The ACA Strikes Again

 

 

"A company like Medtronic is like an organism. It only seeks to survive in a sometimes hostile environment..."

Over Father's Day weekend, when most were involved with summer plans or family events, a huge economic earthquake hit Minnesota. Medtronic, a stalwart of medical innovation and business in the Twin Cites, announced it was going to merge with (or buy) an Irish firm named Covidien. The price tag of this event will be a whopping $42.9B.

Now because this was announced over the weekend, I was not able to see much news analysis on this gargantuan merger. However, I did see some. A PR spokesperson for Medtronic said this merger was done to control costs, as some uncontrollable costs have gone up due to the new health care law. The analyst helped translate - the device tax of ObamaCare is driving more and more companies like Medtronic to merge. It is the only way for some to survive.

Now it does not take an MBA from Harvard to read into the rest of the story. Medtronic will be moving its executives to Ireland, which will now become the new headquarters for Medtronic. The operational headquarters will remain here. What sense does that make? Plan and simple, taxes. For Medtronic to relocate to a country rich in VAT taxes, shows how bad our Federal and State tax burden here really is.

The only humor in this story was when Medtronic CEO Omar Ishrak met with our beloved Governor. When he dropped the bomb that the Medtronic would be moving its headquarters overseas, he told Mark not to worry - this new merger will create 1,000 jobs in the Twin Cities. Really? Now I have been through one or two mergers in my career, and seen others happen. They are great for the shareholders, but seldom bring good news for the working troops. There is always a duplication of some efforts which results in redundancy, and that results in layoffs. If Ishrak said this move would cost 1,000 jobs, I might have bought that one.

So who will be next? Boston Scientific? St. Judes? Does anybody really care? According to our lap dog media, ALL jobs lost in the "Great Recession" have been replaced. Sunshine and lolly pops have returned to the neighborhood. Here is the real story. In a global economy, a company does not have any allegiance to a country nor a state. It only has allegiance to the shareholders. The jobs lost were good, well paying jobs. The jobs created for the most part are not. Having a country and state which is business and tax friendly can create an environment where good, well paying jobs are incubated. Unfortunately, the reverse is also true.

As ObamaCare continues to settle in across the land, more and more of its intended and unintended consequences are becoming known. As Frankenstein's Monster became something bigger and more evil than envisioned, so will the ACA. Take an unfriendly and murky tax future, and couple it with ObamaCare, you end up with the perfect storm which created the Medtronic exit.