On the Saturday of this year’s Labor Day weekend, Andrew F. Puzder, CEO of CKE Restaurants, Inc., parent corporation of franchise restaurant’s Hardee’s and Carl’s Jr., was a guest on the Tom Sullivan Show (Fox Business Network). Mr. Puzder is also a senior economic adviser with Gov. Mitt Romney’s campaign. To me, the most interesting aspect of Mr. Puzder’s comments to Mr. Sullivan concerned the costs of PPACA to his corporation. The facts he presented, with the estimated costs of PPACA provided to him by the corporation’s healthcare consultant (the nation’s largest such firm), were as follows:
• CKE’s expenditures on healthcare coverage for employees in its most recent year was about $12 million.
• During that same period, CKE spent about $8.8 million on new restaurants, the sole significant means by which CKE, and its franchisees can grow the size of their businesses and hire more people.
• Each new restaurant employes about 25 people.
• A significant number of franchisees operate more than one restaurant as a part of their business.
• CKE has franchisees who would like to open additional restaurants as part of their business.
• CKE’s consultants best estimate of the first year’s increase in healthcare costs under PPACA will be about $18 million, or in other terms, more than twice what they spend in one year on new restaurants.
To fully appreciate the impact one needs to be aware that PPACA requires any non-exempted employer who employs “more than fifty full-time equivalent employees” (parentheses in original) either (a) to provide comprehensive healthcare coverage (as defined by the Secretary of Health & Human Services) to its employees, or (b) to pay a per-employee and per-day fine, if it does not provide such coverage. Summarized details of PPACA definitions and employer penalties can be found in this Congressional Research Service report.
To put the cost of current healthcare in perspective, one also needs to have a sense of the average amount paid by private industry employers for the insurance costs of their employees. The Bureau of Labor Statistics report for March 2012 indicate that the employer cost in that sector averaged 7.7% of total compensation, with variations among occupational categories ranging between 6.5% and 9.9%.
From the foregoing, and assuming that CKE’s consultant is correct about the order of magnitude of increases to employer costs, it should be readily apparent that PPACA (Obamacare) will likely ensure a serious prolongation in the duration of the current recession, and could conceivably be the trigger for a descent into economic depression.
PPACA is, quite simply, an unaffordable creation by a group of people (i.e., our elected Federal representatives) who have no understanding of simple arithmetic. Mrs. Pelosi has been granted her wish—the bill has been passed and signed into law by our sitting President, and we are now beginning to find out what is in it. If it is allowed to stand, the United States will become, in the foreseeable future, a second (if not third) world nation.