Divided Electorate, Common Agenda in 2013 Politics and Law

This is the second in a series of columns from attorneys at O’Melveny & Myers LLP, examining the intersections of the political and legal worlds in the run-up to Election Day 2012. Many of the issues presented in this article will be analyzed in other columns over the next year.

Justice Benjamin Cardozo once said, “[T]he law never is, but always is about to be.” That sentiment is always true in the midst of an election year, as legislation, regulation, enforcement priorities, even the membership of the Supreme Court, hang in the balance.

It is even more true today. 2013 will mark the 40th year—more than a full generation—in which the United States has suffered slow growth in family income, increased polarization of politics, and weakening of consensus-building institutions. Yet, amidst the discord, frustration and rising populism, the federal government in 2013 will face a common agenda headed by jobs and economic growth. For in-house lawyers whose clients can be impacted by legislation, regulation, or the shifting tides of judicial sentiment, the next two years — encompassing the election year of 2012 and the reconstituted government of 2013 — could be more critical than any comparable two-year period during the past 40 years.

Think back 40 years to 1973: Watergate, Vietnam, Roe v. Wade, the Yom Kippur War, even Billie Jean King trouncing Bobby Riggs in tennis.

Something else happened that was not nearly as visible at the time. Median U.S. family income stopped growing at its post-WWII pace. From 1947-1973, a space of 26 years, median income doubled. From 1973 to 2004, a longer period of 31 years, median income grew only 22%. And since 2004, it has actually declined. For a while the impact of that downward trend was alleviated—by the entry of women into the workforce, for example, or the boom in real estate values in the early part of this century—but with the current economic downturn, the slowdown in income growth has become increasingly obvious.

If the 1947-1973 growth rates had continued apace, the median household income would today be over $90,000, instead of about $50,000. Imagine how that difference—an increase of 80%—would have impacted our current debates about healthcare, unemployment coverage, jobs, or capital investment.

At about the same time, the corrosion of trust in U.S. institutions accelerated. According to Gallup, trust in the federal government is lower today than even during Watergate, which is saying quite a lot.

And the institutional arrangements designed to promote consensus, like strong political parties and the presence of independent-minded members of Congress, eroded. According to one political scientist, cross-party coalitions in Congress hit their peak in the 1970s, then descended to their low point today. After all, for the first time in modern American history, this year the credit rating of the nation took a hit because of a political—not economic—failure.

The combined impact of these 40-year trends has been to unloose political frustration. The pendulum in American politics has always swung in response to the self-corrections inherent in our democracy. Now, the pendulum is swinging violently; witness the divergent outcomes in 2006/2008 and 2010. Populism is on the upswing; one recent poll showed that a strong majority of voters have a favorable view of either the Tea Party or the newer Occupy Wall Street movement.

The reality is, however, that there is only one political agenda for the U.S., no matter who wins which office. Jobs, economic growth, debt, the U.S. role in the global economy, national security in a time of tight budgets—all must be addressed. And that agenda is so full as to leave little room for other issues. One measure of that might be gleaned from the recent voters’ verdicts on ballot measures in Colorado, Mississippi, and Ohio concerning taxes, abortion, and collective-bargaining rights. The message to political leaders: “Keep your eye on the ball.”

Acting as a trusted advisor to business units requires studied strategy. In the midst of upheaval and uncertainty, the best approach for in-house legal teams now is to consider how they can build legal advocacy for pursuit of goals that must be on the common agenda of 2013.

That will mean thinking about what can be accomplished in 2012, monitoring the development of issues over the next year, and—getting to the heart of the matter—constructing a legal strategy. For example:

• What is the future of Dodd-Frank? What regulatory standards will be constructed in 2012 and which will slip into the next presidential term?
• What will the Supreme Court decision on the constitutionality of healthcare reform mean to that industry and the future of economic regulation, broadly defined?
• What will be the impact of populism—of the left and right—on U.S. international economic policy and on foreign direct investment in the United States?
• How might power shift to regulators if Congress continues its inability act decisively (and considering the likelihood that neither party will control more than 60 seats in the Senate in 2013)?

The interaction between politics, policy, and the law over the next two years can be expected to be turbulent and complex. That is the context determining what the law is “about to be.” For businesses and their lawyers, such circumstances present threats—and opportunities.

A.B. Culvahouse is the Chair of O’Melveny & Myers LLP; Jon Sallet is a partner in its Washington, D.C., office. Both are members of the firm’s Public Policy & Political Strategy practice group.