The Obama administration believes companies reporting write downs due to healthcare reform are doing so to hurt the administration:
So the wave of corporate writedowns—led by AT&T’s $1 billion—isn’t caused by ObamaCare after all. The White House claims CEOs are reducing the value of their companies and returns for shareholders merely out of political pique.
A White House staffer told the American Spectator that “These are Republican CEOs who are trying to embarrass the President and Democrats in general. Where do you hear about this stuff? The Wall Street Journal editorial page and conservative Web sites. No one else picked up on this but you guys. It’s BS.”
Just to make it clear this isn’t the belief of some errant staffer, administration officials made similar comments over the weekend:
The White House had no immediate comment on the matter, but administration officials said they believe the announcements are meant to underscore the businesses’ displeasure with the law.
This administration has reached, and crossed, a dangerous line: they are entering into paranoia. They believe that anything that’s inconvenient to them isn’t because they screwed up somehow–but rather because there are people out to get them.
This is a clear-cut issue: companies must recognize charges due to a change by the healthcare reform bill.
Some background: when President Bush and Congress added a prescription-drug benefit to Medicare, they provided a subsidy for companies that continued to provide their own prescription drug benefit for employees. The government would subsidize, tax-free, 28 percent of each employee’s health benefit. In addition, companies could deduct the full cost of the benefit from their taxes, so the subsidy was worth more than the 28 percent. This was done because the government didn’t want companies to dump their employees on the Medicare plan–in other words, because it was cheaper for the government to subsidize private-provided prescription drug benefit.
The Democrats’ healthcare reform changed the law so companies cannot deduct the subsidy from their taxes. This is arguably a good change (although not during a recession), but that’s debatable. Either way, it doesn’t concern us.
Companies, in accordance with GAAP, have recognized costs resulting from this change in law. That’s what Caterpillar’s $100 million and AT&T’s $1 billion charges are. That is how much the change in law will cost them over time.
Democrats, and particularly Henry Waxman and the administration, have crossed the line in characterizing these SEC filings as politically motivated. Here’s the reality: those companies are required by law to recognize it. The only politically-motivated part of this story are Waxman’s hearings and the administration’s claims.
It shows a disturbing disconnect from reality, willful or not, on the part of the White House and Congressional Democrats. Anything that makes them look bad is taken as an attack, a conspiracy against them.
That’s the kind of thinking, coincidentally, that Nixon employed. That’s dangerous.