As government regulation of the roofing industry continues to grow, so does the importance of congressional elections. What happens Nov. 4 in the midterm races for the Senate and House of Representatives is sure to affect government policies that are of great importance to all sectors of the roofing industry.
Given the link between the election outcomes and government policies that regulate businesses, roofing professionals need to be fully aware of what is at stake when voters go to the polls this fall: control of the next Congress during the final two years of Barack Obama's presidency, which will end in January 2017.
To some degree, it could be argued this year's contest is round two of the 2012 elections. After three "wave" elections in a row in 2006, 2008 and 2010—elections with a strong national trend favoring one party or the other—the 2012 elections essentially produced a stalemate. President Obama won re-election over Mitt Romney but largely failed to garner any strong policy mandates for governing. Meanwhile, in 2012, Democrats defended and even added slightly to their Senate majority, while Republicans lost a handful of seats but still maintained a firm grip on the House.
The results of the 2012 elections left Washington, D.C., nearly evenly divided between Democrats and Republicans who have vastly different visions of key policy issues. This has produced unprecedented political gridlock and dysfunction during the 113th Congress.
Members of Congress are waiting until the outcome of the November elections before addressing critical issues. More important, they will take their cues about how to proceed from any messages voters send in the fall elections. As such, the elections could profoundly affect government policy for at least the next two years and possibly well beyond.
Given some of the legislation that has emerged from Congress in recent years, it is tempting to accept political gridlock on Capitol Hill as a positive development because it prevents Congress from passing legislation that regulates businesses even further. However, there are two primary reasons gridlock in Congress is bad for businesses in the long term.
First, Congress must address the growing national debt to minimize adverse effects on the economy. At a minimum, this means tackling reform of Social Security, Medicare and Medicaid, the three major entitlement programs, and this extraordinarily difficult task must be done on a bipartisan basis.
The situation is rapidly becoming more urgent. Although annual budget deficits recently have stabilized, they are projected to grow again after 2018 and add another $7.6 trillion to the national debt during the next decade, according to the nonpartisan Congressional Budget Office. Without the reform of major entitlement programs, pressure will increase for massive tax increases that could kill economic growth.
Second, many, and indeed most, of the challenges facing roofing businesses come from regulations issued by federal agencies, not from new legislation from Congress. It is vital Congress pass regulatory reform legislation to reign in federal agencies that have run amok with new and burdensome regulations and heavy-handed enforcement during recent years. But this is impossible under the current political logjam.
The race for the Senate
The prize up for grabs in the midterm elections is control of the Senate. Senate Democrats currently hold a 55-45 seat majority, so Republicans need a net gain of six seats to take control of the Senate next year. With Republicans widely expected to maintain and even add to their majority in the House, the focus primarily is on key battleground races that will determine who controls the Senate in 2015.
If Republicans are able to capture the Senate and hold their House majority, this greatly will constrain President Obama's agenda, much of which NRCA has found to be problematic, during his final two years in office.
Moreover, Republican control of Congress will provide them with an opportunity to move forward on a unified basis with a positive agenda that reflects their vision for the future. This may include major initiatives, such as tax reform, immigration reform, regulatory reform and major reform of the Affordable Care Act (ACA).
Given the current fractious nature of congressional Republicans, there is no guarantee they will be able to accomplish any of this. And even if they have majorities in the House and Senate, Republicans will need to attract some support from Democrats to develop negotiating leverage with the president, who will have the option of vetoing any legislation passed by a Republican Congress.
If Democrats are able to successfully defend their Senate majority in the fall elections, they and the president will have much more leverage when negotiating future legislation with House Republicans.
The race for control of the Senate, now reaching its final weeks, presents voters in many states and districts with a fundamental choice that substantially could affect policy issues of particular interest to NRCA, the roofing industry and the nation for years to come.
One key area of disagreement between Democrats and Republicans involves taxes. Most Democrats insist any effort to address the government's long-term budget problems and pass any type of tax reform must include substantial tax increases. In contrast, nearly all Republicans oppose tax increases beyond those enacted in early 2013 and propose to address budget problems primarily through spending cuts, entitlement reform and expected revenue gains from tax reform legislation that facilitates greater economic growth.
Any legislation that increases taxes will affect businesses of all sizes. Many owners of pass-through businesses, who pay taxes on an individual basis, now face federal income tax rates of 36 or 39.6 percent, and with state and local taxes and new taxes authorized by the ACA, they often face marginal income tax rates of nearly 50 percent. NRCA opposes more tax increases on entrepreneurs because this will reduce the capital needed to start and grow businesses within the roofing industry as well as other sectors of the economy.
Republicans would like to pass tax reform that reduces income tax rates for all types of businesses (corporations and pass-through entities) to somewhere between 25 to 28 percent. President Obama and many Democrats want to maintain the top individual rates for high earners while lowering the 35 percent corporate tax rate. Given that about 75 percent of NRCA members are pass-through businesses, many roofing contractors could face effective tax increases under some forms of tax reform proposed by Democrats.
Certainly, Republicans still will need to contend with President Obama's veto threat on any tax legislation in 2015-16. But they will have much more leverage if they control both chambers of Congress and can pass a tax reform proposal that is popular with the public. In contrast, if Democrats remain in control of the Senate, any final tax reform approved by Congress in 2015 or 2016 likely will not be as favorable to many businesses.
Another important issue for the roofing industry that will be affected by the elections is the future level of federal regulation. Given that Republicans generally have proved to be more responsive than most Democrats regarding business concerns with respect to regulations on businesses, a Republican takeover of the Senate could set the stage for positive action on regulatory issues in three primary ways.
First, control of Senate committee chairmanships would double the oversight capacity of Republicans to review all federal regulatory activities, which is a core function of Congress. House Republicans have been aggressive in holding oversight hearings that can expose the adverse effects of burdensome regulations, and committee oversight would increase markedly if Republicans also hold Senate committee chairmanships that allow for setting agendas and scheduling hearings on regulatory matters. This will increase the ability of Republicans to restrain the Obama administration's regulatory agenda, much of which is of great concern to NRCA.
Second, it is conceivable a Republican-controlled Congress could go beyond oversight functions and actually pass legislation to block or overturn specific regulations. This can be done by including policy riders in congressional appropriations bills that fund agency budgets.
For example, the Occupational Safety and Health Administration's (OSHA's) silica regulation currently is a candidate for such an effort in Congress. NRCA has been working with other construction groups to lay the groundwork for attaching a policy rider in legislation authorizing OSHA's budget that effectively would block the agency from implementing the proposed silica rule. There is some degree of bipartisan support for this measure, and if Republicans control the Senate and House, the chances for successfully having this amendment enacted into law and blocking the final regulation substantially will increase.
Third, a Republican-controlled Senate also would greatly increase the chances that Congress would pass regulatory reform legislation, an NRCA priority. NRCA has been working to advance several regulatory reform initiatives in Congress, with the primary effort focused on the Regulatory Accountability Act (RAA). This bill is designed to strengthen protections for businesses against intrusive regulations by providing for more public input and transparency in the agency development process, among other protections.
The House approved the RAA and several other regulatory reform bills in early 2014 with bipartisan support. Additionally, several Senate Democrats have joined Republicans in becoming co-sponsors of the RAA. However, despite significant bipartisan support for this legislation, Senate Majority Leader Harry Reid (D-Nev.) has shown no interest in allowing the bill to come to the Senate floor for a vote.
The chances for congressional passage of regulatory reform legislation, which would have substantial long-term benefits for the roofing industry, will greatly increase if Republicans control the Senate and House in 2015. Given his record on regulatory issues, President Obama likely will resist regulatory reform, but he will come under pressure to sign any legislation that has significant bipartisan support.
Not surprisingly, the ACA is a major campaign issue. Moreover, the midterm elections could be pivotal to the long-term success of the law and its effects on the national economy and employers who offer their employees health care coverage.
If Republicans win a majority in the Senate, they will be in position to pass legislation to either repeal significant portions of the ACA or replace them with market-based reforms. Republicans could, if they choose, use the budget reconciliation rule that allows the Senate to pass budget-related legislation with a simple majority of 51 votes rather than the 60-vote threshold required for most legislation (this is how a Democrat-controlled Congress approved the original ACA in 2010).
Another possibility under Republican control would be to work on a comprehensive ACA alternative bill (or a series of smaller ACA alternatives) that would gain enough support from Democrats to be sent to the president for signature or veto. Such a scenario may be realistic if the outcome of the elections is seen as an unfavorable referendum on the ACA, which continues to be unpopular with the public according to recent polling.
One key area of the ACA that may receive attention from Congress next year is the employer mandate provision, which was unilaterally delayed by the Obama administration and now is scheduled to become effective in 2015 and 2016. There already has been speculation even among some Democrats and other ACA supporters that the employer mandate, given its enormous complexity, may need to be reformed or scrapped to make the ACA workable. The odds of Congress repealing or greatly reducing the burdens of this component of the law on employers will be much greater if Republicans capture the Senate.
Another ACA provision of interest to the roofing industry is the health insurance tax on fully insured health care plans, which became effective earlier this year. NRCA has made repeal of this tax, the cost of which will be borne mainly by small and mid-sized employers and workers, a major legislative priority.
On the other hand, if Democrats maintain control of the Senate, Reid will be in a position to work with the administration to limit potential changes to the ACA. It is possible some Democrats, especially those who are up for re-election in 2016, will push for legislation to fix the ACA from their perspectives, but any such changes will be much less ambitious and transformative if Democrats control the Senate.
The Obama administration has continued to advance a series of regulatory initiatives designed to achieve the goal of making union organizing easier. NRCA has opposed these initiatives because they place new burdens on employers or restrict their abilities to respond to union organizing campaigns. NRCA represents union and open-shop contractors and supports a balanced approach to labor-management policy but has determined recent administration regulatory proposals from the National Labor Relations Board (NLRB) and Department of Labor would upset this balance.
During the past few years, NRCA, working within a coalition of business groups, successfully has blocked several labor-related initiatives of concern to employers through litigation. These initiatives include an NLRB regulation requiring employers to post a notice of employee rights in the workplace, a rule designed to greatly accelerate the time frame under which union elections are held, and Obama's so-called recess appointments to the NLRB in 2012. However, it appears the NLRB remains committed to moving forward with a one-sided agenda during the remainder of the president's term despite strong opposition from NRCA and hundreds of other business groups.
Generally, congressional Republicans have been more receptive to NRCA's concerns and other business groups with respect to the administration's labor regulatory agenda. As such, control of the Senate will increase the ability of Republicans to conduct oversight of the NLRB and other agencies, as well as present the potential opportunity to include policy riders in appropriations bills that might block some of the more problematic regulations. A Senate controlled by the president's allies likely will hinder efforts to reign in federal labor-related regulations.
Immigration reform is yet another issue of importance to the roofing industry. Again, a Republican takeover of the Senate would seem to increase the chances of getting an immigration reform bill enacted in 2015 that best meets the roofing industry's needs though the situation may not be as clear cut as on some other issues.
NRCA supports immigration reform that increases border security, improves workplace enforcement without overburdening employers, provides an avenue for workers to enter the U.S. legally when our economy needs them and addresses the problem of the existing illegal work force in a balanced manner. NRCA continues to hear from members that labor shortages are a major problem, and immigration reform is one way to solve the problem. As the construction industry economy improves during the coming years, labor shortages likely are to become more acute within the roofing industry.
In 2013, the Senate passed a comprehensive bipartisan immigration bill that would accomplish several NRCA goals. However, the legislation has a major flaw: It fails to provide an adequate temporary worker program that meets the construction industry's economic needs. This was the result of opposition to a temporary worker program from labor unions and Democrats. NRCA also is disappointed House Republicans failed to move forward with immigration reform this year because of a lack of consensus regarding how to proceed on the issue.
Given the border crisis that unfolded this summer, which further inflamed an already volatile issue, and the fact that distrust between the president and congressional Republicans is at an all-time high, it is difficult to predict what Congress may do with respect to immigration policy in 2015. However, there is speculation Republicans will be more willing to move forward on immigration in 2015 because it could help efforts to broaden support among Hispanic voters, which is seen as critical to GOP efforts to take back the White House in 2016.
The likely best-case scenario for immigration reform during 2015 from NRCA's perspective would be for a Republican-controlled Congress to work with Democrats for immigration reform on a bipartisan basis. However, getting immigration reform that meets the roofing industry's workforce objectives will be an uphill battle no matter who controls Congress. This is because most Democrats, who are allied with labor unions, as well as some Republicans, fear a temporary worker program designed for semiskilled workers will displace U.S. workers.
More work needs to be done to educate Democrats and Republicans about why immigration reform is important to the construction industry.
As the candidates head into a sprint to the finish, indications are the race for control of the Senate could go either way. Public opinion polling in the battleground states indicates nine Senate races are considered true "toss-up" races or are competitive and several others could become competitive during the final two months of the campaign.
As of early September, most independent analysts give the Republicans better than 50-50 odds of winning the net six seats needed to take the Senate majority. The 2014 landscape greatly favors Republicans as Democrats are defending 21 seats while Republicans are defending only 14 seats. Moreover, seven seats now held by Democrats are being contested in so-called "red states" that Romney won in 2012 by substantial margins, whereas only two Republican-held seats face competitive contests.
Many Democrats are likely to face head winds this year because midterm elections during the sixth year of a presidency usually are a referendum on the incumbent president. Indeed, the only time the incumbent president's party gained seats in a midterm election since 1934 was in 1998, when a strong economy and what was viewed as Republican overreach on the impeachment of President Clinton caused Republicans to lose five House seats.
Given the tendency toward a "six-year itch" in which voters tend to punish the party in the White House, it will be difficult for fellow Democrats to overcome President Obama's sinking approval ratings, which in early September were hovering around 40 percent. However, it should be noted approval ratings for the Republican party as a whole are even lower than those of the president, so individual Republican candidates must differentiate themselves from the party if they are to win in contests outside of Republican-dominated states.
As of early September, the Real Clear Politics website was predicting Republicans will pick up seven seats, one more than the six needed to win the Senate, based on an average of all major polling in the battleground states. Several key battleground races will determine control of the Senate in 2015.
First, Republicans are widely expected to pick up three seats currently held by Democrats in Montana, South Dakota and West Virginia because of retiring incumbent Senators and well-positioned GOP candidates. All three states went heavily for Romney in 2012, so Republican victories appear likely.
Next, Republican candidates are mounting highly competitive challenges against four incumbent Democrat senators who are running in states won by Romney in 2012: Rep. Bill Cassidy (R) is challenging Sen. Mary Landrieu (D) in Louisiana; Rep. Tom Cotton (R) is taking on Sen. Mark Pryor (D) in Arkansas; State House Speaker Thom Tillis (R) is up against Sen. Kay Hagan (D) in North Carolina; and former Alaska Attorney General Dan Sullivan will challenge Democrat Sen. Mark Begich in Alaska. Defeating incumbent Democratic Senators has been extremely difficult for Republicans during the past decade, but Democrats have not faced such a difficult political environment as they have this year.
Additionally, Democrats are defending two Senate seats in states won by President Obama in 2012 that have competitive races. In Colorado, Republican Rep. Cory Gardner is mounting a strong challenge to Democrat Sen. Mark Udall, and in Iowa, Republican State Sen. Joni Ernst is running against Democrat Rep. Bruce Braley for the seat now held by retiring Sen. Tom Harkin. Both races could go either way. Finally, Democrats are favored in contests in Michigan, Minnesota, New Hampshire, Oregon and Virginia, but it is possible some or all these races could become competitive for Republicans depending on how the campaigns unfold.
Only two Senate seats now held by Republicans are considered to be competitive at this time. Senate Minority Leader Mitch McConnell is facing a strong challenge in Kentucky by Secretary of State Alison Grimes, and in Georgia, businessman David Perdue won the Republican nomination to face Democrat Michelle Nunn in the open seat of retiring Sen. Saxby Chambliss. Both races are expected to be close, but given these are red states, the Republican candidates have a slight edge.
Generally, Republicans have nominated much stronger general election candidates this year than they did in the 2010 and 2012 Senate elections. But in the current highly volatile political environment, much can happen in the final two months that dramatically could affect the outcome of these races.
It is important to note that though most of the focus is on the battle for control of the Senate, what happens in the House elections also matters with respect to the future of key roofing industry issues. There is broad agreement that, barring some political earthquake before Nov. 4, Republicans will keep the House majority and are likely to add to it.
If Republicans add to their majority, this likely will help bring greater unity among GOP lawmakers and could help them move forward with a positive agenda in 2015. This may be particularly true for immigration reform where House Republicans have not been able to coalesce around legislation or even general principles. House Republicans are pursuing a 12-seat net pickup as their goal, and something close to that certainly is possible given the current political environment.
Attaining control of the House and Senate will put Republicans in a commanding position on Capitol Hill in 2015. If this transpires, congressional Republicans may be able to move on major initiatives. Additionally, they may be able to begin addressing the government's long-term budget problems with modest reforms of entitlement programs though this is an even more daunting goal.
Keep in mind that regardless of who has the majority and sets the agenda, it still will be necessary to get 60 votes to pass most legislation in the Senate. Therefore, some degree of bipartisanship will need to emerge in 2015 if the current gridlock is to be broken.
Duane L. Musser is NRCA's vice president of government relations.
Clearly, much is at stake for the roofing industry in the 2014 elections. NRCA actively supports candidates in key Senate and House races through ROOFPAC, NRCA's political action committee. NRCA members are urged to become engaged by investing in ROOFPAC and becoming directly involved with candidates who share policy views that will help bring about future prosperity in the roofing industry.