A general malaise has set over jan/san distributors as both the private and public sectors wait anxiously for the November presidential and congressional elections, which are expected to have far-reaching economic implications.

The jan/san industry is doing a bit of hand-wringing as the economy continues to teeter on a fiscal cliff; it could plummet back into a recession or remain flat, both of which will have adverse consequences for the sector.  

Whether Republican presidential nominee Mitt Romney or President Barack Obama push the economy over the cliff or airlift it to safety is anyone’s guess. But one thing is certain, businesses are undertaking a wait-and-see attitude until the general elections conclude.

“The opinions of each of the candidates are so diversely different, it’s really hard to have an opinion. Everyone is tightening their belts again because we really don’t know what’s going to happen,” says Belinda Jefferson, president of Hercules & Hercules, a Detroit-based distributor.  

Democrats Vs. Republicans

The overarching difference between President Obama and Romney in terms of fiscal policy is how each views the role of government. The President believes government should take an active role in stimulating the economy through spending on education and infrastructure to help spur job creation.
Romney, on the other hand, believes government should get out of the way of business. The former governor of Massachusetts has advocated for more deregulation and a reduction in the corporate tax rate as vehicles to stimulate the sluggish economy and create jobs.

“Both President Obama and Gov. Romney recognize the economy needs help, but they differ significantly on their views regarding the best way to stimulate job growth and economic expansion,” says Bill Balek, the director of legislative affairs at ISSA.

Congress’ political future is also creating angst in the business community. Currently, the Republicans have a majority in the House and Democrats have a slight edge in the Senate, but that could change with 33 Senate seats and every House of Representative seat up for grabs. Many political pundits believe that the Republicans have a fair chance to hold the majority in the House and gain it in the Senate, where Democrats hold a 51 to 49 edge but have 23 of the 33 seats at stake.

“It is difficult to make accurate predictions in congressional races this early on in the election process. Regardless, it is important for the business community to be engaged politically and, at the very least, get to know the positions of the congressional candidates in their states so that they can make informed choices when they visit the polls later this year,” Balek says.

Election Issues

In terms of the presidential and congressional races, one of the big issues that jan/san distributors are tracking is taxes, namely the Bush Tax Cuts, according to Balek. The cuts, spearheaded by President George Bush, to individual income taxes, worker payroll taxes, tax credits for research and development and a depreciation bonus are all set to expire by the end of 2012.

“Tax policy is huge, [hence] the uncertainty that everyone talks about in the business community — nobody is hiring and they are sitting on cash,” says Jade West, who is the senior vice president-government relations for the National Association of Wholesaler-Distributors (NAW). “They’re not going to [invest] until they know what happens with the tax rates at the end of this year, until they have some sense of the regulatory agenda is going to look like and until they have some sense of whether we pull back from the fiscal cliff or just run crazily over it.”

As of the end of July, tax cut compromise between the White House and Congress seemed less and less likely as lawmakers turn their attention to politics and the November elections.

Another issue that seems to be on the radar of many in the distribution industry is health care reform, namely the Patient Protection and Affordable Care Act (PPACA), which is expected to have a particularly strong impact on small businesses.

President Obama’s health care reform, which gained a huge victory earlier this summer when the Supreme Court largely upheld the measure, levies a $2,000 or $3,000 fine per employee for distributors with 50 or more full-time employees who do not provide health coverage.

According to Balek, this provision is an “unreasonable burden” on small businesses that have more than 50 employees, but cannot afford to provide health care coverage. The provision also discourages growth because companies will be less inclined to hire above the 50-employee threshold.  

“Economists predict this provision will add substantially to businesses’ operating costs, slow economic growth, and add to the unemployment rate at a time when the economy continues to sputter along and suffer from reduced consumer spending,” Balek says.

Romney has promised to issue an executive order “that paves the way” for the federal government to issue Obamacare waivers to all 50 states and work with Congress to repeal the legislation “as quickly as possible,” according to his website.

West says that she has heard from many of association’s members that while they want Obamacare to be repealed, they also are calling for health care reform.

“We need to get … Republicans to do something about what was already a broken health care system. We can’t repeal Obamacare and put us back where health care was. It remains the one issue, outside of the tax arena, that keeps employers up at night because they don’t know what’s coming,” she says.

The jan/san industry is also keeping a careful eye on the future of “Last In, First Out” (LIFO) legislation in terms of the presidential election. President Obama has submitted budgets that include repeal of LIFO, an accounting method used extensively by distributors and manufacturers in the cleaning industry, according to Balek.

“In effect, the repeal of LIFO would act as an unprecedented retroactive tax increase and have a devastating economic impact on many of the companies that use it, particularly small, privately-held businesses,” he says.  

‘We Built It!’

Obama irked many small business owners in the distribution industry when he said, “If you’ve been successful, you didn’t get there on your own,” during a campaign stop in Virginia. Although not necessarily a substantive policy issue, the phrase has become a rallying cry for Romney supporters, who say the President’s statement indicates a lack of appreciation for small business and free enterprise. In direct response, “We Built It!” was the conservative refrain at the 2012 Republican National Convention.

The President’s statement “is probably the most stark evidence of the total difference between the two candidates in philosophy in government and comprehension of business and what makes it work,” West says. “Our guys are just enraged. Beyond the fact that everyone acknowledges that you can’t get anything done if you don’t have roads and highways and bridges. But the government didn’t do that for us, we pay for that. Those are taxpayer-provided services not gifts from government.”

On the flip side, Jefferson says Obama is correct with his assertion that small businesses do not make it on their own because entrepreneurs rely on government initiatives and programs that help them get their ideas off the ground.

“It was blown out of proportion because we really didn’t make it on our own. We had the support of our staff, we have some support from government initiatives,” Jefferson says. “I think some of it is the political rhetoric. We didn’t get here on our own.”

The candidates and their parties also have differences regarding the environment, energy and employee safety regulations which have a huge impact on the jan/san industry. But ultimately the choice voters and business leaders have in November comes down to a philosophy of the role of government in helping the struggling economy off the cliff.

“Government is simply in the way right now. It’s in the way in the regulatory stuff, it’s in the way in legislative policy and it’s in the way on fiscal policy,” West says. “So the presidential election and the congressional elections are of immense importance.”  

Brendan O’Brien is a freelance writer based in Greenfield, Wis.




POSTED ON: 9/21/2012