Election Results Demand Legislative Compromise, But Outlook for New Congress Remains Unclear

SEMA News—February 2013

FROM THE HILL
By Dan Sadowski

Election Results Demand Legislative Compromise, But Outlook for New Congress Remains Unclear

A Fresh Start in Washington?

	During the ’80s, Republican President Ronald Reagan (left) forged many bipartisan compromises with Democrat House Speaker Tip O’Neill. Courtesy Ronald Reagan Library

Before last year’s election, we predicted that the U.S. House of Representatives and Senate would remain divided along party lines. The election results proved that prognosis to be correct. President Obama was reelected; Republicans continue to control the House and Democrats control the Senate. With the election behind us, we can now more fully explore the ramifications of continued divided government.

In the SEMA News November 2012 “From the Hill” column, we argued that if House and Senate control remained split, President Obama (or Romney) would be required to establish a tone of bipartisanship and cooperation early in his term to ensure any hope of legislative progress. However, while it appears to have been a “status-quo election,” there were changes of consequence.

President Obama earned a convincing victory, and Democrats increased their membership in both the House and Senate. As a consequence, the primary responsibility for fostering bipartisanship may have shifted from the president to Republicans on Capitol Hill. Conversely, President Obama will be tested on whether he has the leadership skills to bring the parties together and forge agreements. Much has been written about the compromises fostered by President Ronald Reagan and House Speaker Tip O’Neill. Can this be President Obama’s “Reagan Moment?” The short- and long-term fate of the country may depend on the answer.

Both sides enter the fray knowing that voters sent a clear message in the November election. Gridlock is unacceptable, and the president and Congress are expected to address the nation’s many fiscal and social problems rather than campaigning for the next election. Voters want the politicians to understand that it is possible to reach an accord that can be viewed by each party as a solution, not a victory nor a defeat.

Both sides also are well-versed in history. They know that divided government can work. Although it has failed recently, there have been previous times when split control was viewed as a way to maintain checks and balances. Recent examples from the ’90s include welfare reform and tax increases/spending cuts that led to economic prosperity. In the ’80s, a divided Congress and the president were also able to put in place the last major reforms of the tax and social security systems.

As this column is being written, the lame-duck Congress is meeting to decide if an accord can be reached on the nation’s budget to avoid the so-called “fiscal cliff.” Both House Republicans and the president are using careful language to demonstrate toughness while remaining optimistic for a bipartisan compromise to avoid massive tax increases and uncontrolled spending cuts. How the issue is resolved will set the tone in Washington for the immediate future.

Improving relationships between lawmakers plays a vital role in negotiating compromises. The last four years provided scores of examples of dysfunction, from abuse of the Senate filibuster to the president’s abstaining to work with Republicans on bipartisan solutions. The year 2013 offers an opportunity to hit the reset button.

We may have finally reached the end of the road in terms of avoiding decisions on issues of national importance. Kicking the can down the road has lost its appeal. A feeble economy, high unemployment, skyrocketing deficits and underfunded entitlement programs demand attention.

While it is also clear that the American public wants lawmakers to address domestic issues, the political landscape will likely be shaped as well by international events, including the state of the European economy, the crisis in the Middle East and the fight to deter a nuclear Iran.

So what does the election result mean for small-business owners? Lawmakers will decide whether to extend a number of tax breaks for businesses or reduce the overall corporate tax rate instead. The measures include renewal of the research-and-development tax credit, the bonus depreciation credit and Section 179 deduction. Capital gains tax rates may increase while the estate tax reverts to 2001 levels. The 2% payroll tax cut may end for workers, and income tax rates may increase for people at the 25%-or-above level.

As the new Congress convenes, SEMA’s government affairs office continues to advocate for common-sense solutions on behalf of member companies. The need for economic clarity and regulatory relief are key issues. The initial signs on Capitol Hill that lawmakers understand this need are positive. Should this environment of tentative bipartisanship continue, the results for SEMA members and business owners could be very positive.

For more information on the 113th Congress and how SEMA’s government affairs office is protecting your industry, your voice and your future on Capitol Hill, contact Dan Sadowski, director of congressional affairs, at dans@sema.org.