we move further left we are going to have a rude awakening: that Europe, Japan, Singapore, and in the Coastal China, etc. run much more efficient socialized economies than we can ever do. Let's get the US back to its bread and butter, minimal government, and free enterprise, and see if we cannot regenerate job creation on domestic soil rather than jobless profits.

S.

[user_id]

Originally Posted by Sandpointian

Please America, reach back in your memories of economic growth and use common sense. The minute this bill passes, businesses will implement cost cutting procedures that will transfer jobs overseas.

This sort of thinking is inaccurate and usually based on a misunderstanding of the global economy.

Business cannot transfer jobs overseas continuously, after all what will they pay the foreign workers with? The foreign workers need to be paid with their own currency C, but an American business can only get C if someone in that country wants to C for dollars.

Now, a country can temporarily manipulate their currency and allow its citizens to convert dollars for C, but this will lead to many problems if attempted long term (as can be seen today).

Businesses can only outsource work if other parts of the economy create something of value to the rest of the world.

[Sandpointian]

You had best take a basic course in economics--because your analysis makes little sense.

Here is lesson free of charge.

Unit labour costs for a given manufacturing job (salary plus benefits) runs at 500%+ of what that same cost is in China, Vietnam, or India. Product is made and sold in the US. All else equal this lowers the cost structure of the firm and increases profits. The currency discussion need not enter the picture.

US firms have been outsourcing for 200 years. From expensive urban centers, to cheaper towns nearby major urban centers. Now we see major distribution centers in the middle of nowhere (IKEA model) or in smaller cities with major logistical infrastructure (UPS). Other "outsourcing" can be seen in the movement of operations from expensive places like the Bay Area to cheaper locales, like Sacramento. Going overseas is a simple extension of this model.

What happens over time? Irrespective of the currency, increased productivity will drive up unit labour costs and that gap will close. Now, increases in productivity overtime should also drive up the currency, which should further close the gap. Key word is "should." China and other Asian currencies have been actively buying US assets which keeps their currencies from appreciating, thus prolonging this effort.

However, all discussions on the currency are immaterial to the point being made. Higher operational costs incentivizes cost saving tactics, one of which is to outsource.

An example might help you understand. I have billing operations inhouse. To get them done locally, it costs me $40/hour (all economic costs inclusive of tax considerations). If I contract this person locally for 40 hours a week, this is $1600/week or US$83,200/year. Those same tasks might be done in Indian for $20,000 a year, a savings of $63K/year.

To pay said person, I can either make deposits in their USD account (in which case, adds to USD reserves of the country once the person exchanges for rupee or simply sits in a USD account as USD) or I can buy rupee and wire ruppee. Such a transaction has infinitesimal impact on the currency exchange but adds considerable heft to my profit margins.

Unless labour costs per unit of productive hour increase to that of the US (right now it is not even close--they are cheap per unit of quality) or the rupee appreciates considerably, this money machine for outsourcing will continue. It is for this reason that US labour has been pressuring Congress to get tough on China

In the long-run, there is no free lunch and prices should adjust. However, Asian central banks are pushing this horizon out via t-bill purchases and SWF money. However, these are not costless efforts, higher domestic inflation and discentivizing organic risk capital suggests this pipeline to development has its limits, i.e. the Golden Goose has a finite lifetime.

You see, there are benefits to combining left and right brain!

[user_id]

Originally Posted by Sandpointian

Blah blah blah....

You see, there are benefits to combining left and right brain!

Oh yeah? Please demonstrate them next time. You did not address the issue I brought up, which is a simple one:

Business are not free to out-source all they wish, for every foreign worker they pay and/or every foreign product they import there most (in the limit) be someone in that country buying (or a chain of such purchases via multiple countries) US produced goods. Anything else would result in one country giving the other free labor and/or goods. This is the nature of a system of global fiat currencies, the same would not be true if the global money system was based on commodity money.

If you have two countries with currencies C1 and C2 and one is not interested in the owning the currency of the other than no out-sourcing cannot occur regardless of relative labor costs etc. Business can run with their pants down to other countries, but sooner or later they will no longer have any way to pay foreign factories and workers. You are trying to explain things from a single companies perspective and yes the action of a single company is unlikely to move the currency markets. But you see, you stated that businesses would act in mass and that most certainly can move the currency markets. The argument you gave is just a composition fallacy. The question is not about a single business, but what happens when "businesses transfer jobs overseas".

As I said a country can try to manipulate matters by converting dollars to its currency (and hence building dollar reserves), but such will only work in the short term and the costs of doing so will be realized long term.

By the way there is only one Asian central bank that is building dollar reserves at this point, namely China's.

Your response was just odd, as you appear to acknowledge my point at the end. Perhaps just like to see yourself arrogantly type about things.

[texdav]

Kennedy is famous for this type of bill;remember when he intorduced a aternative to the medicare prescription drug bill trying to derail the main administration bill. What he is trying to do is put more pressure on companies to support the administrtions bill or what they come up with ;with his bill as a sort of threat.Remember that the administrtion is now talking with congress to actaully tax any company payments to individual insurnce as income to the indivdual as a way of paying the government cost to cover those that can't pay and will shift the burden to the individuals.They are doing this because they realise that private insurance now provides huge subsidses to medicare;medicaid and those that don't pay now by paying much higher cost to hospitals and other providers.When everybody is covered it all changes.They know that thier so called savings they promise don't add up to much without drastically reduced services.Basically they have no idea how to make the heavy burden that indivdaul insurance payments to providers without taking on huge cost in their program. Hospitals could quickly go under if say evrybody was cover by medicare and medicaid payment structure.Mnay doctors would never have a practice established because of cost and doctors would choose other fields in teh future because of the time and cost to get their degree;besides the loss of the best candidates.

[UpperPeninsulaRon]

Originally Posted by Sandpointian

Kiss even more jobs good-bye.

Kennedy bill would make employers provide care - Yahoo! News (http://news.yahoo.com/s/ap/20090606/ap_on_go_co/us_health_overhaul - broken link)

Forcing employers to pay for health care...Hmmm....let's see...Outsource the bill payment system...the telemarketing...the coding...the manufacturing...the web admin...

This will be the one - two punch that cripples the economy. First of all, as Senator Kennedy proposes, employers would be forced to provide health care. The left punch occurs when all health care benefits become taxable income. Say hello to more automated check out lines as the workforce will dwindle under this scenario. And the "plight of the middle class" rhetoric that one hears from the administration is not ture at all. The administration's actions actually help to further reduce the middle class as the lower class individauls will be the reciptients of ongoing programs to pay for things like free health care, the very wealthy already pay a huge load, so the middle class will get hit in more and more taxes (regardless of the untruth about 95% benefiting).

If your employer currently makes health care available to you and you are middle class, the premium for the health care is probably around $20K for a full plan. Guess what, if taxed, you just got about a $4-5K tax increase and no raise!

[Traderx]

Aren't you guys getting the cart ahead of the horse here? As I understand it there isn't even a bill yet just a couple of drafts of which Kennedy's is one.

Also, as far as outsourcing, who does the bulk of that? I presume it's larger companies who already provide health insurance so does making it mandatory effect them at all? It seems to me the biggest impact would be on small companies. Would it be all that surprising even if this idea comes to pass that small companies would receive some sort of exclusion similar to FMLA?

As a former business owner I see things a little different than some of you. I didn't offer insurance for about 4-5 years even though I could have afforded it probably in year 2. The reason I ended up finally offering a plan was simply because I needed one to attract and retain better quality employees because others in my industry started offering health insurance.

Another thing. As a business owner I never really minded rules that effected everyone. If my cost of business went up but my competitors didn't that irked the hell out of me and I felt at a disadvantage. But, if all our cost went up equally then I knew I had the same relative competitive advantage as before so it was sort of a wash. But so far I haven't seen anything about how this is going to cost businesses that already offer plans more money. Not saying it won't but until we see some numbers is impossible to judge what the impact might be.

[floridasandy]

perhaps it is kennedy's cart which is ahead of the horse since his draft did not include details of how his proposals would be paid for. i would think if you have a proposal you should find a way to fund it first.