In the game of dominoes, when the first one is knocked over, each domino proceeds to knock down the one behind it. The same holds true for corporate America as the first dominoes have fallen on companies like AT&T and Caterpillar due to the increased taxes from the health care bill. While AT&T becomes the company for whom the bell doesn't toll, Caterpillar will now rot in it's cocoon instead of morphing into a butterfly.
How are the increased taxes impacting these companies? In simple terms, accounting change rules require a change to be recorded when a law goes into effect, not at the point in the future when the cash is actually spent. Therefore, the future taxes extorted from these companies will be recorded in the first quarter of 2010 financial statements. Isn't that just special?
Of course Waxman has called a hearing of these companies' CEOs to meet with him and the other mob bullies in Washington. What they will learn is that the accounting rules are set by the FASB (Financial Accounting Standards Board) not Congress, and that Waxman and his mob cannot just coerce these companies into submission. We'll see how that turns out since the mob seems determined to fight to the death.
As it stands right now, as noted by the Heritage Foundation these are just the first side effects. There is a lot more on the horizon.
The companies noted here are just a sampling. The first quarter results of all public companies will be victims of the "change" promised by Obama, and no doubt be posting first quarter losses resulting from the impact.
The results of this is actually multi-dimensional. The stock market will most likely experience a decline as companies post these losses. Investors will react by either selling or refraining from future investments. Less investments or lower stock value means less capital for companies to use to expand and grow, and the economy will continue to shrink.
This is only the beginning though, as these are only estimated losses. Reality will kick in later, as the estimates are re-analyzed, and no doubt additional losses will be incurred.
Of course, these companies could recover these losses. So, what are their options?
- Option 1: Companies would lay off employees, thus increasing the number of unemployed Americans, in order to try to achieve a profit.
- Option 2: Companies would pass off these increased taxes to the consumer, resulting in all products and services costing you more (including the cost of health care), and less demand for everything other than necessities, since consumers have a budget, earn the same salaries, and will not have more money to spend.
Both of these options impact demand as they will both result in the consumer having less money to spend. Less money spent results in less revenue earned by companies. When companies make less money, they lay off workers, thus increasing the number of unemployment which decreases demand, and the cycle continues on a downward spiral.
It becomes a vicious cycle without an end in sight, until companies shrink to the point of bankruptcy. Death by taxes becomes a self fulfilling prophecy, thanks to the government take over of health care.
Oh, but let's not stop there! Let's kick everyone while they are down. Just in case companies use their American ingenuity to find ways to survive, Obama wants to double down. Under the guise of reform, Obama plans to inflict additional wounds on Wall Street to ensure that companies bleed to death.
No doubt, Obama the SuperZero will rush out of his Ratcave and "rescue" everyone with government bailouts until the government owns everything.
Obama, Pelosi, Reid and all the other traitors in the house and senate have knocked down the first dominoes, and the rest of the companies will follow, continuing until they achieve their end game when the last domino falls with our economic collapse. Game over. These are the worst players for our nation. We need new players to start a new course and send the dominoes in a better direction. It is time to call this game and start a new one. The new game is scheduled to start in November.