CEOs won’t dare defy Waxman, even with facts on their side

Benjamin Domenech Research Fellow, Heartland Institute
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In the aftermath of World War II, the U.S. Senate War Investigating Committee called hearings in an attempt to publicly shame and excoriate industrial titan Howard Hughes. Hughes was accused of wasting taxpayer money on his F-11 and HK-1 projects. The hearings backfired as the stubborn Hughes accused the Senators of corruption and blackmail and of being beholden to his competitors, and he detailed the millions of his own dollars he spent on these projects.
The committee, embarrassed by the unexpectedly effective defiance of the infamous recluse, disbanded without filing a report.

Don’t expect that kind of defiance from the chief executives of AT&T, Verizon Communications, Caterpillar, and Deere & Co., if they respond to the demands of powerful Democratic Chairman Henry Waxman. In letters issued Friday, Waxman called on each of these CEOs to appear before his committee for the absurd purpose of defending internal memos to their own employees, and related statements to the press, about the impending changes in their health care plans.

Of course, these CEOs likely had little or no involvement in the estimates about how these new policies would affect their companies. They have hardworking professional staffers and auditors who focus on these issues for a living and make assessments not for the sake of politics but with an eye on what’s best for the company, its shareholders and its employees.

The trouble for Waxman and his fellow Democrat leaders arises from the direct conflict between the (accurate) statements of these companies and Obama’s oft-repeated promises that if you’re happy with your health care, nothing will change.
Obama said in Iowa City last week, “[My opponents] will have to finally acknowledge that this isn’t a government takeover of our health care system. They will see that if Americans like their doctor, they will keep their doctor. If people like their plan, they will keep their plan.”

The ludicrous nature of this claim didn’t prevent Obama from saying it again and again (but these are words, just words) even as the Associated Press, ABC News, FactCheck.org, and a multitude of independent groups found this promise inaccurate at best. These predictions were borne out within the week, as companies warned employees their coverage plans will change in the face of new taxes and cut off tax breaks for providing benefits.

In a regulatory filing last week, AT&T reported, “As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health-care benefits offered by the company.” It also announced that the health care legislation would result in a $1 billion first quarter non-cash charge against profits.

In some of these cases the companies are required to make 8-K disclosure filings detailing their shifting tax burden under the law. Federal law requires them to make these reports, and these companies would not have filed them if they didn’t have the internal and thorough documentation on the matter.

If the CEOs’ statements or subsequent testimony conflict with internal memos or downplay risks to their companies that eventually come to pass, or if they back off plans to save their shareholders money, they expose their companies and themselves personally to shareholder class-action lawsuits for securities fraud or breach of fiduciary duty. These would be filed, coincidentally enough, by Waxman’s allies in the trial bar.

Thus as CEOs face the choice of a fiduciary breach or a political backlash from partisan Washington, it’s still better to obey the law, even if a powerful Democratic Chairman gives you hell for it.

But compliance with the law is no excuse for embarrassing the President and his Congressional satraps. Waxman’s aims are clear: he must send a powerful signal to American business leaders that any criticism of Obama’s new health care regime, however well-grounded in the facts, will not be tolerated. You can’t govern a country with CEOs running around shooting off their mouths, talking about how your policies will hamstring their companies—especially if they’re telling the truth.

No one should expect these 21st century CEOs to follow Hughes’s example. They have shareholder interests to protect and massive government contracts they could lose. In the new American economy, the best way to get rich is to make something for the government, and no company wants to land on the feds’ enemies list. Even if the CEOs believe that Republicans will soon recapture Congress and send Waxman packing, back to the malodorous impotence of a Ranking Minority Member, they know that there are no certainties in electoral politics and that Congressional Democrats have long memories.

So Waxman’s attempt to add “meme-killer” to his resume in his committee chambers on April 21 is unlikely to be met with stubborn resistance from the CEOs themselves, but the numbers don’t lie.

From the beginning and in defiance of everything known about health care costs, reform was sold by the President and his allies as an economic boon, something that would help ease the burdens of business, lower premium costs, and make everyone happy. But that’s the problem with massive reforms based more on good intentions than on proven policy steps: they tend to run smack into the brick wall of facts. Obamacare is crashing much earlier than any of us expected.

Benjamin Domenech (bdomenech@heartland.org), a former political appointee at the Department of Health and Human Services, is managing editor of Health Care News.