On February 23, 2013 the Wall Street Journal ran an
editorial under the title: “ObamaCare and the '29ers'” and the subtitle: “How
the new mandates are already reducing full-time employment.” This is a good
article in the sense that it chronicles the extent to which some people will go
to minimize the effect of a new situation they consider to be harmful to their
interests.
If the stories reported in the piece are all true, and if
the activities are widespread as claimed, we can only be saddened by the fact
that young people are subjected to this kind of hassle when it comes to landing
their first job and keeping it. On the other hand, we can also see the
phenomenon as being an oddity of the modern age to which the young will have to
adapt. It is an oddity that will, in many cases, help the young learn how to
overcome the unexpected difficulties that come their way, and this will
contribute to the shaping of their character.
But to stop here is to glance superficially at the
phenomenon while neglecting the fundamental considerations that accompany a
topic of this importance. If like the Journal editorial says: “These employment
cliffs are especially perverse economic incentives,” we should ask ourselves if
the phenomenon has any redeeming quality that would make it worthwhile for
society to keep the law that is ObamaCare.
As we attempt to answer that question we realize that we're
tackling a very large subject matter. This is due to the fact that employment
is the important underlying consideration in the story. Since employment is
related to the growth rate that can be achieved by a modern industrial economy,
we are compelled to take a close look at how ObamaCare may affect the growth
engine of such an economy. And this is a huge undertaking.
What is certain about economic growth is that it is
important to have when there is a need to employ people. Not only that but
growth also helps a great deal when trying to balance the national, regional or
municipal budgets. In addition, growth allows for the implementation of new
programs – be they of the social kind or any kind. In short, growth in the
economy is a useful process that responds well to the needs of just about
everyone in society.
We know that growth has happened to an economy when we see a
Gross Domestic Product (GDP) that is larger this year than it was last year.
And so we ask: If this is the case, is there a mechanical model that would show
how growth comes about? The answer is yes, there is such a model but before
discussing it, we must define what an economy is and how it works. This done,
we can then discuss growth, discuss how the economy may be stimulated to obtain
it, what the cost will be and who might pay for the undertaking.
To begin with, we must recognize that since the beginning of
time, there have been all sorts of economies that were based on a variety of
resources, and based on the management styles that were ordained by the
prevailing conditions. Even today, there exist all sorts of economies that look
different from one another, each operating differently and yielding a different
result. What is of interest to us in this discussion, however, is the modern
industrial economy that is diverse and well balanced by the sectors that make
it.
Such economy would have taken roots at the start of the
original Industrial Revolution some two centuries ago, and would have evolved
continually ever since. What differentiates it from the newly industrialized
economies is that its growth has been organic and self-generating whereas the
emerging economies experience a growth that is artificially produced. The
organic growth rate of the old economy would be modest by comparison but more
or less steady over a long period of time. This contrasts with the newly industrialized
economies whose growth may be high but is often erratic, and at the mercy of
developments beyond the control of the emerging nations.
If we look for an economy that satisfies the description of
an old economy, we must look to the Continent of Europe because that is where
the original Industrial Revolution started. If we look for an economy that is
ideal, we may not find it on this planet. If we look for an economy that is
close to ideal, we find one that is large enough and diverse enough to satisfy
our requirement. This would be the economy of France which is well balanced by
its sectors – most notably agriculture, industries, construction and the
services. It also resembles the American economy in many respects but enjoys
the advantage of having grown organically from the start.
The question before us is this: How did an economy such as
that transform itself from being an agrarian economy two centuries ago to being
the industrial economy it is today? To simplify the discussion, we make an assumption
which, in reality, is not too far from the truth. We assume that for a long
time, the trade that France
was having with the rest of the world was negligible or non-existent. Thus, we
can think of the ideal economy as being a self-contained and closed system.
The economy has two parts; the part that produces the goods
and the services, and the part that consumes those goods and services. But we
must also recognize that the two parts are made of one and the same society
where everyone is a consumer and every able body is a producer unless it is
looking for a job. The totality of what the economy produces in a given year is
called the wealth of the nation – also called the GDP. It is customary in the
modern age to assign a monetary value to that GDP, one that is designated in
the local currency. It is also customary to convert that value into the American
dollar, a currency that is traded internationally, and that is well received
everywhere.
To take an example, let us say that France is
populated by 50 million people and has produced 2. 3 trillion dollars worth of
goods and services in a given year (call it year 1). The nation has also
consumed all those goods and services which mean that on average, the people of
France
have lived at the per capita level of 46,000 dollars a year. If by some magic
the same people produce 2. 4 trillion dollars worth of goods and services the
following year (call it year 2); they would have produced 48,000 dollars on a
per capita basis. This is growth. But even if they do not consume all those
goods and services, we would still say they lived at that high level.
But why would a society not consume all that is produced in
a given year? The short answer is that no society possesses the ability to grow
the economy by magic. What it will do is produce and consume only 2 trillion
dollars worth of the goods and services that the consumers buy everyday. And it
would have produced 0. 4 trillion (400 billion) dollars worth of what is called
capital goods such as production machines, and infrastructure projects such as
research facilities, labs and others. It would also have produced investment
services such as a program to inoculate the children of the nation against say,
the possible return of an old disease – polio or meningitis, for example.
And that would be the investment that will help the economy
grow next year – not the magic that nobody really has. Indeed, the society of
our example will have gone through the trouble of producing capital goods and
investment services to enlarge the base of its economy, and to make it possible
to produce more goods and more services in year 3 than it did in year 2. To
this end, that society will be able to boost its production of goods and
services from 2. 4 trillion dollars to say, 2. 472 trillion dollars. This would
be an increase of 3 percent – what is referred to as the rate of growth.
Thus, we see that to produce growth next year, we must
allocate some of our human and capital resources this year to produce the
capital goods and the investment services that will enlarge the economic base.
We can repeat this performance year after year by deciding to produce consumer
goods and services at less than full capacity. When we do this, we live below
our potential but make sure that we and our descendants will live better next
year and all the years after that.
This is a sacrifice that society will have to make. America must
come to accept the idea that ObamaCare is an investment in the future whose
purpose is to service the entire American population, leaving no one behind.
Everyone should accept making a small sacrifice today so that tomorrow may be a
better day for everyone.
ObamaCare is the law of the land, and will not be repealed
anytime soon. On the contrary, it will be entrenched more solidly year after
year, and will become as much a part of the American landscape as Social
Security.
Learn to love it America , and spend your time and
effort in search of ways to alleviate the pain of the young who will be looking
for a steady and permanent job.