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Sunday, March 8, 2009

What are Obama's Plans to Help Businesses?

During February 651,000 jobs were lost. The unemployment rate is over eight percent. As Obama put it in his weekly address, it is the highest unemployment rate in a "quarter century." During the address, he mentioned the Consumer and Business Lending Initiative, a $1 trillion program to revitalize lending. 

The initiative expands the $200 billion program started in November that lends money to investors so they can purchase securities that are backed by debt. It was called the Team Asset-Backed Securities Loan Facility. The initiative will also include securities backed by commercial real estate mortgages. 

Stimulus package and businesses

The American Recovery and Reinvestment Act contains help for small businesses, including $730 million to the Small Business Administration, which is an independent government agency that helps small businesses. The $730 breaks down as follows:
  • $375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90 percent for certain loans
  • $255 million for a new loan program to help small businesses meet existing debt payments
  • $30 million for expanding SBA’s Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to microlenders
  • $20 million for technology systems to streamline SBA’s lending and oversight processes
  • $15 million for expanding SBA’s Surety Bond Guarantee program
  • $25 million for staffing up to meet demands for new programs
  • $10 million for the Office of Inspector General
“The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities,” said Acting SBA Administrator Darryl K. Hairston. 

Fixing the Healthcare system will save businesses money

Last Thursday, Obama held a healthcare summit. He linked addressing the problems with the healthcare system to "putting America on a sustainable fiscal course." The U.S. healthcare system is in sorry shape. The Commonwealth Fund Commission gave the U.S. healthcare system a score of 65 (out of 100) when compared to other industrialized countries. The overall performance of the healthcare system did not improve from 2006 to 2008, and access to healthcare decreased. The efficiency of the healthcare system continued to be low.

The U.S. spends twice the amount per capita on healthcare that other industrialized countries do, but ranks last among 19 industrialized countries. It ranked 15th last year. The rate of uninsured adults increased from 35 percent in 2003 to 42 percent in 2007. According to the Commonwealth Fund Commission, “We are headed toward $1 of every $5 of national income going toward health care.”

Health insurance premiums for employers increased almost five times faster than inflation over the last five years, according to a 2008 study by the National Coalition on Healthcare (NCHC). Health insurance premiums also increased four times faster than wage growth. Premiums are rising at double digit rates. "It is becoming clear to many companies that at current rates, their health insurance expenses will outpace their profits,” the NCHC study stated.

The rising costs of premiums affects businesses by reducing their capacity to grow, which in turn affects the economy because the job growth rate slows and wages do not increase.

Productivity decreases for businesses unable to provide their employees with coverage. The HR Policy Association puts the annual cost of decreased productivity between $87 billion and $126 billion.

A survey last year by the Kaiser Family Foundation asked employers what changes they will make to health plans for the next year. Forty percent said they are or are very likely to increase workers contributions. Forty-one percent said they will increase deductible amounts, 45 percent will increase office visit cost sharing, and 41 percent will increase
the amount employees will pay for prescription drugs.

Last September a study by the Urban Institute titled Making Healthcare Reform Work for Small Businesses showed that small businesses are more affected by rising health insurance premiums than large businesses. In 2006, only 35 percent of businesses with less than 10 workers offered health insurance to employees, but 98 percent with 1,000 or more workers did. 

A study titled The Future of Employment-Based Health Benefits by the Employee Benefit Research Institute concluded that employers “have clearly passed the tipping point on retiree health benefits, which are in a sharp decline.” The percentage of businesses with less than 200 employees that offered retiree health benefits decreased from 68 percent in 200 to 59 percent in 2007.

The National Federation of Independent Business (NFIB) believes that the “current system of health insurance and health care is financially unsustainable and threatens the health and financial security of the American people.” Small business owners and their employees are “especially vulnerable to the weaknesses of our current system.”

Obama's healthcare plan

Obama does not support a government-run healthcare plan or letting health insurance companies operate without regulation. Instead he favors a plan that requires health insurance companies to cover pre-existing conditions, creates a Small Business Health Tax Credit to help small businesses afford offering their employees coverage, and prevents insurers from overcharging doctors for their malpractice insurance.

Obama's plan would also create a National Health Insurance Exchange which would include private insurance options and a public plan based on benefits available to congressional members. 

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