OBAMA’S NEW RULINGS AND PFIZER’S RESPONSE TO NEW RULING
The first article gives an in-depth look at more new regulations coming out of the Obama Administration. The Obama Administration has till Mid May to issue new regulations (If Republicans win the White House and maintain control of Congress, any rule issued by Mr. Obama within 60 legislative days of the end of his term could be overturned. That is because a Democratic president wouldn’t be there to veto a congressional vote to block the regulation).
The second article by the Chairman and Chief Executive Officer of Pfizer explains how the U.S. pharmaceutical industry will be impacted by this week’s U.S. Treasury’s new ruling which will affect their competitiveness against foreign companies . Nancy
THE WALL STREET JOURNAL
Obama Readies Flurry of Regulations
Burst of rule-making comes in an election season that has already been tough on corporate interests
Planned moves—across labor, health, finance and the environment—range from overtime pay for white-collar workers to more obscure matters such as requiring food makers to disclose added sugar on cartons of flavored milk.
The expected burst of regulation follows an intense few weeks in which the administration has targeted corporate tax inversions, imposed new rules on brokers and advanced restrictions on company relations with union organizers.
The could’ve-been Pfizer-Allergan mega-merger was scuttled by new Obama administration regulations on corporate inversions and something called “Earnings Stripping.” How could these clampdowns be costly to companies with interests overseas? Jason Bellini has #TheShortAnswer. Photo: AP
The moves have drawn sharp reactions from business groups. After the tax rules, a top U.S. Chamber of Commerce official lamented “politicians bullying America’s job creators.” The head of the Business Roundtable, which represents big-company CEOs, criticized “unilateral action” by the administration.
The rush reflects President Barack Obama’s aim to use his final months in office to cement a progressive domestic-policy legacy using executive powers despite fierce opposition from a Republican-controlled Congress.
Business uncertainty from Washington may not change anytime soon. Presidential front-runners in both parties have shown greater hostility toward business in some ways, with Democrats promising stiffer regulation and Republicans calling for new tariffs or an end to subsidies.
In his first seven years, Mr. Obama issued 392 regulations deemed “major,” meaning each carries an expected economic effect exceeding $100 million annually. Forty-seven more sat on the drawing board for this year. The tally issued already tops the totals during the eight-year tenures of George W. Bush, at 358, and Bill Clinton, at 361, according to an analysis by George Washington University’s Regulatory Studies Center.
Raw tallies can be imprecise because they obscure particularly consequential regulations. The Environmental Protection Agency’s clean power plant rules issued last year, for example, would require a 32% cut in power plant carbon dioxide emissions by 2030 from 2005 levels. Such a bid to address climate change aims to reshape how energy is produced in America. In February, the Supreme Court granted a temporary order blocking the regulation until courts resolve legal challenges.
Although Mr. Obama has until his term ends in January to make regulations final, a deadline looms this spring. Congress can vote to stop any regulation within 60 legislative days of its completion. The president can veto such resolutions.
If Republicans win the White House and maintain control of Congress, any rule issued by Mr. Obama within 60 legislative days of the end of his term could be overturned. That is because a Democratic president wouldn’t be there to veto a congressional vote to block the regulation.
To issue regulations and still leave 60 legislative days before Mr. Obama’s term ends, he has to issue them by mid-May.
Executive orders aren’t subject to such a review, though Congress could pass laws to constrain or undo them. On Tuesday, Mr. Obama said the Treasury’s latest action to deter corporate inversions stemmed from the failure of Congress to overhaul international tax laws. “My hope is that they start getting serious about it,” he said.
Democratic front-runner Hillary Clinton promises to defend Mr. Obama’s executive actions and go even further on inversions. “This is not only about fairness. This is about patriotism,” she said in December when she promised to stop inversions along the same lines as this week’s actions.
GOP candidates pledge to use the same powers to undo Mr. Obama’s agenda, blaming regulations in part for an economic expansion that has been slow to lift incomes. At the same time, Republican front-runner Donald Trump has repeatedly castigated Washington for failing to stem the tide of corporate inversions and other candidates pledge to roll back corporate welfare.
Some regulatory expansion stems from legislation. The health-care and financial regulatory laws passed in 2010 instructed regulators to fill in specifics later. The Affordable Care Act is responsible for around one in four major regulations issued in the Obama administration, according to the George Washington University tally.
That count doesn’t include many others, such as those created by the Dodd-Frank Act, because they are enforced mainly by agencies outside the executive branch, like the Consumer Financial Protection Bureau.
For workers, the administration has proposed doubling the salary threshold that generally determines which workers are eligible for overtime pay—raising it from its current level of $23,660, last updated in 2004, to $50,440. Hourly workers who earn salaries below the threshold would become eligible for overtime pay if they work more than 40 hours a week.
Ed Brady, who runs a small home-building company in Bloomington, Ill., said he understands the need to raise the threshold but said the proposal would raise it too much at once.
The increase would require him to put his salaried white-collar employees on an hourly schedule. For his construction superintendent, who earns $36,000 a year before production-related bonuses, “I’m not sure he would be happy with that, or that I’d be able to keep him,” he said.
The Food and Drug Administration is preparing rules to update nutrition labeling on packaged foods and beverages to disclose added sugar. The labels would set the recommended intake of added sugar at no more than 10% of calorie intake.
All the rules face questions of how they will fare after Mr. Obama leaves. A court challenge offers opponents the best shot at directly stopping them, say analysts, but that takes time. Congress could curtail some through spending bills.
Despite GOP candidates’ frequent promises to repeal regulations, advisers to presidents say doing so may take time due to public comment and review.
“President Cruz or President Trump cannot walk into the Oval Office and say, ‘I’m getting rid of this regulation, that regulation,’ and expect that it will be done tomorrow, next week or even next month,” said Sally Katzen, regulatory chief during President Clinton’s second term.
Presidents also discover they don’t want to burn political capital repealing consumer or environmental protections. After Mr. Bush took office, his team reviewed regulations Mr. Clinton had enacted just before leaving. “We didn’t agree with a lot of them,” said John Graham, regulatory czar for Mr. Bush. But “refighting all those battles” wasn’t worth it.
Write to Nick Timiraos at nick.timiraos@wsj.com
THE WALL STREET JOURNAL
Treasury Is Wrong About Our Merger and Growth
The broken U.S. tax system puts American companies like Pfizer at a competitive disadvantage.
In the pharmaceutical industry we develop medicines and therapies to address world-wide health challenges. The work is complex and deeply gratifying. At Pfizer we employ more than 30,000 highly skilled people in the United States alone and invest almost $8 billion annually in R&D, much of it in the U.S.
Surely we benefit from world-class academic institutions, a highly skilled labor force and other attractions of doing business in the U.S. But the key point is so do our foreign competitors. And they pay significantly less for the privilege. So we compete in a global marketplace at a real disadvantage. The U.S. tax code has among the highest rates in the Western world and forces its multinationals to pay U.S. tax on income earned abroad if they want to bring it back to this country.
The real-world consequences are significant. In Cambridge, Mass., where Pfizer has a state-of-the-art research lab, we are surrounded by foreign-owned competitors’ facilities. When those companies invest in their facilities, it is often as much as 25%-30% cheaper than every dollar we put into research and jobs. Why? Because our competitors don’t have to pay the penalty imposed on U.S. corporations bringing earnings back to America. We can invest less—because of a broken tax system.
Pfizer has long worked with Congress to make the U.S. tax system more competitive and fair. In the absence of tax reform, we undertook a proposed merger with Allergan PLC in good faith and after intense study and review of current laws. This strategic transaction, driven by strong commercial and industrial logic, would have made it easier to invest in the U.S.
On Monday the U.S. Treasury announced a third set of new rules governing corporate re-domicilings, or so-called inversions. It surprised many because Treasury Secretary Jack Lew said in 2014 that “we do not believe we have the authority to address this inversion question through administrative action. If we did, we would be doing more. That’s why legislation is needed.”
This week’s Treasury action interprets the tax laws in ways never done before. This ad hoc and arbitrary attempt to single out and damage the growth opportunities of companies operating within the current law is unprecedented, unproductive and harmful to the U.S. economy.
The action was accompanied by much unfortunate rhetoric about tax avoidance. No one was shirking their U.S. tax bills. In a merger with Allergan PLC, an Irish company, we would have continued to pay all federal, state and local taxes on our U.S. income. All that these new rules will do is create a permanent competitive advantage for foreign acquirers. Simply put, there will be more foreign acquisitions of U.S. companies resulting in fewer jobs for American workers.
What fails to get noted is our steadfast commitment to science and good corporate citizenship. More than half of Pfizer’s 1,000-plus R&D collaborations take place in the U.S., where our partners include academic hospitals, government organizations, nonprofits, foundations, patient advocacy groups and other pharma companies.
Companies like Pfizer and Allergan contribute to the communities in which we operate. To be pilloried as “deserters” when we are trying to stay competitive on a global stage so that we can continue to invest in the U.S. is wrongheaded. Government policy should encourage investment certainty and job creation. Combining these two businesses would have had a positive impact on the lives and livelihoods of many people.
While the Treasury’s proposal is a shot at Pfizer and Allergan, this unilateral action will hurt other companies as well. If the rules can be changed arbitrarily and applied retroactively, how can any U.S. company engage in the long-term investment planning necessary to compete? The new “rules” show that there are no set rules. Political dogma is the only rule.
Pfizer will continue to make medicines that significantly improve lives. We are proud of our heritage, our commitment to patients and we will continue to drive for cures.
Mr. Read is chairman and chief executive officer of Pfizer Inc.
