February 10, 2023

Thought of the Week

This week I attended the Public Affairs Council’s (PAC) annual Advocacy Conference. The conference brings together nearly 500 public affairs professionals in one place to focus on such things as sharing best practices in crafting a grassroots advocacy program, offering tips for post-pandemic lobbying, and outlining strategies for managing a crisis from the public affairs perspective. Three dominant themes emerged from this year’s gathering—using data for stakeholder mapping; in a world of hybrid work how to use digital grassroots advocacy tools to create “echo-chambers” for specific issues, legislation, or regulatory action; and determining whether and how to engage on social and cultural issues. Beyond the harder mechanics of mapping or digital advocacy, this third theme seemed to transcend the others. Lisa Osborne Ross, U.S. CEO of Edelman, the world’s largest public relations firm, related how her firm’s 2023 Trust Barometer identified that societal leadership is now a core expectation of business. She explained that the pandemic created the environment where business, as opposed to government, media, or NGOs, became the most trusted source for information. Today, the business community, particularly large corporations and employers, is viewed as having not just a role but a duty in building trust among a divided electorate. To fill a void once held by government institutions, corporations must find a way to not only engage in policy without becoming embroiled in politics, but also determine whether and how to engage on social and cultural issues. In an effort to answer this question, Pfizer’s Chief Corporate Affairs Officer Sally Sussman detailed the pharmaceutical giant’s framework for navigating social challenges. At the heart of any decision to engage is a complete understanding of the company’s internal values. Once understood, five questions should be asked: (1) does the issue relate to the company’s purpose; (2) how does the issue concern the firm’s stakeholders; (3) what choices exist in responding; (4) how does the issue relate to corporate values, not politics; and (5) what is the price of silence. One does not have to be a Disney employee to realize that ESG factors are in the news today now more than ever. A sound strategy on how to deal with emerging cultural and social issues will only become increasingly important to any company’s ongoing success.       

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

Capital Alpha’s Take on the State of the Union Address. Although President Biden offered few details on clean energy policy, taxes, or other specific policy areas in his State of the Union address, the president did address broad topics that are appropriate to a presidential campaign or a race for the party nomination. The president’s speech represented dynamics typical for a president in year three—the midterms are over, signature legislation is complete, and re-election depends on delivering what is already in the pipeline and on the state of the economy during the re-election year. President Biden had three primary goals in his State of the Union address. First, announcing that he is running for president. Call it a soft launch because he did not formally indicate that he was running, but he revisited themes that he used in the midterm election and tested themes that he will probably use in the campaign. The president took credit for two years of bipartisan success and a strong economy. Second, President Biden showed he wants to secure the Democratic nomination, avoiding any possible primary challenge. The speech was an audition to demonstrate that he is still capable of leading his party at the top of the ticket. While Biden did not actively campaign during the 2020 presidential election, this was largely due to the unique circumstances of the Covid pandemic, he wants to show that he is high energy, alert and articulate, can engage with a large audience, interact spontaneously with his audience, and change course as needed. While he has the job now, he needs to show that there is no need for a younger candidate and that he is progressive enough. Third, the president needed to prepare for his showdown with Congressional Republicans over the debt limit. With this matter building to a head by early summer, the president wanted to cast himself as a reasonable person with a prudent fiscal plan, the steward of a successful economy, and the ultimate guarantor of Social Security and Medicare.

Eurasia Group Says Financial Institutions Can No Longer Bank on Republican Congressional Allies. Republican pushback against environmental, social, and governance (ESG) efforts is leaving large U.S. banks vulnerable to attacks from not only the left but also traditional allies on the right. While the near-term financial stakes may be minimal, the unwillingness of both political parties to advocate for major banks may be a harbinger of less policy influence in the future. Large financial institutions should pay attention to which ESG initiatives become the focus of conservative backlash. With international climate commitments likely to be in the GOP’s crosshairs, expressing progressive policy stances is guaranteed to generate Republican opposition, although most ESG activities focused on climate and social matters will pose relatively limited risks.

Observatory Group Labels Fed Chair Powell a “Hawk.” Federal Reserve Chair Powell’s commitment to bringing down inflation is credible. In fact, because this effort will determine his legacy, he has become more hawkish than the FOMC as a whole and most of its participants. The pictures of the Fed’s Hawk-Dove continuum showing Powell near the center are dated, and Powell genuinely believes his legacy will be determined by whether or not he conquers inflation, not whether he avoids a recession. This has been revealed in his many comments, including at the recent post-FOMC presser when he said, “it is very difficult to manage the risks of doing too little.” In addition, his earlier misjudgment of the “transitory” nature of post-COVID inflation is a factor in his resolve to tame inflation. In thinking about how this will influence FOMC consensus going forward, two factors are central to the calculus. First, the Committee’s solidarity has been a function of high inflation and the lack of evidence of major costs to the economy due to the rate hikes to date. Second, Powell knows the Committee well personally and manages them deftly. Assuming costs do emerge, with new FOMC participants to take into account, solidarity may decline, particularly if the inflation data slows consistently and/or larger economic costs come into view. The relative dovishness of the Committee compared to Powell is behind the view that there is scope for earlier rate cuts than the current FOMC target of second half of 2024. The conditions most likely to produce an earlier shift are core inflation slowing steadily throughout 2023 and inflation expectations remaining well behaved, even with only modest evidence of less excess demand for labor. In other words, a recession does not have to be among the conditions if inflation slows as described. 


Talks with those at the National Journal’s Hotline confirmed suspicions that New Hampshire is about to get very busy in the next few months as the presidential primary heats up. In fact, former UN Ambassador Haley (R) is heading there for two events after her expected presidential announcement on Wednesday. New Hampshire Gov. Sununu (R) just launched a dark-money group, potentially to support preparations for a presidential bid. And people familiar with former Maryland Gov. Hogan’s (R) plans say he will focus on campaigning there, rather than other early-voting primary states, as he considers his White House bid. The apparent concentration on New Hampshire stems from former President Trump’s newfound vulnerability in the state where he won the 2016 GOP primary.

In Other Words

“I know you think Republicans aren’t funny, but if you get enough of us together we’re a real riot,” Rep. Nancy Mace (R-SC) jabbing House Republican colleagues at the Washington Press Club Foundation dinner.

“Let’s be honest: We all knew Matt Gaetz wouldn’t let the speaker vote get to 18,” Rep. Nancy Mace (R-SC) at the Washington Press Club Foundation dinner.

Did You Know

The five universities that have produced both a president and a Super Bowl-winning quarterback are the University of Delaware, Stanford University, Miami University, University of Michigan, and the U.S. Naval Academy.

Graph of the Week

The Biden administration has announced a four-part “Unity Agenda” that is intended to focus on areas where the parties can come together to address issues relating to mental health, the opioid epidemic, cancer, and veterans. Whatever progress may be made in these areas, a recent Conference Board report notes that 78% of companies view today’s political environment for business as extremely or very challenging, and 42% of U.S. corporations expect the environment to become even more difficult in the next few years.  

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