While a vote on health care reform legislation appears to be imminent, should it pass it could have broader economic implications, even if the bill itself won’t take effect for some time.
As CNBC “Mad Money” host Jim Cramer predicted – if it passes, get ready to see a sell-off on Wall Street. Cramer appeared on CNBC’s March 18 “The Kudlow Report,” with his former broadcast partner Larry Kudlow. Kudlow asked Cramer to elaborate on his theory ObamaCare could send the financial markets reeling or “topple the stock market,” as Kudlow described it.
“First, it is the single biggest impediment to the stock market going higher,” Cramer said. “And a lot of this has to do with what's not being talked about enough with how it's going to be paid and also about what it will do to small business formation. This bill is a disaster for both.”
Cramer said the uncertainty this health care bill present to entrepreneurs is an obstacle, but he also explained the anticipated higher taxes that will finance this legislation are going to be another barrier for higher stock prices.
“You're either going to have health care premiums go up dramatically, which is just terrible, particularly if you and I wanted to start a business,” Cramer said. “We would have no idea how much it would cost. But the last thing we want to do is start it. Probably stay at our old job. Yet you and I know that small businesses are the secret. That's how we get employment in this country. Or we have dramatically higher taxes. And it looks like -- people won't even realize it when it hits them – but you and I fought very hard for a very long time to reduce taxes and I think we played a role. Reduce taxes on capital gains, reduce taxes on dividends.”
And with higher taxes, Cramer explained the appetite for risk won’t be there for investment in the economy.
“At a time when the investor is just completely flummoxed, doesn't know what to do – I think it’s going to lead to big selling in the second half of the year, when people say, ‘Jeez, all the reasons, the favorable tax treatment that made us risk owning stocks – going away.’ Very bad for the stock market.”
But that’s just the tip of the iceberg Cramer said. If health care passes, Obama will make a push at amnesty for illegal immigrants – that in turn will be covered by this health care legislation at a cost to every one else.
“I think this is a two-step process,” Cramer said. “The first step is this health care – which they scored it as not being that bad for taxes. You and I think that's a little disingenuous. But what will happen next, I think Obama will be emboldened as he would be – a big victory. So the next thing is a push for amnesty for people who have immigrated to the country not legally. And I think that's where you're really going to get the step in the function up in the cost of this. I wish that we would – the debate in Congress dealt more with this because what would really break the back of Treasury is a whole group of people who we never thought we'd be covering who we will be covering.”
The “Mad Money” host suggested these impediments will constrict the American entrepreneurial spirit.
”This is where I think, again, if you're going to try to get employment down – which I think you and I both know is the secret to the growth of this country and the secret to restoring our country's greatness, frankly – you can't have impediments put in that are certainly going to counteract any of these little job bills that Congress is passing. I think the single biggest impediment is before I hire an employee it's going to cost me $12,000. I better stay at my old job. I better not start a new job. And yet America is based on people taking those risks and starting new jobs.”
Cramer has rumbled with the White House before, criticizing the Obama administration’s “lurch toward populism.”  In March 2009, Cramer drew the ire of the White House with a “Today” appearance.  Asked by Matt Lauer whether or not Obama’s policies are “shareholder friendly,” Cramer declared, “This is the most, greatest wealth destruction I’ve seen by a president” As a result, Press Secretary Robert Gibbs called out Cramer in a press conference.