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In a Wall Street Journal op-ed piece last week, U.S. Secretary of Commerce Gary Locke argued that the scary thing isn't what health care reform will look like, but whether health care reform happens at all.
I buy his argument. Somewhat.
While he fails to propose any ways to reduce health-care costs -- I guess that's not really his job -- Locke does make some good points about how the high cost of health care is slowly killing American businesses, and, by extension, American workers.
For instance, how many American customer-service and information-technology jobs at the likes of General Electric (NYSE: GE ) , Citigroup (NYSE: C ) , and Dell (Nasdaq: DELL ) could have been saved from going abroad if health insurance hadn't risen to nearly 10% of payroll in 2006 for U.S. employees? After all, it was only 1.2% of payroll back in 1960, as Locke notes.
Locke argues that the burden is especially heavy for small businesses, which pay 18% more per worker for the same insurance than their larger brethren. I can't argue with his statistics, but I think Locke's argument starts to break down when he asks, "How many aspiring owners of businesses are locked in jobs they don't like for fear that striking out on their own would cause them to lose their health insurance?"
The lack of universal health care might be keeping us from having one more dry cleaner in town, but I don't think it's having a substantial effect on the level of innovation in the U.S. from newly minted companies.
I doubt health care is a major concern of many entrepreneurs. Were Sergey Brin and Larry Page worried about whether they'd have health care when they left Stanford to found Google (Nasdaq: GOOG ) ? I'm sure that launching a revolutionary product occupied much more of their time than worrying about health insurance.
Young people can afford to self-insure; they're relatively healthy, and their low net worth means that losing everything in a disaster isn't all that bad. While we don't have universal health care, there is a safety net for the uninsured in cases of emergencies.
As I see it, health-care reform isn't likely to increase the number of companies creating innovative products -- the companies investors are looking for. You could even argue that health-care reform could stifle innovation if it forces companies to spend money on health care that would otherwise be spent on growing the business in its early years.
A stalemate isn't an option
No matter what your view of the current bills working their way through the House and Senate, whether you think a public plan will kill capitalism or enhance it, I think most people agree that something has to be done.
According to Locke, health-care costs are projected to account for about 18% of the U.S. GDP this year. That could grow to 28% in 2030 and 34% in 2040 without reform. Those levels are just insane.
There's only so much consumer spending to go around, and a stalemate in Washington could be a disaster for many companies. For instance, Starbucks (Nasdaq: SBUX ) and Coach (NYSE: COH ) could be hit with a double whammy, as they both increase their costs for employee health insurance and lose customers who have less of their paycheck available for discretionary spending.
On the other hand, companies such as Wal-Mart (NYSE: WMT ) and Southwest Airlines, which pride themselves on giving consumers more bang for their buck, could benefit if there are fewer bucks available because consumers are spending them on health care.
What do you think the chances of a stalemate might be? In the comments area below, let us know whether you agree with Secretary Locke's assertion that health-care costs are killing America.