A week after President Barack Obama signed his sweeping health care legislation into law in March, Rep. Henry Waxman (D-CA), the powerful chairman of the House Energy and Commerce Committee, called hearings demanding several prominent American CEOs appear in defense of their companies’ announcements the legislation could hurt their bottom line.
A few weeks later, Waxman’s office quietly announced the hearing had been canceled—raising the question of why it was called in the first place, and whether the possibility of future hearings could put companies in the spotlight for reporting negative financial news resulting from Obama’s plan.
Companies Required to Report
In the wake of passage of the health care bill, several major companies announced enormous tax writedowns resulting from the legislation’s costly new regulations and fees—some, as in the case of AT&T Corporation, in excess of $1 billion.
Waxman, in a March 26 letter to the chief executives of AT&T, Verizon Communications, Caterpillar, and Deere & Co., demanded the CEOs of these companies appear before his committee to defend these reports, and to turn over any internal communications regarding the announcements.
Charles Hooper, a health care scholar at the Hoover Institution and president of Objective Insights, a market research consultancy in California, said the Waxman hearings were canceled because congressional staff mistook required reports for a political statement. To abide by federal regulations, publicly held companies must report to their stockholders and to the broader marketplace when their tax liabilities are changed.
“Public companies, like AT&T, are under very strict regulatory rules on how to they should practice their accounting. I seriously doubt that these companies were tweaking their tax writedowns to make Obamacare look bad,” Hooper said. “They have to honestly report, and if they do not, they get sued by state attorney generals and shareholders.”
More Hearings Could Come
According to Hooper, more Congressional hearings like the canceled Waxman event will happen in the future as American companies adjust to expensive new regulations.
“There will be more and more hearings, of course. Companies have to make good business decisions that allow them to survive, and a lot of that is going to run counter to what the President and the Congress would like,” Hooper said.
“Congressional hearings offer Congressmen the chance to showcase their talents and make themselves look good while putting pressure on companies to play the political game,” he added. “They are a waste of time and effort, with a lot of heat and not much light.”
Hearings Would Be ‘Pure Extortion’
Diana Furchtgott-Roth, a health care policy expert at the Hudson Institute in Washington, DC, said the Waxman hearings would have been an act of “public relations blackmail.”
“I am afraid for corporate America because in reaction to canceling the hearings, the companies have now agreed to take a closer look at how Obamacare will [supposedly] lower their health care costs,” Furchtgott-Roth said. “Waxman has implied that if these companies do not come up with a different conclusion, he will rake you over the coals. It’s pure extortion.”
Furchtgott-Roth maintains if the Democrats do not want to see companies take such public tax writedowns because of Obamacare, they will have to change the nation’s accounting regulations.
“Waxman is using the power of his office to extort companies. These companies have to take these tax writedowns, and make them public, because that is the regulation according to the Securities and Exchange Commission,” she said. “President Obama’s Secretary of Commerce, Gary Locke, should speak to the Securities and Exchange Commission Chairman to get their regulations in order. You cannot have one regulation requiring open information and another saying ‘no, you can’t release that.'”
Companies ‘Will Bow to His Will’
Furtchtgott-Roth has broken down the figures and says more companies are going to be taking large tax hits because of Obamacare, a fact which could cause discomfort for the nation’s CEOs.
“More companies are going to be taking multimillion-dollar hits because of Obamacare. Waxman is going to make life very unpleasant for them. He has been known beforehand, pre-1994, to hold hearings directly attacking corporations and CEOs,” Furchtgott-Roth said. “Corporate America is not strong—it is very timid, and it will bow to his will.”
Incompetence a Possible Motivation
Edmund Haislmaier, an expert in health care policy and financial markets at the Heritage Foundation, thinks Chairman Waxman shut down the hearings because he realized he had made a mistake in calling them.
“There is another explanation for these hearings: Ignorance and incompetence. It’s possible Chairman Waxman and his fellow Democrats on the committee generally did not realize that when you take away a tax benefit from a company, regardless of its merits, that means the company will have higher taxes and lower net income, and that will trigger a reporting requirement with the SEC.”
Waxman ‘Backed Down’
Haislmaier suggests the committee staff exhibited gross incompetence.
“They did not realize that this was going to happen with the passage of Obamacare, and it’s possible the staff are just grossly incompetent when their first reaction to hearing that American companies were taking such large tax writedowns was to say ‘this must be evil CEOs trying to embarrass us’, and nobody in the room knew that publicly traded companies have to report their tax writedowns.”
As for whether Waxman may have learned from his mistake, it remains to be seen whether he will call for similar hearings in the future.
“The significance of these canceled Waxman hearings is that he backed down,” Haislmaier said. “They charged off to demand hearings, and then when they realized their mistake, they had to backtrack and say, ‘Never mind.'”
Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.