Commentary Magazine


Topic: Enron

Enron Accounting, Obama-Style

James Klein of the American Benefits Council writes in opposition to the attacks by the administration and Rep. Henry Waxman that corporations’ write-downs of losses due to ObamaCare are some sort of political scare tactics:

The new health-care law contains two sentences that change the tax treatment of a subsidy originally crafted in 2003 when Congress established the Medicare prescription drug program. As a result, companies must now impose on their financial statements the present value of their entire new future tax liability. The Obama administration’s position is a) that the original tax provision was actually a “loophole,” and b) that companies are acting irresponsibly by refusing to acknowledge the overall cost savings associated with the new law.

Notwithstanding the unusual tax treatment in the original provision, the bottom line is indisputable: The subsidy exists for the express purpose of saving the government money by keeping retirees on company prescription drug plans rather than having them enroll in the Medicare drug plan. Now that Congress has reversed the policy, corporations must report eye-popping charges on their financial statements.

As Klein notes, it is the frenzied ObamaCare defenders who are playing politics with the tax code, and worse — berating corporations to defraud shareholders. (“As for the government’s assertion that companies are failing to adequately account for all the savings they will enjoy from health-care reform, isn’t that exactly the kind of “creative” accounting that got Enron in trouble?”)

This is the administration that promised to take the politics out of science and the ideology out of foreign policy. But in fact everything — including the tax code — is merely part of the Chicago machine, which threatens to mow down any rule, any entity, and any critic standing in its way. Lacking internal restraint and humility, this administration and the country would surely benefit from some robust legislative scrutiny and oversight. The voters in November will have an opportunity to check the voracious power of an administration of bullies.

James Klein of the American Benefits Council writes in opposition to the attacks by the administration and Rep. Henry Waxman that corporations’ write-downs of losses due to ObamaCare are some sort of political scare tactics:

The new health-care law contains two sentences that change the tax treatment of a subsidy originally crafted in 2003 when Congress established the Medicare prescription drug program. As a result, companies must now impose on their financial statements the present value of their entire new future tax liability. The Obama administration’s position is a) that the original tax provision was actually a “loophole,” and b) that companies are acting irresponsibly by refusing to acknowledge the overall cost savings associated with the new law.

Notwithstanding the unusual tax treatment in the original provision, the bottom line is indisputable: The subsidy exists for the express purpose of saving the government money by keeping retirees on company prescription drug plans rather than having them enroll in the Medicare drug plan. Now that Congress has reversed the policy, corporations must report eye-popping charges on their financial statements.

As Klein notes, it is the frenzied ObamaCare defenders who are playing politics with the tax code, and worse — berating corporations to defraud shareholders. (“As for the government’s assertion that companies are failing to adequately account for all the savings they will enjoy from health-care reform, isn’t that exactly the kind of “creative” accounting that got Enron in trouble?”)

This is the administration that promised to take the politics out of science and the ideology out of foreign policy. But in fact everything — including the tax code — is merely part of the Chicago machine, which threatens to mow down any rule, any entity, and any critic standing in its way. Lacking internal restraint and humility, this administration and the country would surely benefit from some robust legislative scrutiny and oversight. The voters in November will have an opportunity to check the voracious power of an administration of bullies.

Read Less

Misunderstanding Massachusetts

The Washington correspondent of Der Spiegel reacts to the Massachusetts election by suggesting Obama’s troubles may simply reflect “a case of the best US president at the worst time” — a great man understandably unable to bring “change” because he has to deal with so many crises:

Barack Obama has spent his first year in office fighting one crisis after another. Now he faces a political crisis of his own — the defeat in Massachusetts threatens his health care reform, his most important domestic project. Is it a case of the best US president at the worst time? …

In times of crisis, insecurity and defensiveness trump any openness to change. And since his inauguration Obama has had to deal almost exclusively with crisis management. The financial crisis, the automotive crisis, the jobs crisis, the climate crisis, the global crisis. There have never been quite so many crises.

The five crises do not quite compare with inheriting the Great Depression (FDR) or World War II (Truman), and memories are short about what George W. Bush faced in his first year: a recession caused by a burst Internet bubble; the failure of the seventh largest company in the country (Enron) and one of the Big Five accounting firms (Arthur Andersen); an attack on New York and Washington, D.C.; a stock market that crashed and an economy that tottered; the need to mobilize the country for a war in Afghanistan; a failed “peace process” inherited on Inauguration Day (with a new Palestinian war against Israel already in its fifth month); etc.

The difference is that Bush did not spend his first year blaming Bill Clinton for the Internet bubble or the inherited recession, or the ineffective response to the first World Trade Center attack and the multiple attacks thereafter, or the bungled peace process. Bush got tax cuts enacted that helped restore the economy; began his war on terror that kept the country safe for the next seven years; worked cooperatively with Ted Kennedy on major education legislation; and so on.

Obama spent his first year responding to the financial crisis with massive borrowed-money bailouts; to the automotive crisis with a government takeover and a transfer of wealth from secured creditors to unions; to the jobs crisis with a trillion dollar “stimulus” that didn’t work; to the climate “crisis” with a nonbinding international agreement featuring a blank appendix; and to the “global crisis” with … what?

Most of his time was devoted to ObamaCare, something unrelated to the five “crises” he faced and something that got more unpopular the more people understood it. He made a lot of trips and speeches, most of them reminding the country that now was the moment and telling the world that his hand was outstretched. For the coming year, he plans a huge tax increase in the guise of letting current tax rates “expire” and has no plan for the real crisis he will face: Iran.

He has not been the best president and these are not the worst of times — and the sort-of-God/best-president-ever treatment he received from the mainstream media contributed significantly to the problem he now faces. His belief that he just needs to slow down and “explain to people why we’re doing what we’re doing” is a more-cowbell response that ignores what Massachusetts was trying to tell him.

The Washington correspondent of Der Spiegel reacts to the Massachusetts election by suggesting Obama’s troubles may simply reflect “a case of the best US president at the worst time” — a great man understandably unable to bring “change” because he has to deal with so many crises:

Barack Obama has spent his first year in office fighting one crisis after another. Now he faces a political crisis of his own — the defeat in Massachusetts threatens his health care reform, his most important domestic project. Is it a case of the best US president at the worst time? …

In times of crisis, insecurity and defensiveness trump any openness to change. And since his inauguration Obama has had to deal almost exclusively with crisis management. The financial crisis, the automotive crisis, the jobs crisis, the climate crisis, the global crisis. There have never been quite so many crises.

The five crises do not quite compare with inheriting the Great Depression (FDR) or World War II (Truman), and memories are short about what George W. Bush faced in his first year: a recession caused by a burst Internet bubble; the failure of the seventh largest company in the country (Enron) and one of the Big Five accounting firms (Arthur Andersen); an attack on New York and Washington, D.C.; a stock market that crashed and an economy that tottered; the need to mobilize the country for a war in Afghanistan; a failed “peace process” inherited on Inauguration Day (with a new Palestinian war against Israel already in its fifth month); etc.

The difference is that Bush did not spend his first year blaming Bill Clinton for the Internet bubble or the inherited recession, or the ineffective response to the first World Trade Center attack and the multiple attacks thereafter, or the bungled peace process. Bush got tax cuts enacted that helped restore the economy; began his war on terror that kept the country safe for the next seven years; worked cooperatively with Ted Kennedy on major education legislation; and so on.

Obama spent his first year responding to the financial crisis with massive borrowed-money bailouts; to the automotive crisis with a government takeover and a transfer of wealth from secured creditors to unions; to the jobs crisis with a trillion dollar “stimulus” that didn’t work; to the climate “crisis” with a nonbinding international agreement featuring a blank appendix; and to the “global crisis” with … what?

Most of his time was devoted to ObamaCare, something unrelated to the five “crises” he faced and something that got more unpopular the more people understood it. He made a lot of trips and speeches, most of them reminding the country that now was the moment and telling the world that his hand was outstretched. For the coming year, he plans a huge tax increase in the guise of letting current tax rates “expire” and has no plan for the real crisis he will face: Iran.

He has not been the best president and these are not the worst of times — and the sort-of-God/best-president-ever treatment he received from the mainstream media contributed significantly to the problem he now faces. His belief that he just needs to slow down and “explain to people why we’re doing what we’re doing” is a more-cowbell response that ignores what Massachusetts was trying to tell him.

Read Less