The Cost of Obamacare and the Cost of Pizza

John Schnatter, CEO of Papa John’s, complained a while back that Obamacare would result in a rise in the price of Papa John’s pizzas by as much as 11 cents, maybe even 14 cents!

(Wasn’t John Schnatter in favor of universal health care at one time?)

I don’t mean to pick on Papa John’s or question John Schnatter’s assessment.  Let’s just say it is true and think out loud.

If the kind of burden consumers — whoops, I mean corporations and job creators — will bear to ensure that we implement the Affordable Care Act amounts to things like 14 cents a pizza, is that really too high a price to pay for an important service like health care?

Shoot, the price of tomato sauce likely fluctuates more than 14 cents a pizza from month-to-month or from location-to-location.  How do businesses survive?  How do consumers budget?  Why hasn’t the free market fallen to pieces?

These complaints are silly.  At worst the increase in labor costs initially might slow hiring until employers “recover” from the shock of these costs.  As I mentioned, other costs of business change and fluctuate, but business goes on.  Supply and demand work it out.

And to complain that such surcharges are a drag on GDP is a matter that washes out when the costs of uninsured decrease with a better health care system.  And it is hard to be overly sympathetic at any rate when corporate profits are at record levels as a share of GDP.

If anything, one should be more suspicious of business motives when they raise prices behind a policy change such as Obamacare.  San Francisco is a case study we can check.  In that city a health care mandate was passed and it turned out that about half of the employers who set up surcharges spent about 10 per cent of that money on health care.  The rest stayed with the business.

Who is going to pay this 14 cent increase?  John Schnatter or the people who buy is pizzas, is one question.  Where that money would go is a better one.

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5 thoughts on “The Cost of Obamacare and the Cost of Pizza

    1. Tour Guide Post author

      Yes…you’re right. Perhaps I need to be clear so the tenor of the post isn’t missed. If anyone shouldn’t be complaining about the cost of Obamacare, it is someone who claims he will have to increase the price of his product less than 1% when the consumer will be picking up the tab anyway. The real cost will exist if this increase causes a decrease in sales and revenues. It is hard to see how this would be the case. It is more likely people would pay much more — a buck or two — and get a decent pizza instead of the Papa Johns variety.

      Other businesses will have different costs. John Schnatter sounds ridiculous.

      Reply
  1. Invisible Mikey

    Yeah, it sounds much like when oil companies raise the price of gas because weather interrupts distribution, or because of “uncertainty” in the middle east, or because local refineries need maintenance, or because…
    It’s just an excuse to raise the price, not a reason.

    Reply
    1. Papa Johns

      I just can’t believe he doesn’t feel foolish talking about 14 cents when the trade off is better health care for Americans. There have been much worse changes in tax policy that have adversely affected price of products and services.. he’s just trying to make a big deal over this because he’s against Obama Care at it’s heart.. he should just speak honestly instead of making himself look ridiculous.

      Reply

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