Mr. President, This Pizza Can’t Get Any Smaller : Health costs: Small business’ only option under the Clinton plan would be to cut jobs.
Watching the televised reports marking the D-day anniversary, I was reminded of how well the Clinton Administration had learned the cardinal rule of warfare: You are better off deceiving your enemies than attacking them head on. It worked at Normandy, and now the President is relying on it to pass health reform. “Just raise your prices 1% or 2%” and health- care reform won’t cost you anything, Clinton responded to Herman Cain, president of Godfather’s Pizza, during a televised town hall meeting.
It all sounded good over the airways, but you will search in vain through the proposals littering Washington looking for a guarantee that costs are limited to a couple of cents on each slice of pizza. What you will find are references to thousands of dollars in mandated costs per worker.
There is an irony here. For years, the federal government has been unable to raise taxes fast enough to cover its costs. More often than not, it hasn’t even been able to accurately predict how much it would lose in a given year. This year it will overspend its budget by well over $1 billion. Now that same government wants to act as my business adviser and help me set prices. We used to call government actions designed to raise prices inflation. Now it’s a mandate.
The marketplace, for pizza as well as many other products and services, doesn’t work according to the President’s description. If it did, discount retailers like Wal-Mart and Price Club or low-frills airlines like Southwest would not exist. Prices matter. Consumers have consistently shown themselves willing to sacrifice service--not to mention the people who provide it--for a lower price. (Who pumped your gas this morning?) My customers can always eat out less often when prices rise. They won’t have any more money to spend in my restaurants just because I raised my prices.
Our industry would happily provide broader health-insurance coverage (we already offer substantial coverage to our employees)if consumers were just as willing to pay higher prices.
The President’s mathematics ignores a word that never seems to get mentioned in health reform: profits. I’ve never incurred a substantial cost in my business without asking what it does to our business’ health. History is littered with failed businesses, lost jobs and broken dreams for those who disregarded this practice. Yet, Washington stands ready to impose costs on each and every business in the country without ever defining those costs in relation to profits.
In the service sector, annual profits per employee are less than $2,000. They are more than $9,000 in manufacturing. Yet by all accounts, the costs to employers from a health-insurance mandate will exceed $2,000 per employee. When the added costs per employee are greater than profits from that employee, it’s easy to see why those jobs are at risk. For many companies, these higher costs will exceed their entire year’s profits.
And the loss of these jobs should not be taken lightly. We provide an entrance to the world of work, a bridge from school to career and often a ticket from welfare to independence. Eating and drinking establishments, in particular, are among the greatest sources of opportunity in our economy.
If, on average, every restaurant in America cut only one employee per shift, we would lose 750,000 jobs, more than the industry’s total employment has grown in the last three years.
When it comes to estimating employment and benefit costs, I’ll put my track record up against the government’s any day. During my 37 years in the restaurant business, I have been responsible for the employment of more than 2 million people. I doubt anyone in the Administration can top that. But its plan could end it.
