The plastics industry and the manufacturing community are bracing themselves for uncertainty - and a new agenda - in Washington as a Democrat-controlled Congress takes charge this month for the first time in 12 years.
``In general, we are going to see a change in the agenda,'' said Chris Brown, senior director of federal government affairs for the Society of the Plastics Industry Inc. in Washington. The new leadership will have a different approach from its predecessors to natural gas, trade and health care, with more focus on issues such as executive compensation, the minimum wage, budgetary responsibility and the environment.
What that change in control means, however, is uncertain, for two reasons. The Democrats have only a slight margin of control in the Senate, 51-49, and in all likelihood will have difficulty mustering the 60 votes needed to overcome any filibuster attempts. Second, the health of ailing Sen. Tim Johnson (D-Mont.) could lead to a 50-50 split in the Senate should a replacement be needed, because the appointment would come from the state's Republican governor.
``I don't have a good feel yet for the moderate Democrats coming into Congress,'' said Mike Lynch, director of government affairs at Glenview, Ill.-based ITW Inc. ``They tend to be fiscally conservative and socially moderate and I don't know how they will come down on trade. I do know that there will be a lot more oversight hearings and more effort to second-guess the administration.''
Nonetheless, the National Association of Manufacturers is pressing ahead with an aggressive agenda focused on energy security in the U.S., revitalizing the nation's infrastructure, creating a level playing field for trade, cost containment in health care and education initiatives to address the skills gap in the workforce.
``It is an ambitious, aggressive agenda, but it is one that can be achieved,'' said John Engler, NAM's president and chief executive officer. ``The political makeup of Congress has shifted dramatically, but the challenges of the increasingly competitive global marketplace remain. To ensure the success of our manufacturing economy, we need action by Congress.''
The four issues looming largest are energy and raw material costs - both tied to the availability and price of natural gas - rising health-care costs and trade, particularly as it relates to China.
But, before Congress addresses any of those issues, it first is going to have to address the budget questions left unresolved by the lame-duck Congress, which passed a continuing resolution to keep the government and its programs running until mid-February.
Another budget-related issue: the food-contact notification program, which the plastics industry considers vital to get new food packaging products to market.
``That is one thing we are looking at closely,'' said Brown of the $6 million program that was cut from last year's Food & Drug Administration budget and then restored through industry lobbying. ``If it was cut last year, it will be cut again [from the budget] this year. Whatever we do will have to be a legislative solution'' so the industry doesn't have to fight for funding every year.
FDA is pushing for a fee-based program - which SPI opposes. ``We want to avoid user fees,'' Brown said.
On the energy front, although NAM is optimistic that it can persuade Congress to allow more drilling in the Outer Continental Shelf, Brown isn't so sure.
``We are not going to see a lot of movement in areas like drilling for natural gas.'' He said that the new Congress is more likely to look at alternative energy, conservation and eliminating or repealing tax incentives for oil drilling. Brown added that the new incoming chairman of the House Resources Committee, Rep. Nick Rahill II, D-W.Va., already has said that the drilling rights on 8.3 million acres in Lease Area 181 passed by the last Congress will be the last during his tenure as committee chair.
Despite its high visibility, energy costs take a back seat - in both the eyes of legislators and other manufacturers - to rising health-care costs. In a survey released in December, 51 percent of the chief executive officers surveyed by the Washington-based Business Roundtable - an association of CEOs of leading U.S. corporations - cited health-care costs as the greatest cost pressure facing their business. Energy costs were second, but cited by only 16 percent of those surveyed, down from 27 percent one year ago.
``We are seeing a lot of companies starting to feel the pain of health-care costs,'' Brown said. Nearly half of the respondents to a NAM survey said their health-care costs have risen from 11 percent to 20 percent in the past year.
Brown said SPI would like to see Congress OK the use of association health plans to create a larger pool of companies that can share risks, but incoming Democrats don't support that idea.
``They have different ideas and a different perspective to health care,'' with tax credits for the uninsured and permission for Medicare to negotiate prices of prescription drugs, two of their higher priorities.
Yet the larger uncertainty is how the new Congress will approach trade and China currency issues, as well as reauthorization of presidential authority to negotiate trade agreements that will expire in July.
``It looks as though this Congress will be somewhat skeptical of trade agreements and focus more on oversight and enforcement,'' said Eugenia Ross, director of international trade for SPI. The new Democratic majority is expected to push for stronger labor and environmental provisions in trade agreements, be more aggressive toward China and seek stronger enforcement of U.S. trading rights, she said.
The issue of worker pay and executive compensation also will surface, with Democrats promising to introduce legislation to increase the minimum wage to $7.25 from $5.15, with the rate possibly tied to the Consumer Price Index. The last time the federal minimum wage was increased was 12 years ago, when Democrats were in control,
In addition, the sudden reversal Dec. 22 by the Securities and Exchange Commission to amend rules it had adopted in July to govern executive stock options will trigger scrutiny by Congress of executive pay. The revised rules will make top executive pay look smaller than it actually is because it will let businesses spread the estimated value of those options over several years.