How Will The New Congress Treat The HVACR Industry?

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The November elections did little to change the landscape in Washington for the 113th Congress. Sure, Democrats made incremental gains in the House of Representatives and strengthened their majority in the Senate by two seats, but no one had to order new letterhead. Barack Obama is still President. John Boehner is still the Speaker of the House, and Nancy Pelosi is the Minority Leader. Harry Reid and Mitch McConnell are still the Majority and Minority Leaders in the Senate.

The previous Congress was generally marked by gridlock and partisan fights that lead to very few bills being passed into law. If you think that’s a good thing then you should look forward to the next two years. Looming in the not too distant future is Election Day 2014. As the dust settled in November the winners and losers looked toward this mid-term test that is sure to drive the Congressional agenda over the next two years.

There will be 33 Senate races across the country in 2014. Of those, Republicans will be defending 13 seats, and only one of them in a state that Obama won — Maine where Susan Collins is a popular moderate. On the other hand, Democrats will be defending 20 seats, including seven from states that went to Romney a few months ago.

Why does this indicate gridlock? Simple, Senate Majority Leader Harry Reid knows that mid-term elections that precede a President’s lame duck term are not good for the majority party. In 2006, Republicans, who controlled both ends of Pennsylvania Avenue, lost six seats and the majority in the Senate, and 31 seats and the majority in the House.

In order to avoid losses, Reid will protect the vulnerable Democrats from taking tough votes that won’t play well back home. But he’ll be pushed by House Republicans, who will introduce and pass bills just to make the Senate vote on them. And this dynamic of Republican House versus Democratic Senate, which has been in place for the last two years, will continue for another two.

So, if Congress isn’t going to change its ways, then how will anything get done? The answer to this question is more of the same — meaning that Congress keeps debating the big issue items like tax reform, energy policy, and regulatory relief, then pass short-term extensions of tax policy, six month budget bills that may cause government shutdowns, and hold media friendly hearings that don’t result in any change.

Since most initiatives begin as bills in the House, Republicans will use their majority to push hard to expand our energy sources in places like the Alaska National Wildlife Reserve, off shore of the East Coast, and by building the Keystone XL pipeline and opening access to shale gas fields across the Appalachian and Upper Plain states. They  will try to dismantle the health care reform bill piece by piece before it begins to go into effect. And you can bet they will hold the Administration accountable for missteps at the Department of Energy, in foreign policy, and the Department of Justice.

We know that by the end of March, Congress will have to pass an appropriations bill to fund the government through September. If they don’t do it by March 27 the government will shut down. About the same time, Congress will have to raise the federal debt limit. This could be a repeat of the summer 2011 economic turbulence when the White House and House Republicans played chicken with the economy and the S&P downgraded the U.S. debt.

Most of what I’ve mentioned affects the big picture, but you’re probably wondering about how the next two years will go for small business HVACR contractors. Again, it will likely be like the last two years, which means Congress does not make it easy to plan long term.

Congress loves to help small businesses invest in themselves, either through tax incentives, loan guarantees, improvement zone grants, or accelerated depreciation. And lots of ACCA members, and other businesses, take advantage of these incentives when they are available. And that’s the key phrase, because sometimes these incentives are passed late in the year and applied retroactively. No one is going to buy a new truck today thinking that Congress may pass a law that retroactively qualifies it for an expanded expensing allowance.

We also know that the other half of Washington, the regulatory agencies, will crank out lots of new rules and regulations that are sure to disappoint business interests. Those battles will heat up in the coming year, and the House of Representatives will likely challenge them.

So there may be some new names and faces in Congress, but the teams are the same and the tactics and politics remain unchanged. As I’ve written before, the politics of the day will likely trump the policy. But this industry has learned that you cannot take your eye off the unpredictable regulatory agencies, because that’s where the real change is coming from.

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Posted In: ACCA Now, Government