Contrary to popular perceptions, the United States has a much smaller small-business sector (as a share of total employment) than other countries at a comparable level of economic development…The authors observe that the undersized U.S. small business sector is consistent with the view that high health care costs discourage small business formation, since start-ups in other countries can tap into government-funded health care systems.
Krugman proposes two explanations:
One is our lack of national health insurance; I personally know a number of people who gave up jobs at small firms in order to get health coverage. Another possibility, more favorable to the United States, is that in some European countries (Italy comes to mind) firms stay small to escape onerous regulations.
And piles on:
Either way, though, one more American myth bites the dust. We’re not independent free spirits; on the contrary, we’re more likely than Europeans to be cubicle rats working for big employers.
If reforming health care is the key to revamping small businesses (even if removing the employer tax exclusion is initially painful), then by all means. This report should only increase the drive of progressive politicians to do the right thing, and it should hold to account the “centrist” senators that taut the American free spirit.