Dems admit health care charges to earnings were right
When major companies declared that a provision of the new health care law would hurt earnings, Democrats were skeptical. But after investigating, House Democrats have concluded that the companies were right to tell investors and the government about the expected adverse effects of the law on their financial results.While I am not an account, I have dealt with enough of them to know the companies were right all along.
At issue is a section of the law that eliminates a tax break available to companies that provide drug benefits to retirees as part of their insurance coverage. The tax change, expected to generate $4.5 billion of revenue over the next 10 years, will help offset the cost of providing coverage to the uninsured.
Within days after President Obama signed the law on March 23, companies filed reports with the Securities and Exchange Commission, saying the tax change would have a material adverse effect on their earnings.
The White House suggested that companies were exaggerating the effects of the tax change. The commerce secretary, Gary F. Locke, said the companies were being “premature and irresponsible” in taking such write-downs.
Representative Henry A. Waxman of California and Bart Stupak of Michigan, both Democrats, opened an investigation and demanded that four companies — AT&T, Caterpillar, Deere and Verizon — supply documents analyzing the “impact of health care reform,” together with an explanation of their accounting methods.
The documents — hundreds of pages of e-mail messages and financial worksheets — include large amounts of data that substantiate the companies’ concerns. They have reignited a battle over the law in Congress.
Representative Joe L. Barton of Texas, the senior Republican on the House Energy and Commerce Committee, said, “From a financial standpoint, from a purely economic standpoint, many companies would be better off discontinuing health care as a fringe benefit, paying the penalty and pocketing the savings.”
In a memorandum summarizing its investigation, the Democratic staff of the committee said, “The companies acted properly and in accordance with accounting standards in submitting filings to the S.E.C. in March and April.”
What this kerfuffle tells us is just how few Democrats in the White House and Congress comprehend business and their own accounting rules. What is even more surprising is that none of them had the common sense to pick up the phone and call the SEC and ask them whether the charges were appropriate.
They could have saved themselves a lot of embarrassment and saved the NY Times the trouble of having to bury the embarrassment inside the paper.