Bad ideas, both. This sort of micromanaging via legislation always gets Congress in trouble. Mandating insurance coverage is the worst sort of market-meddling, and it will inevitably drive up insurance rates. And such meddling almost always has unintended consequences. The Senate Health, Education & Labor Committee wants insurers to pay for colonoscopies, but what will happen when newer, more effective testing procedures come along? Insurers and their customers will be saddled with the old technology.
POLITICAL PASSIONS. Every year, Congress seems to fixate on one medical procedure. It has required coverage for mental-health care, demanded that insurance companies pay for mammograms, and insisted that hospitals keep mothers longer after giving birth. These may all be worthy issues, but keep them in mind when your insurance rates rise by 20% or more this year. It's better to let the market for health care sort such matters out.
The stock options matter is even more egregious. On July 15, Senator Phil Gramm (R-Tex.) temporarily derailed the effort that would require companies to take a charge against earnings for stock options granted to executives and employees. Top Democrats vow to try again. And this is just the latest skirmish in what has been an unseemly battle in an arena where Congress has no business.
For nearly a decade, Congress has been meddling in the accounting treatment of options. In 1994, the Financial Accounting Standards Board (FASB) was ready to require companies to recognize on the books -- or, in auditspeak, expense -- the cost of options. But the Senate, responding to massive business lobbying, sent FASB a not-so-subtle message: Don't even think about it.
WRONG THEN, WRONG NOW. FASB, the body that was charged with developing accounting standards, is supposed to be independent. But congressional pressure, combined with business opposition, was too intense, so FASB backed off. The use of options exploded. And the rest, as they say, is history.
A couple of years ago, Congress jumped into accounting standards yet again. That time it was to stop FASB from requiring companies to change the way they disclosed to shareholders the value of mergers. Once again, the accounting board backed off in response to the Hill and corporate pressure.
Now, with lawmakers falling all over themselves to show they're tough on corporate corruption, a goodly number of senators want to get back in the options game. I believe that expensing options is a good idea. But just as the Senate was wrong to block expensing in '94, lawmakers would be wrong to demand expensing now.
PEDAL TO THE MEDDLE. This is not a matter for politicians. Lawmakers are also considering creating a new regulatory system for accounting, which they certainly have the right to do. And they aren't wrong when they say the current arrangement is toothless. But once they settle on a system for developing bookkeeping rules, they should let the standard-setters do their job.
Business, of course, is howling that Congress is mucking around in complex accounting rules. It's hard to feel sympathetic, since the same corporate lobbyists worked so hard to get Capitol Hill to meddle back in the '90s.
It's tempting to just write this off as payback. But if we have learned anything in the post-Enron, post-WorldCom world, it's that accounting is too important to be lefts to pols. Congress should just butt out. Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BusinessWeek Online