‘Terrified’ lobbyists brace for lame-duck chaos, expecting tough tax, budget votes

Lobbyists are making sure to schedule their vacations before the November election in anticipation of a frenzied congressional session at the end of the year.

Many on K Street are living in fear of the lame-duck session that will begin when lawmakers return to Capitol Hill after ballots are cast. Big-ticket items — including the expiring Bush tax rates, budget sequestration and an increase in the debt ceiling — will have to be dealt with by Dec. 31.

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Votes on those politically tough issues are unlikely during campaign season, so lobbyists are preparing for November and December to be their busiest work period of 2012.

“I don’t think anyone is taking a vacation after the election. It’s the lame duck to end all lame ducks,” Steve Elmendorf, president of Elmendorf Ryan, told The Hill.

Kathryn Lehman, a partner at Holland & Knight, said the likely agenda for the lame-duck session “sends shivers down people’s spines. It’s unbelievable.”

“You should have your Christmas shopping done well in advance of December. That’s my advice to everybody,” Lehman said. “It’s going to be ugly.” 

One lobbyist shared an investor note with The Hill that calls the lame-duck session “a fiscal cliff,” a term used by Federal Reserve Chairman Ben Bernanke to describe the tax increases and budget cuts that are set to begin at year’s end.

“Clouding a solution to these fiscal issues is the fact that this is a presidential election year and the outcome for dealing with the fiscal cliff really cannot be known until the election winners are known,” said the note, dated April 16, by Strategas Research Partners. “By our count, the approaching fiscal drag would require a solution larger than any fiscal stimulus bill passed to date and is double the size of any post-WWII tax increase.”

The note estimates if Congress takes no action by the end of this year, the drag on the U.S. economy could be roughly $537 billion in 2013 — or 3.5 percent of the gross domestic product — from a combination of expiring tax cuts and slashes to the federal budget.

The unholy trinity of the Bush tax rates, debt-ceiling negotiations and automatic budget cuts isn’t the only thing weighing on lobbyists’ minds. 

Other legislative issues that require action from Congress include the expiration of the payroll tax cut, extending unemployment benefits, reversing cuts to doctors’ Medicare payments, spikes in the Alternative Minimum Tax (AMT) and the estate tax and the renewal of a tax-extenders package popular with business.

Lobbyists are fretting about a number of post-election scenarios for the lame-duck session — such as a GOP-controlled House snubbing a reelected President Obama, or a Senate in Democratic hands refusing to work with Republicans after a Mitt Romney victory.

“Are we worried? Terrified,” said Jade West, senior vice president for government relations for the National Association of Wholesaler-Distributors, who is planning on taking time off before the election so she can work through December.

West said she is telling lawmakers that the economy can’t withstand a $4 trillion tax hike come January, which she calculates would result from increases in the estate tax and the AMT as well as all of the Bush tax rates expiring.

“Just because the likelihood of Congress doing any major policy initiative before the election is slim, that doesn’t mean you don’t set the stage,” West said. “If you don’t put the time in now, the result you will see in November or December may not be the result you want to see.”

Lehman is lobbying on renewing the wind energy production tax credit for one of her clients. The credit is usually considered part of the tax extenders package, but Lehman is pushing for its passage before the lame-duck session, potentially on another piece of legislation.

“The conventional wisdom is a lot won’t get done until the lame duck, but that doesn’t mean you don’t stop looking for opportunities,” Lehman said.

Others are working lawmakers hard and scheduling their life around the lame duck.

“I am definitely planning on working the entire month of December. The only vacation plans I have are for August,” said Michael Herson, president of American Defense International.

Herson is focused on the automatic budget cuts facing the Pentagon from sequestration, which are slated to be $500 billion over 10 years.

“It’s something the defense industry is definitely concerned about, and the effects are already beginning to be felt right now,” Herson said of the automatic cuts. “This is a problem that can’t wait for the lame duck to be fixed, if it’s going to be fixed right.” 

Herson said he expects the House will move before the election to offset all of the budget cuts agreed to in last year’s deal to lift the debt ceiling. The question remains whether the Senate will act on that legislation.

Lobbyists do expect that some major legislation will move before November. They pointed to a number of bills, such as cybersecurity legislation, reform of the postal system and another extension of the highway bill as likely candidates for passage.

Bob Van Heuvelen, founder of VH Strategies, noted that the Food and Drug Administration’s medical device and prescription drug user fees would have to be reauthorized before they expire at the end of September.

“There is a good deal of hope that it can get resolved before the Sept. 30 deadline,” Van Heuvelen said.

He also said farm-state lawmakers might heed calls from constituents and push for action on a new Farm Bill.

“That’s still an open question, but if it becomes politically expedient, you could see it move too,” Van Heuvelen said.

Nick Allard, a partner at Patton Boggs, said lawmakers would need legislative action before November to impress voters.

“Members of Congress will need accomplishments, something to run on,” Allard said.

Further, deals could fall into place at the last moment, and K Street needs to be prepared for whatever is to come.

“Think of watching the U.S. track and field team at the Olympics. It may be a one-minute event, but it has taken years of preparation,” Allard said. “Ninety percent of lobbying is preparation. Drafting, researching, negotiations — all prep work.”