Not Business As Usual: Venable’s “Election Watch Group” Assesses Impact Democratic House Will Have On Multiple Industries

8 min

WASHINGTON, DC (November 7, 2006)—The mid-term elections are likely to bring changes regardless of which political party controls Congress.  Should the Democrats gain control of either one or both chambers, many observers believe the legislative shift will have an impact on a host of industries. The Government and Legislative Affairs group at Venable LLP is available to comment on some of the likely changes and offer insight into how the changes may have an effect on commerce.

Former U.S. Senator Birch Bayh, fresh from campaigning in his home state of Indiana, is among those at Venable who can speak on the mood of the electorate.  And former U.S. Secretary of Transportation James Burnley is available to discuss what might be ahead for commercial aviation, air cargo and homeland security.

In addition, Venable’s able government watchers offer a few industry-specific projections:

Financial Services: Consumer Protection, Housing – Committees Are on Notice

William Donovan, who has spent more than 30 years representing the interests of financial services providers such as credit unions and thrifts before Congress says, “If Democrats take a majority in either the House or the Senate they can be expected to make a concerted effort to tie a ribbon on the long-pending GSE reforms soon after the 110th Congress convenes in January.  The financial services industry should also expect to see much greater emphasis on consumer protection in a number of areas, including data security, predatory lending and in promoting affordable housing initiatives.  In fact, a House Financial Services Committee chaired by Congressman Barney Frank (D-MA) could be expected to place a greater focus on housing-related issues than we have seen in more than a decade.”

Mr. Donovan noted that federal preemption issues would also likely be the subject of renewed scrutiny.  “There is a growing struggle between the states and federal regulators as far as who has the last word in determining which laws will apply to financial services providers doing business in the various states.  Often played out in the courts, that question could move front and center in a Democratic House or Senate.”

Health Care and Pharmaceutical: Revenge of the Generics

Veteran legislative and health care attorney Catherine Bennett recently joined Venable after 27 years with Pfizer, where she served as vice president of government relations and worked on a wide range of health, tax, intellectual property, and trade policy. 

Ms. Bennett noted that pharmaceutical manufacturers, perceived as closely aligned with the GOP House Leadership, may be in for some major adjustments under a Democrat-led Congress.  “Two of the potential committee chairmen, John Dingell and Harry Waxman, both experts on using the power of committees to push change, are likely to focus some of their energies on health care and the pharmaceutical industry,” Ms. Bennett said.

“A first order of business for Democrats will be to push legislation that authorizes the Secretary of Health and Human Services to negotiate drug prices with pharmaceutical companies for Medicare Part D,” she added.

“The generic drug industry may have a powerful ally and will push for a streamlined FDA approval process for so-called follow-on biologics, on which Congressman Waxman has already proposed legislation, backed by Senate powerhouses Charles Schumer and Hillary Clinton.”

“As for oversight, off-label marketing of drugs, patent litigation settlements, and drug safety will all be on the table, something that pharma companies have not had to worry about under a Republican controlled House,” Ms. Bennett noted.

Energy: Policy and Climate Change, More Support for Alternative Energy Sources

Venable partner Richard Powers, an energy business veteran for 30 years, has worked on a number of legislative initiatives. Noting that both Representatives Dingell and Waxman will likely be in positions of leadership on the Energy and Commerce and the Government Reform committees, he expects a steady stream of hearings and inquiries on energy issues.

"There will be an extreme shift in attitude towards energy policy, especially in the House, during the next session under Democratic leadership and it’s a pretty safe bet that hearings and inquiries will come," said Mr. Powers. "The Democrats are well aware that President Bush is vulnerable on energy issues, especially if gasoline and home heating oil prices spike or portions of our aging electric infrastructure produce power spikes or outages." They will want big oil to give back some of the gains received as part of the Energy Policy Act of 2005, and they will push for extensions of tax credits for alternative energy sources – including solar, wind and biomass – and for renewable fuels and portfolio standards."

Climate change and the environment will also play a bigger role and the Democrats will attempt radical changes to the Clean Air laws, including cutting CO2 emissions. Getting the Republicans and the Administration to go along is another matter. It should, however, shape the debate for 2008. Finally, the role of the nuclear power industry will continue to get play as we look for ways to address the spent fuels issue.

Homeland Security and Transportation: Cargo Inspection, Reform of Air Traffic Systems on Tap

Former Transportation Secretary James Burnley, who leads Venable's transportation practice, is one of the nation's foremost authorities on transportation issues.  He notes that demands for further changes to cargo inspection rules could intensify.

"Companies in the business of moving cargo across our borders, or anywhere by air, will need to be proactive in the debate about how to assure the continuing efficient movement of goods.  Draconian inspection demands that don't substantially increase our security could gravely damage our economy,” said Mr. Burnley.

Congress also must reauthorize aviation programs next year.  "An intense debate has already started on restructuring aviation taxes and on reform of the air traffic control system.  We can expect that to play out throughout 2007," said Mr. Burnley.  He noted that the air traffic control system could be facing a significant increase in demand for its services over the next few years.  "Thousands of a new generation of 'micro' jets have been ordered and will begin showing up in U.S. air space next year.  As this occurs, the air traffic control system also has to transition to a GPS-based system."

Taxation: Surprising Bipartisanship? How About an Estate Tax Compromise

Venable’s tax commentators include Sam Olchyk, who spent eight years as tax counsel to the Senate Finance Committee and the Joint Committee on Taxation, along with Ray Beeman, who was tax counsel to the Joint Committee on Taxation.  The two attorneys believe that Democratic control might not necessarily align with conventional wisdom:

“The big surprise for most people is that Congress could reach a bipartisan compromise on the estate tax by the end of 2007,” says Mr. Olchyk.  “Despite the philosophical differences surrounding this issue, there is a bipartisan desire to forge a compromise and eliminate the growing uncertainty regarding the fate of the estate tax after 2010.  The passing of the election could provide the window of opportunity needed for a consensus to emerge.”

Added Mr. Beeman, “For the most part, there probably will be a stand-off on business, corporate and individual income taxes, and on tax reform. However, Democrats will show a more business-friendly face than many might expect, although perhaps with a different mix of winners and losers than under Republican control, and any attempts to roll back the 2001 and 2003 tax cuts will be short-circuited by the inevitability of a presidential veto.”

Communications: Privacy, Net Neutrality, and Media Consolidations

Erik Huey—who represents a range of communications companies as well as entertainment and artist organizations such as the Screen Actors Guild, American Federation of Television and Radio Artists (AFTRA), and the Recording Artists Coalition (RAC)—noted that privacy and net neutrality advocates should expect a more receptive Congress in the months ahead if Democrats regain control of the House.

“The Bush administration's electronic surveillance programs were a significant concern for many constituents and Democrats in Congress, which may spur interest on the Hill in improving privacy protections,” Mr. Huey said. “Net Neutrality is also another high-profile issue that may jump back on the radar in a Democratically controlled House or Senate.”

“Increased scrutiny of ownership consolidation among media, entertainment, and communications companies may also be high on a Democratic Congress' priority list,” Mr. Huey commented. “Democrats will likely subject media and communications industry mergers to increased scrutiny."

Foreign Policy: Getting Answers on Iraq, North Korea, and Iran

Venable’s James Jatras has deep understanding of numerous international policy and trade issues. He spent years as a top foreign policy analyst on the Senate Republican National Committee and is affiliated with some of Washington’s leading think tanks, including the Heritage Foundation, Cato Institute, American Enterprise Institute, and others that shape the thinking of policymakers on national security issues. 

Mr. Jatras noted that cordial and cooperative relationships between the Senate and House chairs and ranking committee members will likely cut down on Congressional contentiousness, but says Iraq will unquestionably remain a top issue.

“The Democratic party’s critique of the Iraq war is in many respects very similar to what is being articulated by many Republicans,” Mr. Jatras said.  “In fact, few Democrats are advocating for an abrupt pull-out from Iraq. Many in both parties feel that more U.S. personnel and money are needed now in order to achieve a successful conclusion to the mission.”

Mr. Jatras added, “With the voting public clamoring for answers onIraq, I would expect there to be some investigations. In addition, I would expect an up tick in the number of hearings on the situations in North Koreaand Iran.” 

Please let us know if you would like to speak with any members of Venable’s Election 2006 group.

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