Wednesday, August 24, 2011

Why Big Business loves Big Government

In a nutshell, Big Business loves Big Government because the cost of Big Government always falls most heavily on Small Business.  The most egregious recent example of this is Obamacare, which imposes healthcare obligations across the board on big and small businesses.  The marginal impact, however, falls most heavily on small businesses since most big businesses already provide healthcare to their employees!  [Now you may say, that is only fair, why shouldn't Small Business provide healthcare as well?  But that's a question for another discussion.]

If Big Business already provides healthcare then it will incur virtually no incremental costs from Obamacare.  Small Business, on the other hand, finds itself with a new costly mandate.

One of the main ideas that this blog will continually stress is that if you increase the cost of something you will get less of it.  [I think this is a very simple concept, but for some reason Washington doesn't seem to understand it.]  So here you have a situation where the cost of operating a small business will clearly rise--meaning you will end up with less small businesses than you would have otherwise expected.  Since Small Business competes with Big Business, less Small Business means less competition!!  And less competition means higher profits for Big Business!!  Of course less competition also means less overall employment, but that's not the concern of Big Business.

And this is true not only for Obamacare but for any government action that imposes costs or regulations on business:  Big Business can always spread the cost of Government mandates out over a much bigger base than Small Business.  [My usual example is to imagine two basketball players, one 7 feet tall and one 6 feet tall.  If you put 100 lbs of weight on each of their backs, which one is more likely still to be able to dunk?]

So, whenever you hear CEOs of Big Businesses supporting Big Government programs you should always take it with a grain of salt.  They really aren't doing the country any favors.  Like Br'er Rabbit, they're usually just asking for what's good for them--less competition and higher profits.    

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