The year 2012 was one of questions, not answers.
An unspeakable tragedy that convulsed the nation ended a year that did little to resolve fundamental issues that keep both citizens and employers awake at night. Eleven months of political debate and a fourth year of halting economic recovery left the Americans at year-end still face-to-face with a fiscal cliff, a governmental impasse and, last week, a haunting societal abyss made manifest at a tiny elementary school in Newtown, Connecticut.
The nation thus began and ended 2012 with questions. Will lawmakers resolve a $16 trillion debt problem without throwing the country back into recession? Will the newly re-elected president and Speaker of the House come to agreement? Will employers regain the level of confidence they need to resume investing in expansion and jobs? Will the economies of China and Europe recover?
The top 10 stories to affect Massachusetts employers in 2012:
- Fiscal cliff, European debt and slowing Chinese economy imperil Massachusetts.
The same Massachusetts innovation economy that helped the Bay State ride out the Great Recession found itself uniquely vulnerable to debt and deficit crises unfolding on both sides of the Atlantic. Failure by U.S. lawmakers to avoid automatic budget reductions and tax increases threatened to trigger deep cuts to bedrock Massachusetts industries such as defense and health care. An austerity-driven European recession continued to impede a key export market for Massachusetts companies, while growth in China declined 1.4 percentage points to its lowest rate since 1999. The result – Massachusetts unemployment rose from 6 percent in the spring to 6.6 percent in November.
- Massachusetts passes a first-in-the-nation law to limit increases in health-care costs.
Governor Deval Patrick signed a bill in August limiting the increase in medical spending in Massachusetts to a level equal to overall economic growth from 2013 until 2017. The spending growth target will drop to 0.5 percentage points below gross state product from 2018-2022 before returning to the economic growth benchmark in 2023 and beyond. Associated Industries of Massachusetts President Richard C. Lord was named in November to represent employers on the board of a new commission that will implement the cost-control law.
- United States Supreme Court rules federal health care reform constitutional.
The high court ruled in a 5-4 decision on June 28 that the portion of federal reform that requires everyone to purchase health insurance – the so-called individual mandate – is constitutional. The court ruled that the mandate violates the commerce clause of the Constitution, but is permissible under the taxing power of Congress. The landmark decision, coupled with the re-election of President Barack Obama in November, ensured that Massachusetts will be the only state in the nation to face the challenge of reconciling federal reform with an existing state health care reform.
- Manufacturing continues to make a comeback as companies create trend of re-shoring.
A funny thing happened to the conventional wisdom that manufacturing moves inexorably overseas – companies like General Electric, which resumed making appliances at its sprawling Appliance Park campus in Louisville, Kentucky, started bringing it back. Research by the MIT Forum for Supply Chain Innovation found that manufacturers are reconsidering their supply chain strategies due to higher labor costs in developing countries, energy costs and political stability issues. It was good news for Massachusetts, where manufacturing employment stabilized after a sharp decline during the recession.
- President Barack Obama wins a second term, defeating former Massachusetts Governor Mitt Romney, while Elizabeth Warren defeats Scott Brown on a platform of making business accountable.
An electorate made restive by four years of economic turmoil nevertheless turned away from a former financial executive promising economic change and returned to the status-quo of divided government. The re-election of President Obama affirmed the inevitability of federal health reform and set up a redux of the fiscal battle between the president and Congressional Republicans over whether to address the federal deficit through tax increase of spending cuts. Massachusetts voters elected Warren, a Harvard University professor and the creator of the Consumer Financial Protection Bureau, to the Senate seat held by Republican Scott Brown.
- Courts postpone National Labor Relations Board rules on accelerated union elections and employee rights posters.
A United States District Court issued a judgment in May invalidating a far-reaching National Labor Relations Board (NLRB) regulation promoting accelerated union representation elections. Ruling in favor of the United States Chamber of Commerce and the Coalition for a Democratic Workplace (of which AIM is a member), the court found that the NLRB did not have the required quorum to pass the rule. Separately, a federal appeals court blocked another NLRB rule requiring more than 6 million U.S. employers to post a workplace notice informing employees of their right to join a union.
- Massachusetts lawmakers pass a balanced budget with no tax increases, but hint as the year comes to a close that they are likely to seek additional revenue in 2013.
Governor Patrick signed a $32.5 billion budget for Fiscal Year 2013 that included no new broad-based taxes and the final installment of a three-year drop in corporate income taxes from 9.5 to 8 percent. The budget represented a 3.2 percent increase in spending over Fiscal Year 2012. Lagging tax revenues during the fall created a $540 million budget shortfall that prompted the governor to announce cuts in local aid and state government. Beacon Hill lawmakers have sent strong signals that they may seek to raise taxes for transportation, higher education and other purposes next year.
- Governor Deval Patrick and the Massachusetts Legislature freeze unemployment insurance rates for a third consecutive year.
Lawmakers froze unemployment insurance rates at Schedule E, averting an automatic 31 percent increase from $715 per employee to $935 per employee. AIM argued that the fund used to pay jobless benefits in Massachusetts would grow to between $300 million and $400 million, even if rates were frozen. Beacon Hill did not move forward with changes to the unemployment benefits structure that would assure the solvency of the jobless fund for the long term.
- Massachusetts employers benefit as Congress grants Permanent Normal Trade Relations (PNTR) with Russia and re-authorizes the Export-Import Bank.
Congress and President Obama followed up the signing of three free-trade agreements in late 2011 with the granting in 2012 of Permanent Normal Trade Relations (PNTR) with Russia, a move experts believe will create new market opportunities for companies in Massachusetts that have already boosted exports to Russia by 30 percent this year. Re-authorization of the Export-Import Bank was also important to the export-driven Bay State economy – the bank has provided loans to 74 exporting Bay State companies in the past two years in amounts from $5,500 to $27 million.
- Nomination of Massachusetts Senator John F. Kerry to be secretary of state sets off a political donnybrook one month after the election.
President Obama on Friday nominated Kerry, Chairman of the Senate Foreign Relations Committee, to replace Hilary Clinton as Secretary of State. The news set off speculation that everyone from Scott Brown to Edward Kennedy Jr. to Congressman Edward Markey to the actor Ben Affleck would compete for Kerry’s senate seat during a special election next year. Affleck’s name prompted wags to suggest campaign slogans for the actor, including The People magazine’s seat; Vote baby vote; and Armagettinoutthevote.