News of the Tautological

Daily Best of the Web   —   Posted on February 24, 2014

The following is an excerpt from’s “Best of the Web” written by the editor, James Taranto.

News of the Tautological 
“Wealth Gap Is Widest in Some Affluent US Cities”–headline, Associated Press, Feb. 20

C No Evil 
Soon after leaving New York’s City Hall Jan. 1, Michael Bloomberg moved to the United Nations after Secretary-General Ban Ki-Moon named him “special envoy for cities and climate change.” Earlier today Ban and Bloomberg appeared together at U.N. headquarters, where the secretary-general sang the former mayor’s praises.

“Mayor Bloomberg is much better known for his strong stewardship on environment and climate change,” said Ban. “He has made this great city of New York a carbon-free city.”

We live in New York–not far from the U.N. in fact–and it’s news to us that it’s “a carbon-free city.” Has Ban ever been to the Diamond District?

You’ve no doubt heard about the latest ObamaCare “delay”–the announcement that the Internal Revenue Service will waive fines on certain employers that do not provide workers with medical insurance. That “employer mandate,” which by law took effect this year, had already been put off until 2015. Now it won’t be enforced until 2016 for companies with between 50 and 99 employees, and those with 100 or more will escape fines if they offer insurance to 70% of their employees rather than the 95% stipulated in the law.

Because most big employers already cover workers, “the employer mandate is not an especially important policy lever in the Affordable Care Act,” shrugs the Washington Post’s Sarah Kliff. The “lever” metaphor–something that moves–seems precisely chosen. The employer mandate’s main intent would seem to be to prevent companies from dropping coverage, not to induce them to start. It’s meant as a constraint, not a lever. Anyway, Kliff concludes that while the new delay “can matter politically,” in terms of its effect on the insurance market, it “will likely amount to a relatively small, if non-existent, change.” We think she means “if existent.”

One problem with the employer mandate is that it creates perverse incentives. Businesses with fewer than 50 employees aren’t subject to the mandate, which means that for a company on the cusp, the marginal cost of hiring the next employee could run into the tens of thousands of dollars–or, for one just above the threshold, the marginal savings from firing a worker can be considerable. Employers can also reduce their liability by replacing full-time workers with part-time ones. The exact workings of the mandate are complicated; the National Federation of Independent Business, appellant in the 2012 Supreme Court case that upheld most of ObamaCare, charts some scenarios.

By adding a new threshold–100 workers as well as 50–the new delay creates an additional perverse incentive. At least until 2016, a company that doesn’t offer insurance is better off not hiring the 100th worker–or firing him. But as Fox News Channel’s Chris Stirewalt points out, the regulations for the new delay attempt to forestall the latter possibility:

Obama officials made clear in a press briefing that firms would not be allowed to lay off workers to get into the preferred class of those businesses with 50 to 99 employees. How will the feds know what employers were thinking when hiring and firing? Simple. Firms will be required to certify to the IRS–under penalty of perjury–that ObamaCare was not a motivating factor in their staffing decisions. To avoid ObamaCare costs you must swear that you are not trying to avoid ObamaCare costs. You can duck the law, but only if you promise not to say so.

The specific regulation is on page 124 of this PDF from the Federal Register. It stipulates that the full exemption for the mandate applies if “the employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition”–that is, if it doesn’t fire workers to get below 100:

A reduction in workforce size or overall hours of service for bona fide business reasons will not be considered to have been made in order to satisfy the workforce size condition. For example, reductions of workforce size or overall hours of service because of business activity such as the sale of a division, changes in the economic marketplace in which the employer operates, terminations of employment for poor performance, or other similar changes unrelated to eligibility for the transition relief provided in this section XV.D.6 are for bona fide business reasons and will not affect eligibility for that transition relief.

Legal or regulatory changes that affect the cost of labor would fall into the category of “changes in the economic marketplace in which the employer operates.” So it would be more precise to say that employers may cut back employment for any bona fide business reason except to take advantage of the ObamaCare mandate delay.

The administration thus acknowledges that its policy creates a perverse incentive and orders employers not to act upon it. But that can’t be enforced. A business will take into account all relevant factors, including the additional costs imposed by ObamaCare, in making decisions about hiring and firing, including whether to terminate employees for poor performance, sell a division, etc. In practice, the new rule is a ban–under threat of criminal liability–on acknowledging the perverse incentive. Call it OmertàCare, a government-imposed conspiracy of silence.

[Note: The last excerpt is from the Feb. 12 BOTW archives.] For more “Best of the Web” click here and look for the “Best of the Web Today” link in the middle column below “Today’s Columnists.”