2011: Now Trending in Public Affairs

05 January 2011

By Michael Kehs, US Director, Public Affairs

With the Republicans taking back the House of Representatives and greatly reducing Democratic ranks in the US Senate, it will be almost impossible to enact any controversial legislation. We are unlikely to see legislation of the magnitude of the 2010 Patient Protection and Affordable Care Act and Financial Reform for the next two years because of simple arithmetic.

In the Senate 60 votes are required to bring a measure to the floor.  Virtually every issue of any consequence faces a filibuster threat. With a new alignment of 53-47 in the 112th Congress the Democrats will find it tough sledding to attract seven Republican votes. For the Republicans to find 13 Democratic votes will be nearly impossible. Minority Leader McConnell has publicly indicated that finding 41 votes among his Republican Caucus should prove no problem. This means he controls the legislative agenda even though Democrats cling to a narrow majority. If he does not want an issue addressed, it will not be addressed. Gridlock will likely reign despite the punditry corps’ current claims that the political parties have to work together to address the on-going economic tribulations.

Over in the House of Representatives expect an onslaught of legislative initiatives.  With the Republicans controlling at least 242 seats, based on the most recent tabulations, and only needing 218 votes to pass a bill, they can pass whatever they like with little fear of the Democrats countering their priorities. Plans are in the works for the “bill of the week” to demonstrate to the electorate that Republicans are in tune with public desires to see more done to create private sector jobs and reduce government spending. However, when these bills make their way over to the Senate they are likely to be unceremoniously tossed aside.

Although the prospects for momentous action are bleak, divided government could lead to the enactment of narrow legislation in any of these broad areas if either side shows a proclivity toward compromise:

  • Tax Reform (Tax cuts, International competitiveness)
  • Regulatory Reform
  • The End of Earmarks
  • Tort Reform
  • Energy Jobs Initiative
  • Healthcare Law Changes

Corporate Implications
The potential consequences of the change in Congressional leadership could pose a serious set of new challenges for Corporate America. Some corporations are mistakenly interpreting congressional gridlock as a positive indicator that they are no longer in the crosshairs. What has changed is the venue for action, not the threat of government intervention into a whole host of business activities. The Obama administration has been signaling for some time its intent to become much more focused on regulatory activity.

Federal agencies have a backlog of rules to promulgate. They are working against a White House-imposed deadline of 2012, prior to the next Presidential election.  The Environmental Protection Agency, under Administrator Lisa Jackson, has shown an unprecedented willingness to circumvent the legislative process, unilaterally issuing rules that antagonize a wide swath of the business community.

Large healthcare and drug companies will face over 40 major rules implementing the Affordable Care Act. Every company that depends on Medicare and Medicaid reimbursements will be affected. Over 200 rules are said to be in the works to implement the changes to our financial laws. Investment banking, credit card companies, insurance interests and accounting firms are all in play.

Infrastructure and transportation related businesses are facing acute appropriations concerns given the Republicans’ disdain for any “stimulus” oriented measures. Telecommunications companies are in for more FCC regulatory action encompassing a myriad of concerns from net neutrality to broadband.

In this environment, every company now has a new business partner–Uncle Sam–whether they like it or not. The bottom-line for business is they will have no choice but to engage with government, find allies and shape public policy at every opportunity.  Not engaging puts American businesses’ bottom-lines in severe jeopardy.

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