Just like that, Washington’s political landscape has shifted again.
Republicans expanded their majority in the House of Representatives and captured enough seats in the Senate to seize control of that body, splitting political power between the Capitol and the White House. And while it remains to be seen whether single-party control of Capitol Hill will diminish or deepen the gridlock in Washington, it has changed the outlook for some of the legislative items that tend to matter most to employers and entrepreneurs.
There are also new faces locally. Maryland voters elected Republican Larry Hogan governor, ensuring divided government in the Democratic-dominated state capital. And the District is getting a new mayor, Democrat Muriel E. Bowser.
Tax reform has been lingering just out of reach since the start of Obama’s presidency, but it may have a real shot to reach his desk now that one party controls both chambers of Congress. Rep. Paul Ryan (R-Wis.) and Rep. Orrin Hatch (R-Utah), who are likely to head finance committees in each chamber, have said that crafting a workable, comprehensive tax proposal would be a top priority. At a recent campaign stop, Ryan said he expects to have legislation ready sometime next year.
It’s worth noting that a Republican-authored tax plan may sit better with smaller businesses than the alternatives pitched so far by the White House, as Ryan and others have insisted on an overhaul that includes lower individual rates and lower corporate rates (the Obama administration has pushed for corporate-only changes). Small-business groups have noted that most small companies are set up as pass-through entities, so their owners pay taxes as part of their individual taxes and would thus see no benefit from a law that merely lowers the corporate rate.
— J.D. Harrison
Republican leaders have long said, and former presidential candidate Mitt Romney reiterated last week, that the party would move immigration reform toward the top of its priority list if it took control of the Senate. And even with the president expected to circumvent lawmakers with executive action on some of the most immediate immigration-related challenges, it appears the GOP will start crafting its own broader package.
While the devil will be in the details, and though it remains unclear just how broad an overhaul Republicans are interested in pursuing, there will be many business leaders pleased to hear that the issue could be back on the table. Some seasonal and tourism companies, for example, have complained that they are having trouble finding low-skill labor to help them operate during peak season. Meanwhile, technology executives have urged lawmakers to address what they see as a shortage in highly skilled workers in fields such as science and engineering.
While it has been the ultimate goal for some Republican lawmakers, the chances of a full repeal of President Obama’s signature health-care reform remains unlikely. Some political analysts have said they expect to see a repeal bill now finally reach president’s desk, but it would be swiftly vetoed by Obama. Republicans did not pick up enough seats to override a presidential veto.
However, that’s not to say that the outcomes last week will not have a significant impact on the law. Republicans are likely to start pushing through proposals that would chip away at the statute, and they have put a bull’s-eye on some of the most controversial provisions for small businesses — that is, rules requiring companies to provide health plans or pay a penalty, as well as language that define “full-time” worker status as at least 30 hours per week.
In many cases, Republican control on the Senate will put a clamp on the president’s agenda for his final two years, but there are a few exceptions. For example, his attempts to strike two massive trade deals — one across the Atlantic and another across the Pacific — have largely been thwarted by members of his own party, including now-outgoing Senate Majority Leader Harry Reid (Nev.).
With Republicans at the helm, Obama may actually find it easier to close those deals. During a speech at the White House last week, he said trade talks would be one of the first items of business he discusses with Republicans on the Hill. If successful, the deals could be a boon for companies that bring in materials or goods from abroad, as well as those that are interested in selling to customers overseas.
Perhaps counterintuitively, an effort to raise the federal minimum wage could get a boost under the new Republican-led Congress. On the campaign trail, a number of GOP candidates expressed support for a higher wage floor — an increasingly popular position among voters in both parties, as evidenced by the fact that all five states with minimum wage hikes on the ballot last week approved them. There’s some support for a higher federal limit as a way to bring some consistency to the hodgepodge of rates being set at the state and local level.
It’s an issue that has split business owners down the middle, as some have warned that forcing higher pay would hit their bottom lines and force them to cut back on hiring. Others believe that higher wages would put more money into the their customers’ pockets, resulting in more spending and higher sales.
Now that Republicans are set to take control of the Senate, the outlook for government contractors, especially defense companies, appears the slightest bit sunnier.
Defense companies from Lockheed Martin to Raytheon to BAE Systems overwhelmingly donated money to Republican campaigns in this election cycle, so the GOP’s victory is certainly not unwelcome.
“Defense contractors almost never take sides in elections, but they know that Republicans are generally more likely to favor their programs than Democrats,” said Loren Thompson, a defense analyst and consultant to Lockheed Martin.
Regardless of who is in control, federal spending on defense is likely to increase, analysts say, because there is no shortage of global conflict at the moment.
Both parties are in agreement that the Pentagon needs additional support to address geopolitical threats such as the Islamic State and the Ebola crisis, said Ryan Crotty, fellow and deputy director in the international security program at the Center for Strategic and International Studies, a think tank.
“The question is, what pays for it?” Crotty said. “There’s a political mandate that any additional spending you want to do has to be paid for by spending less from somewhere else.”
In the short term, contractors are waiting to see how Congress decides to fund the government before the end of the year. The government’s continuing resolution expires on Dec. 11. A lame-duck Congress has to decide whether to extend that resolution and maintain current funding levels or appropriate new funds. Defense spending is one of the key components of any funding measure that Congress decides on.
In the long term, the new Congress must also tackle the issues of sequestration, the debt ceiling and Defense Department funding in fiscal 2016, which come to the fore early next year and affect all businesses, including contractors.
“In terms of big issues, I don’t think anybody expects major progress” on budget priorities as a result of the election, said Stan Soloway, president and chief executive of the Professional Services Council, an Arlington-based trade group.
Instead, smaller measures on issues such as fixing the Pentagon’s procurement process are more likely, trade groups say.
“There’s an inclination to want to make government work well,” said Elizabeth Hyman, executive vice president of public advocacy at TechAmerica, an advocacy group. “We hope to see common-sense procurement and acquisition reform.”
Contractors are closely tracking changes in committee leadership after the Republican sweep.
For instance, Sen. John McCain (R-Ariz.) is widely expected to lead the Senate Armed Services Committee.
McCain, a former Navy pilot, has long been a vocal critic of cost overruns on big defense programs including the F-35 jet, which might put some weapons systems under the scanner.
But McCain is “a defense hawk” by any definition, Thompson said.
“That means if contractors can stand the pain, they’re probably going to end up better off in the end,” he said.
Similarly, Sen. Thad Cochran (R-Miss.) is expected to take over chairmanship of the Senate Appropriations Committee from Sen. Barbara Mikulski (D-Md.). This could mean additional funding for the Navy to modernize its fleet and potentially benefit contractors such as shipbuilder Huntington Ingalls, Thompson said. But it also gives Mikulski a less prominent perch from which to advocate for the region’s cybersecurity industry and press to locate the FBI’s headquarters in Maryland.
With the election out of the way, contractors are expecting a little more economic certainty, if only for a little while.
At the very least, “a Congress with one party holding both sides is more likely to be able to push through changes,” Crotty said.
— Amrita Jayakumar
There are currently 48 state laws governing how companies must notify their customers and employees if their data has been breached.
That makes it complicated for regional and national companies when a breach happens — if they are based in Washington but have employees or customers in a dozen states, for example, each of those dozen states’ different laws apply to how the company must notify those people.
For that reason, the business community as a whole largely supports the passage of a single federal law so that in the event of a breach, companies would only have to comply with one law as opposed to 48 different laws when notifying the affected customers and employees.
Versions of that legislation have been stuck in House and Senate committees, but now that the two chambers are both under Republican control, businesses are hoping that the passage of a unified federal standard will move more quickly.
— Catherine Ho
Taxes and patent trolls are two issues the retail industry is hoping the Republican-led Senate will take up in the next two years, according to David French, senior vice president for government relations at the National Retail Federation.
“From a government standpoint, we think [a Republican pick-up in the Senate] is an important step in the right direction,” he said.
Among other measures, NRF officials said a Republican-led Congress is more likely to pass legislation limiting the reach of “patent trolls” that have long plagued the retail industry with lawsuits, especially when merchants venture into e-commerce. Senate Majority Leader Harry Reid pulled the plug on a patent reform bill earlier this year, but a Republican-led Senate may be likely to resurrect talks, French said.
The lobbying organization warned that Republican control of Congress may make it trickier to pass a bill requiring online merchants to collect the same sales tax as their brick-and-mortar counterparts. Senate Majority Whip Richard Durbin (D-Ill.) has been a champion of sales-tax fairness, and with Democrats taking a back seat in the Senate, that could become a fading priority.
“With Durbin in the minority, the issue may be more challenging in 2015, so retailers need to step up efforts for the legislation to receive final passage during the lame-duck session,” J. Craig Shearman, vice president of government affairs at the retail group, wrote on the federation’s site Wednesday.
— Abha Bhattarai
Four years after the implementation of the post-Great Recession Dodd-Frank Wall Street Reform and Consumer Protection Act, regulation is still top of mind for banks and credit unions.
Financial institutions are hoping a Republican stronghold in Congress will make for loosened regulation and tweaks to Dodd-Frank.
If nothing else, having a clear majority in both the House and Senate will help pass legislation more quickly, according to Katherine Marisic, vice president of political affairs for the National Association of Federal Credit Unions. The Democratic-led Senate has blocked recent attempts by the House at changing key measures of the Dodd-Frank Act.
“We hope there is a real opportunity for some regulatory relief from Dodd-Frank that our members have been dealing with,” Marisic said. “The Republican-held Senate and the Republican-held House may be willing to work together on this type of issue.”