F. A. Hayek wrote in his seminal book The Road to Serfdom that command economies were doomed to failure for the same reasons that Ludwig von Mises postulated two decades earlier. The millions of simultaneous decisions that occur in any economy of significant size requires a decentralized, distributed network of knowledge that only a properly-regulated free market can provide.
Von Mises offered that as his central point on why the Soviet “experiment” (as NBC called it in the opening ceremonies at Sochi last week) was doomed to failure. Centrally-planned command economies cannot succeed because they are inherently incompetent.
Hayek took von Mises’ argument a step further. Not only would such command economies fail, Hayek argued, but they would produce increasingly arbitrary governance and eventually erode the rule of law altogether. “[T]he use of the government's coercive powers will no longer be limited and determined by pre-established rules,” he predicted. “The law can, and to make a central direction of economic activity possible must, legalize what to all intents and purposes remains arbitrary action.”
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If observers didn’t find themselves convinced by 20th-century history, they can learn Hayek’s lesson in the compressed course of Obamacare 101.
The latest arbitrary salvo from the Obama administration in an attempt to rescue its collapsing command health-insurance economy came from the Treasury Department earlier this week. As Barack Obama made headlines by issuing yet another delay in enforcement of the employer mandate – again ignoring the January 2014 statutory deadline for compliance in his own legislation – Treasury announced that it would keep an eagle eye on businesses that reacted to the exploding costs of compliance. The IRS would require employers to file a “self-attestation” on their tax forms “to “certify” that they are not shedding full-time workers simply to avoid the mandate.”
This demand is based on … what, exactly? Until the Affordable Care Act, the federal government had no jurisdiction on employers’ options for staffing size or type. In fact, they still do not have jurisdiction under the ACA. The law requires businesses with 50 or more full-time employees to provide health insurance as part of their compensation package. It further defines “full time” for the purposes of this law as those employees who work an average of 30 hours a week or more.
What the law does not do is tell employers that they have to keep their current staffing levels in perpetuity, and in the same classifications. The statement itself tacitly admits Treasury’s lack of jurisdiction by declaring that businesses will have to file a “self-attestation” to “certify” benign intent in making business decisions on staffing. The form itself might create a perjury trap, but there is no other authority for the federal government to pursue action even if businesses did decide to adjust staffing based on Obamacare costs.
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The Obama administration declined to specify exactly why this warning went out in the first place. It became necessary because employers have discovered just how much cost Obamacare will add to their ledgers. Democrats who pushed the employer mandate insisted at the time that businesses would find that the law bent the cost curve downward and would welcome its impact.
Instead, skyrocketing premiums and taxes have created a big jump in personnel costs (AOL CEO Tim Armstrong estimated it at $7 million annually), which employers will have to resolve either through staffing reductions, downward adjustments in compensation, or higher prices.
Small wonder, then, that the White House pushed the mandate enforcement deadline out even further for mid-sized employers. President Obama himself said that he wanted to keep businesses from dealing with the real-world consequences of the law. "Even with the tax credits,” Obama told reporters in a press conference, “in some cases they still can't afford it, and we have hardship exemptions, phase-ins, to make sure that nobody is unnecessarily burdened.”
Businesses have had plenty of time to prepare for these mandates, though, and have plenty of options to deal with regulatory costs and benefits. If the mandate was as beneficial as the administration claims, the White House would have no need to keep delaying its enforcement.
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Furthermore, the sudden demand that businesses stop adjusting for regulatory policy is nearly the height of hypocrisy for this administration, which has repeatedly offered short-term gimmicky tax credits for business decisions that boost its policies, including an ill-considered credit for hiring that ended up costing taxpayers millions for hiring decisions that would have been made anyway. Suddenly, the Obama administration has to take action outside of the law because employers respond to regulatory signals more predictably than one-off credits.
In other words, it’s a demonstration of arbitrary power, of precisely the kind predicted by Hayek. And it’s no longer just opponents of the ACA noticing.
At National Journal, Major Garrett blasted the latest unilateral changes in enforcing statutory law by noting, “The Affordable Care Act means what it says and says what it means. Until it doesn’t. … [T]he arbitrary is the norm.”
The editorial board at The Washington Post blasted Obama for his “increasingly cavalier approach to picking and choosing how to enforce this law. “ Garrett’s colleague Ron Fournier and the Daily Beast’s Kirsten Powers both declared their patience at an end to the arbitrary changes and continuing incompetence from the Obama administration – and all of these people support the law in principle.
The attempt to create a command economy in the health-insurance market has failed, in the same manner that Hayek predicted, and resulted in the same arbitrary use of power to attempt to compensate for those failures. The demand for businesses to “self-attest” that they aren’t following standard business principles foreshadows the later stages of unreality that will take from F. A. Hayek to George Orwell on a long enough continuum.
This is what comes of ignoring the warnings from both men about the nature of centrally-controlled command economies issued seven decades ago.
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