Tuesday, November 13, 2012

Elections Have Consequences, #2 - Obamacare's Job Destruction Continues Down To Small Businesses

This is a second in an occasion series that will examine the consequences of the past week’s election results. The aim of this series is to ensure that voters better understand that their votes should be only the beginning of what happens to this country in the near future and that they are responsible for what happens. They set events in motion with their votes and votes/elections have consequences.

This is a follow up to the first in the series that we posted yesterday. These two series will review the immediate impacts of last week’s elections which will likely cause Obamacare to go forward without changes. And we are now seeing the job destruction that last week;s election is causing. Companies are unable to cope with the myriad new taxes and regulations that Obamacare is starting to impose on their operations, causing companies to slash their workforces and reduce hours for the remaining workers. Elections do have consequences, real human consequences

1) A lot of the companies slashing jobs that we reviewed yesterday were rather large. They include major medical device manufacturers, national restaurant chains, and a large supermarket chain. However, smaller companies are also getting hammered by Obamacare.

A small business owner in Nevada called into a CBS radio station last week and discussed what is happening at the business he owns in Las Vegas. He claimed he employed 114 people but had to lay off 22 of his staff. He asserts that his justification and cause behind the layoffs was because of the higher health insurance costs imposed by Obamacare. With those costs, he can no longer employ as many people and still keep his business viable:

“I’ve done my share of educating my employees. I never tell them which way to vote. I believe in the free system we have, I believe in the right to choose who they want to be president, but I did explain as a business owner that I have always put my employees first. I always made sure that when I went without a paycheck that [I] made sure they were paid. And I explained that I always put them first and unfortunately I’m at a point where I’m being forced to have to worry about me and my family now and a business that I built from just me to 114 employees.

“I explained to them a month ago that if Obama gets in office that the regulations for Obamacare are gonna hurt our business, and I’m gonna have to make provisions to make sure I have enough money to cover the payroll taxes, the additional health care I’m gonna have to do, and I explained that to them and I said you do what you feel like in your heart you need to do, but I’m just letting you know as a warning this is things I have to think of as a business owner.

“I had to lay off 22 people today to make sure that my business is gonna thrive and I’m gonna be around for years to come. I have to build up that nest egg now for the taxes and regulations that are coming my way. Elections do have consequences, but so do choices. A choice you make every day has consequences and you know what, I’ve always put my employees first, but unfortunately today I have to put me and my family first, and you watch what’s gonna happen. I’m just one guy with 114 employees — well was 114 employees — watch what happens in the next six months. The Dow alone lost 314 points today. There’s a tsunami coming and if you didn’t think this election had consequences, just wait.”

I cannot prove that this person exists, that he actually owns a business, and he actually had to layoff 22 people. However, he seems sincere and what he is saying is not incompatible with what we reviewed yesterday and what we we review today. He genuinely seems depressed and sad about what Obamacare is doing to his business, to his loyal employees, and to his family. As he says, “elections have consequences.”

2) If you go to the CBS radio site that broadcast the interview and read the comment section of its website:

 (http://lasvegas.cbslocal.com/2012/11/07/vegas-employer-obama-won-so-i-fired-22-employees/),

 you will see that this business owner is not the only local Las Vegas business that is getting hammered by Obamacare:

“We were prepared to open a franchise with 3 sites, but it all hinged on who won the election. The margins on operating a business is not what the general public thinks it is - they think you operate a business and you're rich. Not true at all. When you add something as expensive as Obamacare to the equation, there is simply no way the numbers work anymore. Instead, we took the money we were going to use to open the franchise and create jobs and will put it into emerging markets in South America and Asia.”

“You don't have to wait things out. We run a small business and are in the same boat. We have met with our accountant and fully understand what Ocare is going to do. Those who do not run a business simply have not a clue what it is like.”

“Struggling small business can't afford it. They don't have the money. It isn't there. It isn't going to be there anytime soon. They can't raise their prices and stay in business. A small business person I know has told his staff he will most likely have to put some of them on a part time position so that he doesn't have to lay off any of them.”

“My competitors and other vendors in my field are all saying the exact same thing. "We cannot survive another 4 years." I was at a Chamber of Commerce meeting yesterday with about 75 other business owners and probably 60% were all voicing the exact same concerns. The rest were being quiet and listening intently. Several of the attendees admitted that they were closing their doors at the end of the year when their taxes and insurance costs will force them out of business.”

“Its about saving the company. What don’t you get? Its too expensive to have employees. I am considering going back to how it was when I started. me and one employee. Why should I have 25 when all I do is try to make payroll and the subsequent taxes that go with it?”

“After having been in business many years, I can with no doubt state that this will hurt our business. We will not cut back but we also will not expand and take any risks because if success is now penalized, People forget that business in there to make money, not be a social program for people. You pay a fair wage for a fair days work (you owe them nothing more or nothing less), but it is not your job to have your employees make the same thing that the person who took on the risks did.”

You get the idea. These are only Las Vegas business owners. I would bet the ranch that these types of analyses, reasoning, and resultant plans to cut jobs, slash hours, and curtail expansion are going on all over the.

3) In a National Review Online article from November 8, 2012, the writer cites a number of nonpartisan sources (e.g. Congressional Budget Office, Associated Press, etc.) in summarizing what Obamacare is likely to do to the job situation in this country along with the related statistics:
  • Obamacare will likely it will have the unintended effect of making part-time employees more desirable than full-timers.
  • France is a bellweather of what is likely to happen in this country since France also has the same 50 employee threshold as Obamacare relative to health care benefits and as a result France, “has more than 2.4 times as many firms with 49 employees as with 50,” according to the article citing of Jed Graham in Investor’s Business Daily. By creating this ceiling of arbitrary 50 employees, economic growth is stunted.
  • The article reviews the estimates of Congressional Budget Office director Doug Elmendorf who predicts that Obamacare will result in 800,000 fewer jobs and many more Americans getting converted to part time employees.
  • The article reviews a number of sources that have analyzed the prospects and profiles of Americans under the age of 25 years old and how devastating this legislation will have on their prospects of ever getting a full time job.
  • The article concludes that Obamacare will have the most dire impacts on low income workers and services employees, the exact types of Americans this law was supposed to help. Talk about missing the mark: “It’s becoming increasingly clear that Obamacare will result in fewer full-time jobs for low-wage Americans. Wasn’t that precisely the demographic that Obamacare was supposed to help?”

4) But why are the impacts likely to be so dire? Let’s do some simple math exercises to see how devastating this law is relative to medical device manufacturers:
  • Obamacare places a 2.3% tax on medical device manufacturers sales/revenues.
  • Let’s assume that a manufacturer has annual sales of $100 million.
  • Let’s assume their profit margin is 10$ which translates into $10 million in annual profits, money that can be used to upgrade the business, expand the business, hire more workers, etc.
  • Under Obamacare, the medical device tax on annual sales is 2.3% of $100 million or $23 million.
  • Thus, while the tax is ONLY 2.3% of sales, it is a full 23% of the profits. Obamacare will reduce this company’s ability to pay more in salaries, grow his business, hire more workers, etc. by a full 23%.
If the profit margins is only 5%, not unheard of in a product manufacturing business, the reduciton in profits would be over 50%.

No business can expect to have its profits reduced by such high levels without taking remedial steps to protect the future of the business. And, unfortunately, those actions to make up for lost profits to secure the viability of the business is resulting in fewer job opportunities and hours in order to protect the future jobs and hours of other employees.

5) And finally, in a November 7, 2012 CNBC report, Boeing announced a major restructuring of its defense division on Wednesday that will cut 30% of management jobs from 2010 levels, close facilities in California and consolidate several business units to cut costs. On November 8, 2012, Reuters reported that Energizer will cut about 10% of its workforce or 1,500 jobs.

There is no indication in these two reports that Obamacare was the driving force behind these cuts. However, they are real job reductions that will likely were not prevented by the election results on November 6. The fact that the announcements were suspiciously made within 48 hours of the election could indicate that the leaders of these companies were waiting for the results of the election prior to deciding what acts to take for their respective companies, and these are their conclusions.

Yes, elections have consequences. If you voted for winners in last week’s elections, your work, if you are a good citizen, is not done. It is your responsibility to ensure that those you elected actually do their jobs to the best of their abilities for the good of your fellow Americans.

You need to contact those who won and tell them to work on solutions, not their next reelection campaigns. Tell them to work on developing real problem solutions, based on the root causes of those problems, not political solutions. Tell them to actually care about America and not their own careers, personal enrichment, and egos.

The consequences of your vote is direct line to a multitude of Americans becoming unemployed and underemployed. What are you going to do about it between now and the next election? If nothing, please do not vote the next time since you are not capable of living up to the consequences of your vote.

******
Please note: Just in case you were wondering about my assertions over the past two posts, up until the midterm elections in 2010, I had never voted for a Republican for national office in my life and I have never voted for a Republican for President, including Mitt Romney. Thus, be assured, that I am not a disgruntled Republcian voter as a result of the November 6 election results. I am a disgruntled American you recognizes, after extensive research, that Obamacare is a national disaster.

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