WILL THE FEDERAL GOVERNMENT BE THE NEXT COMPANY STORE?

WILL THE FEDERAL GOVERNMENT BE THE NEXT COMPANY STORE?

Professor Bob

 Decades ago it was not uncommon for mining companies and even some manufacturing companies to have what was known as “company stores” or even company towns. The businesses were located outside of town as to make it difficult for employees to shop in town. The businesses then created what became known as the company store for people to do their shopping and company housing for the people to live. The companies usually did not pay the employees in money. Instead they paid the employees in scrip which could be used to pay the rent on the housing and to shop at the company store. Of course the price of rent and merchandise was so exorbitant that it was impossible for employees to save. This made it virtually impossible for them to ever improve their lot in life. This got me to wondering if maybe the federal government will become the new company store. Last spring several articles appeared on the subject of delinquent student loans. These articles were about the fact that it had become necessary for the government to garnish the social security checks of people in their 60s, 70s, and even 80s for unpaid student loans. These articles also addressed the issue of delinquent loans of people much younger—those that had incurred what amounted to student loan balances into the six figures for degrees in disciplines that would not pay enough to enable repayment of the debt. This is not the only burden that the public has involving the federal government. There is the horrendous national debt, the effect of quantitative easing, anticipated inflation as a result of quantitative easing, and future increases in interest rates to curb inflation. Then throw in the direct and indirect projected impact of Obamacare on the pocketbooks of the public, the increasing burden of social security being created by the unfunded expansion of unearned benefits, and the rising cost of Medicare and the problem is greatly compounded. Obamacare has a truckload of taxes built into the bill. (Obamacare is not about healthcare.) Some of these taxes/penalties fall on the individual, like the 3.8% tax on net investment income on the profit arising on home sales. But most of the taxes fall onto businesses. Obamacare defines a full-time employee for the purpose of health insurance as one that works more than 30 hours per week. So businesses are doing the same thing they did when the government required retirement plans for those employees working 40 hours per week. They cut the hours of employees. In the case of retirement plans low margin businesses like grocery chains cut employees to 37.5 hours per week. Under Obamacare low margin businesses like restaurants are cutting employees to 30 hours per week. This will mean that health insurance does not have to be provided for those employees but the business must pay a hefty penalty for not doing so. But the penalty is much cheaper than the cost of the insurance. The problem is that those taxes and penalties that fall onto businesses must be passed along to consumers in the form of higher prices. Businesses have to earn a rate of return in line with the risk level of that business in order to attract investment capital. This means that the taxes and penalties from Obamacare cannot be absorbed by business. You and I will be paying those costs in addition to providing our own coverage or paying a penalty. This also includes the health insurance companies which will have to increase rates in order to compensate for the increased coverage. The CEO of Aetna recently projected a doubling of health insurance rates over the next year. Others project an even greater increase. Some healthcare professionals anticipate that Obamacare will eventually make it unprofitable for private health insurers to exist. The end result being a single payer system with premiums paid to the government with care provided on the model used by the VA. The impending social security problem which is several decades down the road will require an even greater contribution to the program. Medicare costs will also continue to rise (14% increase in Part B for 2014) and the Medicare tax will probably increase, possibly to the point where it becomes necessary to replace Medicare with Obamacare. Then throw in the increases in the income and death tax (plus a host of others) requested by the current administration. Increasing the burden on the wealthiest taxpayers will not provide enough to cover Obama’s vacations. This means that rates must eventually go up for even more people. Maybe, in the not so distant future, the federal government will become the new company store. We will simply have our paychecks direct deposited to the U.S. Treasury in return for housing, higher education vouchers, health insurance, retirement, disability, child care vouchers, food stamps, etc. One stop shopping at the company store.

 

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