A Stitch in Haste

Two items of note from Congress.

First, we have bad politics versus bad accounting:

The House voted Tuesday to override a rule that would require companies to count stock options against their profits...

The House vote was 312-111, with 198 Republicans and 114 Democrats voting for the bill that would block a proposal by the rule-setting board for accounting. The board is seeking to force publicly traded companies to record as an expense all forms of share-based payments to employees, including stock options.

...Sen. Richard Shelby...derided the House action as "political interference" in the work of independent accounting experts. "I will continue to fight any effort to pass similar legislation in the Senate," he said.

The House-passed measure...would limit required expensing of options to those owned by a corporation's top five executives. It also would allow newly public companies to delay expensing for top executives in the first three years.

I hope at some point to blog about why option expensing is a total red herring and possibly the dumbest idea in financial analysis. (For a primer, see here.)

But that's not my point here.  My point is that Congress has no business micromanaging the FASB. I couldn't find any numbers on how many House members have MBAs (they're all lawyers, remember?), but I guarantee you it's not many. And have you ever listened to the question-and-answer periods whenever Alan Greenspan testifies?  Most of them couldn't pass a simple Econ 101 exam. So these are the same people who are going to countermand the accounting experts? Bad on its face, and bad as applied.

Again, I disagree 100% with the FASB proposal. But I disagree 110% with Congress mucking around in an issue that few if any of them really understand. Leave it to the professionals to sort out.

Second, we have some monopartisan gridlock:

Republicans are looking toward September to restart talks on extending three popular tax cuts as prospects for a deal this summer ended in deadlock between the White House and the Republican-controlled Congress (SIC!!!).

The White House insisted that the three tax cuts, scheduled to expire at the end of this year, stay on the books for five more years. President Bush had asked Republican leaders to push a bill through Congress this week before a six week summer hiatus and the parties' presidential nominating conventions.

Lawmakers neared agreement late Tuesday to extend the three popular tax cuts for two more years. The shorter timeframe took into account worries among moderate senators, including a few Republicans, about record budget deficits.

The president rejected the two-year offer as insufficient, and tax writers pledged to restart talks when Congress reconvenes in September.
...
The tax bill is one of several items that have seen Republicans at odds with one another over the impact of tax and spending decisions on record budget deficits.

It's one thing for gay marriage to divide the Republican party...but tax cuts?!? (And remember, this is not really about "preserving tax cuts" ... it's about raising taxes!)

Sort of puts a damper on the whole "Vote Gridlock ... Vote Kerry" school of thought.