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How health-care reform may help the economy Print E-mail
Thursday, 24 December 2009

By Ronald Fink

Jonathan Chait makes an interesting observation about health care reform that has been lost in the huge brouhaha over death panels, socialism and insurance industry “bailouts.” And it echoes one I heard President Obama make in an interview with NPR this morning.

To wit: The tax that the Senate bill would impose on so-called “Cadillac” health care plans could boost wages.

How? Health benefits offered by employers are tax deductible, whereas wages, of course, are taxed. So employees have an incentive to demand health benefits instead of wages.

Without that incentive, thanks to a tax on plans that cost a lot but don’t deliver better care, workers may demand and receive higher wages instead.

Of course, employees won’t have much leverage to see such a demand met until job growth resumes, but presumably that will happen sooner or later.

And when it does, health reform could help median income start growing again.

That’s something employers looking for a return to consumer demand fueled by income instead of debt should welcome.

Remember, Henry Ford was no friend of labor but believed it was in his own interest to pay his workers enough to be able to afford his cars. Why exactly is that no longer the case?


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