RUTHFULLY YOURS

By Andrew Puzder

Dec. 27 (Bloomberg) — I am not an expert on health-care
policy, but I do know something about job creation. So when a
House Oversight and Government Reform subcommittee asked me to
testify about the effect on employers of the Patient Protection
and Affordable Care Act, sometimes known as Obamacare, I thought
I could offer some insights.

 As I told the committee in a July 28 hearing, it is
critical that Congress does a good job of balancing the benefits
of new legislation against the costs of that legislation. That
process begins with recognizing that laws like Obamacare come at
a price.

 Our company, CKE Restaurants Inc., employs about 21,000
people (our franchisees employ 49,000 more) in Carl’s Jr. and
Hardee’s restaurants. For months, we have been working with
Mercer Health & Benefits LLC, our health-care consultant, to
identify Obamacare’s potential financial impact on CKE. Mercer
estimated that when the law is fully implemented our health-care
costs will increase about $18 million a year. That would put our
total health-care costs at $29.8 million, a 150 percent increase
from the roughly $12 million we spent last year.

 The money to cover our increased expenses will have to come
from somewhere. We are a profitable company and, after paying
our obligations, we reinvest our earnings in the business.
Reinvesting in the business is how we grow, create jobs and
opportunity. This is true for most U.S. businesses.Cutting Spending

To offset higher health-care expenses, we will have to cut
spending on new restaurant construction, one of our largest
discretionary spending areas. But building new restaurants is
how we create jobs. An $18 million increase in our costs would
more than consume the $8.8 million we spent on new restaurant
construction last year, leaving nothing for growth. We will also
need to reduce our general capital spending, which also creates
jobs and allows us to improve our infrastructure and maintain
our business. In summary, our ability to create new jobs could
vanish.

 To reduce the financial impact of Obamacare, many
businesses, including ours, will have to consider increasing the
number of part-time employees (those who work less than 30 hours
a week as defined under the health-care law) and reducing the
number of full-time employees. So, some individuals seeking
full-time work will need to find two jobs.

 Automation will also become more appealing. For example,
although we value the personal touch, electronic ordering kiosks
will become more economically desirable. Nationwide, 63 percent
of our employees are minorities and 62 percent are female.
Unfortunately, these cuts will affect them the most.

 The complexity of this legislation makes it hard to
anticipate costs in the future. Our investments pay off — when
they are successful — over the long term. Because we don’t know
what our health-care expenses will be in two or three years, we
are unable to determine with any certainty how much our
investments will have to return for us to be profitable. All of
that counsels in favor of holding off on new investments and
saving our funds. We want to grow. But we are unable to do so
knowing that large and undetermined liabilities will absorb
funds we otherwise would invest for expansion.

 My testimony was followed by that of Grady Payne, chief
executive officer of Connor Industries Inc., a supplier of cut
lumber and assembled wood products for shipping and crating
needs. Based in Fort Worth, Texas, it has plants and employees
in eight states and employs 450 people. He laid out the options
open to his company under the health-care law, each of which
would cost $1 million or more. According to Payne, that amount
is “more than the company makes.” He concluded that his
company’s goals have turned “from ‘hire-and-grow’ to ‘cut-and-
survive.’”Scaling Back

Victoria Braden, the president and CEO of Braden Benefits
Strategies Inc., a corporate employee-benefits adviser based in
Johns Creek, Georgia, also testified. She said adoption of the
law led to immediate job cuts at her company as she scaled back
an expansion into a new line of business. Obamacare “is
devastating to my business, expensive for me and my clients to
administer, and works against our goals of helping businesses to
expand, and putting people back to work,” she said.

 I understand that many members of Congress believe
providing everyone with health insurance is a top priority.
Several committee members said so at the hearing, and I respect
them for caring about the uninsured. My point to them was this:
Everyone has a stake in job creation. As far as I am aware, no
one in Washington — Republican or Democrat, liberal or
conservative — can achieve their goals unless our economy
prospers and creates jobs. Washington needs to understand that
legislation like the health-care law has costs as well as
benefits, that the costs suppress job growth, and that when too
much legislation kills too many jobs, everyone suffers.

Chief executives have responsibilities to their existing
employees, customers and shareholders. We simply cannot risk
their jobs and their money by investing when we know that
legislation like Obamacare will make it so much harder to earn a
profit. The sooner both parties in Washington understand this,
the sooner we can all begin looking for ways to strengthen the
social safety net without hurting the economy.(Andrew Puzder is the chief executive officer of CKE
Restaurants Inc. and co-author of “Job Creation: How It Really
Works and Why The Government Doesn’t Understand It.” The
opinions expressed are his own.)

For Related News and Information:
For more Bloomberg View: VIEW <GO>
For more on the health-care law: STNI OBAMAHEALTHBILL <GO>
For more restaurant news: NI RES <GO>

–Editors: James Greiff, Stacey Shick.

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Andrew Puzder at APuzder@CKR.com<mailto:APuzder@CKR.com>;.

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James Greiff at +1-212-205-0370 or jgreiff@bloomberg.net<mailto:jgreiff@bloomberg.net>.