The Outcome of the 2012 Elections and What it Means for Employers

The 2012 presidential and congressional elections are finally over, probably much to the relief of an exhausted electorate and the chattering class of political pundits and pollsters who predicted a much closer race. Six billion dollars of generally negative political advertising from both parties and the new Super PAC ads later, and what are the results? The status quo remains in effect— President Obama was re-elected decisively with 50 % of the popular vote and a whopping 332 electoral votes, in which he won every key battleground state including Ohio, Florida, Virginia, Iowa, Colorado, New Hampshire, and Nevada. The Senate remains in Democratic hands with a 55-45 seat majority. The House of Representatives remains in Republican control. In other words, we have the same divided government, albeit with a few new faces, that has brought us political gridlock over the past four years and longer.

Beyond readings of the tea leaves—or coffee grounds—for the most part the pollsters were wrong in this year’s election. While they weren’t “Dewey Defeats Truman” wrong, where no polls predicted a Truman win in 1947, they were generally wrong at least in how close the outcome would be. Some predicted that Governor Romney might win the popular vote (he lost by over two million votes) and that the Senate might even be tied (the Democratic margin increased).

There were several records set. No president had ever won re-election when unemployment was over 7.2% since FDR. The unemployment rate announced the Friday before Election Day was 7.9%, which at least was slightly better than the 8% it had been consistently for months.

Also, with the record number of women elected in the House, for the first time in history Democratic men will no longer be the majority in their House caucus. And taken together with the elected African-Americans, Latinos, and Asians, for the first time Democratic white males will no longer be the majority in the House Democratic Caucus.

What Does All This Mean?

With divided government—Democrats controlling the White House and the Senate (but by less than a filibuster-proof margin) and Republicans controlling the House, and the leaders in both Houses of Congress remaining unchanged except on several committees—all signs point to continued gridlock. That means that the union’s congressional labor “reform” agenda would be blocked in Congress and instead would continue unabated and perhaps even more aggressively at the U.S. Department of Labor and National Labor Relations Board through tougher enforcement policies, expansive regulations, and administrative decision-making. Over 140 regulations are stalled at the Office of Management and Budget pending the election, so expect a regulatory tsunami. You can also anticipate the Labor Department’s revisions to the “Persuader Activity” regulations to be issued, although probably not until early next year.

The results also mean that the Affordable Care Act (Obamacare) will not be repealed so that the “play or pay” mandates will still go into effect in 2014. Governors and state legislatures, which have resisted instituting exchanges pending the Supreme Court challenge and then the 2012 elections, now must face a decision whether to continue the fight on principle. The scores of scheduled government regulations required by Obamacare will now begin as well.

The first test of continuing gridlock in Congress will come in the current lame duck session on the issue of sequestration, i.e., failing to renew the Bush-era tax cuts, increasing taxes on those earning $250,000 annually (including small businesses paying at the individual rate), and indiscriminate spending cuts of 10% across the board, including military spending. Economists predict that going over this “Fiscal Cliff” before sequestration goes into effect on January 1, 2013—only weeks away—would drive the country into a recession.

So what has happened since this week’s start of the year-end lame duck session with a holdover Congress that will be replaced next year by the newly-elected 113th U.S. Congress? Well some, such as Senator Patty Murray have said that it’s really a “Fiscal Slope”—not a cliff—and the only way to force compromise on tax cuts and spending cuts is to go over the “slope” and allow sequestration to occur.

While there has been some softening of the partisan rhetoric since the elections, leaders of both parties in Congress are being encouraged to hang tough by their parties’ extremes.

My prediction is that Congress will be in until we hear sleigh bells, but that it’s very difficult to reach agreement on all of the details of a budget package in five weeks. I expect to see some stopgap compromise solution, which once again will kick the can down the road into the next Congress, but will avoid sequestration.

As for what happens next year on labor and employment law issues following the 2012 elections, that’s for another blog. One happy thought—just when you thought you were safe from election campaigns, the campaign for the 2014 mid-term elections is just now beginning.

Harold P. (Hal) Coxson is a shareholder in the Washington, D.C. office of Ogletree Deakins, and he chairs the firm’s Governmental Affairs Practice Group.