04/09/2009 05:12 am ET Updated May 25, 2011

Business Interests Weakened Before The Battle

The news is brutal for Washington, D.C. associations which represent - and advocate for the interests of -- the nation's major industries.

The National Association of Manufacturers (NAM) and the Pharmaceutical Research and Manufacturers of America (PhARMA) have not only cancelled their annual meetings, but have laid off staff and lobbyists - as did the Council of Insurance Agents & Brokers, the Securities Industry and Financial Markets Association, and the Mortgage Bankers Association.

"The economic realities facing our members are impacting our budget and projections for the coming year," NAM president John Engler wrote to his board of directors, informing them of plans to save $2.9 million by freezing salaries and cutting the travel budget.

"Positions and functions have been consolidated, streamlined or eliminated," Engler noted, resulting in a net reduction of 17 FTE's." An FTE is corporate-speak for "full time employee."

The trade association community - a core of corporate America's power in the nation's capitol - has been decimated by the economic collapse, forced to make major cutbacks and to lay off staff. Largely overlooked in studies of lobbying, Washington trade associations are crucial to the formation of broad coalitions to fight for or against federal legislation, to developing strategies to pressure individual members of Congress, and to finance studies of the costs and benefits of competing proposals.

While tough for the folks caught in the economic undertow, these developments are music to the ears of the Obama administration.

Only slightly less pleasing to the Obama forces is the fact that the economic crisis has taken its toll on individual corporations hiring lobbyists to protect their objectives. Some Democratic firms report an uptick in new clients, but most -- speaking on background -- said that so far, 2009 has failed to significantly swell their coffers. Republican lobbyists, already out of favor because of the Democratic sweep on November 4, privately report that they are struggling to hold onto the clients they have.

No new president has taken office with as broad an agenda as Obama since Franklin Delano Roosevelt in 1933. The administration's policy initiatives will, if enacted, produce massive upheavals in major sectors of the economy, including the entire energy and health care industries. Redistributive tax proposals will further alter the bottom line of almost every individual an corporation in America.

In normal times, Obama's legislative and regulatory agenda would be a gold mine for the multi-billion dollar network of lobbyists, grassroots mobilizers, PR firms, and other specialists in the manipulation of decision-making in the nation's capital.

But the very economic collapse that has given the Obama administration the impetus for its unprecedented drive to transform the federal government -- and its relationship to the private sector -- has simultaneously weakened, and in come cases crippled, large numbers of the companies and trade associations that would be expected to line up in force against this
Democratic insurgency.

Take HealthSouth Corporation. The firm's performance is directly dependent on how much the federal government will pay for Medicare rehabilitative care -- one of the many points of contention in the Obama administration's plan for a massive expansion of access to medical care, especially for those who currently have no coverage. Noting that the details are not yet known, HealthSouth recently warned that it is "extremely important to guarantee that appropriate safeguards are put in place to ensure that payment dollars are allocated to the actual providers of quality post-acute care. To do otherwise would be problematic," repeating the firm's concern with payment issues in a conference call for investors, analysts and financial reporters.

Even as HealthSouth faces life and death decisions which are being, and will be, made by the federal government, the corporation has already had to cut spending on its Washington office from $3.0 million in 2007 to $2.2 million in 2008, and it has begun to let go some of the eight outside lobbying firms to which it had been paying a total of $1.5 million annually, as it has seen its stock fall precipitously - from $20.20 a share in the spring to the $7 range now.

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The future of the coal industry could also be determined by the outcome of the Obama administration's "cap and trade" proposal to limit carbon emissions. As in the health care sector, major coal companies are struggling with sharp drops in their share price - radically pruning the resources available to their Washington lobbying shops.

Arch Coal's stock, for example, has dropped from a high this past year of $77.4 to $10.43. Peabody Energy Corporation has gone from a high of $88.69 to a current price in the low 20s.

The stakes are so high, according to Luke Popovich, spokesman for the National Mining Association, that member companies will back an all-out effort to block what now appears to be the outline of an administration proposal that could force as much as a 65 percent reduction in the use of coal.

"It could be devastating to the coal-based sector," Popovich said.

In fact, two top trade association figures, R. Bruce Josten, executive vice president at the US Chamber of Commerce, and Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, both argue that the threat of the Obama agenda has energized the business community to struggle to surmount the limitations imposed by its battered economic condition.

"There's no denying it's a tough economic time, you're going to see more corporations close, go bankrupt, which means business associations are going to see dues fall. But remember, pain is a powerful motivator -- and there is a lot of pain in the Obama budget," Josten said, contending that Obama "wants to transform energy policy with cap-and-trade that amounts to a massive tax on the American public. His tax policy is confiscatory, redistributionist and, in our view, totally counterproductive."

Van Dongen said his members have been flooding the Washington office with calls after learning that the Obama administration have made it "very clear they are trying to bring about a massive and, I think, radical transformation of the relationship between government and the economy."

Other business lobbyists were not so optimistic. "When you spend your days fighting off creditors, while the people who owe you money are ducking like crazy, it's hard to get worked up over what's going on in Washington," said one lobbyist on background. "Obama has thrown one hell of a punch, but our knees were buckling already."