Saturday, March 27, 2010

The First Fallout from ObamaCare

Mike shot in Operation Ivy (1952)
We are just beginning to experience the fallout from ObamaCare, and the effects won't be confined to the health care sector.

As required by federal regulations (or perhaps laws--I'm not completely sure which) SEC rules, Caterpillar has announced that it will take a $100 million hit in 2010 due to "additional taxes stemming from newly enacted U.S. health-care legislation." John Deere, another manufacturer of construction equipment, has announced that it expects to take a $150 million hit because of ObamaCare. AT&T has announced that it will take a "$1 billion non-cash charge for the current quarter." 3M plans to take a $85 million to $90 million charge related to ObamaCare. These losses will continue to pile up as more publicly traded companies report major changes in their financial situations. (This is one instance where a federal regulations rules are actually serving a public good.)

As these hits accumulate, the effects will rampage through the economy causing destruction far beyond the health care sector. In the construction industry alone, which is already struggling to put it mildly, these losses will destroy jobs (or slow job creation), increase construction costs, and give Caterpillar and John Deere yet another incentive to relocate operations outside the United States. Perhaps we should call ObamaCare the American Jobs and Businesses Destruction and Deportation Act.

Apparently, a subcommittee in the U.S. House of Representatives has called a number of these companies to give testimony about their "assertions," which is about a year too late. It would have been nice if Congress had examined the "unintended" economic effects before they passed health care reform. Were I a betting man, I would offer even money that several subcommittee members will rail against the corporate executives for daring to point out that ObamaCare will have devastating economic effects. Don't they know that Congress repealed the inconvenient laws of economics when they passed ObamaCare?

As if this weren't enough, ObamaCare has already begun destroying parts of the health care sector. Physician-owned hospitals currently under construction may never open because of the nonmedical bureaucratic requirements that must be met under ObamaCare before opening a physician-owned hospital. Essentially, federal bureaucrats will decide whether each new proposed hospital is needed according to a series of arbitrary thresholds set in Washington. The obvious winners in this bureaucratic nightmare are traditional hospitals, which will face less competition and less pressure to innovate and better serve their patients.

Restricting hospital construction will also reduce the number and availability of hospital beds--just one of the more obvious ways that ObamaCare will begin to ration health care. Limiting the number of doctors is another.

I wonder how many doctors will retire or take up different professions because ObamaCare will make practicing medicine no longer desirable or profitable to them. How many will set up shop in other countries to serve American medical tourists? Over the longer term, how many prospective medical students will choose other professions because practicing medicine is no longer worth the expensive education, hard work, lousy hours, bureaucratic red tape, and reduced pay? I can't say that I'd blame them.

Update on March 30, 2010
The Washington Examiner mentions that Securities and Exchange Commission (SEC) rules require companies to report "write-downs in the same quarter that a tax change is enacted."--Chris Stirewalt, "What thrills the Left will scare away the center"

Note: Perhaps using the picture of a hydrogen bomb explosion to illustrate the effects of ObamaCare is a bit much, but it's a beautiful picture, albeit of a very deadly weapon.

Hat tip: Rush Limbaugh website for the article on physician-owned hospitals.
Photo courtesy of National Nuclear Security Administration, Nevada Site Office

Further Reading:
Dennis Kneale, "7 Prickly Questions for ObamaCare," CNBC
"Timeline of Major Provisions in the Democrats’ Health Care Package," Republican Members of the House Ways and Means Committee


  1. Since when are Republicans for corporate welfare? These companies were double dipping. They were getting subsidies, and then getting to deduct that amount on their taxes. Now they are just getting subsidies under the new health bill.

    Are you telling me the Republican response to this "socialist" bill is to hand out more money to corporations. Why should big business get to double dip on the tax payer's dime? Talk about a redistribution of wealth.

  2. I'm not sure I feel sorry for Caterpillar. In 2009, Cat Financial reported revenues of $2.714 billion. $100 million sure doesn't sound like much - except for deceptive publicity for people who don't follow where the decimal goes very well.



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