US, elections, outsourcing, mid-term

Political Round-up - The 2006 US Mid-Term Elections & Outsourcing

Dear Member,

As the impending mid-term elections in the U.S. may have an impact on the outsourcing industry, we thought you might find interesting the following opinion piece written by independent political analyst Ernest Baynard.

The HROA has no political affiliation or stand on any of the candidates.  Mr. Baynard is an independent analyst, and is not in the employ of either political party or the HROA.  His opinions and perspectives are his own, and do not necessarily reflect the opinions of the HROA, its Board of Trustees, or its management.

You may strongly concur with what Mr. Baynard says, or you may vehemently disagree.  Either way, we invite you to express your opinion!  Please send your thoughts on Mr. Baynard’s piece and on the political environment by email to: info@hroassociation.org.  We will summarize member responses and give them air time.  Please visit www.hroassociation.org and click on the HR Outsourcing Channel to see this and other Thinking Points opinion pieces.

Sincerely,

Richard J. Crespin
Executive Director

Political Round-up
The 2006 US Mid-Term Elections & Outsourcing

By Ernest C. Baynard IV, Meridian Hill Strategies

As the 2006 election cycle heats up, there are a number of important trends, and possible developments, which could have significant consequences for the outsourcing industry.  The most significant would be a change in committee leadership in one or both Houses of Congress.  If the Democrats gain a majority in either house the chairmanships of the respective committees that take up legislation will change.  Polling has shown that trade and the political issues surrounding outsourcing and offshoring cut across party lines, and rural, urban, and suburban lines.  It is therefore not simply a Democratic or Republican issue.  As such, there are Democratic Members who are strong proponents of “Free Trade” while there are Republican Members supporting “Fair Trade” policies to ensure that U.S. trade policy is more inclusive of labor and human rights concerns.

The November elections could have a significant impact on how Congress deals with outsourcing and offshoring.  The most immediate impact would take place if the Democrats gained a majority in either or both Houses triggering a change in the leadership of the committees.  The Members who currently chair committees with jurisdiction on trade have generally been friendlier to outsourcing and offshoring than their prospective replacements, many of whom have voiced concerns about the industry practice (see below). 

Short of taking over, it seems highly likely that the Democrats will significantly narrow their margin in the House and may also pick up seats in the Senate.  This November could also bring the election of several new Members who have been vocal opponents of outsourcing and specifically of offshoring.  It bears noting that in political and media circles, these terms often get mixed up together with little distinction made between them.  It also bears noting that candidates and groups will spend millions of dollars on media campaigns in which outsourcing and trade-related job loss will be central themes.

Even if there is no change in leadership, a small change in the number of seats held or in the complexion of the House could affect U.S. trade policy, as “free trade” proponents have found it increasingly difficult to pass trade legislation in this body in recent years.  The most recent example of this can be found in the Central American Free Trade Agreement (CAFTA), which passed by only two votes on July 27, 2005, with twenty-seven Republicans and many pro-trade Democrats voting against it.  The full political impact of CAFTA is yet to be felt, as many members of Congress from both parties who voted for CAFTA are finding that trade policy is a hot-button issue this year in their home districts.  This is particularly true in the Rust Belt and states with heavy textile, domestic manufacturing, and organized labor interests.  This dynamic also cuts across party lines as Democrats, including Melissa Bean (D-IL) and Republicans like Mike Fitzpatrick (R-PA) are challenged by “fair trade” groups in their home districts opposed to their votes in favor of CAFTA.

According to the latest New York Times/CBS News poll Americans have a highly negative view of the Republican-run Congress, with a strong majority of respondents stating they disapprove of the job it is doing and that its members do not deserve re-election.   While to a lesser extent, this dissatisfaction applies to the Congressional Democrats as well, this does not bode well for their Republican counterparts. 

The level of public dissatisfaction found in the poll is remarkably similar to the polling conducted in 1994 when the Republicans won fifty-two seats to take the House and Senate.  However, there are important differences between now and 1994.  Firstly, there were over 100 seats in play in 1994.  Today, thanks to redistricting efforts, there are only about 40 competitive districts across the nation.  Secondly, the Republicans have a significant fundraising advantage heading into the last six weeks of the election.

While redistricting and fundraising are advantages for the Republicans, there is another factor in play today not present in 1994 that may make the difference for Democrats: Mark Foley.  FOX News reports the eruption of the Rep. Mark Foley (R-FL) scandal, who resigned his seat on September 29th, has caused the polling numbers of numerous Republican candidates in key races to drop by double-digits.  Given this reality and the already high level of dissatisfaction among the voters, it appears the Democrats could win enough seats to regain control of the House if the election were held today.    

A Democratic-controlled House would usher in a new agenda under Democratic Leader Nancy Pelosi and new leadership on committees with jurisdiction on trade and outsourcing.  One such committee, the House Committee on Ways & Means, has primary jurisdiction over the generation of federal revenue, including the approval of trade deals.  Another, the House Committee on Government Reform & Oversight, has jurisdiction over government operations, including federal contracting.   It appears that Rep. Henry Waxman (D-CA) is poised to take over the gavel of this committee should the Democrats take power.  Waxman is a progressive, outspoken government watchdog.  His Republican counter-part, Tom Davis, has a record of supporting government restructuring, including the tough standards for government performance embodied in the Government Performance and Results Act (GPRA) of 1993, passed during the Clinton Administration.

A third committee with jurisdiction over trade and interstate commerce is the House Committee on Energy & Commerce.  A Democratic majority would likely make Rep. John Dingell (D-MI) the chairman and Jan Schakowsky (D-IL) the chair of its subcommittee on Commerce, Trade, and Consumer Protection.  Both are from strong labor States, have been outspoken critics of U.S. trade policy under the Bush Administration, and have a strong pro-union voting record.  In addition to these key committees, a Democratic takeover could increase the influence of labor unions and progressive groups seeking to pass “fair trade” initiatives and anti-outsourcing/offshoring related legislation.  Although their influence could be counter-balanced by their counterparts in the Senate.  The current chairman, Cliff Stearns, has a fairly pro-trade record, including voting for CAFTA. 

One area that could feel immediate affects is Presidential Trade Promotion Authority (TPA), which expires in June 2007 unless extended by Congress.  TPA gives the President a free hand in negotiating trade deals and submitting them to Congress for up-or-down votes with no amendments.  If TPA is not renewed, Congress would have the ability to alter trade deals with amendments that could include anti-outsourcing provisions.  The main push by labor groups at this time is a compromise that renews TPA with provisions that ensure workers in countries with whom we trade have the right to organize.  This dynamic could open the door to a host of other “sector specific” negotiating instructions that could limit the scope of services and industries subject to a bilateral trade deal.

In 2005, New Jersey joined Tennessee, Illinois, Maryland, and Washington to become the fifth state legislature to pass a law curbing or banning offshoring the performance of a state government contract.  The New Jersey law provides: “For every state contract for services, only US citizens and legal resident aliens shall be employed.” The New Jersey law is the toughest in the nation, as it bans state contracts from being performed outside of the U.S.  The law, known as a “state contract ban,” was inspired by the fact that telephone inquiries by welfare and food stamp clients under New Jersey's Families First Program were being answered in call centers in Mumbai, after the contractor moved his operation there to cut costs. 

In 2004, the Maryland state legislature passed House Bill 183 which “authorizes procurement officers to consider whether a contractor or subcontractor will render a contract for services from a site that is outside the United States unless the contract for services is related to a proceeding or event outside the United States.”   This “preference” bill was vetoed by Governor Robert L. Ehrlich (R), who is up for re-election but is trailing his opponent, Baltimore Mayor Martin O’Malley (D) in the polls.  If Ehrlich is defeated, the bill could come to the desk of the Governor once again, and this time be signed into law.

Other states have required that prospective contractors disclose any operations that will be performed outside the state or the U.S. and allow that to be a “factor” in deciding whether to grant the contract.  There is a growing trend, particularly in states with a strong union presence, to ensure that work performed under a state contract be done in-state or within the United States.   State legislatures in at least 36 states have introduced more than 100 bills to ban or curb offshore outsourcing, and a study by the National Foundation for American Policy (NFAP) has found this trend could continue on the federal level.  The election outcome in the House will play a major role in whether groups seeking federal outsourcing restrictions in Congress succeed. 

 
About the Author
Ernest C. Baynard IV is a veteran of the last five election cycles who has managed numerous media and public affairs campaigns for a diverse group of corporate and political clients.  He has also served in several senior level positions over the past ten years in the White House and on Capitol Hill.  As President of Meridian Hill Strategies Inc., Baynard works with some of the nation’s top CEOs and political leaders to create a powerful voice for them inside the Beltway and in the national media.  He serves as a guest lecturer on media and politics at the United States Military Academy and has also lectured at Georgetown University and Johns Hopkins University.  Baynard has made numerous appearances on CNN, MSNBC and other networks regarding international trade issues before Congress.

Please note:  The opinions and perspectives in the preceding article do not necessarily reflect the opinions of the HROA, its Board of Trustees, or its management.  Disagree with Ernest Baynard’s assessment?  Let us know your opinion!  Send an email to: info@hroassociation.org.