There are numerous macroeconomic headwinds that could harm the US and world economies in 2014. Investors are already wary of the eurozone crisis, and many are cognizant of major issues here in the US as well as East Asia. Yet, I’ve noticed very few seem to be worried about the impact of the Affordable Care Act (commonly known as “Obamacare”).
In my view, the ACA is the single most likely factor that could hamper US economic growth within the next 12 – 24 months. Not only will the act create major employment headaches, but it also has the potential to hit consumer spending, lower gross private domestic investment, and constrain GDP growth. In a worst-case scenario, it could possibly even lead to recession.
There are several major issues with the act that could cause significant economic harm:
(1) Imposition of higher direct taxes,
(2) Imposition of stealth (hidden) taxes,
(3) Restrictions on employment,
(4) Restrictions on high-deductible insurance plans, and
(5) Higher costs imposed on low-skilled laborers
In Part I of this series, I examined the direct taxes in the ACA. With this article, I want to focus on two even bigger issues: stealth taxes and the healthcare cost-spiral.
My view is that the stealth taxes in the act, combined with the direct taxes, have potential to hit consumer spending and investment significantly, which could lead to lower-than-expected economic growth in 2014.