Sometimes I get the impression that government officials think they are working on commission, paid by the number of bills and rules they create or pass into law. While I am sure the volume of bills and regulations that are turned out makes the standard question, “Honey, what did you do at work today?” a little easier to answer, a mountain of laws doesn't exactly serve the interests of the U.S. business community.
Often, legislation passes without lawmakers fully understanding all the measures included, which may not become evident until years down the road. A recent example of this was the provision in the Health Care Reform bill that would have required a business to report and issue a 1099 to any person or company that they did more than $600 in business with during a calendar year. This would have been devastating to businesses, and it is clear that legislators did not know about the provision tucked away in the 1,000-plus pages of the legislation. That or they simply did not have the time or wherewithal to fully examine its implications.
Fortunately, and in a rare case of bipartisanship, Congress voted overwhelmingly to repeal the 1099 reporting provision before its implementation. Unfortunately, repealing bad policy is more the exception than the rule in Washington, D.C., and this leaves us dealing with the ramifications.
A perfect example of this lies in the 2007 Energy Bill, which had an official title of the Energy Independence and Security Act of 2007. A Democratic Congress passed this legislation, and President Bush signed it and hailed it as a wonderful bill. Unfortunately, what some praised in 2007 is now causing us headaches in 2011.
The provision that has received the most public attention is the mandate that bans the use of many traditional incandescent light bulbs which would force consumers to purchase a more energy-efficient and expensive light bulb. Sound familiar? It sounds to me like the national minimum efficiency standards that currently govern our industry. Regrettably, the 2007 Energy Bill went a step further in regards to efficiency standards; it empowered the Department of Energy to establish regional standards for air conditioners, furnaces and heat pumps which HARDI has consistently opposed. In fact, HARDI maintains that the establishment of these regions will be detrimental to consumers, contractors and distributors.
For consumers, the increase in efficiency levels that will undoubtedly accompany the establishment of regions will assuredly raise the cost of purchasing a product and will limit consumer choice. Further, the cost of purchasing replacement equipment and parts will rise as products in the market will be phased down or altogether eliminated. It is tough for me to believe that the energy savings a consumer may gain from purchasing government-mandated 14 SEER air conditioners will offset the added expense that is likely to come with the product. And for energy-efficiency advocates, I make the following point: If consumers can't afford to replace aging equipment, they will simply choose to repair the outdated equipment, or worse, switch to a room air conditioner.
Contractors face a dilemma in not only making sure that they are installing the proper equipment in the correct region but also the likelihood that they will have to handle an increase in paperwork to assure compliance with the standard. Not to mention what will happen when a competitor decides to break the rules and offers a noncompliant product at a fraction of the cost of the price-inflated, mandated equipment.
For distributors, regionalization and increased-efficiency standards will prove particularly vexing. First, everyone in our industry knows that sales fell drastically following the last increase in standards, and a regional approach could only amplify that result. Additionally, those distributors who service multistate markets will have to carry equipment that only a portion of their customer base uses. This will diminish their buying power, reduce profits and pose a logistical nightmare in warehouses.
So the next time you hear a legislator talk about how many bills they passed and how great the measure will be for everyone, remember that unintended consequences buried deep in the legislation (that may not be apparent right away) could hurt your bottom line.
Jon Melchi is HARDI's government affairs manager. Contact him at 614/345-HEAT (4328) or [email protected].