Democrats Storm Congress: What it Means for Spend Management

The fact the Democrats have regained control of the House of Representatives and Senate should come as no surprise to those who've tracked approval ratings of the economy and the Iraq war. But the purpose of this post is not to pass judgment on the election result -- you've probably already deduced that I don't think there was any hope this time around for promoting Spend Management principles through better government with either party choice. Rather, I'd like to share some early musings about what a Democratic congress will mean for Spend Management in the US, and other parts of the world.

To begin, let's dispense with the terms liberal and conservative in describing the party labels. Both are flawed in today's environment because there's nothing conservative from an economic and Spend Management perspective about the current GOP platform and leadership, at least in the party's mainstream. Moreover, both party platforms support the self interests of their lobbying and louder voting constituents when it comes to trade and tariff issues, rather than what is right for the economy and the world -- not to mention Spend Management. But having said this, here are some of my predictions for the policies that a Democratic house will try to push through which will impact the Spend Management world.

First, I would wager that the new Democratic congress is going to attempt to erect new tariffs and import barriers in areas that serve their agenda. I would also guess that they will launch investigations into outsourcing practices as well. While I doubt that as long as Bush is in office we'll see significantly higher tariffs and restrictions, there's no doubt that the Democratic congress will push for greater economic protectionism, supporting open border trade and transactions only when it suits their agenda. For companies engaged in global sourcing activity and cross border transactions, I'd suggest serious investments in cost modeling and supply chain flexibility to determine alternative sourcing -- and even logistics -- strategies should we see higher tariffs or other import restrictions. For example, if we see a new round of tariffs or import restrictions for certain countries, companies will need to become more familiar with transshipment strategies. It's a good thing most politicians don't understand the gray market!

Second, I suspect we'll see a reinvigoration of funds and interest in green programs, both from a domestic R&D perspective and a global trade and relations one. Manufacturers and suppliers engaged in such areas as fuel cell development and alternative energies might stand to receive preferential treatment from a research subsidy and tax break perspective. This might add costs in the short term (e.g., RoHS), but long term, it is a good thing for all of us on a personal level, let alone sustainable Spend Management success at the company and country level.

Third, I suspect we'll either see a reduction in government pork or a large increase in it. Why? Both the Bush administration and Democrats have proven their love of free spending over the years. Either we'll see constructive gridlock -- which is what I'm hoping for -- or "free ranging pork" as a compromise to the spending fetishes of both groups. The latter prospect is scary, especially if it increases the US national debt. A rising debt burden could wreck havoc with the dollar relative to other currencies, rendering previous global sourcing decisions ineffective for companies large and small. But the flip side is this might be good for exports. Go figure.

These are just a handful of initial thoughts on what the Democratic victory will mean. Just as I've previously suggested that Spend Management professionals stay on top of financial and trade issues by reading such publications as The Economist, I also believe that it's critical that procurement and operations leaders also proactively think about the economic and trade implications of the changing political tone inside the Beltway. And most important, it's critical to dispense with personal politics and look at the situation analytically, examining what it means for Spend Management and the general business climate.

Jason Busch

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