Distribution Trends

Political Prognostications: What I See in the Tea Leaves

With a little less than one year left until the 2016 elections and a little more than one year left in President Barack Obama’s final term in office, it’s time to take a look at what 2016 may have in store for HVACR distributors and our industry at large.

One More Year!

What can we expect in Obama’s final year? My guess is more of what we’ve had the last five years, which includes continued stalemates with Congress and a flurry of activity via regulators and executive action. Some of you may believe this is hyperbole and that it’s not uncommon for exiting administrations to move into regulatory overdrive (which is true). However, a recent study from Sam Batkins of the American Action Forum illustrates how the regulatory burden has impacted the HVACR industry during the past seven years.

Among the points in Mr. Batkins study:

• Since 2007, the Department of Energy (DOE) has finalized 25 major rules (a major rule is one with an economic impact of more than $100 million) that have imposed more than $8 billion in annualized cost. Expect the band to keep playing as DOE’s regulatory agenda says there are 11 more major rules left to finish in 2016.

• Since 2010, DOE has imposed more than $76.6 billion in regulations upon the HVACR industry.

• The HVACR industry has lost 55,000 jobs since 2001.

I anticipate continued action and changes to the SNAP List from the Environmental Protection Agency in 2016 as well as the finalization of updates and changes to EPA’s 608 program as part of the President’s Climate Action Plan. Other regulations likely to make headlines will be a host of actions from the Department of Labor, particularly on wage and hour rules impacting exempt/nonexempt employees and actions from the National Labor Relations Board.

What about Congress?

To put it bluntly, most Americans believe that Congress has accomplished little during recent years, and they would not be wrong. The only organization that has been more poorly run over the past few years than Congress is the Cleveland Browns. Will things change with Paul Ryan (R-WI) at the helm of the House? Maybe, but given the House Republican majority’s continued fascination with circular firing squads, I wouldn’t bet my paycheck on it. On the Senate side, Minority Leader Harry Reid (D-NV) has continued his role as chief blocker of GOP-authored legislation by holding his caucus together and bogging down bill after bill.

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I would anticipate another year of nibbling around the edges, with a few potential areas of compromise, most likely regarding the tax code.

Election 2016

I expect the 2016 election cycle to be one of the more interesting exercises in campaigning that we have ever seen. The reason for my thinking is that there appears to be more money involved in campaigns than ever before and more ways to spend it. In previous years, the two major groups spending money on races were the campaigns themselves and national political parties. They were limited to spending money on TV, radio and mailers. Now we have multiple groups spending millions of dollars in a variety of new and inventive ways, and they do so to promote a particular candidate or issue that may have fallen by the wayside in the past. Most media coverage tends to focus on the horse race nature of the campaign than the issues, with some deviations for “gaffes” or media created controversies. Ultimately, I think that voter turnout will be down in 2016 as people just want the perpetual campaign to stop.

In talking with HARDI members and people throughout the country, I see a growing sense that the status quo is not working and a desire for competency in leadership positions. In Washington, we’ve seen the juxtaposition of an overactive executive branch and a legislative branch that too often fails to produce anything. We have two choices, to accept this ineffective government or work to change it for the better. I know this: We cannot afford more of the same moving forward.