New Laws, Regulations and Election Make for a Tumultuous 2020 for Printers
In a year containing a presidential election — to say nothing of a presidential impeachment — the pace of lawmaking will probably slow down as the drama of the political events ratchets up. But as Lisbeth Lyons, vice president of government affairs for Printing Industries of America (PIA), points out, “the sausage still has to be made:” and some of the wurst coming out of Washington, D.C., and elsewhere will have to be digested by printers.
The meal as a whole will be either hearty or frugal depending on the state of the economy, which is influenced by the same forces that shape national politics. Although the fundamentals are sound, there’s no guarantee that they will remain that way as the year’s momentous decisions are reached.
Election seasons, notes Andrew Paparozzi, chief economist for the Specialty Graphic Imaging Association (SGIA), breed uncertainty that can turn into “a significant drag on the economy” as people and companies wait for things to grow more predictable. He also thinks there’s reason to fear disruption from what he calls “the international economic brinksmanship” of ongoing trade and tariff conflicts.
Cloudy with a Chance of ...
As a result, concurs Ronnie H. Davis, PIA senior vice president and chief economist, the economic outlook for the printing industry is “probably as cloudy as it’s been in quite a while.”
Although Davis, like Paparozzi, doesn’t see a clear risk of recession in 2020, he believes printers should think of themselves as having “one foot in the recession scenario, and one foot in the robust growth scenario,” as they plan strategically for the months ahead.
Welcome, then, to the political and economic landscape for the printing industry in 2020. It’s a picture certain to remind printing business owners that they don’t operate in a vacuum, and that they’re as answerable to the realities and mandates of the public sphere as they are to the demands of private enterprise.
In a few ways, the present time is on the industry’s side. For one thing, an election year as contest-packed as this one is certain to generate strong demand for campaign-related printing (see sidebar at bottom of article).
As Marci Kinter, SGIA’s vice president for government and business affairs, observes, printers may get some legislative relief from the fact that, during an election year, Congress is generally more reluctant to take actions “that may be seen as contentious for the business community.”
She says, nevertheless, that regulation-spawning issues like recycling and “the global plastic waste crisis” remain high on many lawmakers’ agendas. And the states, Kinter emphasizes, won’t necessarily slacken the regulatory pace this year to the same extent that Washington does.
Impeachment Puts Lawmaking in Flux
In the nation’s capital, predicts Lyons, the “pretty stark differences” that exist between the two major political parties, and the “unusual flux” in Congressional routines caused by impeachment proceedings, "big ticket items” like health care reform and taxation are off the table, deferring discussion of them to the presidential debates.
Instead, according to Lyons, the parties — particularly the Democrats, blocked by a Republican-controlled Senate — will resort to introducing “messaging bills” that stake out their positions regardless of the bills’ chances of being passed. The industry should pay attention to these “trial balloons” — for instance, the package of proposals known as the Green New Deal — as harbingers of legislation to come, Lyons says.
Activity in state houses also bears watching, and California continues to be a bellwether of laws and regulations that could impact printers and businesses in other states, if similar measures are adopted there.
Lyons notes, for example, that the Golden State attempted to pass a “skip the slip” bill that would have required retailers to ask shoppers if they wanted paper receipts before printing them. Kinter points to the elaborately titled California Circular Economy and Plastic Pollution Reduction Act, aimed at achieving a 75% cut in packaging and plastic waste by 2030 through the elimination of single-use packaging and other single-use items.
California enactments aren’t the only ones that printers should be tracking on their legislative radars.
‘Extended Producer Responsibility’ Bills
Gary Jones, SGIA’s director of environmental, health, and safety affairs, notes a “movement” among lawmakers in various states to draft bills based on the principle of “extended producer responsibility,” or EPR: basically, imposing fees on manufacturers of recyclable products to help pay for the infrastructure needed to recycle the products.
Maine has resolved to draft EPR legislation covering common household packaging, and other states, according to Jones, can be expected to come up with EPR measures of their own.
Laws like these require the votes of elected representatives. Regulations leading to similar outcomes are made by fiat of federal and state agencies, preferably with the guidance of groups and coalitions advocating for the printing industry. Jones says that, while the current regulatory climate for printers is “somewhat positive,” the task of keeping the rules aligned with the interests of our industry is never easy.
The good news on the federal regulatory front, according to Jones, is that U.S. agencies have more than fulfilled the Trump administration’s policy of removing two existing regulations for each new one introduced. In September, the White House announced that the administration had cut 8½ regulations for every new rule, far exceeding the original promise.
Jones says the rule reduction ratio at the Environmental Protection Agency (EPA) — the source of many air-quality standards that printers are bound by — is 6:1. He credits the agency with “moving very aggressively” on rollbacks, and says that if its officials have a choice, “they’re not going to introduce additional regulations.”
An important win for the industry at the beginning of last year, and one for which SGIA had lobbied, was the EPA’s modification of its “once in, always in” rule, which freed companies that reduced their emissions below the major-polluter threshold from having to continue to comply with the rule’s strict record-keeping and reporting requirements. Jones notes, however, that although the more liberal policy has been in place for a year, the rule change itself has not yet been finalized.
The Occupational Safety and Health Administration (OSHA), according to Jones, “hasn’t done as much” as other agencies in terms of deregulation, but he says a moratorium on new measures there “has ground the regulatory process to a halt.” Jones also notes that OSHA is an agency without a leader, with its most recent nominee for the full post having withdrawn his name from consideration last May.
Not Your Father’s Lockout/Tagout
OSHA administers a rule that epitomizes the difficulty of getting workplace regulations to reflect the actual conditions of the workplaces they apply to. This is lockout/tagout, a long-standing requirement that production machinery be turned off and de-energized (unplugged) before service and maintenance procedures can be performed on it.
The issue, says Jones, is that today’s electronic, computer-controlled print production systems can’t be de-energized as casually as older, mechanical devices could. They may take a long time to come back up to full operation; and in any case, they can’t run built-in diagnostic routines without electricity to power them.
What OSHA didn’t understand, according to Jones, is that with equipment like this, “it’s not easy to turn it off, turn it back on, and remain in business.” He says a proposed lockout/tagout wording change would have made de-energizing such systems mandatory, leading to “literally millions and millions of dollars” in losses to printing, and to virtually every other industry as well.
That is why SGIA joined 13 other trade groups in a task force seeking a more realistic response from OSHA. Jones says the agency agreed to drop the problematic wording change in May of last year, but has not officially finalized the regulation since then.
The result, according to Jones, is that “OSHA inspectors are struggling in the field” as they try to oversee lockout/tagout compliance in keeping with the rule.
No such procedural uncertainty exists at the government entity with the most symbiotic connection to the printing industry: the U.S. Postal Service (USPS). As direct mailers know, its rules for putting print into the mailstream are unambiguous — just as unambiguous as the root causes of its ongoing economic troubles.
The Price of Prefunding
The troubles are severe. The USPS reported a net loss of $8.8 billion for its 2019 fiscal year, an increase in net loss of $4.9 billion compared to 2018. The total volume of mail and packages delivered during the year declined. Most of the loss resulted from the Postal Service’s obligation to cover, in advance, 100% of the health care costs of its future retirees — a prefunding burden it has carried, alone among government-related agencies, since 2006.
Mail industry professionals understand that the numbers refer to “paper money” and “accounting adjustments” rather than actual assets, and thus know that the losses aren’t as drastic as they may appear to the public at large, says Leo Raymond, managing director of MailersHub, an online community for commercial mailers. But, he’s critical of Congress for not doing more to alleviate the situation.
In 2019, Raymond asserts, “nothing was done — Congress was too busy arguing. They haven’t achieved anything that would be beneficial to the Postal Service.” A statutory cap on rate increases taking effect this year will limit that addition to revenue, Raymond adds. He’s no more sanguine about what will happen next, declaring that “absent an overriding Kumbaya in 2020,” Congress isn’t likely to take further action.
That would not appear to bode well for H.R. 2382, the USPS Fairness Act of 2019, a single-page bill calling for the repeal of required prepayment of future Postal Service retirement benefits. But, says PIA’s Lyons, H.R. 2382 has nearly 300 bipartisan co-sponsors and thus could be fast-tracked for consideration if and when Congress moves ahead with it.
Lyons recently wrote in a PIA publication that without retiree prefunding, the USPS would have been in the black in each of the past six years. She says that passing H.R. 2382, which would require no taxpayer funds, is a way of “stemming the bleeding now” and freeing the Postal Service to tackle more comprehensive reforms.
Waylaid by Wayfair Supeme Court Ruling
Printers and mailers have legislative and regulatory concerns beyond those linked directly to the USPS. One of them is their potential liability under the U.S. Supreme Court’s 2018 South Dakota v. Wayfair decision, which requires sellers and shippers to collect sales tax in states they deliver tangible products to, whether they have a physical presence in those states or not.
Raymond says the industry has reacted with “wholesale confusion” to Wayfair because rules for complying with it vary from state to state. Given that there are 12,000 taxing jurisdictions in the U.S., he adds, the ramifications of the decision will catch up with those subject to it “sooner rather than later.”
Those mailing within or into California should pay heed to the California Consumer Protection Act (CCPA), written to give the state’s consumers greater control over the personal information that businesses collect about them.
Depending on their size and volume, businesses such as direct mailers and marketing service providers that maintain, buy, or sell personal data on California consumers will have to comply with the bill’s transparency and disclosure requirements as of Jan. 1, 2020 (enforcement begins in July). Raymond says that while “there’s some level of awareness” in the industry about the impact of CCPA, MailersHub is working to familiarize more people with it.
Growth Is Good, but …
Everything that happens in 2020 will take place against an economic backdrop that looks to be, as of this writing, about as good as it’s going to get — a lukewarm source of encouragement at best.
It’s not that print markets aren’t growing. According to a PIA Flash Report titled “Economic and Print Market Scan for 2020,” the industry’s total value of shipments increased by 3.61%, to $171.4 billion, from 2017 to 2018. Printers’ profits were said to be “generally healthy based on historic trends.”
The problem is that the industry can’t wall itself off from broader economic trends and events that dampen its growth. For instance, says PIA’s Davis, while corporate tax cuts and deregulation expanded the economy as a whole by about 1%, the effects of trade conflicts have trimmed it by the same amount — with the printing industry feeling both the positive and the negative boost.
There also continues to be “a big negative impact” from the replacement of print by other media, exacerbated by opt in/opt out policies that induce people to go paperless, according to Davis.
This explains why Davis says that out of the four possible 2020 economic trajectories he posits in the Flash Report — accelerated, modest, sluggish, and recessionary — the most likely scenario is the one whereby the industry “will sort of muddle through and get modest growth again,” probably in the vicinity of 2%.
SGIA’s Paparozzi, similarly, foresees sales growing between 1.2% and 2%, but he’s concerned about the printing industry’s ability to maintain even that subdued pace.
“Margins are what matter,” he declares, noting that right now, they’re under considerable pressure at many companies. Although nearly 60% of an SGIA survey group reported increasing their revenues in 2018, only 36.5% said they were able to increase profits — an indication, according to Paparozzi, of how difficult printers are finding it to “shepherd” more of what they earn to the bottom line.
‘Tipping Point’ for Labor Looms
Besides uncertainty, the other of the “two major drags” that Paparozzi sees confronting the industry is its chronic shortage of skilled personnel. He says the reality for printers in a tight labor market is that “you have to hire practically anybody,” including people who will jump ship at the chance of getting better pay somewhere else.
“I’m afraid that we’re getting very close to that tipping point,” where labor shortages begin to hurt productivity and profits across the board, Paparozzi muses.
As for the coming of a recession in 2020, neither economist wants to sound an alarm. Davis puts the chance of having one at 25%, noting that “there are no specific reasons overall” for a recession to occur.
Paparozzi doesn’t quote odds, but points out that the economy is never “due” for recessions: they happen as consequences of dire events such as financial bubbles, major errors of policy, or “exogenous shocks” that stress the socioeconomic fabric as a whole.
He adds that because we can’t know what the trigger will turn out to be, the cause of the next recession may already be in place. But he thinks that whatever it is, it is not likely to reach “recession-inducing proportions” in 2020.
Despite everything, Paparozzi says, “printers are finding growth in a broad range of end-markets,” such as graphics and signage, POP, and personalized direct mail. Davis concludes that after “the long streak of pretty good years” that have followed the end of the last major recession, “printing is still an industry of opportunity” for well-managed firms.
Small Victories, Big Wins
Kinter says that meanwhile, on the legislative and regulatory fronts, SGIA will keep on seeking “small victories” that enhance the industry’s position and enable it to avoid needless curbs on what it does.
One such achievement was a cooperation with the Spokane River Regional Toxics Task Force that “helped them understand the need for color in printing,” and the necessary presence of colorants in dyes. That “slowed the steamroller down” in terms of regulation and established SGIA as a credible partner in reducing toxic compounds in the Spokane River — a win-win for all concerned, according to Kinter.
Lyons says that, in 2020, PIA will continue to drive advocacy through its Print Powers America Action Center, a resource for helping printers reach out to lawmakers. She reports broad support for Print Powers America Week, an initiative aimed at promoting printing’s contributions on the national, state, and local levels.
Even at this early date, 2020 shows every sign of turning out to be, as Lyons puts it, “another polarizing election year.” But, by staying focused on the public issues that matter most to them, printers can keep polarization’s corrosive effects at bay and emerge from the tumult of 2020 in better shape — no matter whom the voters ultimately install in the Oval Office and the chambers of Congress in 2021.