The myth of small businesses and healthcare

One of the favorite talking points of the Republicans who oppose the Affordable Care Act (ACA) is that it will kill job growth and hurt small businesses.  Quite honestly, I think that their government shutdown which they admit is largely about defunding/delaying/repealing the ACA is doing a fine job of doing both.  Forget what they think “Obamacare” will do.  But in the current issue of the New Yorker, James Surowiecki takes on the myth, at that, according to him, is what it is, that the ACA will do horrible, terrible, no good things to the economy.

The G.O.P.’s case hinges on the employer mandate, which requires companies with fifty or more full-time employees to provide health insurance. It also regulates the kind of insurance that companies can offer: insurance has to cover at least sixty per cent of costs, and premiums can’t be more than 9.5 per cent of employees’ income. Companies that don’t offer insurance will pay a penalty. Republicans argue that this will hurt companies’ profits, forcing them to stop hiring and to cut workers’ hours, in order to stay below the fifty-employee threshold.

How much of this is true?

The story is guaranteed to feed the fears of small-business owners. But the overwhelming majority of American businesses—ninety-six per cent—have fewer than fifty employees. The employer mandate doesn’t touch them. And more than ninety per cent of the companies above that threshold already offer health insurance. Only three per cent are in the zone (between forty and seventy-five employees) where the threshold will be an issue. Even if these firms get more cautious about hiring—and there’s little evidence that they will—the impact on the economy would be small.

Meanwhile, the likely benefits of Obamacare for small businesses are enormous. To begin with, it’ll make it easier for people to start their own companies—which has always been a risky proposition in the U.S., because you couldn’t be sure of finding affordable health insurance. As John Arensmeyer, who heads the advocacy group Small Business Majority, and is himself a former small-business owner, told me, “In the U.S., we pride ourselves on our entrepreneurial spirit, but we’ve had this bizarre disincentive in the system that’s kept people from starting new businesses.” Purely for the sake of health insurance, people stay in jobs they aren’t suited to—a phenomenon that economists call “job lock.” “With the new law, job lock goes away,” Arensmeyer said. “Anyone who wants to start a business can do so independent of the health-care costs.” Studies show that people who are freed from job lock (for instance, when they start qualifying for Medicare) are more likely to undertake something entrepreneurial, and one recent study projects that Obamacare could enable 1.5 million people to become self-employed.

English: This is a diagram depicting the perce...

English: This is a diagram depicting the percentage in US who have no health insurance by age. (Photo credit: Wikipedia)

Remember that large employers get tax incentives to provide health insurance.  The ACA will actually do the same for small businesses.

Obamacare changes all this. It provides tax credits to smaller businesses that want to insure their employees. And it requires “community rating” for small businesses, just as it does for individuals, sharply restricting insurers’ ability to charge a company more because it has employees with higher health costs. And small-business exchanges will in effect allow companies to pool their risks to get better rates. “You’re really taking the benefits that big companies enjoy, and letting small businesses tap into that,” Arensmeyer said. This may lower costs, and it will insure that small businesses can hire the best person for a job rather than worry about health issues.

Surowiecki ends his short piece with this kicker.

The U.S. likes to think of itself as friendly to small businesses. But, as a 2009 study by the economists John Schmitt and Nathan Lane documented, our small-business sector is among the smallest in the developed world, and has one of the lowest rates of self-employment. One reason is that we’ve never had anything like national health insurance. In a saner world, changing this would be a reform that the “party of small business” would celebrate.

So it seems that implementation of the ACA with small business health insurance exchanges will actually help lead to more job growth.

Boston’s men in the news

No, I am not talking about the mayoral candidates all but one of whom is a man.  And I’m not talking about Alex Rodriquez and the Yankee who beat the Sox last night. (Maybe we shouldn’t have taunted him so much?)  I’m speaking of James “Whitey” Bulger, recently convicted felon and Larry Summers who thinks he should run the Federal Reserve.  Here is a great take on the two from cartoonist Dan Wasserman.

wise guys

Maybe I’ll go for a walk at Castle Island this week in memory of Whitey.  While I’m walking, I can send negative thought waves to President Obama about Larry.

The Next Fed Chair? Not Larry Summers.

Why would the President want to appoint someone who once opined that women were not good at science?  The man who was hired to end the economic crisis, but likely contributed to its making.  I’ve been thinking about how to approach this for a few days now and then I saw two pieces by Shirley Leung in the Boston Globe Business Section.  I think she says exactly what I wanted to say.  In the first, she discusses Larry Summers.

No need to hold back here: Larry Summers as the next Fed chairman?

Worst idea ever.

Summers, by all accounts, is a brilliant economist, one of the best of his generation. He is also someone who is confident, and, in times of crises, may be the adult in the room that he supposedly said the Obama administration didn’t have when the economy collapsed.

But he lacks one critical trait I like in my Fed chairmen: He’s not boring.

Summers is far from bland. He is arrogant and a lightning rod and would carry so much baggage he couldn’t fit it on the shuttle to Washington.

Do we need a Fed Chair that is all about Larry Summers?  I think not.

In his book “Confidence Men,” about the Obama White House’s handling of the economic crisis, former Wall Street Journal reporter Ron Suskind paints Summers as brilliant but overconfident and prone to unnecessary battles. “As he has aged, he has grown less troubled by being uninformed,” Suskind wrote.

That’s not what you want in a Fed chairman. The nation’s top central banker must manage the economy primarily by raising or lowering interest rates and must build consensus to do so. He must work with six other Fed governors and 12 regional Fed bank presidents. Imagine what would have happened if the Fed board was split over what to do with the economy in 2008? What would that have done to the markets?

“I know Larry very well. He is a smart guy,” said Allan Meltzer, a Carnegie Mellon professor who has written the definitive history on the Fed. “But the skills that are required for that job are not just brilliance, they are ability to manage compromise. He doesn’t do that well.”

This is to say nothing about how he ran Harvard.  When he left, they picked Drew Faust, a women who was his opposite in many important ways.

So, who should be the next Fed Chair?  How about a woman?  Senator Elizabeth Warren and Shirley Leung are backing Janet Yellen.

English: Official picture of Janet Yellen from...

English: Official picture of Janet Yellen from FRBSF web site. http://www.frbsf.org/federalreserve/people/officers/yellen.html (Photo credit: Wikipedia)

Just as forcefully as folks are coming out against Summers, there is a campaign mounting to promote Janet Yellen, Ben Bernanke’s number two.

Unlike Summers, Yellen has significant monetary policy experience. She has been the vice chair of the Fed board of governors since 2010, and prior to that she ran the San Francisco Federal Reserve bank for six years. She has been involved in the Fed’s quantitative easing strategy, hatched during the Great Recession to keep money flowing and the US economy alive.

And unlike Summers, she is sufficiently boring, a key trait we want in someone running our central bank.

If Yellen got the nod, she would break the glass ceiling at the Fed, becoming the first woman at the top. She already has some high profile endorsements from New York Times columnist Paul Krugman and former FDIC chair and UMass-Amherst professor Sheila Bair.

Bair, in a blog posted on Fortune earlier this week, argues that Yellen is the most qualified candidate, but the financial world’s old-boy network is trying to derail her candidacy:

“So why isn’t she a shoo-in? The ‘whispering’ campaign against her among industry types has been deafening. ‘Doesn’t understand markets.’ Translation: She may not bail us out if we get into trouble again. ‘Not assertive enough.’ Translation: She won’t stand up for us against the populists who want more regulation. ‘Lacks gravitas.’ Translation: She doesn’t show up very often in the financial media.”

I guess we haven’t come far enough for the Wall Street guys to be comfortable with a woman.

Bair also takes a whack at Summers. “Unlike Larry Summers, Tim Geithner, and other Bob Rubin minions frequently mentioned in the financial press as potential Bernanke successors, she was not part of the deregulatory cabal that got us into the 2008 financial crisis. In fact, she had a solid record as a bank regulator at the San Francisco Fed and was one of the few in the Fed system to sound the alarm on the risks of subprime mortgages in 2007.”

Others are also rallying behind Yellen. Senator Elizabeth Warren of Massachusetts on Friday confirmed that she has signed a letter Senate Democrats are circulating and plan to deliver to President Obama calling on him to nominate Yellen because “she is the best person for this job.” As early as Monday, activists, including women’s advocacy groups NOW and Ultraviolet plan to send a letter to Obama and Senate majority leader Harry Reid to support Yellen’s candidacy and oppose Summers’. When he ran Harvard, Summers set off a firestorm when he suggested women lacked the same “intrinsic aptitude” for science as men.

The President recently said he was not going to make a decision until fall, so we have time to make sure he appoints the best qualified person who, in this case is a woman.  Not Larry Summers.

Beating the heat

We just finished a week or so of 90+ temperatures with high humidity in Boston without air conditioning.  We survived quite well.  It wasn’t until day 6 or 7 that I really began to suffer – that the was day there was no afternoon sea breeze.  Exhaust fans on each floor pull air through the house and smaller fans are placed in the rooms we use the most.  We are lucky to have good four-way ventilation.  Cool showers and cooking in the mornings = or not at all – also help.  (We went out once to out favorite pub so find that their air conditioning was not 100%, but it was just fine.)  I am one of those rare people that don’t like living in refrigerated air.  So I was very interested in the Boston Globe article in the Sunday Ideas Section titled “How to Live Without Air Conditioning”  In it, Leon Neyfakh  points out the life style changes that we could make so that we at least reduce our energy consumption.

Since the technology was invented in 1902, and the first window unit was brought to market in 1939, air conditioners have become ubiquitous in the United States. Today, almost 90 percent of American households have one—as do the vast majority of restaurants, stores, museums, and office buildings. During weeks like the one we’ve just had, these places are sanctuaries: To walk into one after being outside is to be reminded how sweet life can be.

But all that magic chilling comes at a cost—something most people are aware of on a personal level, because their electricity bills are so high during the summer, but not so much on a global scale, which is really where the problem lies. In China and India, air conditioning sales have reportedly been growing by 20 percent per year; around the world, air conditioning energy demand is projected to increase vastly over the next decades. According to Stan Cox, author of the 2010 book “Losing Our Cool,” air conditioning in the United States already has a global-warming impact equivalent to every US household driving an extra 10,000 miles per year.

English: Series of air conditioners at UNC-CH.

English: Series of air conditioners at UNC-CH. (Photo credit: Wikipedia)

Think about that.  And we continue to build office buildings taller and more dependent on artificial cooling.  Yes, maybe some are energy efficient and green building, but they still consume vast amounts of energy.

When experts look at A/C use in America, they immediately see a spot of illogic: We use vast amounts of energy just to let businesspeople do something they’d probably rather not do anyway. “We are probably overcooling our office buildings by 4 to 6 [degrees] F just so that office workers, particularly the males, can wear their business suits,” wrote Richard de Dear, who is head of architectural design science at the University of Sydney and a researcher on thermal comfort. “The current clothing behaviour is costing us a fortune in energy and greenhouse emissions!”

In Japan every summer, in an environmental initiative called “Cool Biz” that started in 2005, government officials encourage building managers to let temperatures climb to 82 degrees and advise employees to loosen their sartorial standards. In 2011, the government even put on a fashion show, with models catwalking in untucked polos, capri pants, and Kariyushis, a Japanese take on the Hawaiian shirt.

Here in America, it probably wouldn’t require such a hard sell. Many female workers already dress for summer weather, and would likely be delighted not to have to huddle in sweaters against the A/C. Among men, polos are already considered appropriate on casual Fridays, and it’s not hard to imagine that most would happily embrace a breezier style for the rest of the week. Instead of long pants, they could don formal shorts—a concept that has long been embraced in Bermuda, where executives can be seen attending meetings with exposed knees.

And people can do similar things at home.

Even a mid-sized building could save considerable amounts every year by operating at shorts temperature. But if modifying what we put on our bodies could help us give up extreme climate control, rethinking buildings themselves—and how we ventilate them—would go even further. Already, some of us live in homes that can be effectively cooled by opening windows in the basement and on the top floor every morning, thus taking advantage of the so-called stack effect to pull cool air up through the house and allow hot air to vent into the street. People can also try “evaporative cooling,” a modest, low-tech form of air conditioning, by hanging wet towels in the window or setting them in front of a basic electric fan.

Some of  Neyfakh’s life style suggestions like changing to a work schedule with early morning hours, a mid afternoon siesta, and late work hours are a tougher sell:  Too many people commute long distances.  But people who telecommute could try raising the temperature at home a few degrees so that they at least don’t have fried brains and the inertia that comes with it.  Also try adjusting blinds to follow the sun and plant trees.

There are some parts of life, it must be said, for which air conditioning is not just a luxury but a necessity. The Internet depends on servers that require climate control in order to not go up in flames. Modern skyscrapers depend on it, as well. If we gave up air conditioning, New England would largely be fine, at least for now, but entire swaths of the country would become uninhabitable: Summers in the Sun Belt cities and in parts of the South would be so harsh that millions of people would simply move away. We also would be unwilling to take away A/C from those most sensitive to extreme heat—namely, the sick, the very young, and the elderly.

That doesn’t mean that trying to reduce our society’s addiction to A/C is a fool’s errand. The fact is, our bodies are built to adjust to heat—it’s just that we haven’t had to lately, because we’ve become so accustomed to refrigerating ourselves when the weather gets hot. A study in which researchers surveyed 21,000 people, spread out across 160 buildings on four continents, found that “people in warmer climates were more comfortable in warmer indoor temperatures than their counterparts in cooler climate zones,” according to Richard de Dear, one of the coauthors.

The findings indicate that people actually prefer being in places where the temperature fluctuates, as long as they have some control over it. “If you have the ability to open or close a window, turn a fan on or off, change the blinds, modify your clothing—it just becomes a natural part of your day-to-day living, and you don’t build these expectations that conditions should be the same all day and all year round, which I would call ‘thermal monotony,’” said Gail Brager, an architecture professor at UC Berkeley who also worked on the study. “We not only accept—we actually prefer—a wider range of conditions that float with the natural rhythms of the outdoor climate.”

No doubt this is hard to believe, as you sit there in your air-conditioned home, happily soaking up the artificial breeze emanating from the murmuring machine in your window. But is there not something fearful about refrigerating ourselves with such vigilance? We’re not cartons of milk, after all; we will not spoil, even if we do sweat a little. In fact, by taking full advantage of the technology inside our own bodies—technology that makes it possible for us to adapt to a whole spectrum of temperatures—we might discover we’ve been missing out on a way of life that actually feels quite natural.

Everyone doesn’t have to go air conditionless as we do, but there is nothing wrong, and much to gain by not making all of our buildings so cold.  Maybe we can at least agree on a temperature like 80 or, like the Japanese, 82 and save some energy.

More nails in the Republican coffin?

For a number of years now, I have watched part of the Republican party that has as its main, if not sole, purpose, to dismantle government.  They called the Democrats bluff with the sequester which so far has appeared to have little effect.  Who cares if a military base can’t afford fireworks or if the Blue Angels can’t afford to do a fly over?  In the big scheme of things, those are pretty unimportant.  But now more and more federal workers are being furloughed.  For example, local HUD (Housing and Urban Development) offices are closing for five Fridays in July and August.  That is 5 Fridays that staff will not be paid.  This is money that won’t be spent on a vacation or for car repairs or for food and clothing – all things that add to the economy.  (Here is an interesting website that tracks furloughs.)  And while a number of agencies have figured out ways to avoid furloughs, many workers will still be affected – still more if Congress can’t manage to pass a budget for the fiscal year that begins in October.  The loss of incomes will slowly begin to mount.

But it isn’t just the failure to produce a budget.  A recent New York Times editorial summed up the issue quite neatly.  They called it a refusal to govern.

On two crucial issues this week, the extremists who dominate the Republican majority in the House of Representatives made it clear how little interest they have in the future prosperity of their country, or its reputation for fairness and decency.

The two issues are immigration reform and the removal of the food stamp program for the House agriculture bill.

These actions show how far the House has retreated from the national mainstream into a cave of indifference and ignorance. House members don’t want to know that millions of Americans remain hungry (in an economy held back by their own austerity ideology), and they don’t want to deal with the desperation of immigrant families who want nothing more than a chance to work and feed themselves without fear of deportation.

On both issues, in fact, many House Republicans are proudly asserting that they will stand in the way of any attempts to conduct a conference with the Senate. That might, after all, lead to a compromise.

And it isn’t just in the House.

Few things sum up the attitude of the current crop of Republicans in Washington than their loathing of conference committees. On issue after issue, they have passed radical bills and then refused to negotiate. On Thursday, for example, Senate Republicans refused for the 16th time to allow the Democratic Senate budget to be negotiated with its dangerously stingy counterpart in the House.

On immigration, House members fear a conference with the Senate would add back the pathway to citizenship that they consider a giveaway to undesirable non-English speakers. The eventual House border bills “should not be handed to a conference committee so that they can be reconciled with the Senate bill,” wrote Representative Tom Cotton of Arkansas in The Wall Street Journal on Thursday. Instead, he and others say, the Senate should be forced to take up whatever the House produces.

Senate Minority Leader Mitch McConnell may believe that ending the filibuster with a majority vote will spell the end of the Senate and cause Harry Reid to be remembered “as the worst leader of the Senate ever”, but in my opinion, the continuous use of the filibuster has already come close to destroying the Senate.  Everything should not require 60 votes.

The New York Times editorial ends with this

A refusal to even to sit at a bargaining table is another way of refusing to govern. The nation’s founders created two chambers for a reason, but Republicans, in their blind fury to harm the least fortunate, are forgetting even those fundamental national values.

From left, Representatives Tim Murphy, Mark Sanford, Cathy McMorris Rodgers and Sean P. Duffy, all Republicans, after the House approved an agriculture bill.

From left, Representatives Tim Murphy, Mark Sanford, Cathy McMorris Rodgers and Sean P. Duffy, all Republicans, after the House approved an agriculture bill.

This is why the most recent Quinnipiac poll shows that while 53% felt the President was doing too little to compromise with Congress, a whopping 68% felt the Republicans leaders in Congress were doing to little to compromise with the President.  And everyone thinks Congress is dysfunctional blaming both parties.

There is something called the greater good and I think many in Congress, particularly Republicans, have forgotten that ideal.

Photograph: Christopher Gregory/The New York Times

Putting the minimum wage in persective

Dan Wasserman of the Boston Globe explains why we need an increase in the minimum wage.

Wasserman 6-5

This needs to be a national increase.  Yes, I know.  When businesses have to pay more, they won’t hire.  But there is another side to their objection.  If they pay people more, then there will be more spending and more business and they can hire.  Plus there will be more payroll taxes paid on the larger salaries.  And more state and local taxes.  Conservatives would be happy because some folks wouldn’t need food stamps as a lot of working people do now.  Seems like a winner.

I know that some economists argue that increases always lead to higher unemployment, but a large number of small businesses already pay wages higher than the legal minimum.

Put simply, small businesses are our economy. Given that it’s still recovering, the economy needs all the help it can get to make it over the proverbial hump and flourish. Small businesses will play a key part in that journey.

Given their importance, politicians should stand up and take notice when small business owners say they strongly support a policy that has and will continue to elicit political fights of the knockdown drag-out variety, such as increasing the minimum wage. The minimum wage is a business issue that impacts a wide swath of small firms, and according to scientific opinion polling Small Business Majority released this week, two-thirds of them support increasing it and adjusting it annually to keep up with the cost of inflation.

Some have claimed that raising the minimum wage would put small firms out of business because they won’t be able to afford to pay their workers more. Our polling found a whopping 85 percent of small businesses across the country already pay their workers more than the minimum wage, though.

“You need to pay workers enough to survive. It’s in your best interest as a company because if you don’t there is nothing tying them to you.” That’s Clifton Broumand, the president of Man and Machine, a specialty computer product business in Landover, Md., who pays his workers more than the minimum wage and supports increasing it. “I want my employees to have the chance to grow and improve here. I want them to want to stay so we don’t have a lot of turnover. And I pay over minimum wage because it’s the right thing to do.”

The President proposed an increase to $9 in his State of the Union Address:  Let’s just do it.