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EconomicPolicyInstitute July 30, 2009

During another week of intense debate over the affordability of health care reform, EPI economists analyzed original and publicly available data and found that the proposed House health reform bill would pay dividends for small business and other groups, and that costs incurred by the federal government would help reduce total health spending over time.

In Health Care Reform: Big Benefits for Small Business, EPI’s director of health policy research Elise Gould and economist Josh Bivens note that only 35% of businesses employing fewer than 10 workers offer health insurance, and those that do usually pass on a higher share of the cost to workers than do larger businesses. A key problem is that small businesses typically pay more for health insurance because of the way policies are sold. The authors conclude that reforms that would create more competition among insurers and reduce their administrative costs would significantly reduce the cost small businesses incur providing health insurance. An independent analysis by the Lewin Group of EPI’s Health Care for America plan — which closely resembles the House reform bill — finds businesses with fewer than 10 employees that provide health insurance would save about $3,500 per worker.

In a related piece, Small Business and Health Reform, Gould challenges the assumption that the proposed surcharge on high incomes contained in the House health reform bill would discourage entrepreneurial activity, and cites research from the Joint Tax Committee finding that nearly 96% of taxpayers who report business income would not be affected by the surcharge.

And, in Seeing the Big Picture in Health Reform and Cost Containment, Bivens shows why a federal government investment in health care reform could produce big savings in total health costs over time. Cost analyses that focus strictly on the cost of health reform to the federal government, he argues, are misguided. “Fundamental health reform is worth doing even if it does not pay off in big federal budget savings,” Bivens writes. “Health care is an area where the more costs are loaded up on the federal government, the more efficiently care tends to be delivered overall.” Politico quoted Bivens explaining why the main focus of health reform needs to be on reducing total health spending over time, since health spending is currently rising faster than gross domestic product.

Just how bad is the economy?
In The Job Isn’t Done: More Jobs and Family Supports Needed, EPI President Lawrence Mishel notes that unemployment is projected to surpass 10% by the end of this year and climb to 10.5% by the end of 2010. While the American Recovery and Reinvestment Act is creating jobs, the economy is deteriorating much faster than anyone had predicted when that legislation was passed last winter. Mishel calls for increased government intervention to strengthen the social safety net, provide more relief to states, and create targeted employment programs for regions most ravaged by the recession. “The cost of failing to act is substantial,” writes Mishel, who notes that one quarter of American children are threatened with poverty and one-sixth of the working population faces unemployment or underemployment. A Christian Science Monitor story about income inequality quotes Mishel saying the United States has “the highest (income) inequality by far in our history and among advanced nations.”

Pain is much worse for African Americans and Hispanics
In Unequal Unemployment, Algernon Austin, director of the Race, Ethnicity and the Economy Program, discusses the heavy toll rising unemployment is taking on minorities, including African-Americans, whose nationwide unemployment rate is expected to rise to 16%. Austin’s Issue Brief also looks at different regions of the country, such as California and Nevada, where unemployment among Hispanics is expected to reach 18% by this time next year. Among African Americans in Michigan, unemployment in the second quarter of 2010 is expected to reach 24.9%, the same as the peak national unemployment rate experienced during the Great Depression. The report received widespread media coverage and the Los Angeles Times highlighted the finding that Latinos in California are losing jobs at a faster rate than other ethnic groups. Congressional Quarterly cited the research extensively in a feature in its weekly magazine, and quoted Austin explaining that during recessions, “the relatively weak position of minorities in the workforce exacerbates their already high unemployment rates.”

China’s growing share of the U.S. trade deficit
An analysis by EPI’s International Economist Robert Scott illustrates how China’s share of the United States’ non-oil trade deficit has risen dramatically, to 83% year-to-date in 2009, from 26% in 2000. That trend has continued over the course of the recession, which has resulted in a sharp decline in the country’s overall trade deficit. Scott notes that China could help reduce this imbalance by revaluing its highly undervalued currency, giving up energy subsidies for exports, and forgoing the dumping of exports in the U.S. markets.

Doug Hall joins EPI as new EARN director
EPI is pleased to announce that Doug Hall has joined as director of the Economic Analysis and Research Network (EARN), after being an active member of EARN for 10 years. Hall most recently served as director of operations and research for Connecticut Voices for Children, where he played a leading role in work related to family economic security and state tax and budget analysis. He is the author or co-author of eight State of Working Connecticut reports and is an expert on child poverty, the earned income tax credit, and state economic development policies.

From the EPI Blog
Lawrence Mishel and Will Kimball
The Top 1 Percent of Wage Earners Falters in 2013—Was it a Temporary Event?
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Myths and Facts About Corporate Taxes, Part 2: Will Congress’s Idea of “Base-Broadening, Rate-Lowering Tax Reform” Fix What’s Wrong With Our Corporate Tax Code?
Ross Eisenbrey
Corporations Are Stealing Your Constitutional Rights: Forced Arbitration Clauses
Lawrence Mishel
Chair Yellen Is Right: Income and Wealth Inequality Hurts Economic Mobility
Ross Eisenbrey
Businesses Agree—It’s Time To Raise the Minimum Wage
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