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Fiscal Battles Portend Good Year Ahead for K Street

When the congressional agenda includes cuts to entitlements and defense programs, a fight over the debt ceiling and potential tax changes that could affect virtually every sector of the economy, you can bet on one thing: Lobbyists will be very busy this year.

K Street executives do not predict dramatic growth in their industry for 2013, but they do expect a steady uptick in revenue with clients deeply vested in what comes out of Washington, D.C.

“Everything’s on the menu, which is why business is good,” said Steve Elmendorf, a Democratic strategist who runs Elmendorf|Ryan. “Those fiscal deals potentially impact everybody. There’s almost no client who’s not interested in the outcome. And it’s hard to predict.”

Lobbyists say they expect fiscal issues to dominate the discussion throughout the year. And clients from the private and public sectors may have targets on their backs as Congress and the Obama administration eye spending cuts and revenue-raisers to pare the deficit and resolve budgetary standoffs.

Other contentious issues such as gun control and an overhaul of immigration law will also be on the docket. And the continued implementation of the Dodd-Frank financial law and the Affordable Care Act also will dominate K Street’s days.

In addition, members are expected to debate a transportation bill, as well as policies that would affect the energy and environmental sectors.

“A lot of the year is going to be waiting for the next shoe to drop,” said Rich Gold, who runs the lobbying practice at Holland & Knight. “And all these things will be weaving in between the debt limit, appropriations bills and sequestration and other chronic things hanging out there, like when your mother-in-law comes to visit and won’t go away.”

Gold noted that clients’ enthusiasm for comprehensive tax reform has soured since the White House signaled that a package may not be revenue neutral, and some clients have pivoted from an offensive posture to a defensive one.

“That’s making a lot of tax folks around town say, ‘There’s a time and a place for tax reform,’ and if the president says he wants to tax us more, this may not be the time or place,” he said.

When Congress, as part of its deal to avoid the fiscal cliff, delayed the automatic spending cuts known as the sequester, they ensured that defense-industry lobbyists such as Cord Sterling would maintain a hectic pace.

“Sequestration continues to be the 800-pound gorilla in the room, the thing that continues to keep us up at night,” said Sterling, a vice president at the Aerospace Industries Association. “We’re going to educate the new members by providing a lot of information to them.” He said that his side also plans to dispatch economic reports to policymakers that show that the sequester cuts could result in the loss of 2 million U.S. jobs.

“A lot of people forget how big the hit to the economy will be,” Sterling said. “We hope they recognize that it would very likely put us back into another recession or at least sluggish growth.”

Dan Gans, founder of the boutique lobbying shop Polaris Consulting, concurred that fiscal issues are at the top of the ticket.

“At least for the foreseeable future, the second part of the fiscal cliff, the debt ceiling, sequestration, funding of the government are all going to dominate the landscape and until they resolve those issues, it’s hard to see how they get to anything else,” Gans said. “The political divide is so great right now that it’s very difficult for me to see in the short term how Republicans and Democrats come together on some of these sticky issues. I just think it’s a very toxic atmosphere.”

But, he noted, there’s still lots of lobbying work to do.

In looking for cost savings, a number of members of Congress and business stakeholders have suggested adjustments to entitlement programs, including cuts to Social Security or increased co-payments for Medicare recipients. This, too, promises to be a contentious debate that groups such as AARP won’t shy away from.

AARP’s David Certner said the seniors lobby will strongly oppose any cuts to Social Security as part of a budget deal and will fight off proposals that ask seniors to pay a bigger share of their Medicare costs. “We would like to refocus the debate: How do we actually lower the cost of health care?” he said.

Joel Jankowsky, a partner with Akin Gump Strauss Hauer & Feld, said lobbyists and their clients are also working to get to know new members, as well as those who have just assumed committee or subcommittee chairmanships, such as Rep. Jeb Hensarling, R-Texas, on the Financial Services panel.

“If you look at where the chairmen have changed, or even ranking members, the history has been that they bring with them their own agenda,” Jankowsky said. “So I think that will drive the list of things to be considered.”

Jankowsky said K Street will also keep its eyes on proposed changes to the Senate’s filibuster rules. Should senators overhaul the parliamentary maneuver, it could make a lobbyist’s job of killing legislation harder but also make it easier to push for passage of bills. Jankowsky said lobbyists don’t plan to weigh in on the debate.

“We would never presume to tell the Senate how to run its business,” he said.

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