Next week begins Congress' lame duck session - the last chance for Democrats to push climate change, card check and immigration. The week will include leadership elections in the House and Senate, and Congress will reassemble after Thanksgiving to finish the session.

Legislation likely to be considered will be the Paycheck Fairness Act (which makes it easier to sue employers for discrimination based on pay disparities); Omnibus Appropriations bill(s) for fiscal 2011; extension of federal unemployment benefits; suspending cuts to Medicare reimbursement rates for physician services; extending the Bush tax cuts all or in part; extending the aviation and surface transportation programs; and potentially a vote on the debt commission recommendations (report to Congress is due Dec. 1). 

AGC's election Web page contains information on the impact of the election on the industry, as well as materials to help you navigate the changing political environment. The Web page also contains an audio recording of Tuesday's conference call hosted by AGC's chief executive officer, Steve Sandherr.

For more information, contact Jim Young at (202) 547-0133 or youngj@agc.org.

On November 9, the co-chairs of the National Commission on Fiscal Responsibility and Reform laid out a preliminary proposal to cut the federal deficit by hundreds of billions of dollars.  The sweeping proposal - which has garnered opposition from liberals, labor unions and conservatives, including most members of the commission itself - includes several items related to the construction industry, including the AGC-endorsed recommendation to increase the federal gas tax.  The co-chairs and members of the commission made it clear that the proposal was just a starting point endorsed by only the co-chairs. The commission report will be official only if supported by 14 of 18 commission members.

In addition to joining other transportation stakeholders in sending a letter to the commission in support of a proposal by Senators Tom Carper (D-Del.) and George Voinovich (R-Ohio) to increase the gas tax by 25 cents, AGC sent a detailed letter to the commission recommending a 25 cent gas tax increase to be divided between deficit reduction and the Highway Trust Fund.  AGC has and will continue to meet with the members of the commission in advocating for the increase to be included in the commission's final report, due December 1.

The draft proposal also calls for cutting billions of dollars in domestic and military spending and remaking the tax code.   Spending cuts of note to the construction industry are:  the termination of low-priority Army Corps of Engineers construction projects (beach erosion and rural water treatment program run by the Corps); cuts to the U.S. Embassy construction budget (largely in security reduction);  elimination of runway expansion and capital investment grants to large and medium-sized hub airports through the FAA's Airport Improvement Program; and an increase in the Inland Waterways Trust Fund fuel tax to cover all costs of construction and maintenance.  The plan would also ban Congressional earmarks.

On the tax code front, the plan would end or cap a wide range of tax breaks including the deduction for home mortgage interest and dependent children.  The plan calls for a higher tax rate on capital gains and dividends while offsetting that increase by lowering individual rates.  The plan would also lower the top corporate tax rate of 35 percent to as low as 26 percent.

In an attempt to tackle the problems with Social Security, the plan calls for a gradual increase in the retirement age to 68 by 2050 and 69 by 2075, a reduction of Cost of Living Adjustments, and cutting benefits by changing the current benefit formula.  The plan also seeks to address the Medicare "Doc Fix" through various payment reforms, cost-sharing and malpractice reform.

Senator Claire McCaskill (D-Mo.), chair of the Senate Contracting Oversight Subcommittee, is pressing forward in her efforts to investigate the effectiveness of the Alaska Native Corporation (ANC) program. McCaskill has expressed on numerous occasions her concerns over the unique government contracting preferences for ANCs and will soon introduce legislation to treat ANCs equal to other small, disadvantaged businesses seeking government contracts.  Senators in Alaska are expected to strongly oppose this legislation.

If enacted, her legislation would:

• Eliminate the ability of ANCs to receive sole-source contracts exceeding the caps applicable for other 8(a) participants of $3.5 million for services or $5.5 million for goods;
• Eliminate the automatic designation of ANCs as socially disadvantaged business enterprises, requiring ANCs to demonstrate their social disadvantage by providing evidence of "racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups";
• Eliminate the automatic designation of ANCs as economically disadvantaged, requiring any ANC seeking to participate in the 8(a) program to demonstrate that corporation's economic disadvantage upon entering the program;
• Require ANCs to count all affiliates and subsidiaries in size determinations for 8(a) eligibility, which shall be limited to no longer than nine years, as is required for other 8(a) participants;
• Require ANCs who choose to participate in the 8(a) program to own a majority interest in only one 8(a) subsidiary at any one time;
• Require ANCs who choose to participate in the 8(a) program to be managed by individuals who qualify as socially and economically disadvantaged under the program, as other 8(a) participants must do; and
• Prohibit ANCs who chose to participate in the 8(a) program from operating as pass-throughs to non-Native companies that do not qualify under the 8(a) program.

Following an investigative series published by the Washington Post in October, Senator McCaskill also called on the Small Business Administration's inspector general, the agency's independent auditor, to investigate the claims made in the articles and asked that the inspector general report back to Congress and if necessary, refer its findings to the Department of Justice.

AGC is currently conducting a review of this legislation and its potential impact on government contracting.

To view of copy of Senator McCaskill's letter to the SBA IG, click here.  To view a summary of Senator McCaskill's proposed legislation, click here.

On Tuesday, voters across the country voted on ballot initiatives that will raise revenue for transportation, transit and other infrastructure programs. Despite the economic conditions, measures passed include increases in sales taxes, property taxes and vehicle registration fees to finance roads and transit projects. A number of school districts and localities issued increases in bonds for construction. (more…)

Republicans gained a net of 63 seats so far on Tuesday night, putting the House at 239 Republican seats, 186 Democratic seats, and 10 seats uncalled (list below).  The current Senate breakdown is 52 to 46 (Republicans picked up 6 so far) with 2 states - Washington and Alaska - yet to be finalized.

The AGC PAC contributed more than $1,000,000 to 252 candidates.  So far, AGC has contributed to 209 winners or a win percentage of about 83 percent.  That number will continue to be adjusted as the undecided races come in. (more…)

Still Counting and "Lame Duck" May Set Tone for Next Year

Click here to view the shift in power and AGC's projected changes in leadership.

The voting is over, but the counting continues.  Republicans have secured a majority in the U.S. House of Representatives and there is a smaller majority of Democrats in the U.S. Senate. This year's wave election may have also washed out the old saying that "all politics is local." The local voters were driven by national issues like health care and spending, and were fueled by national media that focused on party conflict. 

Incumbency and experience were the cause of significant losses for sitting Committee Chairs of the Budget, Armed Services and Transportation Committees. The conflict continued unabated when Nancy Pelosi (D-Calif.) issued a statement this morning celebrating the Democratic majority for "courageous action" and Jim DeMint (R-S.C.) issued a statement urging new members not to "fall into line."  

The Republican majority and shrinking Democratic numbers will alter the legislative and regulatory issues AGC members face during a lame duck and in the future. While the change in power is clear, what exactly will come of it is not. In the coming weeks and months, AGC will work to analyze and interpret events in Washington, D.C., and will keep you updated on what the changes in Congress mean in practical terms. Republicans will start the lame duck session with 42 instead of 41 senators as a result of special elections held in conjunction with the general election.  The 112^th Congress will require bipartisanship to pass even small issues. The tone will be set early in the Congress by the interaction between the leaders of both parties, both chambers and the president - in fact, it may be set during the lame duck session beginning November 15. 

Lame Duck

The lame duck agenda will include the funding for the rest of fiscal year 2011 (nine months worth of federal funding) and the extension of SAFETEA-LU and FAA authorization, as well as deciding how to handle the expiring tax cuts, extension of the Medicare doc fix and extension of unemployment benefits.  It could also include the confirmation of Jacob Lew as the new Office of Management and Budget director. They could also vote on a bill to block the imposition of the greenhouse gas rule and the Defense authorization.  The productivity of the lame duck will likely signal the productivity of the 112^th Congress.

Congress Overview

The closely divided Congress will contrast with the large majorities Democrats held after the 2008 election. Some of the new members bring with them their own agenda and an anti-establishment mentality that could impact how leaders in both parties try to corral votes. The outstanding question is this: Will there be more partisanship or more bipartisanship? The agenda will be dictated by what the lame duck does or does not accomplish.

Congress and the Administration may be able to work together on trade issues, education and deficit reduction. However, many members will be cognizant of the recent voter backlash against members of Congress who had moved more toward the center.

The parties will elect leaders and committee chairs during the lame duck. Click here to see a run-down on who AGC anticipates will be the Congressional leaders in the 112^th Congress.

Federal Construction Spending

Both Republicans and Democrats have pledged austerity. Republicans in Congress and President Obama have put some specifics to where they feel construction spending should be. In his FY 2011 budget, the president proposed holding spending close to $112 billion in 2011 and a  three-year discretionary funding freeze. For 2012, he has instructed departments to cut their spending by five percent more. The Republicans have pledged to impose a hard budget cap, and  hold spending at about 2008 levels (Congress appropriated a little more than $107 billion for construction in 2008, very close to where the Obama Administration would be with a five percent cut for 2012).  The lower spending levels and the hard budget cap envisioned by the Republicans will likely create a battle for funds in a zero sum world.  In addition, AGC envisions a significant fight among Republicans on how to handle or how to limit earmarks.  Fewer earmarks could result in fewer votes for construction spending legislation in the future.

Obama Administration Overview

With President Barack Obama now halfway through his first term, his reelection efforts start today. Leading up to Election Day this year, he said his major priorities for the next two years were overhauling the nation's immigration laws, passing energy, education, transportation and climate-change legislation, and shrinking the federal deficit. Even with both Houses of Congress, Obama had difficulty winning approval of the health care and financial reform bills, and he failed to pass cap and trade legislation.  His goals will now be even more challenging. The president will need to decide if he will work with or work against a divided Congress.  President Obama will probably continue to advance goals that do not rely as much on Congress, such as making greater use of the executive branch's regulatory machinery. However, much of his agenda could be scuttled by the economy, and based on the election results he will have to address the jobs situation before the larger social issues.