The Waxman Inquisition

March 30, 2010

Several large companies have announced that they are taking charges to reflect expected losses resulting from the Obamacare legislation, specifically the deductibility of subsidies for providing retired employee drug coverage. [1] The White House says these companies get the dual benefit of a subsidy and a deduction, so the removal of the deduction simply closes an over-generous loophole. Be that as it may, the change represents a substantial reduction of income for some large employers.

The companies and their announcements, as reported by Business Week, are as follows:
AT&T: $1 billion
Deere & Co.: $150 million for the current fiscal year
Caterpillar Inc.: $100 million for the first quarter of 2010
Verizon: Said the law change “may have significant implications for both retirees and employers.” [2]

Since these announcements tend to put the health care law in a bad light, Rep. Henry Waxman must of course hold hearings to grill the CEO’s and try to intimidate them for daring to suggest that the law might need to be changed, and that it will deliver a serious blow to their bottom line.

Rep. Henry Waxman (D-CA), chairman of the House Energy and Commerce Committee, has “requested” internal documents justifying the write-downs, and asserts that “independent analyses” show that the law is supposed to reduce their costs. So Waxman is preparing a hearing apparently to disparage these companies for the sin of giving unfavorable publicity to the Congress and Administration. Of course, this plan could backfire by bringing even more negative attention to the health care law.

Waxman appears to think that these companies just wanted to embarrass the Democrats. These announcements should be justly embarrassing, but why would the companies make such announcements? It seems an expensive ploy, if that were the purpose. But they have valid reasons and requirements to fulfill. Accounting rules require that these known future losses be taken on their books at current value. Failure to do this would be misleading to investors. The companies do this in spite of the probability that their stock prices could go down as a result, something they do not wish to have happen.

Waxman wants to defend the law and put pressure on some of its critics. The Democrats’ strategy is generally to try to silence critics, demonize them, and, if possible, criminalize them. Waxman must know this is an unjustified and costly inconvenience. The “independent analyses” by the Congressional Budget Office have been based on information provided by the Democrats, who view the health care “reform” through rose-colored glasses. The things that are supposed to provide lower costs are not likely to happen (huge Medicare cuts, etc.) and the tax picture (in addition to the changes whose effect is being recorded by these companies) is unfavorable and probably largely unknown as to how bad it will really be.

Democrats hope to lay a trap to embarrass and intimidate the executives they are summoning. It remains to be seen whether the execs will be assertive or submissive. Generally, they want to be on the government’s good side, but at what cost?

The heretics must be called to account for the sin of doubting the cost-effectiveness of Obamacare. Even if they expected some financial benefit down the road, they can’t record that until it actually happens. Those pesky accounting rules again.

Meanwhile, they are expected to dig up every email, worksheet, confidential document, and published document to explain their decisions, and be prepared to defend them and to explain their accounting methods. They are asked to testify at a hearing on April 21, and to provide the requested information by April 9. And for what? For Waxman’s bullying PR stunt. None of Waxman’s efforts on this serve the public interest in any way.

In Waxman’s letters, he claims to be concerned about “unintended consequences.” This is just the tip of the iceberg of unintended consequences. That is largely the main characteristic of the results of liberal legislation. Of course, this particular legislation was passed as quickly as possible, with as little concern for (or knowledge of) the actual content as possible. As Rush Limbaugh pointed out, when this law results in the collapse of insurance companies, it will be explained as a private-sector failure that has to be corrected with a single-payer plan. That is what Obama and the liberals have wanted all along. Meanwhile, how dare any private sector employers question its effects?

[1] Byron York, “Democrats threaten companies hit hard by health care bill,” 03/28/2010, Washington Examiner.com.

[2] Viola Gienger, “AT&T, Deere CEOs Called by Waxman to Back Up Health-Bill Costs,” 03/27/2010, Bloomberg Business Week.


See copies of letters from Waxman to the executives here.

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