Voters Opt for the Status Quo

In Tuesday’s elections, voters opted for the status quo where the balance of power will remain shared among President Barack Obama, Senate Democrats and House Republicans.

Unlike the past three elections which resulted in significant changes in incumbents and party control, the federal government essentially remains unchanged despite a reported $6 billion in advertising spending. Much of the change that did occur in congressional races was a result of the once-in-a-decade redistricting as a result of reapportionment.

Heading into Election Day, history was on the side of the president. Since World War II, only three presidents were denied a second term by voters – Ford, Carter and Bush ’41. Incumbency is a powerful factor and it certainly benefited Obama. When Republicans were enduring a rancorous primary, his campaign was able to build a massive Get-Out-the-Vote (GOTV) ground effort which would eventually drive his supporters to the polls in key battleground states.

Obama also benefited from an improving economy. The unemployment rate is down to 7.9% from 9.1% in January. The number unemployed is down by three million workers over the last two years. Consumer confidence is up 30 points from one year ago. While no one is satisfied with where the economy is at today, and there is clearly much improvement needed, the perception of voters regarding the current economy is that it is improving and people are starting to believe that better days are once again within reach. This was simply not the case one or two years ago.

As we saw in the results, much of the president’s coalition remained intact. While votes in Florida are still being counted, Obama carried all the states that backed him in 2008 with the exception of Indiana and North Carolina as well as Nebraska’s second congressional district. As it stands today, Obama received 303 electoral votes to Romney’s 206. Though the difference in votes is stark, the margin of victory within the battleground states was close.

In many of the competitive Senate races where there was no distinct demographic or partisan advantage, the deciding factor was the quality of the candidate. Simply put, the better candidate who ran the better campaign won. This was the case in 2010 when Republicans fielded exceptional candidates (i.e. Ayotte, Portman and Rubio) and is still the case in 2012.

Would the outcomes have looked different if:

• The Republican field had not been cleared in Florida? • Less controversial candidates had not been the nominee in Missouri or Michigan?
• If Sen. Lugar (R-IN) had decided to retire, making it more likely that a different candidate would have emerged from the primary?
• If someone other than a now 35 year old who had just taken the oath of office as State Treasurer three months before announcing his run for Senate in Ohio had been the nominee?

At the same time, there were several races where the strongest possible Republican candidate was on the ballot with Heather Wilson (R) in New Mexico, Linda Lingle (R) in Hawaii, Linda McMahon (R) in Connecticut and Sen. Scott Brown (R) in Massachusetts. Maybe in a non presidential election, the results could have been different, but all fell to their challengers in the four Democrat leaning states.

The Senate becomes slightly more Democratic when it convenes in January. The balance of power will be 53 Democrats, 45 Republicans, 2 Independents (expected to caucus with Democrats) and includes 12 new members (8 Democrats, 3 Republicans and 1 Independent).

Following redistricting, neither party could claim an outright victory in the number of House seats that would clearly change hands simply due to redrawing district boundary lines. However, there was significant change resulting from the new lines at the district-by-district level. A large number of incumbents decided not to run for re-election largely because they faced too steep of a re-election fight simply because their district became too favorable to the challenging party.

A significant shift also occurred in the number of competitive districts that could possibly change hands. Many districts that were once competitive were made much safer for one party. With Republicans in control of the redistricting process in more states than Democrats, the result was that more Republican seats were moved into safer territory. This resulted in Republicans having to defend fewer seats, especially many from the large 2010 freshman class, than they would have if the maps had not changed. The new, simple math of it all in the House gave Republicans a distinct advantage in maintaining majority in a non-wave election year.

As a result, there is only an expected net gain of +6 seats for Democrats – a far cry from the 25 needed to regain control of the chamber. As it stands now, voters elected 233 Republicans and 193 Democrats. Nine races are still undecided. The freshmen class will include at least 82 Representatives (35 Republicans and 45 Democrats).

Unlike the last three elections where one party clearly won the day, this election was more of a split decision. Democrats win the night on points by taking the biggest prize in winning the White House and also maintaining control of the Senate though Republicans can claim important victories in keeping control of the House.

Republicans certainly will look at the 2012 election as an election of missed opportunities. They could have done better, but Democrats benefited from a slow, but improving, economy and a better set of candidates in key senate races.

The main result of Tuesday’s federal elections is that the balance of power remains unchanged.

Legislative Impact

For the second consecutive cycle Congress will be closely divided and moving large pieces of legislation will be difficult to overcome Senate filibusters. The outstanding questions remain: Will there be more partisanship or more bipartisanship? Will Congress avert the fiscal cliff?

The agenda for the next Congress will largely be dictated by what the lame duck does or does not accomplish. Issues that could be considered in the lame duck include the expiration of the Bush era tax cuts and tax extenders, increasing the debt limit, Obama 2010 tax cuts, the Medicare Doc Fix, and Department of Defense Authorization.

Below is a run-down on issues AGC anticipates will be on the agenda for the next Congress.

Federal Funding/Budget

Congress enacted a continuing resolution (CR) to fund the government and avoid a shutdown before the election. Under the CR, government spending for the first six months of fiscal year 2013 remains at about FY2012 levels through March 27, 2013. Sequestration, which is an across-the-board cut to defense and non-defense discretionary spending, must be dealt with in the lame duck. Otherwise, these cuts will go into effect January 2, 2013.

The earmark moratorium pushed by the Republican conference last Congress will likely continue.

Infrastructure Investment

The 112th Congress suffered from stimulus hangover, which made advancing pro-infrastructure legislation a challenge. Several federal construction accounts saw significant cuts through the appropriations process. The 112th Congress did manage to pass short-term FAA and transportation reauthorization bills which expire at the end of fiscal year 2014. AGC is actively involved in including pro-water and transportation infrastructure policies and funding solutions in any potential lame duck legislative packages. In the likelihood that the lame duck session of Congress does not fully address AGC priorities, the 113th Congress will have to deal with authorization bills for Clean and Drinking Water State Revolving Loan Funds, the Water Resources Development Act, and transportation and aviation.

• Transportation Infrastructure: MAP-21 provided stable funding for the Highway Trust Fund through FY 2014 but did nothing to address the long-term viability of the trust fund. If a “grand bargain” is reached in the lame duck there is a possibility of increasing revenue going in to the trust fund. If a "grand bargain" is not reached and Congress instead puts a framework in place that could lay the groundwork for a larger deal in the 113th Congress, it is possible to include the long-term viability of the Highway Trust Fund in that framework.
• Water Infrastructure: Much work remains unfinished on water/wastewater infrastructure. For the lame duck, fiscal cliff legislation remains a target vehicle for the popular private activity bond legislation, and "grand bargain" legislation remains a target vehicle to take water infrastructure out of the deficit-spending financed general fund with establishment of a clean water trust fund. If the Water Resources Development Act (WRDA) is brought up, it will be a target vehicle for a WIFIA mechanism. In the 113th Congress, SRF reauthorization and SRF appropriations will be the earliest targets, with initial action expected in the Senate.
• Water Resources Development: The Senate Environment and Public Works Committee is in the process of drafting a Water Resources Development Act (WRDA) 2012 bill. The long-shot goal would be to bring up the bill in the lame duck. Considering the earmark ban the bill would be considerably smaller than in years past. The House will not consider a WRDA bill in the lame duck. In the 2013 Congress, the challenges for a WRDA bill under the earmark ban are not great. There is a possibility that the House and Senate could consider smaller WRDA bills. If Congress decides to revisit its earmark ban, the chances for moving a WRDA bill increase.
• Federal Facilities Infrastructure: The 112th Congress worked on a number of legislative proposals to create a "civilian BRAC" program that would allow federal agencies to more quickly and dispose of excess real property, encouraging redevelopment of those properties. Given the host of competing priorities on a tight legislative calendar, passage of such a measure may be difficult in lame duck but a renewed effort could continue next year. With funding challenges, particularly as a result of the federal spending budget caps and possible sequestration cuts enacted under the Budget Control Act, in the 113th Congress it does not bode well for new spending for federal facilities in FY 13 and beyond.
• Aviation Infrastructure: Following 23 short-term extensions, a three-year reauthorization of the Federal Aviation Administration was passed in the 112th Congress. FAA shares the same expiration date as MAP-21(9/30/2014) meaning the next Congress will be responsible for transportation and aviation reauthorization bills.
  

Labor/HR Policy

After AGC and the broader business community success in preventing passage of the Employee Free Choice Act, card check, in prior Congresses, attention turned to the Department of Labor (DOL) and National Labor Relations Board (NLRB) where the Obama administration began pushing an aggressive anti-business agenda. Other federal agencies also saw the opportunity to not only pursue regulatory alterations of big labor priorities, but to also increase widespread enforcement.

• Union Organizing: In 2011 the National Labor Relations Board (NLRB) issued a series of controversial regulations and rulings that now threaten to upend the long-established federal labor relations law in favor of unions at the expense of employers and employees. The new rules advance the same ends of the Employee Free Choice Act, so-called “card check” legislation, that was rejected by Congress. Congress will unlikely pass any legislation blocking these rules, but the house can be expected to hold oversight hearings on the NLRB.
  • Quickie Election Rule: The NLRB issued a final rule on union organizing elections. The NLRB’s “quickie” or “ambush” election rule would effectively expedite the union election process, limit employers’ opportunity to communicate with workers about union representation, and deprive employees of the ability to make a fully informed decision. The U.S. Chamber of Commerce and the Coalition for a Democratic Workplace (CDW), both of which AGC is a member, successfully brought the lawsuit challenging the rule on several procedural and substantive counts. The NLRB appealed the decision and the earliest we expect a ruling would be late spring or summer of 2013.
  • Notice Posting Rule: The CDW and co-plaintiffs persuaded the U.S. Court of Appeals for the District of Columbia Circuit to issue an order on enjoining a rule issued by the NLRB to require employers to post certain notices of employee rights under the National Labor Relations Act. The notice posting rule could have a decision as early as this month.
  • Recess Appointees: The CDW has a case pending that challenges Obama’s unlawful appointments to the NLRB. A decision in this case could occur in the spring or summer of 2013.
• Safety: Congressional action in the 112th Congress was noticeably quiet. Many Democrat-pushed initiatives never received debate. However, the Occupational Safety and Health Administration (OSHA) under the Obama Administration’s continued working on major rulemakings on exposure to Silica and requiring employers to implement an injury and illness prevention program (I2P2). Under the Obama Administration the federal budget priorities for OSHA have focused resources and goals on enforcement, while ignoring the benefits of cooperative programs, and this theme can be expected to continue.
• Immigration: Comprehensive immigration reform will remain a challenge in the next Congress and President Obama may show a renewed interest in trying to move the Development, Relief, and Education for Alien Minors Act (DREAM Act). The DREAM Act may pass the Senate but would face an uphill battle in the House. The DREAM Act would give conditional permanent resident status to undocumented individuals who entered the U.S. before their 16th birthday and are pursuing higher education or part of the military. Piecemeal legislation may gain some traction. However, that has shown to be a challenge as well. Also facing an uphill battle will be the development of a reasonable new visa program as well as liability protections for use of E-Verify. Senators Schumer and Graham will likely continue to be the main players on immigration in the Senate.
• Project Labor Agreements: The Obama Administration is expected to continue to encourage agencies to use Project Labor Agreements (PLAs). GOP attempts to legislate against PLAs will likely be futile. However, a GOP House can provide oversight on agencies requiring the use of PLAs to ensure that any agreements are fulfilling the executive order set forth by the Administration.
• Pensions: The progress and consensus on reform principles made by stakeholders in the multi-employer pension community could make it possible to get some traction on reasonable pension reform, although Republicans will need to be convinced that pension reform will help employers as much, if not more, as employees. AGC and stakeholders will be proposing reforms to protect the long-term viability of pension plans and the ability of employers to meet their pension obligations.
• Health Care: It is highly unlikely Congress will be able to fully repeal the Affordable Care Act. A House GOP-led effort, which is also an uphill task, could work to delay the implementation of the law. The Obama Administration has been slow to provide key details on the law's health insurance exchanges. Delaying the 2014 start date would save the federal government money and avoid many problems, since most states are in no position to run their own exchanges yet.

Tax Policy

• 2001, 2003 & 2010 Tax Cuts: If Congress is unable to reach an agreement on the Bush-era tax cuts during the lame duck, they will either need to enact a temporary extension of existing policy or they will see rates automatically increase and sequestration automatically cut spending. Comprehensive tax reform, including dealing with the debt limit, sequestration and expired and expiring tax policies likely will dominate the Congressional agenda next year.

Energy & Climate Change Policy

• Climate Change: One of President Obama's most frequent criticisms from the left is his stance on energy/climate change. During the election, both candidates played up their support for domestic coal and oil production. Expect the President to refocus on the climate-change issue and press forward with a regulatory agenda the speeds up and expands existing GHG rules. Cap-and-Trade legislation is still unlikely in the House, but potential now for some kind of broad energy legislation in the Senate. A possible substitution for a Cap and Trade that could be more palatable is a carbon tax, especially where the revenue is directed in such a way as to garner additional votes.

Regulations

Contractors and project owners must already comply with a myriad of complex federal, state and local legal and regulatory requirements throughout the construction process including, but not limited to, zoning, procurement, environmental, labor, and health and safety. Meeting these requirements has become an increasingly burdensome responsibility for contractors and, in some cases, delaying, if not threatening, construction projects and increasing the cost of doing business. Recent studies have put the current regulatory compliance price tag on American businesses and individuals at more than $1 trillion annually.

The Obama Administration will likely continue to use the regulatory and enforcement process for making policy changes they are unable to have enacted by Congress. Below are some of the top regulations likely to affect the construction industry in the next year.

Labor/HR Issues:

• Office of Federal Contract Compliance Programs (OFCCP): Rules with preferences for veterans and individuals with disabilities have been proposed. The rules have detailed recordkeeping requirements for recruitment and promotions, along with a 7 percent hiring goal for these classes of workers. AGC opposes the rules because government enforcement data shows no discrimination by federal contractors against these individuals. Conversely data collected from U.S. business shows the first-year economic impact to comply with the rules would be $2.2 billion each year.
• National Labor Relations Board (NLRB): Final rule known as "Quickie" election rule would shorten time for union representation elections, among other changes, to limit employers communicating with employees. Rule has been blocked pending a court challenge. AGC opposes the rule because the current timeframe and system works. According to the NLRB's own statistics, the average time from petition to election is currently 31, days with over 90 percent of elections occurring within 56 days, and the union wins two-thirds of all elections.
• Department of Labor (DOL): Proposed rule know as "Persuader" rule would broaden reporting requirements of labor relations consults as well as advice provided by associations. The rule has not yet been finalized. AGC opposes rule because it would have a damaging impact on the construction industry due to various unique features of labor relations and labor law in the industry, and due to the rule's inclusion of association-provided advice and education as "persuader" activity.

• Office of Management and Budget (OMB): Executive Order on Project Labor Agreements encourages federal agencies to use these agreements. AGC opposes government-mandated project labor agreements because they can limit number of competitors on a project and there is no evidence proving that a PLA will improve efficiency of a project.

Transportation Issues:

• Department of Transportation (DOT): Changes to rules requiring the use of the Disadvantaged Business Enterprises (DBEs) on transportation construction projects have been proposed. Among the proposed rule changes would be a requirement for prime contractors to submit with their bids a list of DBE subcontractors that will be used to meet contract goal requirements. Significant penalties will be imposed for failure to use the DBEs on the list. AGC opposes the rule revisions because there is no justification for DOT to make the changes, compliance with the revised rule will make it far more burdensome for prime contractors to comply with these requirements, and the net result will likely be decreased DBE utilization.
• Department of Transportation (DOT): DOT has proposed altering the hours-of-service rules that limit the amount of time truck drivers can drive, be on duty, and when they must take breaks. The proposed rules would impact the construction industry by imposing requirements intended for long-haul operations on contractors working in local markets. AGC opposes the new rules because construction industry truck drivers do not undertake the type of long-haul driving that the rule was intended to regulate. These new rules will make it difficult for the construction industry to meet construction schedules and complete vitally needed infrastructure improvements.

Safety and Health Issues:

• Occupational Safety and Health Administration (OSHA): Proposed rule known as "Silica" rule would increase the permissible exposure limits of silica that may be impossible to comply with in the construction industry. AGC opposes the rule because industry has already made significant progress in the last 40 years and the rule would impose $5.5 billion in annualized compliance costs.

Environmental Issues:

• Environmental Protection Agency (EPA)/U.S. Army Corps of Engineers (USACE): Guidance designed to clarify federal Clean Water Act jurisdiction has been proposed and is nearly final. The guidance significantly expands the scope of waters to be regulated by EPA and USACE, and is inconsistent with the procedural protections built into the rulemaking process. AGC opposes the guidance because of the added time and costs associated with significantly expanding the potential number of construction sites that would need to get a Section 404 permit to comply with the Guidance. EPA will decide to either continue with finalizing the guidance, or initiating a rulemaking on the issue of federal jurisdiction, or both.
• Environmental Protection Agency (EPA): The final court decision is expected shortly on the stormwater effluent limitation guideline’s (ELG) numeric limit. The Best Management Practice (BMP) regulation is already finalized, and will be incorporated on a rolling basis into each state’s permit as they come up for renewal.
• Environmental Protection Agency (EPA): The Fine Particulate Matter (PM2.5) NAAQS rule has been finalized, so over the next two years EPA will be going through state data and assigning nonattainment designations. States will have to incorporate new standards into their State Implementation Plans for transportation or risk losing funding. Similarly, EPA is likely to initiate a separate NAAQS rule for ozone control midway through next year, to be finalized in 2016. This will then also go through nonattainment designation and incorporation into state implementation plans, or else states risk losing transportation dollars.
• Environmental Protection Agency (EPA): Expect the Administration to refocus on climate change as an issue in a second term, especially as we see a domestic fossil fuel production boom. Look for them to increase their regulations on greenhouse gas (GHG) emissions and expand existing ones. Or, look for increased regulations on GHG as a tradeoff for increased drilling rights on public lands and offshore drilling.

The Sequestration Fiscal Cliff: Potential Impacts to Construction

As part of the Budget Control Act of 2011 (BCA), Congress passed and President Obama signed into law an automatic, indiscriminate process of across-the-board budget cuts called sequestration. Set to occur on January 2, 2013, the sequestration process would cut approximately $109 billion from defense and non-defense programs in fiscal year (FY) 2013 alone. Next, with these cuts in place, budget caps would limit annual federal government spending levels each year through FY 2021. The combined impact of the BCA is estimated to save the federal government $1.2 trillion. Both Republicans and Democrats have stated their intent to mitigate the sequestration cuts. Negotiations will be ongoing during the lame duck session of Congress and could extend into the new 113th Congress.

If the current law remains in place, the sequestration process would reduce many federal construction investment accounts, with the exception of the Highway Trust Fund, Airport Improvement Program, Department of Veteran Affairs accounts, and General Services Administration accounts. By AGC's estimates, the cuts to construction accounts would exceed $6 billion. According to Dr. Stephen Fuller of George Mason University, on average, $1 billion of investment in nonresidential construction supports or creates 28,500 jobs throughout the economy and adds $3.4 billion to GDP and $1.1 billion to personal income. Consequently, the possible sequestration cuts put some 170,000 jobs, $20.4 billion in GDP and $6.6 billion in personal income at risk.

At a time where the construction industry still faces double-digit unemployment rates and anemic market growth, indiscriminate cuts to construction accounts would only further hamper the construction industry's economic recovery.

Sequestration Resources

• Sequestration account summary chart
• Webinar Power Point

113th Congress Leadership & Committees

With Election Day over, all that remains before the start of the 113th Congress is the post-election lame duck session. Looking ahead to the new congress, a number of changes in leadership positions and committees and subcommittees are expected due to the election outcome, retirements, and Republican term limits. While Democrats general follow a seniority system to determine leadership roles, Republicans operate under a system that combines seniority with term limits and allows for six years at Chairman or Ranking member of any committee. Other factors often dictate committee assignments as well as leadership positions. AGC has made the following observations regarding the next Congress, but we will not know for sure until after the leadership elections and committee organizational meetings.

House Leadership 

Senate Appropriations

Senate Banking

Senate Environment & Public Works (EPW)

House Transportation & Infrastructure

Senate Finance

House Ways & Means

Senate Health Education, Labor & Pensions (HELP)

House Education & the Workforce

House Judiciary

Senate Judiciary

Senate Homeland Security and Governmental Affairs (HSGA)

House Oversight and Government Reform

Resources

• Post Election Powerpoint
• 2012 Election Summary
• Download Post Election Call
• AGC Voting Records