Speaker McCarthy’s D.C. “Bluto” Moment Might Affect Retail

As the federal government was grinding to a halt on Saturday, the aura of consumer confidence started to crack, and retail briefly sensed a potential economic downturn. Pundits are now working hard to re-explain the Congressional funding problem as a crisis averted, but honestly, they only need to imagine a parody screenplay with the beloved actor John Belushi when he played John Bluto Blutarsky in the 1978 American comedy “Animal House”.

In the original movie, Faber College’s Dean Wormer set his sights on closing the Delta Tau Chi fraternity and John Bluto Blutarsky was confronted with a serious life crisis (and revelation) that his fraternity days were coming to an end. Rather than accept defeat, Bluto did his best to rally his Delta fraternity brothers with a rousing staccato speech: “What? Over? Did you say over? Nothing is over until we decide it is!” Bluto also said: “Who’s with me? Let’s go! Come on!

Unfortunately for Bluto, after delivering the emotional tirade, he immediately ran towards the Delta House front door and beckoned his small group of fraternity brothers to follow – but sadly, no one did.

Fast forward 45 years, and retail witnessed a similar scenario unfold in the United States House of Representatives. House Speaker Kevin McCarthy had tried to get his caucus to accept a funding deal, but there were several holdouts who had a different agenda in mind and refused to follow the Speaker’s lead. To save the day (and keep the government from shutting down), the Speaker sought help from the opposition Democrats – to eventually reach an agreement for a 45-day continuing resolution (CR) in order to keep the government operating.

Retail observes these Capitol Hill shenanigans with a very close eye – because non-resolution of issues seriously affects business. If the government were shut down, consumers would shop less, the supply chain would travel more slowly, and pending retail legislation on Capitol Hill would not move. The most immediate fear was that reduced federal spending would remove oxygen at the very beginning of the Q4 retail selling season.

Of course, many Americans don’t follow these federal activities closely, and eventually they would realize that the government had ceased to function. But, what really bothers retailers during this stressful time – is that serious industry legislation is backed up on Capitol Hill and, even now with the CR, there will be additional delays, which means that pending bills end up bumping into the end of year rush. In addition, 2024 is an election year and that means passing retail-related legislation becomes harder to do because the calendar is truncated by the campaign schedule and trade issues are often considered as polarizing political thorns.

There remains a large list of what retail wants to accomplish during the current session on Capitol Hill. To name a few:

*trade programs need to be renewed before their expiration (think AGOA and Haiti).

*the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bills (MTB’s) – which expired in January of 2020 need to be renewed.

*new international trade agreements need to be explored. China’s entrance into RCEP needs to be better understood (think 30% of the worlds GDP).

*the de minimis direct-to-consumer problem needs to be resolved (think free pass on duty and Uyghur inspection to a limit of $800 per person per day)

*and, of course, the annoying tariffs need to be re-visited

From the ashes of the 45-day CR Capitol Hill drama, there is always a celebrated protagonist and antagonist within the conflict. In the craziness of this deferral, the odd part is that both the protagonist and antagonist are from the same Republican Party!

It is likely that Speaker McCarthy (R-Ca) would be cast as the protagonist in this fictional “Animal House” parody, so clearly Representative Matt Gaetz (R-Fla) must be the antagonist – playing the equivalent role of ROTC Cadet Commander Douglas C. Neidermeyer who articulated in the movie: “You’re all worthless and weak!”

As Representative Matt Gaetz said to reporters on Saturday, with regard to Speaker McCarthy potentially losing his post: “Whether or not Kevin McCarthy faces a motion to vacate is entirely within his control, because all he had to do was comply with the agreement that he made with us in January. Putting the bill on the floor and passing it with Democrats would be such an obvious, blatant, and clear violation of that (agreement) – we would have to deal with it.”

Now that Speaker McCarthy officially declared his degree on independence, and actually followed the path that Representative Gaetz laid out, on Sunday’s CNN “State of the Union,” Gaetz said: “I do intend to file a motion to vacate against Speaker McCarthy this week.” And, while appearing on CBS’s Sunday “Face the Nation,” Speaker McCarthy countered with: “I’ll survive, so be it, bring it on, let’s get over with it and let’s start governing.”

Clearly, Speaker McCarthy was compelled to take a stand between removal from his speakership or to team up with the Democrats on a continuing resolution to keep the government functioning. The compromise (with the Democrats) included the removal of $6.2 billion of aid for the Ukraine, which will likely be taken up at a later date. While this infuriated many, the choice to keep the government running was the one that prevailed.

Speaker McCarthy said on Saturday: “If somebody wants to remove me because I want to be the adult in the room, go ahead and try. If I have to risk my job for standing up for the American public, I will do that.”

In Washington, it is often said that all’s well that ends well, and the continuing resolution was probably more than enough drama for everyone involved. With this now on the backburner until November 17, retailers will try their best to move forward with their Capitol Hill agenda.

Since the excitement was all about budget and finance, it’s interesting that the original budget for “National Lampoon’s Animal House” was $3 million dollars and that the movie was a roaring financial success. It should also be noted that that the fictious John “Bluto” Blutarsky went on to become a United States Senator and, in 2001, the Library of Congress placed “National Lampoon’s Animal House” on Washington’s respected – National Film Registry.

Retail is working hard for the consumer and, hopefully, the federal government will be there to help – while the Holiday selling season proceeds as scheduled.

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