The Law Of Unintended Consequences

A number of U.S. companies have modified their accounting statements to reflect increased liabilities that will be imposed on them as a result of the “health care reform” legislation.  The latest (and largest) is AT&T, which is taking a $1 billion non-cash charge to its accounting statements for the first quarter of 2010.  AT&T says the charge reflects additional taxes it will have to pay.  The increased tax burden in this particular instance could cause AT&T and other companies to change — and perhaps eliminate entirely — benefits offered to retirees.

Congress’ response to this news is interesting and entertaining.  The Subcommittee on Oversight and Investigations of the House Committee on Energy and Commerce has asked the CEOs of the affected companies to appear for a hearing and to produce clearly confidential corporate documents, like analyses of the impact of “health care reform” legislation on the companies and other documents, including e-mails, prepared or reviewed by senior company officials concerning health care reform.  Copies of the letters to the company CEOs are available on the Energy and Commerce Committee website.  The tone of the letters is quasi-intimidating and humorous at the same time.  The letters earnestly state that “[t]he new law was designed to expand coverage and bring down costs, so your assertions are a matter of concern” and notes that the companies’ decisions “appear to conflict with independent analyses” like the Congressional Budget Office and the Business Roundtable.

The implication of these letters is that the Committee expects to find a giant cabal, in which large American companies have gotten together to take phony accounting charges to undercut the “health care reform” legislation and make the President and the Congress look bad.  Is Congress really so clueless?  Do they honestly think that large companies manipulate their accounting statements and take $1 billion charges for political purposes?  In this post-Enron era, the accounting statements of publicly traded companies are carefully considered and vetted by independent accounting firms and independent audit committees of the company’s Board of Directors; political views don’t enter into the equation.  And in this economy, do Members of Congress really believe that companies would take huge unnecessary charges that would make their earnings look worse than they already are?

Even more hysterical is the letters’ pitting of the decisions of company management against “independent analyses” from the Congressional Budget Office and the Business Roundtable.  Does Congress actually think that the generic findings of the CBO about decreased premium costs by 2016, or the comments made by the Business Roundtable months ago about some earlier version of the “health care reform” legislation, have more substance than the determinations of company executives who must grapple with how accounting and auditing standards require them to evaluate and report the liabilities of their companies based on the specific of their particular health care plans?

The congressional investigation will leave the company CEOs being summoned in a quandary.  They probably can’t refuse to attend.  In this era of big government, no American company wants to be in the cross-hairs of anti-business congressional committees.  But the alternative is not attractive.  If the companies produce sensitive corporate documents to a notoriously leaky Congress, those documents may end in the hands of keenly interested competitors.  And if the CEOs appear to testify, they will likely be browbeaten by a gang of know-nothings who couldn’t distinguish generally accepted accounting principles from a cracked pumpkin and who will attempt to shirk their own responsibility for foisting increased taxes and increased costs on American businesses.  The hearings won’t be pretty.

Don’t be surprised if other companies announce similar accounting decisions as a result of the changes made by the “health care reform” legislation and if, ultimately, benefit plans get changed materially as a result.  Congress is about to get a serious lesson in the law of unintended consequences and the repercussions of making poorly considered, wholesale changes in the law applicable to a huge chunk of the American economy.

The Jarring Questions On The Census Form

Today we filled out the census form for our household.  The form itself is interesting.  You are asked how many people live in your household and whether you own your own home with or without a mortgage, or rent, or “occupy without payment of rent.”  (I guess the latter category refers to people who live in government housing.)  You are asked your telephone number and your name.  And then you are asked a bunch of demographic questions about the members of your household.  What is their gender?  What is their age?  And, most noticeably, are they of “Hispanic, Latino, or Spanish origin,” and what is their “race” — “white,” “Black, African Am., or Negro,” “Japanese,” or “some other race,” among a number of other options?

The Census Bureau website offers explanations for why each of the questions is asked.  The website states that the Hispanic question (question no. eight) has been asked since 1970 to provide data to federal agencies to use in monitoring compliance with federal anti-discrimination provisions and to state and local agencies to help plan and administer bilingual programs.  With respect to the general “race” question (question no. nine), the website states that “race is key to implementing many federal laws” and that race data are needed to monitor compliance with the Voting Rights Act and the Civil Rights Act, to “assess fairness of employment practices,” to “monitor racial disparities in characteristics such as health and education” and “to plan and obtain funds for public services.”  The website adds that the race-related information also  is used by state and local governments to establish congressional and state voting districts.

The census has a long history of asking demographic and race-related questions.  According to the Census Bureau website, the first U.S. census, which was taken by U.S. marshals in 1790, asked for the name of the head of household and the number of people who fell into various categories — free white males over age 16, free white males under 16, free white females, all other free persons, and slaves.

Nevertheless, you would like to think that by 2010 — decades after our nation’s sordid history of legalized slavery, followed by Jim Crow laws and other forms of legalized bigotry and discrimination, was finally ended by the civil rights movement and the enactment of federal statutes designed to enforce constitutional guarantees of equal protection and to bar discrimination in voting, housing, and employment — we would have gotten past a fixation upon race and counting and categorizing people on racial grounds.  It is jarring, dispiriting, and seemingly inconsistent with the ultimate goal of a color-blind society for a federal government agency to ask people to identify themselves as “black,” “white,” or a member of some other racial group and to say that “race is key to implementing many federal laws.”

Clearly, when it comes to race we haven’t progressed as far or as fast as we might have hoped.  Let’s hope that, when the 2020 census rolls around, the race-related questions are gone and are considered as archaic as the questions asked in 1790.