Political analyst Charlie Cook wrapped up his pointed appraisal of the 2008 presidential election year topography with a quip that not everyone attending the National Restaurant Association’s Public Affairs Conference last month found particularly humorous.
“If Barack Obama wins, your taxes are going up,” Cook told the 775 restaurateurs and association officials gathered in Washington, D.C., for the NRA’s annual grassroots lobbying event. “If John McCain wins, your taxes are going up.”
While some attendees chuckled, the capacity crowd remained largely impassive. Meeting just a dozen or so blocks from Capitol Hill where President George W. Bush and congressional leaders were struggling to make sense of the hard realities of the unfolding Wall Street financial crisis, conference participants were themselves attempting to come to grips with an already complicated and highly charged political-campaign season.
Even before the presidential campaigns had begun in earnest and the new math of the banking industry melt-down threatened to rewrite the economic rulebook, restaurateurs have been dealing with a business environment that has been as challenging as anyone working in the industry today has ever experienced.
As a result, this election season has taken on a more portentous cast. With consumer spending spiraling downward and costs skyrocketing, operators fear that moving the wrong candidate into the White House could further contribute to what already amounts to a perfect storm of troubles. Operators worry about how the candidates will deal with such critical industry issues as union card check initiatives, immigration reform, health care, food costs, taxation and paid sick leave—issues which sometimes find the two men in agreement and other times at odds.
John Sidney McCain III AGE: 72HOME STATE: ArizonaFAMILY: married; seven childrenEDUCATION: U.S. Naval AcademyEXPERIENCE: Representative in U.S. House of Representatives, 1983-1987; Senator, U.S. Senate, 1987-present; Republican presidential candidate, 2000FIRST JOB: ensign, U.S. Navy
Further stoking the uncertainty, both Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., repeatedly and insistently have portrayed themselves as change agents, a slightly fuzzy designation that leaves some voters wondering about the candidates’ eventual agendas once they establish residency at 1600 Pennsylvania Avenue.
At the same time, nobody is prepared to speculate on how much of a game-changer the current financial crisis will turn out to be and how the federal government’s multibillion-dollar Wall Street bailout plan would impact the country over the next several presidential administrations.
In the meantime, though, both McCain and Obama are campaigning at full throttle to become the 44th President of the United States in a closely contested election that many depict as the most exciting race the nation has seen in decades.
“Politically, this is one of the most fascinating elections ever,” says John Gay, the NRA’s senior vice president of government affairs and public policy. “Six months ago, neither of them was even supposed to be the candidate.”
Not surprisingly, feelings within the restaurant industry are running high for and against each of the candidates. William Anton, the founder of Anton Airfood Inc. in Washington, D.C., says that it would be “catastrophic” for the foodservice industry if Obama were to be elected president.
“Raising taxes kills the economy,” Anton says. “McCain wouldn’t raise taxes as dramatically as Obama would. [McCain is] committed to driving down the growth of government.”
Daniel Halpern, chief executive and president of Atlanta-based Jackmont Hospitality Inc., the operator of 10 T.G.I. Friday’s franchised locations and an on-site feeding division, is clearly in the opposing camp.
Barack Hussein Obama Jr. AGE: 47HOME STATE: IllinoisFAMILY: married; two childrenEDUCATION: Occidental College; Columbia University of New York; Harvard Law SchoolEXPERIENCE: Illinois State Senator, 1997-2004; Senator, U.S. Senate, 2005-present.FIRST JOB: ice cream scooper at Baskin-Robbins
“Obama will be a great leader for the country,” he says. “He brings a new sense of leadership and problem-solving necessary to confront the issues facing the country today. As a casual-dining operator, I’m inherently reliant on the middle-class. If I’m trying to grow my business, I need middle-class customers, and Obama is better to grow the middle class.”
Halpern serves as a member of Obama’s National Finance Committee.
But while the foodservice industry, like the nation as a whole, demonstrates a certain level of reflexive partisanship, many restaurateurs are taking a close look at the candidates’ positions on issues they know will have a major impact on how they conduct business in the future.
“Both candidates stand for change,” says David French, vice president of government relations for the International Franchise Association in Washington. “But their definition of change differs. Change for Obama is a reaction to the last eight years and a promise to go in a different direction in the future.”
The McCain vision, he continues, “is based on institutional reform.”
“It’s not so much that we need new policies,” French says, “but we need to know the government is operating in the public interest with more transparency.”
So far, the campaigns of both candidates have been actively courting the small-business vote through their economic programs and tax plans. Michael DuHaime, McCain’s national political director, told NRA Public Affairs attendees that “McCain was on the side of small-business owners.”
“He knows they are the economic engine that drives the country—more so than Sen. Obama,” DuHaime said.
Responding to a series of questions posed by Franchising World, the magazine published by the IFA, McCain said: “It is a terrible mistake to raise taxes during an economic downturn. Under my [tax] plan we will preserve the current low rates as they are, so businesses large and small can hire more people … and we will lower the business tax rate, so American companies open new manufacturing plants and create more jobs in this country, instead of going overseas to flee the second-highest tax rate in the world.”
McCain, who originally opposed the Bush tax cuts in 2001 and 2003—which are set to expire—now says he would extend them and has proposed a few of his own. Obama said he favors extending them for individuals earning less than $250,000 annually.
Michael Strautmanis, senior advisor of Obama for America and the candidate’s chief counsel, told Public Affairs attendees that Obama “has worked for small business throughout his career.”
“They know they had a friend when he was in the state [Illinois] government,” Strautmanis said. “Obama will look at the fundamentals of the economy and make sound decisions allowing us to move in a good direction.”
Responding to Franchising World’s questions, Obama said: “I recognize that small businesses are an essential ingredient to economic growth and United States productivity. I will help small businesses raise capital by exempting investments in small and startup businesses from all capital-gains taxes. I will cut taxes for corporations that will create jobs in America. I will provide a $500 ‘Making Work Pay’ tax credit to almost every worker in America, which benefits self-employed small-business owners in particular who otherwise pay both the employee and the employer side of the payroll tax.”
Ted Balestreri, owner of The Sardine Factory in Monterey, Calif., acknowledges that while he supports McCain, who he insists would be stronger on terrorism and international issues, he did not believe that “either candidate was qualified when it comes to economic issues.”
“The nominee that gathers the best people around him will be best,” Balestreri says. “But I don’t believe that either has that much depth, so why pretend.”
Many in the foodservice industry favor the permanent repeal of the federal inheritance tax, also known as the estate or death tax, which can make it extremely expensive for operators to pass on their businesses to family members. Congress had passed a tax reform bill earlier to phase out the estate tax until it is fully eliminated in December 2010. But if lawmakers do not revisit the issue before the legislation sunsets, the estate tax automatically will be reinstated at its full, pre-reform level in 2011.
“There’s not a more onerous tax on the books,” says Ed Tinsley, the owner of the K-Bob’s Steakhouse chain who is currently running on the Republican ticket for a seat in the U.S. House of Representatives from the 2nd Congressional District of New Mexico.
McCain, who told Franchising World that the estate tax “is one of the most unfair tax laws,” said he would maintain the rate on the tax to 15 percent, with a $10 million exemption per couple.
Obama told the IFA the estate tax should be reformed “to completely eliminate estate taxes for 99.7 percent of Americans.”
“To do so,” Obama said, “I would freeze [it] at its 2009 level of $7 million per couple and index it to inflation after that.”
He added that the remaining 0.3 percent of the wealthiest estates would be allowed to retain a part of the Bush estate tax cut under his plan.
Health care reform is another hot-button issue the candidates have been discussing on the campaign trail. Both men agree that health care costs are far too high and, as a result, pose a competitive threat to small businesses.
The NRA’s Gay says both candidates have “general plans, although they are not at a very detailed level.”
“Some things about each are concerning, and some things we support,” Gay says. “We have to keep a close eye on them as the candidates flesh them out.”
McCain has said he opposes universal health care, but would offer a refundable $2,500 tax credit for individuals and $5,000 for families. He also has said he would open health care markets by letting providers practice nationwide, rather than restricting them regionally, and allowing the purchase of health insurance across state lines.
He told the IFA he strongly opposes “mandates on employers, especially ‘play or pay’ mandates forcing employers to provide employees with health insurance, which would lower wages and force employers to eliminate jobs.”
Obama’s plan would require all employers to contribute toward health coverage for employees or toward the cost of a public plan. He also says he would institute a national public insurance program that would let individuals at small businesses buy affordable health care similar to that available to federal employees.
Brendan Flanagan, the NRA’s vice president of federal relations, notes that McCain’s plan emphasizes change through the tax structure and focuses on incentivizing individuals.
“We want to know where does that leave the employer who wants to be the primary conduit for health care,” he says.
By contrast, Obama’s plan takes a universal-coverage approach, requiring employers to partially fund premiums for all workers.
“We want to know what the burden would be for employers,” Flanagan says.
Ralph Brennan, owner of The Ralph Brennan Restaurant Group in New Orleans, says he believes “McCain can work out a health care plan that is good for the industry.”
“We have seen the Small Business Healthcare plan blocked in Congress,” Brennan says. “Maybe he can push something through that we can accept.”
In addition to harboring serious concerns about the future of the nation’s health care system, operators have been focusing on several other workplace issues during the race for the Oval Office. Minimum wage, never far from the heart of political discussion in the restaurant community, has emerged once again as a key issue.
“Minimum wage is something I would be concerned about,” says Scott Vinson, vice president of government relations for the National Council of Chain Restaurants.
While McCain has voted against recent federal minimum-wage bills, he also has been known to support measures to raise the nation’s base pay when business sweeteners have been attached, Gay says. Obama said he would increase the minimum wage to $9.50 an hour and then index the living federal wage to inflation.
Paid sick leave is another issue the foodservice community has been tracking. Federal legislation has been proposed that would provide workers with seven days of paid sick leave a year for those employees who work 30 or more hours a week. The benefit would be prorated for part-time workers.
Obama said he supports the measure, pointing out on his website that “half of all private-sector workers have no paid sick days, and the problem is worse for employees in low-paying jobs, where less than a quarter receive any paid sick days.”
McCain told Franchising World “particularly at a time when our economy is suffering, I am opposed to federal mandates that raise costs on employers and harm the labor market.” But while he has not come out for or against the specific legislation, he supported the Family Medical Leave Act that enabled both men and women to take leave to care for a child or an immediate family member with a serious health condition. The 1993 law stated that employees could return to a position that was roughly equal in pay, benefits and responsibility.
But the workplace issue that is generating the most heat within the industry is card check union organizing. Organized labor supported a bill called the Employee Free Choice Act that sought to alter the process by which a business decides whether it wants to unionize or not. The measure would eliminate employees’ right to private-ballot elections, and replace it with a card-check system in which they would sign a card in favor of union representation. The House passed the measure in 2007 by a vote of 241 to 185, but it failed by a slim margin of nine to get the necessary 60 votes needed in the Senate.
The NRA and other trade groups argue that the measure, which is likely to be reintroduced in 2009, would make employees vulnerable to coercion. McCain voted against the measure in 2007, while Obama voted for it.
“Obama has said if he is elected he would sign the card check when it passes the Senate,” Anton says. “If card check passes, the U.S. is in big trouble. We would become like France. Unions would have too much power.”
Xavier Teixido, owner of Harry’s Seafood Grill in Wilmington, Del., the home state of Democratic vice presidential candidate Joe Biden, says he’s on the fence with regard to his presidential preferences. However, he adds: “I’m concerned about card check. It’s one issue that gives me pause about Obama.”
IFA’s French says if the unions succeed in passing the bill, “it would not only permanently change the rules of union organizing, it also would favor the political agenda of unions.”
“Once they succeed,” French says, “they will be able to steer dues payments into the political campaigns of those candidates who help them.”
Acknowledging Obama’s support for card check, Strautmanis nevertheless attempted to reassure attendees of the NRA’s Public Affairs Conference that the candidate “will demand an open and transparent process, and allow the restaurant industry to come in and explain their side of the issue to us.”
For the most part, the two candidates agree where immigration reform is concerned. In 2006 McCain co-sponsored the bipartisan McCain-Kennedy Comprehensive Immigration Reform bill, which Obama also supported. The bill, which drew the ire of some of McCain’s Republican colleagues, sought to increase enforcement at the border and in the workplace, while expanding guest-worker programs and offering a path to legal status for the estimated 12 million undocumented workers in the United States.
Obama has said he supports amnesty and granting citizenship to undocumented workers already in the country providing they pay fines and back taxes, learn English, and go to the end of the citizenship line. He also advocates temporary legalization for illegal aliens as guest workers.
The NCCR’s Vinson says Obama is “good on the issue, but McCain is a leader.”
“He was at the forefront of the issue, bucking his own party,” Vinson says.
The candidates do disagree, however, on how to handle rising food costs, in particular what to do about the government’s current food-to-fuel policy, which many say is contributing to food price hikes. Observers say the problem stems partly from The Food and Energy Security Act, which was passed in 2007. The legislation mandates a five-fold increase in the production of ethanol, a renewable energy resource, from 7.5 billion gallons in 2012 to 36 billion gallons in 2022. The measure, which provides subsidies for ethanol blenders, has persuaded farmers to shift their corn harvest to ethanol production or even convert former wheat and soybean fields to more lucrative corn crops.
The industry has told Congress that it wants it to freeze corn-based ethanol at its current level while lawmakers examine the problem.
McCain says he favors the repeal of all ethanol subsidies that encourage increased production. As president he said he would rescind the 51-cent-a-gallon subsidy paid to fuel blenders for using ethanol.
The GOP, meanwhile, has adopted new language calling for free-market utilization of ethanol rather than the current mandates supported by the Bush administration.
Coming from Illinois, a corn-growing state, Obama historically has been in favor of the government’s food-for-fuel policy and ethanol subsidies. However, in the face of the current banking crisis, he has said he might have to scale back his U.S. energy plans to help pay for the bailout.
“McCain has been anti-ethanol subsidies for awhile,” says the NRA’s Gay. “Obama has favored the policies. But we hope there would be room for his position to evolve and that he would look beyond Illinois.”
Meanwhile, as Election Day draws nearer and the McCain and Obama campaigns continue to chug across America, the two candidates are working to communicate their views to a very evenly divided electorate.
Ironically for the foodservice industry, Gay observes, the candidates, as often as not, find themselves discussing the issues with their constituents and the media in restaurants.
“It’s kind of frustrating,” he says. “The candidates are in our restaurants every day. We have a perfect opportunity to talk with them about our issues, but we just can’t.”