Monday, April 5, 2010
HEALTH CARE CUTS PROFITS AND JOB CREATION
Blog: Common Sense Capitalism
In the few short weeks since the passage of the Obama Healthcare Bill, corporations have had to disclose that they will take earnings losses as a result of tax credit reversals under previous healthcare laws. Well, the Obama Administration sounded off to suggest that these write-downs were a vast CEO conspiracy to make a political point, even going as far as calling the write-downs “BS.”
I find it very humorous that these companies are actually following SEC and government regulations to disclose any knowledge of changes in earnings and are being called manipulators by the very people who defend the regulations. What else is there for these companies to do?
Now that we’ve got that “BS” out of the way, let’s focus on the losses these corporations are taking on ObamaCare.
AT&T has announced that ObamaCare will cost it $1 billion.
Caterpillar says ObamaCare will cost $100 million in the first year alone.
John Deere announced ObamaCare will cost them $150 million.
3M ($90 million), AK Steel ($31 million), and Valero Energy ($20 million) announced their ObamaCare costs.
Honeywell announced ObamaCare will cost its company $100 million.
Verizon released an email to employees advising them of an increase in healthcare costs.
Boeing ($150 mil), Prudential ($100 mil), ITW ($22 mil), Goodrich ($10 mil),
Allegheny Tech ($8 mil) have each announced their ObamaCare costs.
So what does this mean for jobs? I believe that each job created costs about $100,000 in salary, taxes, and benefits costs. So, how much are these write-downs when it comes to jobs?
If we take the above (and include Verizon as 0 since we don’t have an estimate yet), we get a total of $1,781,000,000 ($1.781 billion) in write-downs. Divided by the $100,000 in per job costs, we get 17,810 jobs.
While these are non-cash write-downs, they still exemplify real losses in earnings that have to be reported to the investment community. So, if you own stocks, mutual funds, a 401k, a Roth IRA, or any other type of public equity investment, your portfolio could take a hit when earnings of companies are released (especially if real ObamaCare losses are higher than estimates). This includes the above companies and any companies who decide to wait until they announce earnings to disclose ObamaCare related costs.
The above company’s disclosures of ObamaCare related costs immediately as opposed to an earnings announcement should have a short-term effect on the markets. However, if ObamaCare costs continue to be disclosed several months down the road, the market and your portfolio could suffer.
Keep an eye on our new page entitled “ObamaCare Costs” to keep up to date on ObamaCare related costs and the number of jobs those earnings are translated into. Please use our Facebook fan page to disclose any new ObamaCare costs.