Lobbyists Take Aim at the Supercommittee

Special interests hire powerful Washington firms to protect them from budget cuts

Washington lobbyists, who usually spend their days and nights tracking the progress of dozens of bills and chasing after hundreds of members of Congress, will have a single place to focus their attention this fall: the 12-member “supercommittee” charged with finding ways to reduce future budget deficits by $1.5 trillion over 10 years. Whatever you may think of this creation—last best chance for serious debt reduction, cynical political dodge—the influence industry looks at the panel and sees opportunity. “Supercommittee means superlobbying,” says John Feehery, who was a top aide to former Republican House Speaker Dennis Hastert and is now director of government affairs at Quinn Gillespie & Associates, one of Washington’s most prominent shops.

Lobbying firms representing corporations, nonprofits, and interest groups are preparing for an intense autumn as they try to keep the committee’s axe away from their clients’ tax breaks and government contracts. In better times, lobbyists measured their success by how much cash they could wring out of the federal government. Now they’ll consider it a victory just to hang on to what they’ve got. “To try and preserve the status quo, that requires a lot of work,” says Feehery, whose lobbying clients include News Corp., Sony, and Deutsche Börse Group.

It has been a tough year for lobbyists (schadenfreude duly noted). They made out during the epic Washington battles over health care and financial reform, but then business went soft as the economy dragged and the debt fight paralyzed Congress. Lobbying revenue dipped to $1.65 billion in the first half of 2011, down 8.5 percent from the first half of 2010, according to the Center for Responsive Politics in Washington.

The summer doldrums will end when the committee, chaired by Democratic Senator Patty Murray of Washington and Republican Representative Jeb Hensarling of Texas, gets to work. If the members can’t reach agreement by the Nov. 23 deadline or Congress rejects its proposals, automatic cuts to agencies throughout the government will kick in. To protect their clients, legions of lobbyists will get busy studying the lawmakers’ voting records, home-state interests, and pet projects, looking for angles to exploit. The K Streeters will put their connections to work, reaching members of the committee through former staffers and even leveraging other members of Congress. “I always tell my staff that the most effective lobbyist with a senator is another senator,” says Charlie Black, chairman of Prime Policy Group, which lobbies for AT&T, Google, Wal-Mart Stores, and other companies.

Because Congress didn’t directly touch Medicare and Medicaid in the first round of deficit reduction, federal health entitlement programs will now be a big target for Republicans, with potential consequences for hospitals, drug companies, and medical device makers. If automatic cuts are triggered, Medicare providers such as HCA Holdings, which owns hospitals and surgery centers, could face cutbacks in their reimbursements starting in 2013. “The level of hysteria will be palpable,” says John Jonas, who heads the health-care practice at Patton Boggs and represents such clients as Bristol-Myers Squibb and the Home Health Advocacy Coalition. “That’s not to make fun of it, because these are big dollars on the table and those are numbers that are not easy to reach.”

Such automatic reductions would also hit the Pentagon’s budget, and that prospect may force the government-dependent defense industry to band together to pressure the committee, says Michael Herson, president of American Defense International, a lobbying firm whose clients include General Dynamics and Raytheon. In the past, large defense contractors have “just been focused on their [own] pet rocks. They don’t have a history of really lobbying together,” he says. “I think, I hope, that that’s going to change now and there’s going to be a realization among the major defense companies they have to lock arms … which is going to benefit them all.”

Democrats have already signaled they intend to push the supercommittee to recommend raising taxes on private equity fund managers and oil and gas companies. The Republicans’ mantra of “no revenue increases” may make the task easier for tax hike fighters than for those trying to protect spending programs. “The six Democrats will wail and gnash their teeth about the need to have tax increases, and the six Republicans will tell them it’s more likely that Elvis is going to show up here than we’ll agree to that,” says Kenneth Kies, a tax lobbyist at the Federal Policy Group in Washington whose clients include General Electric and Caterpillar.

The lobbyists with the toughest chore will be those seeking to get Congress to increase spending or cut taxes amid the deficit talks. They’ll have to work outside the supercommittee or persuade the deficit panel to make even more cuts elsewhere to offset what they want. While the 12 members slug it out, Congress also will be busy trying to wrap up spending bills for the fiscal year that starts on Oct. 1. The taxes that fund federal aviation and highway programs expire in September, and President Barack Obama wants Congress to extend an expiring payroll tax cut and extend unemployment insurance benefits. Congressional leaders also hope—perhaps unrealistically—to finish trade agreements with Colombia, South Korea, and Panama.

Getting Washington to focus on anything but the supercommittee will be a problem for lobbyists with smaller-bore issues in their portfolios. “The oxygen was sort of sucked out by this whole months-long debt limit debate, and quite frankly, unfortunately, we may very well see the same thing happen come September,” says David Koenig, vice-president of tax and profitability at the National Restaurant Assn. He’s trying to persuade Congress to extend expiring tax credits for hiring veterans and food stamp recipients. Koenig says he isn’t optimistic about his chances: “It’s going to be challenging to try to get attention.”

Before it's here, it's on the Bloomberg Terminal.