This fall, the eyes of millions of Americans–including more than a few people in construction supply–will be trained anxiously on Capitol Hill as 12 lawmakers decide whether and, if so, where to slash federal spending, close tax loopholes, and raise new revenues.
But at the same time, pro dealers around the country will be just as attentive to what's going on a dozen blocks west of Congress, at the Environmental Protection Agency (EPA). It's one of several regulatory bodies that agitate dealers by imposing rules that are perceived as being unnecessary, counterproductive, or detrimental to dealers' businesses.
When it comes to deciding where to put its lobbying efforts, industry groups like the National Lumber and Building Material Dealers Association (NLBMDA) often focus on topics that rarely get mentioned on Fox News but represent big news for their members. Many times this lobbying is done in conjunction with housing industry giants like the National Association of Home Builders (NAHB). And while that cooperation continues, there are inklings that the tea party sympathies of many dealers could test potential future partnerships.
Ask Mike O'Brien, the LBM trade group's president and CEO, to single out his association's recent legislative victories and he'll tick off lobbying efforts like the one that persuaded the House Appropriations Committee to adopt an amendment to the 2012 budget prohibiting the EPA from enforcing its Lead Renovation, Repair, and Painting rule until the agency comes up with a reliable testing kit. In addition, NLBMDA's work as part of a coalition led to repeal of a provision in the Affordable Health Care Act that would have forced dealers to send out far more 1099 forms than they do now.
NLBMDA's alliances with NAHB have more than just ideological roots. O'Brien served for 10 years as assistant vice president of state and local affiliate services at NAHB, while Jenna Morgan Hamilton, NAHB's assistant vice president of government affairs, held a similar position at the NLBMDA for five years in the late 1990s and early 2000s.
The two groups are currently suing EPA over the opt-out clause in the agency's lead rule, and are working together to thwart what Hamilton calls "ambush election rules" that would make it easier for unions to organize workers at companies. Hamilton notes that NLBMDA was "a huge help" during the U.S.-Canada dust-up over tariffs on Canadian softwood exports. O'Brien adds that NLBMDA has supported NAHB's efforts on extending energy tax credits; forcing banks to lend to builders for acquisition and development projects; and proposed changes to qualified mortgages.
Moving Out of Sync?
But there's one big issue that is likely to test the builder-dealer coalition: Whether to continue letting people deduct from taxable income the money spent on mortgage interest. The government could take in an additional $1.5 trillion over the next decade if it eliminated that deduction, estimates Moody's Analytics chief economist Mark Zandi.
The Republicans' original deficit-reduction plan called for elimination of the mortgage interest deduction (MID), while press reports said some Democrats proposed during the debt-ceiling debate to limit use of the MID by the wealthy. Given that history, it's likely the idea will come up again during the fall debt-reduction talks.
NAHB has campaigned loud and long this year against attempts to trim MID as well as eliminate the credit for low-income housing and increase the rate on carried interest. Bloomberg quoted NAHB's chief lobbyist, Joseph Stanton as saying "Any one [change], or partial one of these, could certainly send an uncertain housing market further into the abyss." The association's home page contains a link to a site it created specifically to save the deduction.
NLBMDA officially "continues to be opposed to the repeal of the MID," O'Brien says emphatically, adding: "As that debate develops, we will certainly weigh in." But several signals, including a lack of public statements and website links over the issue (at least as of ProSales' deadline), suggest MID is nowhere close to being a front-burner issue at NLBMDA.
The association's official support for MID got thrown a curveball in March when NLBMDA presented its Legislator of the Year award to Rep. Mike Pence (R-Ind.) shortly after Pence–responding to a ProSales reporter's question–said he favored eliminating MID to help shrink the budget deficit. O'Brien defends the incongruity by explaining that the Congressman had posted a 100% voting record over the prior 12 months on issues of importance to dealers.
An even more profound signal of NLBMDA's view toward MID lies in the fact that some dealers within its membership–even those who say they're okay with MID's preservation–endorse the tea party movement and its anti-tax, small-government focus. It's a position that's particularly noticeable among the NLBMDA officers and dealers most likely to lobby Washington, and it could influence how much of a protest dealers are willing to stage.
Tea Sympathies
"There are a lot of us [lumber dealers] who are selling half as much as we were selling [pre-recession], and we have reduced our expenses by 50% or more," says Chuck Bankston of Bankston Lumber in Barnesville, Ga., who is also the association's vice chairman. "I can't see how it's a bad thing that we want the government to do the same as we've had to do. Our representatives need to treat [government] like it's a business."
Bankston calls the tea party movement "new and exciting. I like a lot of what these folks are saying [and] it's a voice that needs to be heard." Keith Coleman, president of Hamilton Building Supply in New Jersey, regards the tea party as "remarkable." Other dealers–including Chris Yenrick, COO of Smith-Phillips Building Supply in Winston-Salem, N.C., and head of the NLBMDA's legislative affairs committee–say they are clamoring for elected officials who preach and practice "fiscal responsibility."
NLBMDA support for MID also could prove tough to generate because, as a rule, dealers shy from using their businesses as soap boxes to voice political preferences that might run contrary to what their builder customers may want.
Zarsky Lumber in Victoria, Texas, is like most pro dealers in that it doesn't allow political signs, posters or bumper stickers to be posted anywhere on its premises. "We don't want to offend anybody, especially those who are paying the bills," says Travis Fromme, a vice president at Zarsky. His wife, Cally Coleman Fromme, also is an executive at Zarsky as well as NLBMDA's chairman-elect.
What could end up happening with MID might be a repeat of other times when NLBMDA finds itself facing a galaxy-sized issue: Work in a coalition in which others do the heavy lifting. That would free NLBMDA to pursue other objectives, such as passage of the Innocent Sellers Fairness Act. That measure would limit civil actions against sellers of products found defective and would place liability on the manufacturer or the installer.
The tea party movement is unlikely to rupture the longstanding relationship between builders and dealers. But a relatively small group like the NLBMDA can fight only so many battles, so it could affect whether the association gets into this one.
"NLBMDA is best suited to act on issues of high immediacy," observes Paul Hylbert, the former president of Denver-based ProBuild as well as NLBMDA's chairman two years ago. NAHB's Hamilton adds that the dealer group "has to use its resources and time effectively, whereas NAHB is like Bigfoot, so we have the luxury of being more vocal on esoteric issues."
