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NAW News

Now What?

- November 2008

The 2008 election is now history. On January 3, the 111th Congress featuring substantially-expanded Democratic majorities in both houses will be seated. Seventeen days later, President George W. Bush will step aside as Barack Obama becomes the 44th President of the United States.

Our new President and his allies in Congress will take office against the backdrop of a Nation fighting “hot” wars in two places, a floundering economy, financial markets recently in meltdown and “rescued” to the tune of over 700 billion taxpayer dollars, a $10 trillion national debt, and a Federal budget deficit that some experts estimate could reach as high as $1 trillion in this fiscal year.

Some might call it curious that the American people selected a person about whom precious little is known, to lead the nation through the twin crises of war and recession. Objectively, the President-elect has almost no record on Federal issues; he’s been a United States Senator for just four years, and prior to his 2004 election to the Senate, his only foray into national politics was an unsuccessful primary challenge in 2000 to a Congressman from the south side of Chicago. It’s tempting to be reminded of the 1972 movie “The Candidate,” in which fictional U.S. Senate candidate Bill McKay, a newcomer to the political scene, reacts to his unlikely victory over veteran incumbent Senator Crocker Jarmon, by asking his campaign manager, “Marvin … What do we do now?” Interestingly, the newly-minted U.S. Senator’s question goes unanswered.

It’s a question worth asking now. Sixteen years ago, Bill Clinton entered the White House in tandem with a Congress dominated by Democratic allies and pressed for an economic stimulus package, a tax increase, and health care reform. The result: in the 1994 mid-term elections that followed, the GOP picked up 54 seats in the House of Representatives and 8 in the Senate, propelling the Republicans to control of both houses in the 104th Congress, their first bicameral majorities in 40 years and a dominance Congressional Republicans would not fully relinquish for 12 years.

Only time will tell if past is prologue, but this we know …

A second economic stimulus package is on the horizon. In fact, this may be the final product of the 110th Congress that will convene in a pre-inauguration “lame duck” session on November 17th. Estimates of the size of the package start at $300 billion which will be added to the deficit, the former insistence of Congressional Democrats on “paying for” every revenue reduction or spending increase to the contrary notwithstanding. There appears to be a growing consensus that a second, spending-oriented stimulus of significant size is needed to boost demand in an economy featuring sinking consumer confidence. The emerging package is grounded in the thought that the first one was insufficiently large given the size of the economy it was supposed to “stimulate,” and that its tax benefits were used more to pay down existing consumer debt than to boost demand. Stay tuned for the size and composition of “Stimulus II.”

President-elect Obama campaigned on a tax increase platform. For example, the President-elect has proposed a redistributive program of higher taxes that features, among other things, raising the top marginal tax rate on “wealthy” individuals, and thus on thousands of businesses that pay taxes at individual rates, and an increase the capital gains tax rate. Again, if past is prologue, the President-elect and his allies seem likely to reason that the expiration of the current rates, enacted as part of President Bush’s 2001 and 2003 tax cuts, is self-executing so really isn’t a tax “increase.” That is more a political argument than an economic one, and does nothing to alleviate concerns about the effect of higher income and capital gains tax rates on demand, capital formation, and jobs in a struggling economy. Consequently, we have to be concerned that the new President will, with the help of his allies in Congress’ expanded Democratic majorities, go full steam ahead with his plan to increase taxes, particularly given his stated desire to use the tax code to “spread the wealth around,” and his expressed wish to increase the capital gains tax rate even were that to lose revenue.

Healthcare reform was routinely cited by prospective voters throughout the 2008 campaign as a leading domestic policy priority and both candidates for the White House spent a fair amount of time (and money) talking about it. On an issue as large, multifaceted, and complex as healthcare, it will come as no surprise that the competing reform prescriptions of both candidates had both desirable and unattractive features. The President-elect unveiled a program that builds on our employer-based system … a good thing for a number of reasons … but includes an employer mandate which isn’t. Employers that do not offer health insurance benefits to their employees aren’t misers. They are themselves the victims of rising healthcare costs they cannot afford. Heaping unaffordable healthcare costs on the bottom lines of employers that cannot bear them is bad for business and for workers and their families, with an effect that will be particularly harsh in tough economic times.

The same can be said for other proposed mandated benefits; paid family and medical leave imposed on a vastly wider range of employers for example, and regulatory costs: be on the lookout for the resurrection of the Clinton Administration’s ergonomics standard for example, that will drive up every employer’s cost of doing business and drive down productivity.

Perhaps … perhaps … our new President and his Congressional allies can be persuaded to hold off … to focus first on doing things that will restore a wealth and job creating growth economy for wholesaler-distributors and their employees, suppliers and customers. Given the bipartisan consensus that America’s economic and national security would be strengthened were we to reduce our crippling dependence on foreign oil and stop sending $750 billion a year to oil producing countries that don’t like us very much, moving on bipartisan legislation to increase domestic energy production from all sources would seem a good place for the new President and the new Congress to go to find their sea legs.

WHOLESALER-DISTRIBUTORS BEWARE! Organized labor, a Democratic Party constituency of long and good standing, has been waiting for a long time for the political stars to come into this highly favorable alignment. The unions have their public policy agenda, and nothing is higher on their wish list than the card check bill. The Democratic House passed the “Employee Free Choice Act” (EFCA) in the 110th Congress, but the majority leadership of the Democrat-controlled Senate was unable to muster the 60 votes needed to bring it to a vote. And had EFCA made it to the White House, an anti-card check President would have vetoed the bill. The House of Representatives in the 111th Congress can be expected to move quickly to pass card check, and pro-card check forces are in a stronger position in the Senate this time. Critically, President Obama will enthusiastically push for card check and sign the bill into law if given the opportunity.

This bill neither loses Federal revenue nor increases Federal spending, so there is no budget constraint to it. The only thing standing in the way of card check is the aggressive, engaged opposition of employers across the country to this attack on an American institution – the secret ballot. Expect the card check bill in the legislative queue early in the coming year.

On behalf of the National Association of Wholesaler-Distributors’ Board of Directors and its membership, NAW offers its congratulations to President-elect Obama and to the bipartisan and bicameral leadership and every Member of both houses of the incoming 111th Congress. NAW is the “national voice of wholesale distribution” with a grassroots presence in every state and congressional district in the country. We pledge our best effort to work with our new President and every Member of the 111th Congress as cooperatively and constructively as we possibly can on issues of interest and concern to the companies whose industry NAW represents.