Repeat: It's Still the Economy, Congress

We’re in a strange kind of limbo in Washington, DC, these days. President Barack Obama is all over the country hustling his jobs package – “If you love me, help me pass this bill” – and he’s busy setting the stage for a 2012 run against a Congress that doesn’t apparently see the wisdom of White House job creation schemes. We have congressional spending committees going through the motions of deciding how much money the government will spend in fiscal year (FY) 2012, all the while everyone knows they’ll likely just pass a continuing resolution or extend FY 2011 limits until the new Joint Special Committee on Deficit Reduction finishes its budgetary voodoo. And we’ve got lots and lots of rhetoric about farm bill, tax reform, immigration, energy, and other vital issues but no plan on how to get any of them to the president’s desk.

If I were paid a lot of money to sit on cable talk shows and wax political, I’d lay out all kinds of arcane reasons and motivations privy only to someone as smart and connected as I as to why Washington is in this holding pattern. But since I’m not – paid a lot of money, that is – I’ll just tell you: It’s the economy, stupid.

Actually, it’s the economy and no one has a sniff how to get it moving. Is there something that can be done to get the housing market off its knees? Are there real, long-term jobs that can be created? Smarter people than I are struggling with what to do and when to do it when it comes to lighting a fire under corporations currently sitting on an estimated $2 trillion in cash they won’t spend. Is there a way to get all that off-shore multi-national income back on U.S. tax rolls?

What it apparently boils down to from an industry perspective is a lack of certainty. There are no beacons out there guiding business through the choppy seas of Washington partisanship and infighting. However, company executives are telling Washington it makes no sense to make significant spending obligations either to expansion or hiring or both without concrete indicators of regulatory direction, availability of various federal program dollars, tax reform and how extensive might it be, and whether Congress is actually serious about a bipartisan approach to curtailing federal deficits.

There are at least a few bits of evidence to analyze. First, by October 14, the new Joint Special Committee on Deficit Reduction – of which being a member, insiders contend, is either the best job or worst job in Congress – will have in-hand the recommendations from various authorizing committees on how the super deficit committee should cut programs under each committee’s control. The panel then sets about slashing an astonishing $1.5 trillion from federal spending. The good news is that plan must be voted on by December 23, 2011. If it isn’t or Congress rejects it, then across-the-board cuts totaling $1.2 trillion minimum kick in. There’s one indicator.

Included in those committee plans will be recommendations from both the Senate Finance Committee and the House Ways and Means Committee. These are the panels that fashion tax policy and write the laws, and it’s hoped that because of louder and louder bipartisan calls for tax reform and because the chairs of these two committees – Senator Max Baucus (D-MT) and Representative Dave Camp (R-MI) – are also members of the deficit reduction gang, “real” tax reform will be included in the cuts forthcoming.

The focus then shifts to how extensive that tax reform might be. Both House Speaker John Boehner (R-OH) and Obama have paid at least lip service to the need for comprehensive reform and both Baucus and Camp have echoed their respective leader’s sentiments. House Republicans, however, draw the line at any kind of tax increase. Obama, in his jobs bill, has already called for capping total federal tax deductions at 28 percent for individuals making $200,000 a year or couples earning $250,000 a year, while eliminating just about all federal tax breaks for the oil and gas industry.

In his speech to the joint session of Congress, Obama talked about “reforming the corporate tax rates in this country,” while Boehner goes a step beyond and calls for a significant reduction in both personal and corporate tax rates. Boehner also upped the ante in a mid-September speech to the Economic Club of Washington, saying he’s willing to look seriously at closing loopholes and cutting some tax deductions and credits. In interpreting Boehner’s remark, insiders point to $800 billion in revenue enhancers agreed to by Boehner and the president just before the deficit reduction deal blew up and Boehner walked away from negotiations with the president. That package is still on the table and will serve as at least a starting – some say ending – point for the debate over tax reform.

Then there’s regulatory uncertainty. Businesses are hoping against hope the Republican-controlled House will be able to rollback or kill outright several major pending regulatory actions by the Obama administration. While most of these are actions by the Environmental Protection Agency (EPA) – dust, greenhouse gas emissions, boiler/power plant emissions – the House has already passed legislation that overrules the National Labor Relations Board (NLRB) on its action to stop the Boeing Corporation from building a production line in South Carolina. Also on the chopping block for House anti-regulation forces is another NLRB rulemaking that would expedite union organizing by “streamlining” the union election process. Will the Senate go along? It’s too soon to tell.

The Obama administration is also taking baby steps in its desire to at least be perceived as serious about regulatory reform. The president has already killed off a low-level ozone – we call it “smog” – rulemaking after the Congressional Budget Office and the Office of Management and Budget put a multibillion-dollar annual price tag on it. EPA also announced in mid-September it was “indefinitely delaying” its boiler/refinery emissions regulations, and it’s expected the agency will similarly delay its air particulate or “farm dust” rules.

The good news is politicians are saying the right things, and to a degree, the administration is starting to do some right things.

However, industry needs to see a lot more action and would prefer a whole lot less rhetoric. The bellwether on jumpstarting the economy will be the success – or lack of it – by the deficit reduction committee. One smart thing included when that committee was created was lawmakers inserted hard and fast deadlines for action, so at the very least, we’ll know earlier rather than later if success is likely.

If that “special” panel can do what it’s charged with doing, do it by December 23, and can do it without an unreasonable amount of public demagogy, then perhaps that success will begin to restore at least some modicum of confidence in both executives and the citizenry at large.

But then again, maybe not.

October 2011 RENDER | back