Washington Watch

Washington Watch

October 2008

Fed to Lend to U.S. Corporations, Cuts Key Interest Rate

In a front page story on Wednesday the Wall Street Journal reported, "The Federal Reserve said it will bypass ailing banks and lend directly to American corporations for the first time since the Great Depression..." This "historic and potentially risky move...carries the government deeper into the role of propping up private markets. Investors remain unconvinced any of it will work."

According to the Washington Times , "a presidential pep talk and a dramatic move by the Federal Reserve to boost business lending could not shore up sagging U.S. markets as the Dow Jones Industrial Average plunged more than 500 points Tuesday to a four-year low." The Federal Reserve, "invoking an obscure Depression-era emergency law, said it will begin purchasing 'commercial paper' -- the short-term money companies borrow to meet basic needs such as payroll and inventory."

The AP reported that "the action makes the Fed a crucial source of credit for nonfinancial businesses in addition to commercial banks and investment firms -- and also exposes it to risk because so much of the debt would not be backed by collateral." Still, the AP adds that "credit markets, clenched up for weeks now, relaxed somewhat after the Fed's move." The Financial Times explained that "for the hundreds of U.S. companies dependent on short-term loans to fund their businesses or extend credit to customers, the Federal Reserve's plan to buy commercial paper could help reduce borrowing costs that have threatened to crimp profits."

The Christian Science Monitor reported that Fed Chairman Ben Bernanke "is effectively pushing the Fed into the middle of the private market for short-term corporate loans, known as commercial paper. ... The bold measure illustrates the seriousness with which the Fed chairman views the current credit crisis."

Meanwhile, the Washington Post reported that “The Federal Reserve and a consortium of European central banks [Wednesday] announced a half-percentage point reduction in a key interest rate, a coordinated effort to stave off an economic slump even as they continue struggling to tackle a crisis in global financial markets.” The cut reduces the target federal funds rate to 1.5 percent from 2 percent.

According to The Post “Joining the rate cut were central banks in Canada, England, Sweden, Switzerland and the European Central Bank. Central banks in China, Hong Kong, Kuwait and the United Arab Emirates acted separately to cut rates, a move the Australian central bank had taken the day before. More Arab central banks are expected to do the same in coming days.”

CNN noted that “The Bank of Japan joined the statement of the other six banks expressing its strong support of these policy actions. But with its rate already at 0.5% before the joint cut, it did not follow with a cut of its own."

President Signs Financial Industry Bailout Bill into Law Quickly After Passage

The House passed the Emergency Economic Stabilization Act of 2008 on a 263-171 vote Friday afternoon, with 172 Democrats and 91 Republicans voting yea, and 63 Democrats and 108 Republicans voting nay. President Bush signed the measure into law just 88 minutes later. But the quick resolution after a week of uncertainty following the House's initial Monday rejection of the plan did not boost Wall Street. The Dow Jones Industrial Average fell 157 points as news of a rise in job losses continued to dampen feelings about the health of the economy. Some reports indicate that the passage may be just the beginning for government relief efforts.

The Washington Post commented on its front page that Bush's quick signing was an "unusual display of urgency." The measure gives Treasury Secretary Henry Paulson expansive powers -- unprecedented outside of wartime -- to intervene in financial markets by relieving faltering firms of distressed assets backed by home mortgages, which are falling into foreclosure at record rates."

The Houston Chronicle reported that Bush "signed the legislation into law amid fears that the nation's $14.3 trillion economy could be sliding into a steep recession." But New York's Newsday said that experts predict that the "bailout...could make a recession shallower, and potentially even shorter, but it won't stop the economic and housing downturns in their tracks." The Washington Times noted that 25 Republicans and 33 Democrats "were against the bailout before they were for it. Their newfound support came despite the addition of $150 billion in tax breaks that weren't entirely offset by spending cuts or other tax increases."

USA Today reported, "While there appears to be ample regulatory firepower in the oversight parts of the bailout law, it remains to be seen how strongly regulators and lawmakers wield their power." The bill establishes roles for oversight "the Treasury Department's Office of the Comptroller and a new Financial Stability Oversight Board to be run by the Treasury Secretary, the Federal Reserve chairman, the Securities and Exchange Commission chairman, and others." The AP noted that hearings will begin Monday to "examine the failures of current regulations. The House Oversight and Government Reform Committee, chaired by Rep. Henry Waxman (D-Calif.) will hold two hearings on the causes and effects of Lehman Brothers' bankruptcy and on the $85 billion bailout of the giant insurer American International Group Inc." Over the next month, the committee plans to hold "three more hearings...on hedge funds, credit rating agencies and the role of regulators in the run-up to the crisis."

The Washington Post reported that the leaders of France, Germany, Italy, and the United Kingdom "vowed Saturday to protect their banks from the continuing reverberations of the increasingly global financial crisis but could not agree on a common Europe-wide strategy." Unlike the U.S., "Europe plans to continue dealing with its financial problems on a case-by-case basis. That approach, which has involved tens of billions of dollars at a step, is complicated by the transnational presence of so many large European financial institutions." The Los Angeles Times said that the "emergency summit among Europe's 'Big Four' was an attempt to allay some of the fears sweeping across the continent, fears held by financial institutions and individual investors alike. ... But the three-hour meeting highlighted the divisions that bedevil the EU, which comprises 27 member countries with just about as many competing agendas."

Arkansans FOR the Secret Ballot Holds Meetings in State This Week
“Arkansans FOR the Secret Ballot—Protect your Privacy at Work,” the coalition formed by the State Chamber/AIA to oppose the proposed federal Employee Free Choice Act (EFCA), aka Card Check, continues to hold outreach meetings to educate businesses throughout the state.

Michael Eastman, executive director, Labor Law Policy with the U.S. Chamber of Commerce was in Arkansas to provide presentations on EFCA in Monticello, Magnolia, Little Rock and Maumelle on Tuesday and Wednesday of this week. Glenn Spencer, executive director of the Workforce Freedom Initiative also with the U.S. Chamber of Commerce will be in Arkansas Wednesday through Friday of this week to provided presentations in Hot Springs, Jonesboro, West Memphis, Conway and Fort Smith. 

EFCA is a drastic and dangerous piece of legislation that ­if passed ­will be the most radical change to labor law in more than 60 years. It will be brought before Congress in early 2009. The proposal takes away the long-held tradition of using secret ballots for union elections. Instead, the union leaders propose using a card check system ­– a process where votes are cast in public and can be collected by union leaders at a worker’s job, home or on-line.

What you can do:

· Join the coalition by calling the State Chamber/AIA office and ask to be added to Arkansans FOR the Secret Ballot.
· Send a letter (by fax or to district offices) to Senators Lincoln and Pryor and your Congressman.
· Make an appointment to see Senators Lincoln and Pryor and your Congressman and tell them how this will affect your business and the community.
· Write a letter to the editor of your local newspaper.
· Spread the word about EFCA and ask other members of your community to join Arkansans FOR the Secret Ballot.

All State Chamber/AIA members are strongly encouraged to spread the word about this issue to fellow members of the business community as well as to employees. It is vitally important that our members of Congress hear the business perspective on this issue.
 
If EFCA passes, it will strip workers and businesses of critical rights and protections. Please join Arkansans FOR the Secret Ballot and help us protect privacy and promote democracy in the workplace.

Analysts Predict Boeing Strike Will Be Long, Costly

The Seattle Times reported that the strike involving Boeing and the Machinists union "is shaping up to be long, costly and damaging." Estimates indicate that "Boeing's lost profits from even a one-month strike would be at least $1.3 billion -- earnings that won't be recouped for years." But while the Machinists see Boeing's recent profits and large order backlog as an opportunity, "industry analysts question the strength of the union's leverage given the precarious state of the airlines," many of which are cutting capacity. Regarding the strike's impact on the 787 Dreamliner, a Boeing engineer said the company was conducting cleanups of the line. He noted that "a similar cleanup during the last strike made the 777 line 'amazingly more productive,'" but added that little actual work could happen until the Machinists returned.

Get Out the Vote!  
The General Elections are just right around the corner. Early voting for the General Election will begin on October 20. You can early vote at your local County Clerk’s office through Monday, November 3. Polling locations will be open from 7:30 a.m. to 7:30 p.m. on Election Day, November 4.

All State Chamber/AIA members who are registered are encouraged to vote. In addition to voting yourself, encourage your family, friends, co-workers and customers to vote as well.  Help others realize that the right to vote is an opportunity not to be taken for granted. 

Each election, at least one hundred million Americans throw away their right to vote. But with proposals such as the Employee Free Choice/card check legislation hinging on such a narrow margin, the outcome of this year’s election will have a lasting impact on the way this country does business. Issues ranging from energy and the environment to taxes and the continually rising cost of health care make this year’s election a pivotal one for Arkansas and for our Nation. It is vital that the voice of the Arkansas business community be heard. It is vital that your voice be heard. If you don’t vote, you don’t count, so get out and vote!

Congress Approves Resolution, Lifting Outer Continental Shelf Ban
Following action in the House of Representatives to lift its long-standing congressional ban on offshore drilling on the Outer Continental Shelf (OCS), the Senate voted and approved the same continuing resolution (CR) package. The CR will fund the federal government at FY2008 levels through March 6, 2009, and, for the first time in 26 years, the spending package does not include language banning expenditure of funds for leasing and development plans on various parts of the OCS.

Economy Loses 159,000 Jobs in September, 51,000 Manufacturing Jobs Lost

The New York Times reported that the "American economy lost 159,000 jobs in September, the worst month of retrenchment in five years amplifying fears that an already painful downturn had entered a more severe stage that could persist well into next year."

The Wall Street Journal added that the "weakness in the job market spread from the ailing manufacturing industry into services and even the public sector." The unemployment rate remained "at 6.1 percent after a sharp increase in August."

Dean Baker, co-director of the Center for Economic and Policy Research, said, "This should remove any lingering doubts that the economy is in a recession." The Los Angeles Times pointed out that "the unexpectedly high job losses -- many analysts had expected the number to be closer to 100,000 -- came on the same day that the House of Representatives successfully passed the $700-billion rescue plan for the financial system." Furthermore, "the grim employment picture also triggered speculation that the Federal Reserve would attempt to pump some adrenaline into the faltering economy soon by lowering its benchmark interest rate, now at two percent -- perhaps acting even before its regularly scheduled meeting at the end of the month."

Meanwhile, the "Institute for Supply Management said its non-manufacturing index came in at 50.2, slightly below August's 50.6 in August but in line with forecasts. A reading above 50 signals expansion," USA Today explains. "In another troubling sign, the number of long-term unemployed -- those out of work six months or more -- jumped 167,000 to two million," which is "an increase of 728,000 in the past 12 months." According to USA Today, "long-term unemployment now accounts for 21 percent of total joblessness."

IndustryWeek focused on manufacturing employment, which "fell by 51,000 over the month, bringing the decline in factory jobs to 442,000 over the past 12 months." Last month, "job losses continued in motor vehicles and parts (-18,000); this industry has shed 140,000 jobs over the past 12 months." IndustryWeek detailed job losses "among durable goods manufacturers," where "employment decreased in fabricated metals (-7,000), wood products (-5,000), and furniture and related products (-5,000)." Nondurable goods manufacturing saw losses in "paper products (-3,000) and plastics and rubber products (-4,000)...over the month." Jobs in "transportation and warehousing declined by 16,000 in September and by 57,000 since its peak 12 months earlier." Meanwhile, job losses mounted "in trucking (-12,000) and air transportation (-5,000)." Automobile and parts dealers lost 10,000 jobs; "this industry has lost 48,000 jobs in the past four months."

Emergency Highway Funding Update

In last month’s edition of Washington Watch we reported that Transportation Secretary Mary Peters had announced the federal highway trust fund would run out of money by the end of September. Secretary Peters explained the approximately $8 billion funding shortfall was due to “the high price of gasoline, which has prompted Americans to drive less. This means less fuel has been purchased, and less gasoline taxes collected for the trust fund.” The federal tax is 18.4 cents a gallon on gasoline and 24.4 cents on diesel.

Spurred on by those comments and President Bush’s reversal of his previous opposition to emergency funding, Congress acted quickly to rescue the highway trust fund by voting to transfer $8 billion from the treasury to the highway fund. Thousands of road and bridge projects, including several in Arkansas, faced delays or cancellation if the federal trust fund had been allowed to go bankrupt. 

President Bush Signs Americans with Disabilities Act Expansion
The AP reported that "President Bush has signed legislation expanding the protections afforded by the landmark Americans with Disabilities Act (ADA) to those who can use medication or other devices to treat impairments." Since the law's passage in 1990, "the Supreme Court has generally exempted from the law's anti-discrimination protections those with partial physical disabilities or impairments that can be treated with medication or devices such as hearing aids." The new law "directs the courts to a more generous application of the ADA's definition of disability."

The language of the ADA Amendments Act is the result of detailed negotiations between employer organizations and the disability community. The bill generated strong bipartisan support in Congress. Follow the links below for more information on how the ADA Amendments Act will affect your organization:

U.S. Supreme Court’s 2009 Term Expected to Focus on Several Issues Central to the Business Community

The National Law Journal reported, "The Roberts Court's affinity for issues close to the heart of the nation's business community will continue into the October 2008 U.S. Supreme Court term as the justices take on major questions concerning federal pre-emption of state tort suits, environmental regulation, workplace discrimination, arbitration, pensions, and antitrust." So far, the "Court has agreed to decide 15 business-related cases," which amounts to "about 30 to 40 percent of the docket." The docket "is also notable for the type of business cases not there yet, but which have been something of a staple in recent terms: patent, securities and tax." A major issue this term, like last term, will be pre-emption. According to one attorney, "the business community is focused on pre-emption because it seeks one set of rule" In Europe, there is "one set of rules...but having the federal regulatory system and the tort liability and jury systems makes it harder for U.S. business to compete here and harder to compete around the world," he said. The court is expected to take up pre-emption in at least two cases this term.

Round Two on Ergonomics
The U.S. Chamber, anticipating a new union-led push for an ergonomics regulation, is reconstituting the National Coalition on Ergonomics (NCE), an employer coalition that led the effort to strike down a Clinton-era ergonomics regulation.

The U.S. Chamber and NCE recently released research showing that regular physical activity and exercise are more effective than inactivity in heading off musculoskeletal or repetitive-stress injuries and illnesses. In addition, research shows that rates of ergonomic injuries have fallen as companies have voluntarily implemented approaches tailored to their workplaces.

NCE fought the Clinton administration's efforts to issue a regulation on ergonomics on the grounds that it was based on insufficient science and medical understanding and would have resulted in crushing regulatory burdens. The regulation, Introduced in 1995, would have required businesses to redesign workplaces, employees' tasks, or both, and it would have held employers accountable for Injuries not related to the workplace. Noncompliant businesses would have been subject to massive penalties. After a long battle, Congress invalidated the proposed regulation in March 2001.

"The good news is that the latest scientific research confirms that the best way to prevent and deal with these types of Injuries is through continuous physical activity, and that the approaches promoted by the old regulation were incorrect," says U.S. Chamber Vice President of Labor, Immigration, and Employee Benefits Randy Johnson. "The bad news is that we are likely to face a renewed push to issue an ergo regulation in the next Congress, regardless of who wins the White House.”

Environmental Protection Agency Proposal Could Affect Businesses of All Sizes

The Environmental Protection Agency (EPA) has issued a proposal, which if adopted, would regulate CO2 emissions from a wide range of sources that will affect many types of businesses, subjecting almost all industry sectors to a costly and bureaucratic permitting process.

It's not just large manufacturers that would bear the burden of regulation this time. It's also the little guys: it could be the hotel you stayed at this weekend, the bakery where you bought your donuts, the office building you work in, even the church you take your family to on Sunday.

The proposed regulation will affect businesses that use about $78,000 of oil or natural gas per year in "stationary" equipment (i.e., not cars, trucks, and similar). That translates to over one million buildings in the industrial, commercial, and agricultural sectors that could be caught in the EPA's permitting process.

To learn more about how your industry would be directly affected, click here. 

The Environmental Protection Agency (EPA) will be accepting comments through November 27. Click here for more information or to use the U.S. Chamber of Commerce’s website to send a letter to the EPA opposing this regulation. National Association of Manufacturers members can contact Bryan Brendle, (202) 637-3176, for details on a NAM letter to be filed in the EPA docket expressing opposition to the proposal.