Unintended Consequences

Here is a letter I recently sent to the Midland Daily News:

Unintended Consequences

Most advocates of Obama’s health care reform dislike the employer paid health insurance system. Their disapproval of this system is rational – Just imagine if your house, car, etc… were all supplied by your employer and revoked upon leaving the company. I would, however, have a great deal of disagreement with many advocates of Obama’s health care reform over the origins of this faulty employer paid health insurance system.

The employer paid health insurance system is not the result of the free market, but rather, an unintended consequence of price controls placed on wages during World War II by the Roosevelt Administration. These price controls made it illegal to pay employees more than a government determined wage. As a result, businesses began to offer free health care on top of the maximum legal wage limit in order to attract the most valuable employees (as it was illegal to attract the best employees through wages).

The government propped up employer paid health insurance even further by altering the federal tax code. The federal tax code was changed to exclude, without limit, the value of employer paid health insurance from both income and payroll taxes. Although the price controls from the World War II era have been revoked, the employer paid health insurance tax exemption is still in existence today.

With every single piece of legislation enacted by government, there are unintended consequences that negatively impact society. These negative impacts are then ‘remedied’ by further government intervention, which, it is argued, are ‘necessary’ to solve the problem. This creates a cycle that is especially noticeable in both the health care and financial sectors of the economy, where government intervenes most.

Kurt Bouwhuis


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