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Sunday, March 28, 2010

As Obamacare Damage Rolls In, Democrats Act Surprised

AT&T, Deere & Co., Caterpillar, AK Steel, 3M, Valero Energy and Verizon are simply the tip of the iceberg on corporations that are announcing that due to Obamacare they will be forced to make writedowns. (Via WSJ)

AT&T- $1 billion
Deere & Co.- $150 million
Caterpillar- $100 million
AK Steel- $31 million
3M- $90 million
Valero Energy- up to $20 million
Verison has already warned employees that their health care costs will now have to rise.

This wholesale destruction of wealth and capital came with more than ample warning. Turning over every couch cushion to make their new entitlement look affordable under Beltway accounting rules, Democrats decided to raise taxes on companies that do the public service of offering prescription drug benefits to their retirees instead of dumping them into Medicare. We and others warned this would lead to AT&T-like results, but like so many other ObamaCare objections Democrats waved them off as self-serving or "political."

The kicker?

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."

In other words, shoot the messenger. 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.

Democrats were warned but they were so set on jamming through their agenda without consideration of the damage it would do and companies are starting to file their reports now that Obamacare has passed.

Expect more news like this to start coming out.

When companies lose money, they either go broke, raise prices or lower the quality of their benefits because they are not in business to lose money.

Who will end up suffering? Consumers, taxpayers, employees and their families.

I wonder how long before we start hearing talk of more bailouts.