Sunday, March 28, 2010

Damned If You Do...

By Paul Hsieh

As a result of ObamaCare, multiple corporations have recently issued statements about the harmful effects the new law will have on their bottom lines.

According to "The ObamaCare Writedowns" in the March 27, 2010 Wall Street Journal:

Yesterday AT&T announced that it will be forced to make a $1 billion writedown due solely to the health bill, in what has become a wave of such corporate losses.

...On top of AT&T's $1 billion, the writedown wave so far includes Deere & Co., $150 million; Caterpillar, $100 million; AK Steel, $31 million; 3M, $90 million; and Valero Energy, up to $20 million. Verizon has also warned its employees about its new higher health-care costs, and there will be many more in the coming days and weeks.
Several Washington politicians are mad, making threatening statements against these companies:
Commerce Secretary Gary Locke took to the White House blog to write that while ObamaCare is great for business, "In the last few days, though, we have seen a couple of companies imply that reform will raise costs for them." In a Thursday interview on CNBC, Mr. Locke said "for them to come out, I think is premature and irresponsible."

Meanwhile, Henry Waxman and House Democrats announced yesterday that they will haul these companies in for an April 21 hearing because their judgment "appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs."
But as the WSJ notes, these companies are required by federal law to do exactly what they are doing -- namely, to accurately report their financial situation according to their best judgment:
Black-letter financial accounting rules require that corporations immediately restate their earnings to reflect the present value of their long-term health liabilities, including a higher tax burden. Should these companies have played chicken with the Securities and Exchange Commission to avoid this politically inconvenient reality? Democrats don't like what their bill is doing in the real world, so they now want to intimidate CEOs into keeping quiet.
(Read the full text of "The ObamaCare Writedowns".)

Hence, the government is placing these companies in a damned-if-you-do-damned-if-you-don't position.

If they truthfully report how much ObamaCare will cost them, they're being "irresponsible" for not agreeing with the politicians' party line about how ObamaCare will save money -- and they could face Congressional hearings.

If they ignore reality and instead report falsehoods to suit the politicians' wishful thinking, then they could face legal punishment for violating SEC rules.

I can think of no worse perversion of the rule of law than for the government to force honest men into this kind of impossible situation.

[Crossposted from the FIRM blog.]

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