Larry Summers on Employer Mandates

President-elect Barack Obama has named former Treasury Secretary Larry Summers to head his National Economic Council.  Obama also wants to require employers to offer health insurance to their workers.

It is therefore instructive to recall what the head of Obama’s National Economic Council has written about employer mandates:

Economists have generally devoted little attention to mandated benefits- regarding them as simply disguised tax and expenditure measures. Uwe Reinhardt’s reaction is probably typical: “[Just because] the fiscal flows triggered by mandate would not flow directly through the public budgets does not detract from the measure’s status of a bona fide tax.”

Suppose, for example, that there is a binding minimum wage. In this case, wages cannot fall to offset employers’ cost of providing a mandated benefit, so it is likely to create unemployment….

Mandated benefit programs can work against the interests of those who most require the benefit being offered…

If policymakers fail to recognize the costs of mandated benefits because they do not appear in the government budget, then mandated benefit programs could lead to excessive spending on social programs. There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers…

It can plausibly be argued that mandated benefits fuel the growth of government.