America is waiting for the people’s house of the U.S. Congress to move forward. Unfortunately, GOP leadership remains in disarray, leaving them unable to govern while electing a speaker. This is happening as many retailers – who follow this dysfunction closely – have concerns for pending legislation that affects their respective business. Those in the industry will note that they have a better chance of being successful with Republicans pushing retail/trade legislation versus Democrats – as they now watch Washington grinding to a halt – with the second hand of the time clock rapidly ticking away.
While none of the current Washington dysfunction is remotely humorous, one might consult the comic strip Peanuts for guidance about legislative love that was given by the retail industry, but not returned by Congress. Peanuts creator Charles Schultz once said: “There is something funny about unrequited love – I suppose it’s because we can all identify with it.”
Retailers spending time on Capitol Hill feel that their efforts are often unrequited. When they are new to the Hill, retailers quickly learn the difference between industry-related dialogue with a Republican Member of Congress versus discussing the same issue to a Democratic Member. Right now, there are many retail trade issues stalled, and there are other serious industry matters that have been continually slow walked under previous Democratic leadership. The good news was that when House Republicans recently came to power, there were immediate signs of legislative progress, and pending matters showed distinctive movement. However, with current Republican leadership in complete chaos, there is fear that the sun will (once again) set on much needed legislation. One thing is crystal clear – time is short to keep the Government from shutting down, and retail matters also need to move before next year’s House re-election mode kicks in.
Retailers will tell you that Republicans are business friendly and willing to support trade issues, especially if the legislation affects industry located within their particular district. Democrats, on the other hand, are prone to be philosophical, focusing on being pro-labor / pro-human-rights / pro environment or all three combined. Democrats seem more concerned about where one is doing business, versus trying to level the playing field in favor of the consumer. That’s not to say that one way is right or the other is wrong and Democrats can often be very helpful, but the reality is that current retail legislation has been stuck in the mud for quite a while – without significant movement – until Republicans took control of the House earlier this year.
During a fairly typical visit to the Hill several years ago, there was a meeting at a Democratic congressional office about a trade issue affecting the apparel industry, and those in the room ended up leaving agitated and disappointed. The Congressman, who actually represented apparel and retail interests, should have offered a helping hand to the issue of the moment. However, during the meeting, the Congressman actually delivered an anti-trade diatribe while having an impromptu lunch at his desk (as mayonnaise was dripping from his Italian hero to his blotter). Those in the room might recall him saying that he was opposed to NAFTA and there was hardly a trade deal that he ever liked. After reminding him (again) that he represented many retail trades, the impression was – that this office just wasn’t interested to help.
Shortly after the first meeting, another visit to the Republican side of the trade aisle yielded an entirely different result. That second visit was with former Senator Roy Blunt (R-Mo-retired) who was quick to grab the trade issue and provide assistance. Senator Blunt fully understood when a trade concept was good for business, and his office was eager to assist.
Given some background about how different visits to Capitol Hill work, one needs to understand the urgency of response that is needed by the retail industry and why retail GOP dysfunction at this time is bad for business. Many in Government are quick to forget the significant retail bankruptcies that occurred in 2020: like JC Penney, J.Crew, Brooks Brothers, and Neiman Marcus. However, now it’s 2023 and time to take a really hard look at the retail industry and note why the industry needs help. According to the October 3rd press release from EPIQ Bankruptcy, commercial bankruptcies have increased by 61% over last year. While this is clearly not all retail related, the industry has seen big names already utilize the bankruptcy process. So far in 2023, there have been filings by Bed, Bath & Beyond, Party City, and David’s Bridal. It is also reported that there could be as many as 11 other retail companies at risk of a potential future filing.
Many of the current retail problems stem from slowing consumer demand coupled with higher interest rates to finance inventory and, of course, the higher price of gasoline which reduces the amount of discretionary cash that consumers have to spend. In addition, student loan payments have been reactivated, and the cost of rent, food, and childcare has also risen. Some in retail have started to prepare for a potential downturn and industry jobs are already being eliminated. For the month of September, Challenger, Gray, & Christmas Inc’s: The Challenger Report indicates that behind technology, the retail industry has the second most job cuts of any industry in this calendar year with 70,713 – which is a 288% increase over last year.
What does this tell you? Logically, the retail industry (which has traditionally been a bell weather for recession watchers) is becoming stressed and is paring back in advance of what will probably be a difficult Holiday 2023 selling season. The National Retail Federation (NRF) in March of this year predicted that Holiday sales would grow in the range of 4% to 6% (as compared to 5.3% last year). Others have speculated that it could come in lower than 4%.
The retail problem on Capitol Hill is easy to grasp – valuable time is slipping away and the sincere hope that Republicans could save the day is starting to fade. Congress has stalled the renewal of the Generalized System of Preferences (GSP) and Miscellaneous Tariff Bills (MTB’s) since January of 2020. The African Growth and Opportunity Act (AGOA) and the Haiti preference programs need early renewal (as they expire in 2025) and the lack of forward momentum has slowed investment. There is also the reality that the Uyghur Forced Labor Prevention Act (UFLPA) has discouraged inbound shipments from China ($1.7 billion worth of goods already stopped for inspection at the border) while alternative sourcing locations have not been opened up and no trade deals are in work. There is also the de-minimis issue that some foreign owned companies can ship direct to the American consumer without having any inspection or paying any duty/tariff while American companies are severely disadvantaged by that arrangement. Noting that consumer spending is two-thirds of USA GDP, it would be great if the Congressional Republicans could get their leadership act together – in an effort to resolve many of these issues that are important to the retail trades.
While Washington can at times be confusing, those who closely follow any Capitol Hill chaos – generally understand that issues will eventually get resolved. Retailers, however, have been waiting way too long to settle several serious issues and the call to action is even more urgent now.
Charles Schultz’s famous Peanuts character Charlie Brown – probably characterized the best retail spin on the current situation in Washington: “I have developed a new philosophy. I only dread one day at a time.”
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