The Chips Are Down

Here’s what you need to know…

Most Americans don’t think about the nation’s supply chain, but recently, they’ve discovered the consequences of its fragility. Shortages on important technology, like microchips, have driven up the prices of everything from cars to computers – if they’re even in stock – and experts predict it will take years for the marketplace to recover. While automobiles and the latest tech gadgets might be top-of-mind for the chip crisis, Goldman Sachs says the shortage has affected at least 169 industries, including the solar sector, household appliances, and even Fido’s grooming.

COVID-19 presented obvious challenges to America’s supply chain, but so, too, did lesser-known factors. These issues, unlike COVID, may persist for years, complicating efforts to replenish our tech materials supply and increasing costs for businesses and consumers. Public policy plays a key role in rectifying the problem, but many in and out of government are skeptical about getting involved. Here’s what industry public affairs professionals need to know.

The pandemic exposed weak links in our supply chain that will take years to fix.

CORONAVIRUS CHAOS: While the global marketplace screeched to a halt as public safety became the world’s foremost concern, consumer demand for products requiring microchips skyrocketed. Manufacturers did not anticipate the growth in electronic sales, which was the highest in a decade thanks to a new work-from-home reality, as well as limited recreational possibilities during lockdowns heightening demand for “home entertainment gadgets.” Meanwhile, car companies, concerned homebound Americans would curtail demand, canceled microchip orders, only to discover rapidly rebounding sales with pandemic-friendly road trips and an eventual return to normal. But, when they went to place orders for new microchips, they found themselves at the end of the line, behind more profitable sectors. Meanwhile, nationwide lockdowns shut down or reduced activity at key chip production facilities in places like Taiwan, responsible for around two-thirds the world’s microchips, and Malaysia, where a number of German and Japanese firms manufacture semiconductors and related electronic components.

MOTHER NATURE STRIKES SUPPLY CHAIN: The past year also saw “acts of God” disrupting the global microchip supply chain. Texas’s February 2021 winter storms forced Samsung, Infineon, and NXP to shut down their chip manufacturing due to lack of power. Then, a massive drought in Taiwan reduced global production, as chip manufacturers “require[d] voluminous quantities of water to churn out chips” amidst the island nation’s worst water shortage in 56 years. An enormous fire in March 2021 at Renesas, one of the world’s leading auto chip makers in Japan, only worsened the shortage, with executives estimating it would take up to four months to come back online. Just one month earlier, Renesas’s factory had sustained damage from an earthquake.

America’s microchip shortage isn’t merely another painful byproduct of the pandemic. It’s also policy consequence.

OFFSHORE TRADE OFF: While Western firms offshoring production of microchips has meant cheaper products for consumers, it also concentrated the supply chain in East Asia, leaving critical materials abroad. Today, Taiwan generates 65 percent of all global revenues for outsourced chips. Just one Taiwanese company, TrendForce, is responsible for more than half of the world’s semiconductor supply, including 80 percent of microcontroller units that direct car functions like power windows, braking, and headlights, and 92 percent of the world’s most sophisticated chips, including 1.4 billion smartphone processors. Since 1990, the U.S. share of global chip manufacturing fell from 37 percent to just 12 percent, even as half of all companies were headquartered in America. The Semiconductor Industry Association says that without significant government intervention, the U.S. will soon only maintain 6 percent of the world’s chip manufacturing capacity.

CHINA READIES FOR DOMINATION: In December 2020, America announced sanctions on China’s largest chip manufacturer over links to the Chinese military. Chinese firms responded by stockpiling chips for their own use – a sign of what looms on the horizon. The Semiconductor Industry Association warns China is on track to become the world’s largest microchip manufacturing location by 2030. An American adversary, policymakers see Chinese domination in the tech market as not only an economic threat to the U.S., but also a major security concern. Today, China controls 40 percent of the world’s back-end manufacturing, and while the country currently lags in new innovation, it is increasingly adept at copying the works of others and has invested heavily in building a domestic semiconductor industry.

President Biden and Congress want to help, but some legislators and activists aren’t so sure industry deserves it.

LEGISLATION WITH LEGS: In June 2021, the U.S. Senate passed with a large bipartisan majority the United States Innovation and Competition Act (USICA), a $250 billion bill “designed to boost U.S. semiconductor production.” It contains the CHIPS for America Act, allocating $52 billion for domestic semiconductor manufacturing, including $2 billion for “legacy chips” found in the most common automobiles. U.S. Secretary of Commerce Gina Raimondo estimates that between 7 and 10 new semiconductor plants will be built as a result of USICA’s passage, generating at least $150 billion in private sector investment. The legislation awaits action in the U.S. House of Representatives.

BIDEN WEIGHS IN: After a 100-day review, the Biden Administration offered its list of recommendations for fortifying the semiconductor industry. In its brief, The White House argued the “private sector must take the lead” but said the U.S. government can “facilitate the information flow between semiconductor producers and suppliers and end users.” President Biden says he wants urgent legislative action taken, calling on American corporations to bring their manufacturing home and arguing it would be better for jobs and national security if they did. His administration has also begun mediating talks among chipmakers and the industrial sectors suffering from the shortages, with officials insisting that new transparency measures will make things easier. But, industry leaders say they’re still frustrated by the lack of details or deadlines for production.

SKEPTICS ACROSS THE IDEOLOGICAL SPECTRUM: While industry embraces legislative proposals to address the problem, there are activists raising concerns – and lawmakers are paying attention. Sen. Bernie Sanders (I-Vt.), who voted against USICA, accused lawmakers of giving a bailout to offshoring manufacturers. Environmental activists also expressed worries, complaining that any new manufacturing would lead to more carbon emissions. On the right, Sen. Pat Toomey (R-Penn.) said he opposed the legislation because it was Chinese-style central economic planning, while Sen. Rick Scott (R-Fla.) argued America could not afford more debt. Media outlets and think tanks also spoke out against it, with Reason arguing it was a “massive handout” and the Hudson Institute explaining it would put America at a disadvantage in the long run. Even the business-friendly Wall Street Journal is skeptical it would make a difference.

While some lawmakers and Biden officials want to encourage domestic investments to help address challenges causing chip shortages, others in and out of government are skeptical – upset by industry offshoring in the first place, concerned about industry’s environmental impact, and disinclined toward industrial policy and corporate subsidies. Public affairs professionals will have to understand and navigate this scrutiny to ensure the industry can leverage the policy opportunities to address the shortages and satisfy consumer demand.

The Great Compromise May Be Dead

Twenty years ago, a newly inaugurated President George W. Bush faced an evenly split Senate, a slim House majority, and volatile public sentiment after a hotly contested, divisive election result. Securing legislative victories would require bipartisanship and compromise, American traditions dating as far back as The Great Compromise – negotiated over the 4th of July weekend of 1787 – that shaped the U.S. Constitution.

Today, President Joe Biden faces a very similar political landscape. Yet the media, who once exalted compromise as a virtue, now treats it as a deterrent to progressive aims. This new narrative has emboldened the most leftward partisans of the Democratic Party, who are convinced they enjoy a mandate that is not evident in the makeup of this Congress or the voting coalition that elected Joe Biden.

For companies and industries seeking compromises borne out of bipartisanship to advance their policy priorities, this landscape is fraught with challenges. Central to those challenges is the question of whether bipartisan compromise can survive in the age of polarized 24-hour news and social media punditry. If it cannot, what does that mean for public affairs professionals trying to navigate Washington’s morass for their organizations and clients? Here’s what you need to know.

The media, who once celebrated moderates as mavericks, now portray them as roadblocks to progress.

Throughout most of political history, the public and the press have expected elected officials to set aside ideological differences to deliver real results for their constituents and the country. When government is closely divided, this bipartisanship often takes the form of opposition to the majority’s policy proposals and seeking to temper its more partisan impulses.

President George W. Bush discovered this reality firsthand as he tried to advance his agenda. At that time, the media cast his attempts to score legislative victories as extreme while pushback from his own party was sensible, civic-minded, and even brave. When Vermont Senator Jim Jeffords switched his political affiliation from GOP to Independent, he earned glowing media coverage that warned Republicans their pursuit of GOP priorities was alienating moderates. Meanwhile, Sen. John McCain (R-Ariz.) garnered media favor for his independent streak that imposed political obstacles on the new Republican president.

For the past two decades, the media have openly pined for a “radical center” built by the “moderate middle” of “politically homeless” who they say simply seek solutions to the problems facing our country. They heaped praise on the various bipartisan “gangs” who crossed party lines to solve big problems facing the country, and in 2020 argued disaffected Americans eschewed the divisive tone of the Trump Administration for then-candidate Biden’s message of unity and a return to normalcy.

Then Democrats’ narrow 2020 electoral victories left the fate of President Biden’s agenda in a 50-50-split Senate with two moderate Democrats: Sen. Krysten Sinema (D-Ariz.) and Sen. Joe Manchin (D-West Virginia). Once revered as honorable and constructive, moderation, standing athwart the Democrats’ agenda, is now reviled as obstinate and regressive. When Sen. Manchin indicated he would not support progressives’ proposed overhaul of federal voting laws, one liberal commentator accused him of upholding “white supremacy” as a “cowardly, power-hungry white dude,” while The Washington Post’s Eugene Robinson called him a “villain” for refusing to eliminate the filibuster. Sen. Sinema has endured similar derision, with The New York Times lambasting her for standing in the way of “major legislation,” arguing that while her predecessors took courageous stands in the tradition of compromise, Sinema merely “delights in trolling” her fellow Democrats, void of any discernible principles.

The media keeps advancing the narrative of a progressive mandate, but Congressional math and Biden’s electoral coalition suggest otherwise.

This new media depiction of bipartisanship as a bug, rather than a feature, of democracy is built on the premise that progressives have a governing mandate from voters. Yet that is simply not the case. The U.S. Senate is split evenly, while Democrats have the slimmest House majority in two decades – just nine seats. While Biden won the presidency, many Democrats considered the 2020 elections a “failure,” with voters who rejected President Trump also rebuffing candidates who promoted the Democrats’ most leftward policies.

Critics say the media live in a progressive social media bubble that inoculates them from genuine voter sentiment, even within the Democratic Party itself, with election analysts noting platforms like Twitter are largely unrepresentative of mainline Democrats. That bubble gives “Very Online” reporters and commentators a poor understanding of what actually moves voters and those who represent them. This warped view of electoral reality makes it harder for the agenda-setters of the political media to accurately assess the landscape in front of them. Indeed, the moderates they decry, like Sens. Sinema and Manchin, actually better mirror the overall electorate (as well as a significant swath of Democrats) than the progressive voices the media regularly insists Biden must appease.

Industries hoped Democrats’ slim majorities would foster productive bipartisanship, but they got big demands from progressives instead.

The media narrative of a progressive mandate may not match up to governing reality, but it has not stopped liberal Democrats from pushing their party ever leftward. Their policy wish list is long and it is, by most accounts, far outside the political mainstream. These days, they are advocating for major legislative overhauls like the Green New Deal and student loan cancellations. While the Congressional Progressive Caucus promises “sweeping, transformative change,” it seems that neither their Democratic colleagues nor the voters are seeking such extremes.

Neither is the business community. When a governing majority is incredibly slim, as it is now, industries desire the productivity and reliability that bipartisanship and moderation provide. In contrast, intense political polarization often creates instability that industries try to avoid. No matter who is in power, there are still major policy problems and big legislative priorities that businesses need addressed.

Look no further than the full court press from public affairs professionals across a variety of industries on the infrastructure spending package. As we noted during the transition, this issue could “be Groundhog Day for obstruction or Ground Zero for compromise,” depending on how the parties approached it. While industry representatives are pushing moderates on both sides of the aisle to find a compromise, they more overcome an increasingly antagonistic media tone toward the very lawmakers whose support is crucial for success. With significant policy challenges on topics ranging from health care to energy, businesses are hoping that Democratic leadership and The White House will ignore calls from progressives to abandon bipartisanship in exchange for advancing an activist-oriented agenda. To convince them to do so will require challenging the accepted wisdom in the media and overcoming widely-reported (mis)perceptions of reality.

Breaking Up Is Hard To Do

Here’s what you need to know…

As the Biden Administration adds a “global minimum corporate tax rate of 15 percent” or higher to its plans to raise taxes and increase regulations, the business community should be able to turn to its traditional allies among Republicans to fight back. However, while Biden is unlikely to win Republican votes for higher taxes, in today’s political environment, the GOP may not mount the full-throated defense upon which the corporate community has depended in the past.

As Senator Rick Scott (R-FL), who chairs Senate Republicans’ campaign committee, warned companies last month, “There is a massive backlash coming. You will rue the day when … Republicans will take back the Senate and the House.” Indeed, Scott’s “day of reckoning” may not wait until the 118th Congress. Already, companies must contend with Senator Marco Rubio’s (R-FL) “Common Good Capitalism,” Senator Josh Hawley’s (R-MO) anti-trust initiatives, and other populist shifts among Republicans on core business policy interests like trade and tariffs and drug prices.

So, how did we get here, and what does it mean for companies and their business and policy objectives? Here’s what public affairs professionals need to know to help their organizations navigate this political realignment.

Under pressure from progressives in and out of their firms, companies have gone too “woke” for Republicans.

“For decades,” The New York Times recently reported, “business leaders have been able to count on Republicans … to support core policy priorities such as low taxes, reduced regulation and free trade. … But in recent years, that compact has begun to fracture.” Pressure from social activists and activism-oriented employees has led businesses that once avoided the political fray to take controversial stands on matters far beyond their typical purview, alienating conservative Americans and drawing ire from the lawmakers who represent them. For companies, the principles in question seem straightforward – every vote should count, the lives of African Americans matter, and so on – but behind these shared principles are expectations that firms will endorse divisive, partisan solutions as a result.

Every acquiescence, even if made in earnest agreement, may at least temporarily redirect activists’ attention elsewhere, but it also sparks objections from conservatives. These days, Republican lawmakers feel antagonized by what they view as “Big Business” needlessly provoking their voters by engaging on social issues. From Nike pulling its Betsy Ross shoes at the behest of NFL-star-turned-social-activist Colin Kaepernick to social media companies “de-platforming” former President Donald Trump to an open letter from major corporations opposing Republican-led election reform laws, Republicans increasingly see Corporate America as fundamentally at odds with the GOP. Nor does it help that as corporations cut off donations to many Republicans, key business groups get little help from Democrats they backed in the last election.

From TARP to Trump, the GOP base has been increasingly questioning its elected officials’ accommodation of corporations with divided loyalties.

For generations, Republican lawmakers have been reliable partners for business interests as together, they advanced the ideals of limited government, lower taxes and regulatory restraint. These had long been core tenets of conservatism, and these policies served the business community well. However, the taxpayer-funded bailouts of “Big Business” during the 2008 financial crisis led an increasing number of conservatives to question whether or not the interests of Corporate America aligned with their own. This skepticism built on years of automation and outsourcing erasing certain types of American jobs.

These trends have led to an intensifying flirtation with populism, an ideology that up until recently had gained more traction among Democrats than Republicans. While industry analysts may have hoped populism would be on its way out with the Trump Administration, eager GOP would-be successors are lining up for their turn at the anti-corporate bully pulpit. Some, such as Sen. Rubio, argue for a policy approach that “recognizes that what the market determines is most efficient may not be best for America.” These would-be successors’ proposals include protectionist measures intended to help American workers but that could make it more difficult for U.S. companies trying to compete globally, such as trade barriers like Buy American and tariffs, industrial policy for strategic industries, and greater antitrust measures. Such proposals are becoming more accepted among GOP voters, especially “traditional conservatives” nostalgic for Main Street America of yesteryear and increasingly skeptical of large corporations.

This ongoing realignment puts companies’ business and policy objectives at serious risk across the political spectrum.

In 2021, Americans seem to find little room for agreement in politics, but they do share concern over the sweeping influence of “Big Business.” For politicians in both parties, this angst is all the permission they need to push for radical transformations in economic policy. In addition to the shifts on trade and tariffs seen under the Trump Administration, this realignment even has some conservatives musing about the virtues of private sector unions, especially when they’re pitted against activism-minded executives at companies like Amazon.

The most noticed shift in policy, however, may be Republican interest in antitrust measures once a tool generally preferred by Democratic lawmakers who oppose big corporate profits. In addition to toying with the idea of using anti-trust rules against Major League Baseball following their decision to relocate the 2021 All Star Game after Georgia passed new election reforms, some prominent Republicans, including Sen. Hawley, are joining with Democrats eager to break up Big Tech. This major philosophical shift for Republicans could create greater obstacles to mergers and acquisitions, an important consideration as the Biden Administration nominates – and a bipartisan panel supports – antitrust crusader Lina Khan, to serve as a commissioner of the Federal Trade Commission (FTC). While she has previously focused her aim on Big Tech, her activist résumé is ringing the alarm bells across all industries.

From taxes and tariffs to tech and trust, the ground is shifting in Washington for public affairs professionals representing companies and industries, which now face greater headwinds from both political directions in Washington. At the very least, it means that the business community can no longer rely upon a unified GOP to stand strong for their interests in all cases. At worst, it means that Democrats and Republicans could find some room for bipartisan agreement at the expense of “Big Business.” Either way, companies will need to dig deeper to understand the new landscape.

The Employee Activism Revolution

Here’s what you need to know…

As the recent public debate over Georgia’s new voting law makes clear, American CEOs and corporations have been increasingly willing to make their voices heard on hot button social and political issues. While corporate activism is not a new phenomenon, the forces driving that activism have shifted to inside many firms, with employees demanding their bosses speak out and take actions, even if it hurts the bottom line.

With corporate giants such as Delta and Coca Cola issuing public statements disavowing Georgia’s new voting laws and Major League Baseball relocating this year’s All-Star Game from Atlanta, it is worth considering how we got here and what it means for public affairs professionals advising companies and industries. Especially in this hyperpolarized political environment, it is important for CEOs and companies to remember that while they may believe they are signaling the right thing, they very well may be widening the divide instead of closing it. Here’s what you need to know to navigate these debates effectively.

We’ve been in a new age of activism for a while. Companies are just catching up.

We’ve previously written about how activism “has become increasingly professionalized, digitized, and globalized.” While these efforts are not new — see the Keystone XL pipeline opponents who ringed The White House perimeter in 2011 — they increased significantly during the Trump years, with heightened expectations that companies and their leaders would weigh in on issues of the day. Companies today are meeting these expectations more than in the past. As the workforce continues to grow younger, companies must align their actions with a set of shared values and clear purpose if they hope to attract top talent. According to one survey, over three quarters of millennials strongly consider “a company’s social and environmental commitments when deciding where to work.” This rise in employee scrutiny is pushing employers to take stances on political issues they once avoided, creating new political and reputational risks even as they are intended to do societal good. Employee expectations have joined media and advocacy group pressures in thrusting companies into the political spotlight on issues ranging from social justice to the environment and, most recently, voting rights in Georgia. Not surprisingly, public affairs professionals are feeling the pressure, seeing an increase in senior executives’ interest in political and policy issues farther afield from core business needs than ever before.

CEOs are the most trusted leaders in public life. That comes with expectations.

Private businesses have become the most trusted institutions in the United States as Americans have become increasingly divided by politics. That means businesses and their CEOs can play a pivotal role in bridging this partisan divide and rebuilding the public’s trust in societal institutions. A recent study by Edelman found that 54 percent of Americans trust business more than politicians and the media. 86 percent of the respondents expect CEOs to speak out on societal challenges and 68 percent of respondents believe “CEOs should step in when government does not fix societal problems.” In fact, a Morning Consult survey found that despite growing concerns over censorship in the digital public square, Americans even trust big tech companies, such as Amazon and Google, to “do what is right” more than they trust government officials, the news media, and police officers and teachers.

However, CEOs must be aware of the risk associated with their activism. In 2018, we warned that “taking a stand inherently attracts and alienates customers depending on their view of that stance, meaning that companies need to fully understand their customers and audience before starting any corporate advocacy.” The NBA learned this reality first hand last year as it saw its television ratings plummet amidst a league wide social justice movement that weaved politics with the sport. Commissioner Adam Silver said this year “there will be somewhat of a return to normalcy,” in hopes of re-attracting fans who very well may agree with the messaging but want to keep politics out of sports. More recently, in response to Delta’s statements regarding Georgia’s new voting bill, Republicans in the Georgia House of Representatives voted to strip the airline of a tax break worth tens of millions of dollars, while Congressional Republicans have called to revoke Major League Baseball’s antitrust protections over MLB’s actions on the same issue. Whether either of these actions come to fruition, it signals to companies that weighing in on issues that divide Americans might come with a cost to the company.

Employees are engaging in their own advocacy — in and out of the office.

A recent survey found that nearly 40% of employees consider themselves “social activists” who are willing to speak out against their employers on controversial political and societal issues, even if these issues are totally unrelated from their employer’s business or industry. In January, we got a glimpse of how this willingness may evolve. Employees at Google successfully formed a minority union aimed at giving “structure and longevity to activism at Google.” This union intends to be more focused on wielding political influence than traditional union work regarding conditions of employment. The union formalizes employee pressures that have been mounting for some time. In 2018, for example, thousands of Google employees banded together in opposition to a drone-related contract the tech giant had with the Pentagon. Under this pressure, Google allowed the contract to expire the following year. Similarly, in early 2019, hundreds of Microsoft employees signed an open letter protesting the company’s $500 million contract to supply the U.S. military with augmented reality headsets.

Internal employee activism is not unique to the tech industry. In 2019, hundreds of Wayfair employees staged a walkout in opposition to the company’s decision to sell furniture to a migrant detention center and later that year, Nike employees walked out of the company’s headquarters demanding the company offer more support to female employees and athletes. When Georgia was considering a “heartbeat” abortion law, then CEO of Disney, Bob Iger, said that the company would have to reconsider future filming in the state, saying, “I think many people who work for us will not want to work there, and we will have to heed their wishes.” Iger’s sentiment is increasingly shared by corporate executives, with Judith Samuelson, director of the Aspen Institute’s Business and Society Program, predicting more “companies will begin to embrace employees as an early warning system on risk and reputation.”

CEOs need to weigh all sides before taking a stance

While showcasing purpose can strengthen a brand, companies must tread cautiously. Every action has a reaction, and in today’s highly polarized, highly attuned political environment, engaging without fully understanding the facts and the landscape can cause as much or more of a backlash than not speaking out. To stay ahead of this, public affairs professionals and their organizations must first be prepared for today’s fast moving environment by knowing their vulnerabilities and understanding the context of the issue before weighing in. While this trend of corporate activism does not appear to be slowing down, companies must be mindful that the best way forward is to remain consistent with their values and close to their stakeholders in order to avoid a full-blown public affairs crisis.

Even after Texas thawed, policy discourse remains frozen

Here’s what you need to know…

Last month, as extreme cold swept across the southern United States, more than four million Texans were left with rolling, often extended, power outages. As the state and federal governments continue to assess what led to the grid’s failures, interests on both sides of the debate, the mainstream media, and commentators have dug into their partisan positions and are already pointing blame at the other side.

While there is much to discuss regarding the policy implications of the blackouts and how energy providers can prevent extreme weather-related blackouts from happening again, the response by political figures and the media have made it difficult to discern what went wrong and where attention should be placed.

Last year, we asked, “what if seemingly well-intentioned reporters at reputable organizations run stories misreporting events, stating opinions as facts, or otherwise misrepresenting developments?” Now, even as Texas thaws, our discourse remains frozen and that question should be front of mind for public affairs professionals confronting the new reality of issue debate in this era of polarized and fragmented media. Here’s what you need to know to navigate it successfully…

News Events Have Become Opportunities To Score Points.

News events today can become vehicles for advancing pre-determined agendas by a wide range of stakeholders in debates in which you may not have even realized you were participating. Whether it be activist or advocacy groups, elected officials, think tanks, competitors (either in your industry or a competing one), or another group of stakeholders, when news breaks or a crisis hits, everyone takes to their corner and digs into their side’s arguments to lay blame for what happened.

In Texas, individuals and groups on the right blamed wind power and Texas’ move toward renewables for the blackouts, while those on the left blamed the state’s deregulatory efforts that kept its energy grid separate from the rest of the nation’s. Like many such debates, however, there is enough blame to go around and the reasons behind the blackouts are far more nuanced than wind turbines or deregulation. Yet those messages are often drowned out as the media fuels the fight. For public affairs professionals, knowing who the stakeholders are and what agenda they are driving is key to staying ahead of the conversation and preventing potential reputation and political harm when critical news breaks.

The Lines Between Press, Pundits, And Advocates Have Become Blurred.

Many experts, pundits, and press are also advocates, even if they don’t admit it, while others in the press seem to be “just here for the comments.” Instead of pursuing the truth of what caused the blackouts in Texas, news organizations and networks were quoting experts with preconceived views who offered reasoning that conformed to the media’s desired explanation as to what went wrong, depending on where the media entity lands on the ideological spectrum.

Even generally mainstream press has fallen into this practice. The Associated Press, for example, quoted Mark Jacobson, describing him as a professor at Stanford University, as he claimed the bulk of the blackouts were caused by “natural gas and coal and nuclear” energy. Nowhere did the article mention he is co-founder of the liberal actor Mark Ruffalo-backed Solutions Project, which advocates for 100% clean energy, and that his research on energy issues has been questioned by other notable academics. Meanwhile, in an article questioning whether the Texas blackouts could become a nationwide reality, Fox Business quoted Steve Milloy saying that the events in Texas “debunked the notion that wind is reliable.” While the article identified him as a former Trump EPA transition team member, it did not mention his affiliation with The Heartland Institute, a right-of-center think tank well known to question the science around climate change.

Instead of engaging experts to describe the complex reality as it unfolded, the media focused much of the conversation around enabling these conflicting takes. This narrative and agenda driven media environment is the new reality public affairs professionals who are trying to protect their organizations’ or clients’ political and reputational interests are going to have to navigate moving forward. Understanding the real motivations driving public commentary is crucial to anticipating and responding to it effectively.

The Media Needs A Villain, Even When It’s Not That Simple.

When things do not go as expected, media will demand someone to blame, because news in many cases today has become expose without truth seeking. Instead of substantively digging into the root of what is occurring and explaining it with appropriate knowledge and understanding, the press goes on the hunt for a scapegoat that fits a convenient narrative. Once the media sets a narrative, it can be difficult to correct the record.

The events in Texas provide a case in point. Instead of moderating a sober conversation that relied on facts, the media coverage over the Texas crisis was spent debating what energy source was to blame, while also questioning why state officials and energy providers were so unprepared for the storm. However, what was seldom mentioned were the costs associated with preparing for a once in a century storm and how the consumer would respond to increased energy costs they would incur for risks with a very low probability of happening in their lifetime. In today’s media environment, it is a strategic imperative to be proactive in telling your story and advancing the facts before blame is laid and a media narrative sets in, which is increasingly difficult to do as the media continues to fragment into opposing media bubbles.

Public Affairs Pros Must Stay Ahead Of Competing Agendas.

The public affairs environment today is fraught with tensions corporate public affairs professionals must navigate. In this new age of digital media, political leaders, news outlets, and experts  with pre-determined agendas can take to social media and go “viral” in a matter of moments, despite the validity of their claims. That means it is more crucial than ever for public affairs professionals to be prepared to respond. Understanding the risks, stakeholders, and agendas involved is key to protecting your company’s or industry’s business and policy objectives.

Is there a sure bet in this policy debate?

Here’s what you need to know…

For many Americans, this weekend’s big game is all about the commercials. This year, depending on which state you reside in, you may have noticed more of these ads before the weekend even arrived touting online sports betting apps. That’s not surprising, given the American Gaming Association estimates 23.2 million people will wager approximately $4.3 billion on this year’s Super Bowl matchup between the Kansas City Chiefs and the Tampa Bay Buccaneers, with 7.6 million people placing bets using an online sportsbook—a 63% increase over last year.

Why the sudden uptick in (legal) sports betting? Since the 2018 Supreme Court decision overturning the Professional and Amateur Sports Protection Act of 1992, which prohibited sports betting in every state other than Nevada, the sports betting industry has boomed into a market that grossed roughly $1.4 billion in gaming revenue in 2020. With so much revenue at stake, states and localities across the United States are being forced to at least consider the implications of legalizing sports betting and what kind of regulations make the most sense for those communities and their constituents. However, despite the sharp growth in legal sports betting across the country, public affairs professionals and lobbyists who are suiting up to help sportsbooks score face a formidable defense looking to prevent them from reaching the end zone. Here’s what you need to know about the debate that’s taking the field.

The Current Playing Field

In less than two years since the Supreme Court decision that allowed state legislatures to decide whether to permit legal sports betting, twenty-two states and the District of Columbia have made such betting legal. This past election day, voters in three other states – Maryland, South Dakota, and Louisiana – approved ballot measures to legalize sports betting, but residents of those states are still waiting on their state legislatures to set up regulatory measures before those bets can be placed.

While sports betting has become widely adopted across the nation, the regulatory landscape surrounding sports betting varies immensely. Public affairs professionals working with industry leaders must also be aware of the way in which state legislatures permit wagers to be placed. Most states allow a combination of private mobile app based and brick and mortar betting while others only allow betting to take place at designated “retail” locations. One state – Tennessee – authorizes bets to be placed solely on web apps. Another consideration is whether states will open sports betting to the free market or if they will use a limited or single-operator model, such as the one currently being proposed by New York Governor Andrew Cuomo.

Not Giving It The Old College Try

Of the twenty-two states that currently license sports betting, fourteen of them have restrictions on placing bets on in-state college athletic events. Now as the Massachusetts legislature continues to mull over whether it will become one of the next states to legalize the booming industry, a group of local colleges and universities are standing in opposition to the current version of the bill, which includes language permitting wagers to be placed on college athletic competitions. The group, led by Harvard University, fears “such legislation will create unnecessary and unacceptable risks to student athletes, their campus peers, and the integrity and culture of colleges and universities in the Commonwealth.” In addition to Massachusetts, several other states are expected to introduce legislation in the next year, while many others have failed to move the ball across the goal line in years past.

No Home Field Advantage

California, Texas, and Florida—home of more than a quarter of the teams playing in the four major professional sports leagues—have yet to legalize sports gambling, creating room for continued growth for an industry that has already boomed over the last two years. After facing immense pressure from the Tribal community in California, however, the states’ legislature withdrew consideration of a bill that would have legalized online and in person sports betting. Tribal leaders took exception to the online component and argued that the legislation would have broken an agreement between the tribes and the state.

Tribal opposition also stalled legislative efforts to legalize sports gambling in Minnesota, Arizona, Connecticut, and Florida. Despite the opposition, each of these states are continuing to push forward in hopes of reaching an agreement. The Arizona House of Representatives is considering an updated compact that will allow tribal casinos to offer both retail and mobile sports betting while also enabling professional sports teams in the state to offer sportsbooks at their stadiums.

Everybody’s Moving To Texas

In Texas, a fight is shaping up between competing out of state interests. While casino operators in neighboring Oklahoma and Louisiana have fought to keep gambling out of the Lone Star state, Bill Pascrell III, a lobbyist with Princeton Public Affairs Group, has said that “something is going to happen in Texas.” Indeed, Las Vegas Sands has seen its Texas lobbying team balloon recently as it continues its ambitious plans to expand into Texas, and Texas Governor Greg Abbott’s office has reportedly reached out to regulators in states such as New Jersey that have successfully implemented sports gambling for advice. Meanwhile, the state legislature is considering a bill supported by the owners of three of the state’s biggest professional sports teams that would issue licenses to the state’s professional sports teams allowing them to sell betting access to sportsbook partners, similar to what is being considered in Arizona.

What comes next?

With an estimated $150 billion illegally wagered on sports in United States, market intelligence company H2 Gambling Capital projects that as legal sports wagering in the US continues to expand, the industry will be worth roughly $2.75 billion in 2023 and has the potential to grow to $81 billion in 2030.  However, just as the great coaches seek a competitive advantage through film study, practice, and innovation, public affairs professionals will need a competitive intelligence advantage to shape the debate over sports betting.

What are you missing?

2020 was a year full of uncertainties and the COVID-19 pandemic forced almost 70 percent of public affairs professionals to dramatically shift the way they do their jobs. That is according to a new survey of over 300 public affairs professionals representing every industry of the global economy conducted by FiscalNote and CQ Roll Call.

Despite all the uncertainties of this past year, the trends impacting public affairs professionals seem all too familiar. The survey found:

  • Teams are staying small, with nearly half of public affairs teams comprising three or fewer people, and nearly 70% comprising six or fewer;
  • Regulatory uncertainty is increasing, with more than 50% of respondents identifying regulatory activity as the biggest shift (besides COVID) impacting their industry;
  • And there is not enough time in the day to cover the expanding volume of issues you need to monitor and understand.

It is this last trend that gets at the crux of the challenges facing public affairs professionals. The four biggest challenges facing respondents to the survey were, “Team size too small” (50%), “Volume of issues you need to monitor” (46%), “lack of budget” (45%), and “not enough time” (41%). So if you feel stretched thin and overwhelmed, at least you know you are not alone. In fact, FiscalNote noted in its report on the survey results, “Over 77 percent of respondents said that the number of public policy issues their organization is tracking has increased [in the past year], with almost 40 percent saying that the number has increased significantly. Contrast that with the earlier responses that teams are staying small, and you’re left with a staggering amount of information that organizations need to discover, monitor, and report on to internal and external stakeholders.”

It is no wonder, then, that the top stressor (59.4%) among the public affairs pros surveyed was “Fear of missing something related to legislation/regulation,” closely followed by “political environment” (58.3%) and “time constraints” (55%). Nearly eight out of ten public affairs professionals believe they sometimes or often miss key updates, and one out of ten is too overwhelmed to even know if they missed something. That means just one out of ten public affairs pros thinks they never miss a thing.

That fear is exactly why we launched Delve five years ago. Since then, effectively leveraging competitive intelligence for public affairs has quickly become a best practice.

Given the small size of many public affairs teams, they may not have the capacity to track and analyze crucial developments – especially when their time is best spent translating that analysis into action to advance the objectives and interests of their organization or clients.

That’s where Delve comes in – our team of rigorously trained analysts leverages innovative techniques and cutting edge technology to ensure we don’t miss a thing that matters to your interests, while distilling those insights into an actionable, easily digestible format. This approach is how our insights change your outcomes.

The Platform Revolution

Here’s what you need to know…

Driven by the emergence of new technology and online connectivity, the world is in the midst of the next economic revolution. As of 2018, 7 of the 10 most valuable companies in the world were a part of the platform economy. This rapid ascent has put private sector entities, primarily in the technology sector, in a position to make societal decisions that were once decided by communities themselves, often through elected representatives. This shift has significant implications for the business community as economic success  is no longer driven by access to and ability to leverage information, but control over the platform through which that information flows.

This new reality was made clear by the swift reaction by various platforms to the January 6th attack on the U.S. Capitol. It began with Twitter’s announcement that President Trump would be permanently banned from its platform, and in the hours and days that followed, major tech companies seemingly acted in unison to de-platform and blacklist the President of the United States and many of his supporters. Beyond the obvious tech platforms, some in the media are calling for a more expansive de-platforming. A Forbes executive warned companies against hiring former Trump spokespeople, and CNN’s Senior Media Reporter, Oliver Darcy, suggested telecommunications service providers be pressured to deny access to media networks whose content does not meet his approval.

As public affairs professionals and industry leaders watch these developments unfold, it has brought into clearer view the political and reputational risks stemming from the emergence of the platform economy. Reaction to the recent de-platforming’s was swift. While many of Trump’s most staunch opponents celebrated the moves, world leaders such as German Chancellor Angela Merkel called the unprecedented actions “problematic,” and Russian opposition leader Alexei Navalny slammed the moves as an “unacceptable act of censorship.” From being forced to adjudicate de-platforming demands to the threat of being de-platformed yourself, here’s what you need to know to navigate the challenges ahead.

What is the platform economy and why is it important?

Most of us utilize the platform economy daily for commerce and connection. Companies such as Facebook, Google, Amazon, Uber, Airbnb, and PayPal, all belong to this emerging economic system that utilizes online networks to facilitate digital interactions as a means to sell products, provide services, facilitate payments, and bring about an ever-widening array of connections between users.  These platforms represent a major shift in the way industries and companies conducted business – creating digital space for groups to conduct commerce and build communities of interest.

However, as these platforms continue to grow in size and influence, they have simultaneously assumed a larger role as the arbiters of what is right and wrong. Several years ago, we warned, “the tech industry is increasingly vulnerable to activist pressure and government intervention on a range of issues.” Among those issues, we highlighted the growing divide between the individuals calling for big tech to do more to remove offensive speech and others attacking these attempts as censorship. Since then, the divide has widened, and the pressure has grown even as technology platforms have taken over more areas of our lives and commerce.

The vast troves of user data collected by these tech giants, coupled with the algorithms they deploy allow them to act as the “gatekeepers to the economy” in which they can determine what products and services can be provided to whom. Participants in this new platform economy must also worry that their livelihoods can be taken away from them at any moment if big tech are the ones deciding what is right or wrong. We saw this play out recently with Parler, the “free speech alternative” to Twitter and Facebook, in which Amazon Web Services stopped hosting the app while Google and Apple removed it from their app stores. Regardless of the particulars in Parler’s case, it highlights the power of these platforms to decide who wins and who loses in the platform economy.

What’s at risk for platform companies?

Much of the recent debate has been about Section 230, which protects Internet service providers and tech platforms from being held liable from what their users say online. While Democrats and Republicans agree Section 230 needs reform and President Trump made repealing the rule a rallying cry for his campaign, doing so would likely make platforms more restrictive, as they would no longer be shielded from liability. Regardless of the outcome of this debate, platform companies will face increased public scrutiny and pressure to act on the commerce and conversations that happen on their platforms at the risk of alienating segments of their users. If this alienation leads to reduction in active users, the value of the platforms and their business models could be disrupted.

Platforms that have, even when begrudgingly, inserted themselves as the arbiter of what is and is not deemed acceptable participation in society are already beginning to recognize the peril such a role brings. Jack Dorsey, CEO of Twitter, even acknowledged that his decision to ban President Trump could have major ramifications, stating the ban “sets a precedent I feel is dangerous: the power an individual or corporation has over a part of the global public conversation.” In 2017, the Supreme Court ruled in unanimous fashion against a North Carolina law that would have banned convicted sex offenders from using social media. In the ruling, Justice Kagan argued social media has “become a crucially important channel of political communication,” lending credence to the argument that these platforms could face regulation similar to  public utilities that are required to be open and accessible to all.

What’s at stake for those who rely on these platforms?

As we have seen, the emergence of the platform economy has major implications for businesses and private citizens. These platforms have provided an opportunity for businesses to expand and connect in ways never before seen and have given a voice to private citizens that may have previously been unheard. Yet, as these platforms have continued to grow in size and popularity, they can create reputational and political risk for business and individuals who rely on these platforms. Companies that have spent years, or even decades building their reputation can now be destroyed in one viral moment, and if the court of public opinion rules that your brand is not “woke” enough, then you run the risk of being canceled or de-platformed. As the debate surrounding the platform economy continues to unfold, it will be crucial for public affairs professionals to stay ahead of the knowledge curve to best prepare their clients for what comes next.

 

What to expect as the clock approaches midnight

Here’s what you need to know…

These last two months of the Trump Administration have been very different than what the country is accustomed to seeing during a presidential transition period, with serious and weighty issues at hand when it comes to the peaceful transition of power that is a cornerstone of our democracy. While industries and public affairs professionals continue to monitor the developments of this past week, they must also be aware of last-minute regulatory changes being finalized by federal agencies that will have implications long past President Trump’s departure on January 20th.

These so-called “midnight rules” are typical of outgoing administrations, and set the debate for key industry sectors going into the next presidential term, even if they end up being suspended, challenged, or rolled back in what we’ve previously referred to as “the next match of regulatory ping pong.” Across a wide range of sectors, here’s what public affairs professionals  need to know to prepare for these rules:

  • Environmental Issues: The Trump Administration has made a concerted effort over the last four years to roll-back Obama-era regulatory burdens on the energy industry that were aimed at addressing climate change. These efforts have continued during the Administration’s final days, with the Environmental Protection Agency this week finalizing a Scientific Transparency Rule that limits the type of research the agency can use by “giv[ing] greater consideration to studies where the underlying dose-response data are available in a manner sufficient for independent validation.” The EPA also recently codified changes to the Clean Air Act that takes the economic impact of proposed regulations into greater consideration and has declined to increase soot emission regulations, despite pressures from environmentalist organizations.
  • Energy Policy: In a move to capitalize on domestic production of natural gas, the Energy Department finalized a rule that clarifies the department does not need to conduct reviews under the National Environmental Policy Act before approving LNG export facilities. However, not all of the Administration’s last-minute rules are welcome news for the oil and gas industry. Following a court decisionputting the existing Nationwide Permit (NWP) 12 in jeopardy, the U.S. Army Corps of Engineers is set to finalize a rule updating the Nationwide Permit program, splitting out oil and gas infrastructure from other utility infrastructure that previously used NWP 12 for Clean Water Act permitting. According to analysts at ClearView Energy Partners, the decision to split pipelines may make it easier for the Biden Administration to remove oil and natural gas pipelines from the NWP program altogether.
  • Healthcare: As we noted in our last TL;DR, the Trump Administration recently finalized the Most Favored Nations rule in an attempt to lower drug prices. However, a United States District Court has already issued a nationwide injunction on the order that was set to go into effect on January 1st. While the Administration faced a setback on this rule, it is still trying to lock in what it has already done to reform Medicare and the Affordable Care Act (aka Obamacare). In an effort to cement its legacy of cutting regulatory red tape, the Department of Health and Human Services is currently considering a proposed sunset regulation that would set expirations on new and existing HHS regulations. This would require a review of the regulations ten years after they are put in place and ensure they remain properly constructed and have not proven overly burdensome to the economy.
  • Labor And Employment: Independent contractors were thrust into the national spotlight the past two years as California passed Assembly Bill 5 to reshape the gig economy and Californians passed Proposition 22 to exempt many workers from that reshaping. On Wednesday, the U.S. Department of Labor issued a final rule clarifying what constitutes a an employee versus an independent contractor, relaxing the Fair Labor Standards Act’s definition if favor of an “economic reality” test that examines two “core factors” to determine what meets the standard of an independent contractor.
  • Financial Services: In another significant ruling, the Department of Labor has made it more difficult for pension managers to consider anything other than financial factors when it comes to choosing investments, an effort aimed at discouraging environmental and social impact considerations that recently became popular among financial institutions in response to public interest in social impact. Meanwhile, the Office of the Comptroller of Currency has been aggressively trying to finalize the Fair Access to Financial Services rule that would block banks with more than $100 billion in assets from “red-lining” politically disfavored industries such as gun manufacturers and oil companies.

The incoming Biden Administration has already vowed to issue a memo on Inauguration day freezing or delaying any midnight regulations the Trump Administration has put forward. Incoming White House spokeswoman Jen Psaki specifically said the Administration will target Labor’s independent contractor rule, stating that “if it takes effect, the rule will make it easier to misclassify employees.” Beyond the power of the pen, President-elect Biden also will now have the ability to utilize the Congressional Review Act (CRA) thanks to his party’s victories in Georgia’s U.S. Senate runoff elections earlier this week. CRA allows Congress to review and reverse recent (de)regulation efforts, and could leave public affairs professionals and industry leaders scrambling to both ends of Pennsylvania Avenue trying to reduce the uncertainty around which rules will survive. As the current Administration winds down and the new one takes office, the research and monitoring teams at Delve stand by to ensure you have an information advantage.

Bridges, Broadband, and Batteries

Here’s what you need to know…

As the dust settles on the election results, it is clear that regardless of the outcomes in the Georgia Senate runoffs, President-elect Biden will face the most closely divided government in 20 years, with the thinnest margins separating the parties in Congress since President Bush took office in 2000. Similar to the forthcoming 117th Congress, in 2001, the 107th Congress had a 9-seat majority in the House and an evenly divided Senate (until Jim Jeffords switched parties in May of 2001).

At first, this division seems like a uniquely challenging circumstance that will ensure continued gridlock, but history suggests that may not be the case on every issue. Indeed, closely divided government has been the norm over the past four decades, which has seen only four instances of one-party controlled government. Through all of those presidencies – even the vitriolic past four years – major legislation became law when there was cross partisan agreement on a solution to an issue that had an existing coalition of support. We saw this sort of bipartisan compromise for major legislation in 2001with No Child Left Behind, in 2012 with the JOBS Act, and most recently with 2020’s Great American Outdoors Act.

This history suggests Biden will have an opportunity to pass major legislation in his first two years in office, but what issue fits the criteria for success? While Infrastructure Week has become a running joke in Washington, infrastructure investment could provide such an opportunity for major bipartisan legislation. Whether infrastructure spending proves to be Groundhog Day for obstruction or Ground Zero for compromise depends on what the definition of infrastructure is. Here’s what you need to know to leverage this opportunity:

Is there an on ramp for roads and bridges?

Earlier this fall, Congress once again punted on a long-term surface transportation spending bill. In September, after facing pressure by many leaders in the transportation industry, Congress passed a one-year funding extension for the Fixing America’s Surface Transportation Act. The extension for this Obama era bill included over $13 billion for the Highway Trust Fund and provided some certainty to states and municipalities grappling with budget shortfalls stemming from the pandemic. Hopes of a long-term reauthorization bill – which is required every five years after the last bill is passed – faded when Republicans balked at the Democrats’ $494 billion highway bill that passed the House over the summer. The main source of contention was inclusion of measures to address climate and environmental concerns.

Little is likely to change in the forthcoming Congress, as the House will continue its climate push and the debate over how to pay for the bill remains unsettled. The gas tax revenue that traditionally funds highway projects under the law has dwindled as CAFE standards lead to more fuel efficient vehicles and more hybrids and electric vehicles hit the road. That means companies and industries hoping to see infrastructure investment pass Congress will need to get creative about where such investments might focus.

Can the digital divide bring Washington together?

In his campaign plan to “Build Back Better,” President-elect Biden noted, “As the COVID-19 crisis has revealed, Americans everywhere need universal, reliable, affordable, and high-speed internet to do their jobs, participate equally in remote school learning and stay connected.” Biden pledged, “This digital divide needs to be closed everywhere, from lower-income urban schools to rural America …” The pandemic has indeed exposed and exacerbated the digital divide for both online learning to remote working, with tens of millions of Americans in both rural areas and urban centers lacking the internet connectivity to log on and join their peers. This challenge provides a unique cross-partisan opportunity for lawmakers to build an urban/rural coalition to bring high speed internet access to underserved communities. In addition to President-elect Biden’s plan, Senators John Cornyn (R-TX) and Joe Manchin (D-WV) have introduced the Eliminate the Digital Divide Act.

Delivering high-speed broadband to underserved urban and rural communities would positively impact agriculture, healthcare and educational outcomes while opening up more opportunities for more workers to work remotely. Of course, reaching bipartisan agreement on the goal does not mean the debate is settled. From how to pay for broadband rollout, to whether a return of net neutrality rules discouraging private sector investment, to what equipment can or should be used in 5G networks – not to mention by whom and how those networks should be built – remain to be settled. 

The energy transition has to be built before it can happen.

President-elect Biden has made clear he will move aggressively to address climate change in his Administration. While much of those plans will face opposition from Republicans – and even some Democrats – on Capitol Hill, some of his plans may find bipartisan agreement. Biden’s vow to add 500,000 public charging stations for electric vehicles to highways and roads across the nation provides business opportunities for EV manufacturers, utilities, and charging equipment and service companies. These private sector entities are all hoping to lead the way in filling the “range anxiety” inducing void of charging stations across much of the country. However, regulators have to let them do it. Meanwhile, efforts to phase out internal combustion vehicles have begun cropping up. In California, Governor Gavin Newsom recently signed an executive order that prohibits the sale of new internal combustion vehicles in the Golden State after 2035, and regulators in New Jersey recently recommended the state adopt similar measures. However, such moves require enough places to “fill up” citizens’ EVs.

Beyond his plan to accelerate the nation’s transition to electric vehicles, Biden has emphasized his ambitious plan to invest heavily in renewable energy infrastructure for both economic stimulus and emissions reductions. Such plans could be hindered by Republican skepticism as well as progressive demands. Renewable infrastructure requires a range of approvals, like any other such project, and Biden will face progressive pressure to return environmental regulations that were reduced by the Trump Administration to ease infrastructure reviews and approvals. In addition, renewables such as wind and solar remain intermittent power sources requiring peak demand support from natural gas powered plants and other existing energy fuel sources until such time as battery storage technology can mature. As Sen. Lisa Murkowski (R-AK) has signaled, while Republicans seek to protect domestic oil and natural gas production, they could support federal spending to boost research and development of wind and solar technologies, as well as investments in smart grid and electric vehicle infrastructure. However, such support is likely to require the Biden Administration to recognize some of these realities. 

Success doesn’t happen by accident.

As we approach the next Congress, savvy public affairs professionals are preparing for the coalitions of strange bedfellows that may emerge to reach a bipartisan consensus on key legislation. Shaping the debate to advance your infrastructure initiatives means understanding the full range of stakeholders involved in policy discussions while mapping out the operating landscape to gauge potential emerging consensus. As always, Delve is here to provide the insights you need to see around the corner and anticipate any risks or opportunities.