Washington Watch

Washington Watch

March 2009

 

Stay on Top of the Card Check Debate

The “Employee Free Choice Act” (EFCA) was introduced in the U.S. Senate and U.S. House of Representatives on Tuesday with the bill numbers S.560 and H.R.1409 respectively. The bill language is substantially the same as the version of EFCA introduced in 2007. The House version of EFCA was introduced with 223 co-sponsors, while the Senate version was introduced with 40 co-sponsors. Monday, House Speaker Nancy Pelosi (D-CA) indicated that the legislation will be taken up first in the Senate, instead of in the House of Representatives.

Leading up to the bill’s introduction, labor leaders and President Obama have said that EFCA will pass. Additionally, labor leaders stated last week that they currently have the 60 Senate votes necessary to pass EFCA. However, several moderate Senate Democrats have declined to confirm that they plan to vote for the legislation. The AFL-CIO's Legislative Director Bill Samuel has indicated that action to move the bill will not likely occur until the Minnesota Senate seat is determined.

An economic study released last week illustrates the detrimental impact of EFCA on U.S. jobs. The study shows that for every 3 percentage points gained in union membership through card checks and mandatory arbitration, there will be a resulting 1 percentage point rise in the unemployment rate the following year. Based on labor leaders' predictions that EFCA would lead to an increase of 1.5 million new union members - passage of EFCA would cost 600,000 jobs the following year. To access this study, please click here.

With congressional offices being flooded with communications from labor union groups on this issue, it is imperative that the business community’s voice be heard. We need to continue to raise awareness of the devastating impact that EFCA would have on business in Arkansas and across our nation. These efforts are particularly important now that the legislation has been introduced in Congress. We encourage all State Chamber/AIA members to get involved and help us to defeat EFCA. We will continue to update you on key developments, including any legislative action. For further information on our efforts to defeat EFCA, click here. 

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Unemployment Rate Surges To 8.1 Percent, Highest In 26 Years

 

The New York Times reported, "The unemployment rate surged to 8.1 percent, from 7.6 percent in January, its highest level in a quarter-century. In key industries - manufacturing, financial services and retail - layoffs have accelerated so quickly in recent months as to suggest that many companies are abandoning whole areas of business." Most economists now "assume American fortunes cannot improve before the last months of the year, as the Obama administration's $787 billion emergency spending program begins to wash through the economy." Since the recession began, the economy "has eliminated a net total of roughly 4.4 million jobs, with more than half of those positions - some 2.6 million - disappearing in the last four months alone. This rapid deterioration has prompted talk that some industries are being partly dismantled." In February, "168,000 more manufacturing jobs were eliminated, bringing losses over the last year to 1.2 million."

 

The Wall Street Journal noted, "Some economists said the pace of job losses may be stabilizing, albeit at a high level." Still, "manufacturing and overtime hours slid, apparently presaging more job cuts to come. A quarter-million construction and manufacturing jobs vanished; the service sector shed 375,000. Only health services and government eked out job growth." The labor market has "historically been a lagging indicator of activity, which means that even if the economy were to recover soon, the jobless level is likely to climb for many more months. With no immediate end in sight to the downturn -- output in the current quarter seems on track to fall by 5 percent or more after a 6.2 percent decline in the fourth quarter of 2008 -- the jobs picture is likely to get bleaker."

 

The Los Angeles Times added, "Construction companies cut 104,000 jobs, factories 168,000. Retailers cut nearly 40,000 jobs; professional and business services shed 180,000. Financial firms cut payrolls by 44,000, leisure and hospitality firms 33,000." The Times adds, "Disappearing jobs and evaporating wealth in sinking home values and retirement funds have forced consumers to retrench and companies to lay off workers, a cycle that contributes to a downward spiral for all."

 

Bloomberg News reported the new data "indicates the economy is in worse shape than previously estimated and may need additional federal measures to help stop what may become the worst recession in the postwar era. The jobless rate has now already reached the level the Obama administration projected as an average for the whole year." Another report indicated that "more than 103,000 individuals and companies filed for bankruptcy in February." And other figures showed "the destruction of U.S. household wealth left about 8.3 million Americans owing more on their mortgages in the fourth quarter than their properties were worth."

 

The AP added, "All told, the number of unemployed people climbed to 12.5 million. In addition, the number of people forced to work part time for 'economic reasons' rose by a sharp 787,000 to 8.6 million." If "part-time, discouraged workers and others are factored in, the unemployment rate would have been 14.8 percent in February, the highest on records dating to 1994." 

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Personal Saving Increased to 5 Percent of Disposable Income in January

 

The Wall Street Journal reported, "Personal saving jumped to 5 percent of disposable income in January, the Commerce Department said [last] Monday, the highest level in nearly 14 years. It was a remarkable shift from the negative saving rates -- when people were spending more money than they earned -- during the height of the housing bubble in 2005." Economists note that "cheap and easy credit in recent years fueled not only the housing boom but also Americans' insatiable spending, which has now come to a screeching halt." 

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Businesses Gearing Up to Protest Obama's Budget

 

BusinessWeek reported, "Businesses from startups to global giants to drug makers and farmers are gearing up to fight the President's spending plan with ad campaigns and public protests." Business is "hitting hard on the theme that the budget will squeeze vitality out of the economy." Jay Timmons, head of government affairs at the National Association of Manufacturers, said, "They're taking a tremendous amount of money out of the private sector, which will hamper the ability of business to create and retain jobs." Lobbyists are already "planning public protests, ad campaigns, and more targeted appeals to key members of Congress." And "agribusiness interests, startled by Obama's planned subsidy purge -- the President voted for the farm bill last year -- are already mobilizing for a march on Washington ." In addition, "The American Petroleum Institute plans to battle Obama's proposals to reduce the industry's tax breaks through presentations to newspaper editorial boards and visits to Washington by top oil company executives and employees, plus drop-ins by ordinary shareholders." 

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Some Senate Democrats Balk at Cap-and-Trade Plan

 

The Washington Times last week reported some Democrats in the Senate "are breaking with President Obama over his plan for sweeping new climate-change laws that he says will rake in billions of dollars to help offset massive budget deficits. The dissenters, mostly Democrats from Rust Belt states likely to be hit hardest by the proposed environmental rules, question the economic impact" of the carbon-dioxide cap-and-trade proposal. They "also want their states to get a chunk of the windfall from selling the credits - $646 billion over 10 years by Mr. Obama's estimate." The President, however, "wants to spend about two-thirds of the money on tax cuts for low- and middle-income families to soften the bite of higher energy prices expected to result from the cap-and-trade law."

 

At the end of February, Bloomberg News reported, "Senator John McCain (R-AZ), who backs tougher laws to fight climate change, blasted President Barack Obama's plan to raise revenue from an emissions-trading system and said he will have a tough time getting support from Congress." McCain, "who has co-sponsored legislation to create systems to let companies trade pollution allowances on an open market, said the goal of such a program should be strictly reducing greenhouse-gas emissions and addressing climate change," rejecting the idea that "cap and trade should be used for the purposes of generating revenue." 

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Ex-Governor Gary Locke Accepts Commerce Secretary Nomination

 

The Tacoma News Tribune reported, "Taking note of his Chinese immigrant roots and calling him an outstanding public servant, President Barack Obama…nominated former Washington Gov. Gary Locke as the secretary of commerce." Obama, "joined by Locke and Vice President Joe Biden, made the announcement in the ornate Indian Treaty Room in the Eisenhower Executive Office Building ." Speaking "directly to Obama at times during brief remarks, Locke, pledged to work hard as part of the administration's economic recovery effort." During his years as governor, Locke "was something of a hero in China . Shortly after being elected, Locke visited his ancestral home and was greeted by thousands of schoolchildren lining the roads." The nomination was "generally praised by Democrats, Republicans and business leaders." The president of the National Association of Manufacturers, John Engler, called Locke "an 'able leader' with a 'reputation and focus' that will serve him well as commerce secretary." Engler said, " Gary has an acute awareness of business and excellent experience in areas that are important to manufacturers." 

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New Revenues Needed for Highway Trust Fund

 

TransportationSecretary Ray LaHood, addressing an industry audience on February 24, called for innovative ideas and a new approach to solve the nation's infrastructure funding problems. Secretary LaHood called the depleted Highway Trust Fund, which required an infusion of $8 billion in 2008 to offset a revenue shortfall, “a 20th century mechanism for funding roads.” According to the Secretary, all funding options are on the table. On Thursday, February 26, the Surface Transportation Financing Commission delivered its short- and long-term recommendations for funding transportation infrastructure and presented a roadmap to shift from the current fuel tax model to more direct fees charged to transportation users. House Transportation & Infrastructure Committee Chair James Oberstar (D-MN) plans to begin moving a surface transportation bill this spring.

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U.S. Auto Sales Fell Again in February

 

The Wall Street Journal reported, " U.S. auto sales plunged yet again in February, falling 41 percent to 688,000 vehicles," Autodata Corp indicated. "The steep drop left car makers worried the market may not yet have bottomed out." While "almost all auto makers suffered significant setbacks," General Motors Corp.'s (GM) sales dropped "53 percent from February 2008 to 126,170 cars and light trucks," and "Ford Motor Co.'s dropped 48 percent to 99,050." Among "import brands," the Journal mentions Toyota Motor Corp. whose "sales slid 40 percent to 109,583." Also Honda Motor Co.'s sales "fell 38 percent to 71,575 and Nissan Motor Co.'s dropped 37 percent to 54,249." Notably, "Chrysler LLC, which has suffered drops of more than 50 percent in recent months, fared somewhat better than its U.S. rivals, reporting sales of 84,050 vehicles, down 44 percent, thanks to heavy sales incentives."

 

But incentives did not work out for most of car companies, noted the Washington Post. "Big rebates and low-interest financing failed to lure people back into car dealerships and showrooms during another month of layoffs, stock market declines and weakening home values." And "the steep drop puts additional pressure on GM and Chrysler, which are rapidly burning through cash while generating very little income from sales. After receiving $17.4 billion from the government in December, both companies say they will still be on the verge of bankruptcy unless they receive another cash infusion from the Treasury Department on March 31." 

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