November Washington Report

[Nicholas Pyle]

November 15, 2012

TO:      My bakers newsletter for NUPA share - enjoy - Nick

RE:     November 2012 IBA Washington Report

President Barack Obama won reelection by a 2% lead in popular vote, and 303 electoral college votes.  During the three weeks prior to Election Day, President Obama and Governor Mitt Romney were nipping at each other's heels.  Speculation about the close election predicted that the results would not be clear until late in the night.  In the end, a victory for Romney depended on snagging the electoral votes from North Carolina, Virginia, Ohio and Florida.  Although Romney won the 15 electoral votes of North Carolina, Obama won Ohio and Virginia.  As of the date to print on this publication, the results from Florida were not yet complete.  In his victory speech, President Obama emphasized the importance of cooperation between the political parties as well as the White House and Congress in order to overcome gridlock and reach solutions to America's imminent obstacles.

 The 113th Congress appears similar to the current makeup: a Republican majority in the House of Representatives and Democratic majority in the Senate.  The 112th Congress, from 2011-2012, consists of 242 Republican Representatives and 193 Democrats.  The 113th Congress will consist of 233 Republicans and 193 Democrats, but 9 representative elections are still too close to call.  On Tuesday, November 7 Speaker John Boehner (R-OH) said the results of the congressional elections speak to Americans' call for compromise and bipartisanship.  Cooperation at House Speaker John Boehner's (R-OH) lead is crucial to tackling looming legislative challenges during the Lame Duck Session and next year.

 The Democratic Party will hold 53 seats in the Senate next year, while Republicans will hold 45.  30 Democrats and 37 Republicans were not up for reelection this cycle.  15 Democrats and 5 Republicans successfully maintained their seats in the Senate; whereas, one Democrat and three Republicans defeated incumbents.  Two seats were won by Independents, but it is likely that both Senator-elect Angus King (I-ME) and incumbent Senator Bernie Sanders (I-VT) will caucus with the Democratic Party.

 BakePAC support achieved an overall success rate of 53%.  BakePAC contributed to races in the Senate and the House as well as gubernatorial.  We enjoyed great success in the House where 86% of campaigns BakePAC contributed to won the election in their district.  Also, 27% of the Senate campaigns BakePAC contributed to won their elections.  100% of the gubernatorial elections receiving BakePAC support successfully won election, as well.  Unfortunately, IBA lost two close friends of the baking industry in competitive House races.  Congresswoman Mary Bono Back (R-CA) and Congressman Charlie Bass (R-NH) lost their reelection campaigns, and their help with IBA causes will be missed. Congressman Allen West (R-FL) is contesting his defeat subject to litigation and a recount.

The presidential and congressional elections are only the beginning, however.  President Obama and the generally divisive Congress must orchestrate meaningful compromise to successfully maneuver the U.S. around major blockades.  The Lame Duck Session of Congress faces immediate challenges from November 13, 2012 - January 1, 2013 including avoiding the fiscal cliff, reducing the national deficit, and securing a Farm Bill extension or replacement before the 113th Congress begins.  About 40 tax provisions will expire at the end of December 2012 and without legislation during the Lame Duck, the U.S. will hit the debt ceiling.  Furthermore, sequestration will automatically cut approximately $160 billion in government spending, including $55 billion from the defense budget.  In addition, the expiration of the 2008 Farm Bill will start to impact the economy at the end of the year.  Although both the House and Senate have proposed new Farm Bills no compromise was obtained before all attention shifted to the elections.  In the remaining six weeks of the 112th Congress, compromise between the parties is paramount.

 fiscal cliff

 On Friday, November 16, President Obama will meet with House Speaker John Boehner (R-OH) House Minority Leader Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY) at the White House.  No negotiating is planned, but it is likely Obama will use the meeting to set the tone for addressing the crucial issues facing the U.S., especially as several senators and representatives show a willingness to jump off the fiscal cliff rather than agree to a less than satisfying compromise.

 It is imperative that President Obama serve as a mediator with Congress to facilitate a budget deal that will provide real solutions rather than a patchwork of minimal compromise.  Without a budget deal, it may be nearly impossible to move forward with other issues on his second-term agenda.

 During previous debt ceiling talks President Obama held several secret meetings with Speaker Boehner and Representative Eric Cantor (R-VA) at the White House.  Obama's approach was criticized by former Senator Bob Bennett (R-UT) as too broad and without real negotiation of gritty details.  The President may invite key players from the House and Senate to Camp David to reopen discussions far from the pressures of Capitol Hill.   Ahead of the 1990 budget agreement, former President George H.W. Bush held intensive talks at Andrews Air Force Base that helped compile a cohesive budget.

 Shortly after the election, President Obama and Speaker Boehner made public statements alluding to a tax compromise over the Lame Duck Session. Boehner suggested that might agree to raising taxes in order to reduce the national deficit, stating that House Republicans are "willing to accept new revenue, under the right conditions."  Obama recognized Boehner's deviation from his tough stance before the elections and shared that he is also willing to make concessions, "I'm not wedded to every detail of my plan.  I'm open to compromise." 

 Although Boehner is adamant that Republicans will not compromise on raising tax rates across the board, he appears willing to agree to a tax increase for those making $250,000 or more annually.  During his election campaign, Obama emphasized higher taxes on upper-income earners as a necessity to raise government revenue and decrease national debt.  However, Boehner and congressional Republicans will want major reconstruction of costly government entitlement programs in exchange for the tax increase.  Both parties must also compromise on cutting other social programs that disproportionately benefit the poor versus cutting defense spending.

 It is possible that congressional leadership and President Obama will only be able to form a short-term agreement; serving as the proverbial Dutch boy holding the cracking dyke with his finger.  Freshman Congressman Blake Farenthold (R-TX) commented that in his experience, when Congress is given the choice to make big decisions or kick the can down the road, the can is always kicked.