Sequestering ObamaCare’s Employer Mandate

Last week, Senators Orrin Hatch (R-UT) and Lamar Alexander (R-TN) introduced the American Job Protection Act to repeal the ObamaCare employer mandate (a.k.a. the pay or play rules, or the employer “shared responsibility” rules).  Companion legislation was also introduced in the House on the same day.  Full text of the bill is available here.

As FreedomWorks reignites the movement to defund ObamCare in the House as we near the end of the CR on March 27, the American Job Protection Act offers a strong second front against one of ObamaCare’s most damaging provisions.  Sadly, full repeal is not politically feasible right now.  But that doesn’t mean we can’t keep trying to chip away at its more unpopular provisions through bills like this.

It’s Been Done Already
Let’s not forget that we’ve already repealed some of the nastier programs and mandates in prior legislation.  As nicely summarized in this post on Forbes by Grace-Marie Turner, the law’s government takeover of the long-term care industry called the CLASS Act, a major piece in the original legislation, is now history.  Other chunks now out for scrap include the burdensome $600 1099 reporting requirement and the odd employee free choice voucher, which would have allowed certain employees to apply their employer health plan contribution to the cost of coverage on the ObamaCare exchange.

Of course, repealing the employer mandate would be a success orders of magnitude greater than any of those other relatively esoteric ghosts of ObamaCare’s past, and it’s not going to come easy.  It’s going to require a deal.  A deal that Democrats may just be willing to make in light of the precipitous decline in Democratic support for ObamaCare as we near 2014.

The Sequester Provides Leverage
The sequester is by and large a good thing.  At least it finally gets the ball rolling.  But in reality, the cuts in 2013 are so small that they’re more of a rounding error than a serious attempt at cutting the deficit.  As Nick Gillespie at Reason reported, we’re really only going to get $44 billion in cuts this year - and that’s out of $3.55 trillion in federal spending.

Nonetheless, President Obama and his administration have so demonized the cuts and their mostly fanticized effect on jobs, including the now infamous four pinocchio claim by Secretary of Education Arne Duncan that the sequester will cost as many as 40,000 teachers their jobs, that he will need to make a serious effort to prevent his purported parade of horribles.

Repealing the Employer Mandate
So here’s an idea: How about trading the $44 billion in sequester cuts this year for repeal of the ObamaCare employer mandate?  Let’s consider the pros.  According to Senator Hatch’s press release, CBO found that the employer mandate will cost employers $150 billion in taxes over the next 11 years.  And that doesn’t even include the numerous other costs associated with the mandate.  As I laid out in this extensive example tracking the mandate’s potential costs over the course of a full year, the employer mandate will in many cases force employers to spend more subsidizing health insurance premiums for employees, cut employee hours to under 30 hours/week, and restrict growth to stay under 50 full-time employees and equivalents.

But even if we just take the $150 billion in tax savings in isolation, that’s more than three times the $44 billion in cuts for this year.  Plus, the deal would do nothing to touch the sequester for fiscal years 2014 through 2021, when the cuts ramp up to full steam. In other words, it preserves the leverage each year to parlay the sequester to additional ObamaCare repeal efforts or any other conservative initiatives.

The potential uses for the sequester are almost infinite through proper leveraging.  It’s an annually repeating reverse scenario of the fiscal cliff at the end of 2012, where the horrific default position of tax increases was so unpalatable that the Republicans caved on a awful deal.  The Democrats have made the sequester out to be at least as bad as those potential tax increases.  But this time, we’re ok with the default position, even modestly happy with it.

One other silver lining: Because half of the sequester cuts are to defense, half of the returned funds in this deal would be back to defense.  Regardless of your opinion of the size of the defense budget, I think most of us can agree that we would much prefer federal funds be used on defense than domestic discretionary spending.

Now this isn’t a perfect proposal.  If it were, it wouldn’t have any realistic chance of bipartisan support. It requires $44 billion in additional 2013 spending by a federal government that’s already wildly bloated.  By doing so, it will increase the 2013 deficit, add to a federal debt that’s nearing $17 trillion, and thereby further contribute to the future oppressive revenue obligations of the taxpayer.  Yet, when viewed in sum, it’s over $100 billion in savings for the private sector over the next 11 years based on the tax savings alone.  It will also likely save countless jobs in the present, prevent far too many employees from being transitioned to part time, and maybe even spur greater economic growth, all of which would of course benefit both the private and government sectors.

The ObamaCare employer mandate will be a disaster for the economy.  Nobody will be hit harder than small businesses.  As the NFIB CEO recently stated in this commentary on Politico, the compliance costs and nondeductible tax penalties pose a serious threat to wage increases and business investment, and many of these job creators will be forced to cut their workforce, stem growth, pay massive penalties, or go out of business entirely.  With all this in mind, and recognizing the political realities of the day, it may be worth it to trade the 2013 sequester spending cuts for the American Job Protection Act’s repeal of the employer mandate.  It’s a least worth considering.

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