Inside D.C.

The cost of legacy

The Administration has shifted into high regulatory gear as the days of the Obama Administration dwindle down.  As the revolving door begins to spin with the exit of White House appointees to private sector jobs, the final and proposed rules that have pended for years or simply been on the drawing board for as long, are starting to clog the inbox at the Federal Register.

This phenomenon is typical of the last months of a lame duck president.  No matter the party, presidents wrapping up their second terms are all about “legacy,” or how historians will remember them.  The key, however, is whether that legacy is philosophically or pragmatically driven, i.e. did things actually get better for the majority of Americans?

This week we had publication of a long-awaited overtime rule, a rewrite of federal overtime pay regulations to make another 4.2 million folks eligible for time and a half.  Last updated 12 years ago, the rules were due for a fix.  Today, only 7% of the full-time salaried workforce qualifies for overtime, compared to 35% after the rules kick in on December 1, 2016.  Of course, legislation has been introduced to pull back the rule, requiring the Department of Labor (DOL) to do a comprehensive economic analysis prior to reissuing the regulation.

The problem with the rule – a “shot in the arm for the middle class,” says the White House quoting from a very old script – is DOL once again crafted a one-size-fits-all regulation it says will only cost about $1.2 billion in additional wages over 10 years.  One major ag association said the rule is “more hurtful than helpful,” an approach that doesn’t work for rural businesses because it doesn’t recognizes regional differences in median incomes.  “This is particularly concerning as a majority (our) members are located in rural areas where competitive salaries cannot be compared to metropolitan wages,” the group said.

Companies will get creative in order to control personnel costs, impacting compensation and morale.  Some firms will switch salaried employees to hourly status, holding them to strict 40-hour work weeks, and bringing on part-time employees to cover additional hours.  Others may cut base salaries to avoid overtime, and still others will maintain their salaried employees, closely monitor hours worked and adjust salaries to account for overtime, reducing benefits and full-time employees to control costs.

Then there’s EPA and its rulemakings, many of which are hallmarks of the president’s legacy and most of those are snagged in the federal court system.  The House Energy & Commerce Committee whacked agency Administrator Gina McCarthy this week, alleging in a letter her agency is trying to “circumvent the (Supreme Court’s) stay” of the White House Clean Power Plan – CO2/carbon recapture on new and old utility plants.  GOP committee leaders said the Supreme Court’s “extraordinary action” was to “save the states/stakeholders from taking actions, expending resources and incurring costs in response to a rule that may not be legal.  Yet from the very first weeks following the order, EPA has been taking steps that circumvent the Court’s stay and potentially undermine the relief provide by the stay in the first place.”

And we have OSHA’s latest regulatory brainchild, a final rule on how workplace injuries and illnesses are reported, and the posting of that data to the OSHA website, a move to “nudge” industry to prevent more workplace injuries and illnesses.  The new rule is effective in August.

No one can argue with the philosophy of the rule – to reduce workplace injuries – but the shame game is no way to inspire companies to act.  Said the agency:  “With this new rule, OSHA is applying the insights of behavioral economics to improve workplace safety and prevent injuries and illnesses.

Under the new rule, employers in high-hazard industries will send OSHA injury and illness data…for posting on the agency’s website.” The agency said public disclosure of workplace injury/illness data will “encourage” employers to increase efforts to prevent workplace injuries, and allow prospective workers to “identify workplaces where their risk of injury is lowest.” As employers compete for workers, the company’s priority on workplace safety goes up, OSHA reasoned.

These are just three recent examples of the White House shift into full-time legacy mode.  I haven’t even included the First Lady’s rewrite of food nutrition labels to list sugar content, or reinvent the school lunch program.  However, all strike chords reminiscent of campaign speeches.  The question remains:  Will such actions do the greatest good for the greatest number?  We’ll have to wait for the marketplace and/or historians to figure that one out, I guess.