Status Quo in Washington for 2012

You may recall Bill Murray starred in the movie “Groundhog Day,” which was about a weatherman who finds himself living the same day over and over. This plot could apply to most of the 2012 legislative and regulatory action in Washington, D.C., as carried over from 2011.

In late December, Congress and the White House were embroiled in yet another budget-related impasse, which in this instance involved extending the payroll-tax cut for 2012. As with prior budget battles, the issue of how to pay for it pitted Democrats who want to raise taxes on high-income earners against Republicans who want spending cuts to offset the cost. This debate will continue through 2012.

Another fixture likely to stay the same is unemployment. The unemployment rate, measured by the U.S. Bureau of Labor Statistics, fell from 9 percent in October to 8.6 percent in November of last year, but much of that had to do with 315,000 job-seekers giving up and dropping out of the labor force. Construction lost 20,000 jobs during that interval, and, regardless of markets being created by the green-building movement, forecasters predict the outlook for construction in 2012 will be a repeat of 2011.

However, the Keystone Pipeline could change that. Keystone is a 1,700-mile, $7 billion project that would bring 700,000 barrels of oil a day from Canada to refineries on the Gulf Coast. It would immediately create 20,000 construction jobs and, according to the U.S. Chamber of Commerce, ultimately support 250,000 jobs, thus putting money in consumers’ pockets for remodeling and other purchases. However, the White House has delayed a decision on the pipeline until 2013, sparking a push led by Republicans to shorten the process. If the delay continues in the midst of high unemployment, bipartisan congressional pressure will grow to force a decision in 2012.

 

Pressure also can be expected to stop the regulatory avalanche. Despite President Obama’s Executive Order issued Jan. 18, 2011, requiring agencies to review regulations for burdens on job creation, layers of regulations are hampering businesses. For example, on July 6, 2010, changes by the U.S. Environmental Protection Agency to its RRP Rule removed the “opt-out” provision for homeowners. The impact has been costly to remodelers with EPA estimating the provision increased the number of homes subject to RRP from 37.6 million to 77.8 million.

Other agency actions include the Dec. 10, 2010, decision by the Occupational Safety and Health Administration to rescind its fall-protection enforcement directive for steep-slope roofing that allowed the use of slide guards on residential roofs. OSHA replaced it with a new directive that is more rigid and may create greater safety hazards. (To read more about the directive, see Exterior Contractor, page 49.)

OSHA also has a proposed Crystalline Silica Rule being reviewed by the Office of Management and Budget that could dramatically impact construction activities.

The House of Representatives passed several regulatory reform bills in late 2011; this will be a recurring theme in 2012. One of them, the Regulatory Accountability Act, would require cost-benefit analyses of regulations subject to judicial review and has bipartisan support. There also is bipartisan support to defund some of the more egregious regulations.

 

Another recurring theme will be tax reform and what to do with energy-efficiency tax incentives. The homeowner energy-efficiency tax credit (IRC Sec. 25C) is one of some 60 tax credits covering myriad activities that expired on Dec. 31, 2011. Congress typically considers all of them in a “tax-extenders” bill; it is not unusual for Congress to wait until these credits have expired before renewing them retroactively.

Anticipating more muted support for energy-efficiency tax credits in this Congress, a coalition of stakeholders was formed in early 2011 to advocate extending the 25C credit. The coalition has recommended a 25C formula with a $1,000 cap because reverting back to the 2009-10 $1,500 cap would be implausible because of budget constraints and a desire among some in Congress to eliminate credits to pay for a lower corporate rate. Thus, in the case of 25C, what had been a somewhat routine annual renewal of the credit will likely be much more unpredictable in 2012.

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