A Giant Sucking Sound No One Mentions

A few posts back I provided you with your humble servant's situation relative to the impact of Obamacare on our family finances.  In case you had forgotten, we are privately insured, since neither of us is an employee of a company, let alone one offering health insurance.  Our insurance coverage will become illegal at the end of December, according to our insurer, and replacement coverage, worthy of the oppressive minimums forced on us by the Obamacare law, will cost us $13,086.64 next year. That is $6,486.64 more in 2015 than what we will have paid for health insurance in 2014.  Yep, our health insurance cost will pretty much double.

I've already stated my piece about the above, from the lying by the President about its impact on insurance customers, to the absurdity that raising minimum coverages should even have been part of the law that was supposed to be about covering uninsured Americans.  This one is about the economic impact.

How many Americans are like us, independently covered with adequate but soon-to-be-illegal policies?  Three million?  Ten million?  I do not know the answer, but in any case, it is worth the effort to look at the economic impact.

We are supposedly in a "recovery", which conveys the message to the USA that an economy is in a recovery even when it is going from "putrid" to "slightly less putrid". Generally when economists are on the talk shows, they modify the term "recovery" with words like "fragile".  The reason for that fragility is that this "recovery" differs from previous ones in a few ways, probably interrelated.  The recovery is painfully slow, for one, and also corporate America is sitting on cash in unprecedented volumes.

Now, before you say "Well, spend it!  Hire people!", think about this -- with interest rates close to zero, keeping cash is not a very productive use of it.  Corporate America is not hoarding money because they want to; they would much prefer to be hiring, because that would mean they need to hire, which means that demand for their products and services has risen and they can sell more -- that is what drives hiring, not an abundance of cash.  No; they're not hiring because demand is low, because people have become risk-averse about spending because the economy is in the tank and they're not confident in their jobs.  Since fewer people are working now than at the 2008 elections, they're justified.

So -- the crux is Americans' reluctance to spend for fear of their jobs, and when they don't spend then manufacturers don't build, and if they don't build they don't hire.  So we have to ask a question I've not yet heard asked: What happens when billions of dollars are yanked out of American household economies to pay for doubled health insurance that is mandated by law?

Seriously, we need to consider this.  Our household will have over $6,400 taken out of our home by Obamacare that we weren't paying in 2014 or had budgeted for in 2015, and there is no corresponding increase in income possible to offset it.  It is going not for goods or services, per se, but for health insurance, paid in total to an insurance company.  If there are even five million people in the USA in the same boat, that is thirty-two billion dollars sucked out of American consumers' pockets per year.  It is over thirty billion dollars no longer available for food, clothing, corn dogs, cutlery, cricket bats and cauliflower.

Worse yet, that frightening amount is only for those independently insured; it is a safe bet that the increased costs of insurance for business -- especially for small business -- will be passed on to employees in the form of smaller raises than expected.  Factor in even a 1% smaller raise across America and that $32B gets much larger.  And all those increases in health insurance cost are going from the American family's pocket to insurance companies (if you follow the money, you become much less surprised that the American insurance companies are just fine with Obamacare and always have been; the law essentially forces people who happily drive Chevys to buy Cadillacs, so naturally the Cadillac dealers would be happy). 

Starting January 1st, something quite frightening will strike America.  To quote H. Ross Perot (since I did meet him once), that giant sucking sound you hear on New Years Day will be tens of billions of dollars disappearing from the American home economy.

Why is no one mentioning this?

Copyright 2014 by Robert Sutton