Research Briefing

Obama Administration Attempting To Play Down Economic Impact Of  Government-Run Health Care While Job Creators Continue To Be Hit

OBAMA TELLING JOB CREATORS “WE’RE FROM WASHINGTON AND WE’RE HERE TO HELP”

Obama’s Commerce Secretary Claims Billions In Announced Write-Downs Have An Impact That’s Actually “Quite Modest.” “However, in recent days, critics have seized on a minor provision in the law to suggest it’s already increasing health-care costs for businesses. A fair reading of this provision suggests that its actual impact is quite modest, and far outweighed by the benefits for large businesses outlined above… When you look past the hype and the overheated rhetoric, the benefits of the health reforms for America’s businesses large and small far outweigh the impact of this small tax provision.” (Sec. Gary Locke, Op-Ed, “Don’t Believe The Writedown Hype,” The Wall Street Journal, 4/1/10)

And Promises That Government-Run Health Care’s Benefits Will Outweigh Its Costs. “I understand that in these difficult economic times, the potential for any additional expense is not welcomed by American businesses. But in the long run, the health insurance reform law promises to cut health-care costs for U.S. businesses, not expand them.” (Sec. Gary Locke, Op-Ed, “Don’t Believe The Writedown Hype,” The Wall Street Journal, 4/1/10)

BUT OUTSIDE WASHINGTON, GOVERNMENT-RUN HEALTH CARE IS CRUSHING JOB CREATORS

“Honeywell International Inc. Increased Its First-Quarter Earnings Outlook Tuesday And Said It Will Log A $13 Million Non-Cash Charge In Relation To The Recent Health Care Overhaul Legislation.” (“Honeywell Raises 1Q Forecast, But Sees $13M Charge,” The Associated Press, 3/30/10)

Goodrich Expects $10 Million Charge In First Quarter As A Result Of Health Care Bill. “Goodrich Corp. said Wednesday that it expects a one-time charge against its first-quarter 2010 results of about $10 million, or 8 cents a share, due to the recently-passed U.S. health-care reform legislation. The expected charge relates to the elimination of tax deductions available to companies that provide prescription drug coverage to retirees.” (John Ittner, “Goodrich Forecasts $10 Million Health Reform Costs,” Market Watch, 3/31/10)

Lockheed Martin Corp. Expects A $96 Million Charge As A Result Of Health Care Bill. “Also Wednesday, fellow aerospace company Lockheed Martin Corp. estimated that it will take a $96 million charge because of the health-care legislation and expects the charge to reduce per-share earnings by 25 cents in the first quarter.” (Doug Cameron and Bob Tita, “Boeing, Lockheed Expect Health-Care Charges,” The Wall Street Journal, 4/1/10)

Fate Of Jobs At Sallie Mae In Indiana Could Be Determined In A Few Weeks. “Student loan giant, Sallie Mae says it may cut nearly 30% of its workforce now that the government has decided to handle federal student loans itself. Indiana has the most Sallie Mae employees of any state in the U.S., with 1700 workers in fishers and 725 more in Muncie. The company’s Indiana operations manager says top executives hope to decide within a few weeks where to make cuts.” (Kjerstin Ramsing, “Sallie Mae May Cut 30% Of Workforce,” www.fox59.com, 3/31/10)

• Indiana County With Many Sallie Mae Jobs “Concerned” About Bill’s Negative Impact ON Employment Levels. “Jay Julian, president and CEO of the Muncie-Delaware County Chamber of Commerce, said Tuesday that local officials were closely following developments with Sallie Mae. ‘We’re concerned,’ Julian said. ‘We’re desirous of doing all we can to maintain their level of employment here in the Muncie and Delaware County area.’” (Keith Roysdon, “Sallie Mae Cuts - If Any - Could Come In 2 Weeks,” The Muncie Star Press, 3/31/10)

Massachusetts Medical Device Company Executives Say Tax “Could Amount To As Much As 25 Percent Of A Company’s Profits” And Jobs Could Be “Slashed.” “Medical device makers, including large employers like Analogic in Peabody and Medtronic in Danvers, will be expected to pay a 2.3 percent tax on all their sales starting in 2013. It might not seem like a lot, said Bernard Gordon, founder of Analogic and currently chairman at NeuroLogica, but it could amount to as much as 25 percent of a company’s profits. … Medtronic CEO Bill Hawkins in Minneapolis told The Wall Street Journal that staffs could be ‘slashed’ as a result of the bill. In Danvers, Medtronic has employed up to 500 people creating devices for the heart.” (Alan Burke, “Reform May Be Bad For Business, Some Warn,” The Salem News, 3/31/10)

• Massachusetts Medical Device Industry Council Worries Medical Device Tax Will Hurt Innovation. “‘It’s one of the few manufacturing industries left in the United States,’ said Thomas Sommer of the Massachusetts Medical Device Industry Council, a trade group representing North Shore firms like Abiomed in Danvers, the heart pump manufacturer, and Analogic, which pioneered devices like the CT scan and MRI and employs about 1,500 (not all in the medical field). … Sommer worries about the effect of the new tax on the money companies gamble to create new lifesaving technology. ‘Fifteen percent of after-sales profits are plowed back into research and development,’ Sommer said.” (Alan Burke, “Reform May Be Bad For Business, Some Warn,” The Salem News, 3/31/10)
• Massachusetts’s North Shore Chamber Of Commerce Said The Medical Device Tax Is “Highly Unfair” As “Medical Technology Is An Economic Engine For Our Region.” “Robert Bradford of the North Shore Chamber of Commerce is even more outspoken. ‘It just seems to be highly unfair,’ he said. ‘I don’t know why they’re picking on that industry. Medical technology is an economic engine for our region.’ Bradford cited the possibility of layoffs and pointed to the multiplier effect, the homes and products never purchased and the workers in other industries who don’t get jobs as a result.” (Alan Burke, “Reform May Be Bad For Business, Some Warn,” The Salem News, 3/31/10)
•  Bradford: “The Government Should Not Look To Kill The Goose That Laid The Golden Egg…” (Alan Burke, “Reform May Be Bad For Business, Some Warn,” The Salem News, 3/31/10)

AND SQUEEZING ALREADY TIGHT STATE BUDGETS

Texas Puts Cost Of ObamaCare At $27 Billion During First Decade It Is Fully Implemented. “[Texas Health And Human Services] Commissioner Tom Suehs estimates that health care reform’s top-dollar items — Medicaid expansion to roughly 2.1 million Texans, plus heightened reimbursement rates for primary care physicians — will cost the state more than $27 billion between 2014 and 2024, up $3 billion from his most recent estimate.” (Emily Ramshaw, “The $27 Billion Question,” Texas Tribune, 4/1/10)