These subsidies, while characterized by Democrats as "loopholes," actually saved the government money because it cost less to subsidize private drug programs than for the government to provide the same benefit through Medicare:
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."As explained at Volokh Conspiracy the write-downs must be taken immediately:
The writedowns are in response to the loss of a tax-free subsidy for providing prescription drug coverage to retirees. Several years ago, Congress decided it was better to induce corporations to provide prescription drug coverage for retirees than to have the costs paid by Medicare, so it enacted a tax-free subsidy, while still allowing companies to take a tax deduction for the coverage . Under the health care reforms Congress just enacted, however, the deduction will be eliminated in 2013.If these were just financial write-downs, the Democrats would not care.
Why are the companies announcing these changes? And why now if the tax change does not take effect until 2013? Because failure to do so could get the companies in trouble with the SEC. Under standard accounting rules, companies are supposed to take the charge in the quarter in which the tax law change is enacted, not when it takes effect. Because the first quarter ends Wednesday, more writedown announcements may be forthcoming.
But as explained at Powerline, the result will be the elimination of these private benefits for retirees, which has caused the bullies in Washington to use the power of Congressional investigation for intimidation:
Obamacare's chickens already are coming home to roost, and it only has been a week.
These announcements are the tip of the iceberg; hundreds like them will follow as Obamacare becomes a reality. Congressional Democrats, evidently stung by the bad publicity, are trying to strike back. A reader writes:
Good post on the true cost of ObamaCare. But it gets better: the Dems are now shaking down CEOs who don't get with the program. In the attached letter, Henry Waxman not only orders the CEOs of AT&T, Caterpillar, Deere & Co, and Verizon to testify before the Energy and Commerce Committee, but also to produce internal analyses and emails related to their statements. They don't expressly subpoena the CEOs, so we can hope that they tell the Dems to GFY, though somehow I doubt that will happen.
The Dems sent these letters to the Republicans on the committee after 6pm tonight with no advance notice or prior cooperation.
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