Ethics & Public Policy Center

Obama’s Downsizing

Published in National Review Online



President Obama’s speech at the Brookings Institution last Tuesday indicated that he has grasped what everyone else already knew: Americans are more concerned about jobs and unemployment than anything else. What remains puzzling is why an administration that claims to be putting jobs first is still making job-killing bills the top items on its agenda.

This disconnect is starkly shown in the health-care bills before Congress. One can say many things about them, but any fair reading leads to the conclusion that the intended effect is to reduce employment in the health-care sector.

Take the “public option,” which remains in the House bill. Supporters say one reason we need a government-sponsored health-insurance plan is that the current competition among private insurers leads to excess administrative costs. Medicare, they note, has administrative costs of between 3 and 6 percent, while private insurers routinely spend 15 to 20 percent of their revenues on administrative services such as plan administration, marketing, and fraud investigation.

“Administrative costs” sounds quite bloodless and plain vanilla. Who could be against reducing wasteful administrative costs?

But behind every cost is a person. Every “excess” dollar spent on plan administration goes to someone who is judging claims and dealing with the paperwork. That person is likely to be female and without a college degree, the type of person that dominates the support staff in the medical profession.

A successful public option, then, means that many people currently holding administrative jobs at insurance companies and health-care providers will no longer be needed. In a time of 10 percent unemployment–with a further 7 percent of working-age Americans employed part-time because full-time work is unavailable or because they are so discouraged they are not even looking for work–this is an odd priority for the administration to pursue.

But the health-care bills are replete with provisions than can have no other purpose than to reduce medical employment on the notion that these jobs are wasteful.

One section of the bills provides that Medicare payments to doctors will be cut by over 20 percent. And if that provision is not retained, even the CBO’s own scoring would show that the bills would add hundreds of billions of dollars to the deficit over ten years.

It is axiomatic that if doctors get paid 20 percent less, they will try to maintain their own salaries by cutting expenses in their front offices. No business–and doctors’ practices are businesses–reacts to a cut in revenue by keeping expenses constant. The easiest place to find rapid cost reductions is among those employees–again, disproportionately female and without college degrees–you see in the front of any medical establishment.

The bills also contain provisions to discourage primary-care physicians from recommending specialists or prescribing tests. If these provisions work as intended, then clearly employment in these sectors will go down. If you’re an assistant in an oncologist’s office or a person who operates a CAT scanner or MRI machine, you should be worried if the health-care bills pass.

These sections are merely a few examples of how the proposed laws are designed to “bend the cost curve down.” This phrase has captured the imagination of health-care experts and commentators, and the administration’s proposals are increasingly being criticized for not doing more to reduce medical costs. Cost-curve warriors fervently believe that, at 16 percent of GDP, America’s spending on health care is too high, and that we must bring our spending down to levels seen in Canada and Europe–closer to 10 percent of GDP–if we are to have an efficient health-care system.

This can mean only one thing: radical downsizing throughout the health-care sector that would make a corporate raider proud. If our doctors make less, they will employ fewer people. If we are given fewer tests, not as many people will be needed to run and make the machines. If we use fewer brand-name drugs, fewer scientists will be employed to research new drugs and fewer factories will be operated to make them. All these people will be forced to start new careers from scratch, and all because the government will have decided that their jobs aren’t valuable.

One might write this off to the peculiarities of the health-care debate if one did not see similar assumptions and effects in other administration proposals, such as cap-and-trade.

The sole purpose of the cap-and-trade legislation is to reduce the consumption of carbon fuels. If it is successful, it must have the effect of radically downsizing employment in the carbon-based energy sector (though if Obama has his way, employment in “green” energy sectors would increase).

Do you mine or transport coal, the widely used fuel that creates the most greenhouse gases? Are you an engineer who designs drill bits for offshore oil platforms or a laborer who operates a rig? Start polishing up your résumé–your job is on the chopping block.

This, again, is odd behavior for an administration that proclaims it has come to power in the midst of the worst economic downturn since the Great Depression. When FDR assumed office, he promised “bold, persistent experimentation” in his quest to revive America’s economy. Whatever one says about the effect of his policies, no one can doubt that President Roosevelt’s sole focus until World War II was on how to reanimate America’s private-sector economy.

Obama and his advisers may claim they have the same focus, but it is much harder to square their words with their deeds than it was for FDR and his advisers. How can a health-care bill designed to shrink the size of a sector that comprises one-sixth of the American economy add jobs? How will a cap-and-trade bill that increases the cost of energy for everyone and specifically targets America’s fossil-fuel industries add jobs?

FDR remade American life and politics by reforming it, not by remaking it from the ground up. If Obama wants to follow in his footsteps, he might try emulating his approach. Right now, his audacity is not inspiring much hope.

Henry Olsen is a senior fellow at the Ethics and Public Policy Center.

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