Obamacare Costs Won't Be "Passed On"

A blog about business and economics.
March 11 2013 4:09 PM

Don't Believe Restaurateurs Who Say They're Going to "Pass On" the Cost of Obamacare  

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President Barack Obama orders lunch at a Five Guys restaurant May 29, 2009 in Washington, DC.

Photo by Brendan Smialowski/Getty Images

" 'Any added costs are going to have to be passed on,' said Mike Ruffer, a Five Guys franchise holder with eight of the popular restaurants in the Raleigh-Durham, N.C. area. He will need all the profits from at least one of his eight outlets just to cover his estimated added $60,000-a year in new Obamacare costs."

This is self-refuting nonsense. The only situation in which it would make sense for Ruffer to raise prices is if price increases will on net lead to higher revenue. And if price increases will lead to higher revenue (which they might) then it makes sense for Ruffer to raise prices no matter what happens with Obamacare. In fact, Ruffer himself articulates the truth later which is that Obamacare is going to reduce his profits by about one-eighth and he (and any investors in his business) will eat the loss. With corporate profits as a share of the economy at an all-time high, nobody's going to cry for him either. 

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.