Obamacare upheld: economic relief for millions or the catalyst for the next recession?

By Steve Savant

Ash Brokerage Corporation


The political environment just went nuclear, as the fallout spreads from ground zero in Washington out across the country. Both the Democrats and Republicans are glowing — the Dems with an afterglow of victory and the GOP radiating in defeat.

In a stunning 5-4 decision, the Supreme Court had upheld Obamacare, tipped by conservative and strict constructionist Chief Justice John Roberts, who appears to have based his reasoning on the congressional power to tax.

President Obama’s signature legislation stands and now becomes the lighting rod issue of the presidential campaign. After the ruling, President Obama stated, “"Whatever the politics, today's decision was a victory for people all over this country whose lives will be more secure because of this law...”

In response, Republican presidential candidate Mitt Romney said, “What the court did not do in their last day in session, I will do on my first day, if elected president of the United States. That is, I will act to repeal Obamacare.”

The Republican controlled Congress will move swiftly to use punitive procedural tactics to stall the implementation or outright defund the PPACA. More on the politics in a moment.

The economics

Wall Street headed for the sidelines as the market sold off on the news from the high court decision. The private sector has been sitting on billions in cash reserves waiting out a potential double dip recession and the Supreme Court decision on Obamacare. With today’s ruling, the Court has inadvertently forced an executive decision by business owners to freeze hiring. All along, commerce has perceived Obamacare as a deal killer for business expansion. Look for unemployment to rise in response and an inevitable second recession, compounded by the global economic crisis of Europe’s crushing debt and the slow down in the Chinese markets.

The law requires companies with 50 or more full-time employees to provide insurance or pay hefty fines. Small business health option exchanges will be available in 2014. Businesses with a work force under 100 employees could opt to shop for health insurance through these employer-only exchanges in their states. There are tax credits for some small businesses that are providing workers with health insurance as well — those under 25 workers with average salaries of $50,000. Filing for the credits is a bureaucratic nightmare and yields little in tax offsets. Remember, if an employee pursues government health care, the employer could be heavily fined.

Keep in mind that the vast majority of small businesses in the U.S. fall below the 50 employee threshold. Most of these companies could expand up to the employee limit, just not exceed it. Larger corporations will pull back on hiring and capital expansion, causing a ripple effect down to small businesses. Look for business to either re-characterize a single business entity into several different companies or limit their full-time employees to 49 by outsourcing labor intensive work or the hiring of part-time employees to circumvent the law.
And looming in the backdrop of all this is our own national debt, set to cross over the $16 trillion mark (or $77 trillion, if you include all government program obligations). Obamacare will add, conservatively, another trillion dollars over the next decade, even with the new law’s supposed cuts in federal health care spending and revenue from penalties for not participating in Obamacare.

The shortfall, which won’t be small, is going to be borne by health insurance companies, care facilities, hospitals, employers and tax payers. Half the country doesn’t pay federal taxes. Obamacare is a federal program, so the half of the country that does pay federal taxes are going to pay more.

And for those making more than $200,000 a year, there’s the Medicare surtax on earned income and an additional tax on investment income. Look for tax planning business to go through the roof as six-figure households seek tax relief.

On the domestic front, consumers are to receive more than a billion dollars in health care rebates, which for most Americans will amount to an average of a couple of hundred dollars. But before families start cashing in their rebates, keep in mind that those who don’t participate in Obamacare will pay the higher of either 1 percent of their taxable income or $285 in penalties coming up in 2014. But by 2016, that penalty will be either 2.5 percent of their income or $2,085.

Look for families to invoke religious practice prohibitions as the Amish did when they successfully opted out of Social Security. This is all about economics, as politics has been since time memorial. The president himself told us today to look back at this ruling five years from now. Americans will look back at this ruling as the catalyst of deceit default or social economic parity.

The politics to come

The political environment just went nuclear, as the fallout spreads from ground zero in Washington out across the country. Both the Democrats and Republicans are glowing — the Dems with an afterglow of victory and the GOP radiating in defeat. The progressive part of the Democratic Party sees this ruling as the first real blossom of flowering socialism. And the conservatives in the Republican Party view it as a mushroom cloud on the eve of destruction.

The “ICEOTOPE” level on the Hill just shifted into nuclear winter. The country is now in civil war and there will be nothing civil about it. If you think political correctness was making a comeback, the gloves just came off and diplomacy is dead. Both parties’ militant special ops propagandists just went to DEFCON One. There will be no rules of engagement in this war, no Geneva Convention code of conduct. This is take-no-prisoners guerrilla warfare. The presidential election will be a war zone.

The discourse will descend into Dante’s Inferno, where the talking heads on cable TV will position themselves as the last outpost of illumination before descending into hell. The country’s citizens are building their bomb shelters deep in the earth to escape the constant bombardment of 24/7 news cycle that’s ramping up on the airwaves. Meanwhile, the trench warfare of the wordsmiths on the Internet will default into profanity protected by the First Amendment, as they hammer out their iron clad positions over an anvil of the American public.

There is no longer a DMZ. There is no longer a neutral zone. There will be no peace in our time.