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The economic downturn has bypassed K Street so far, but some large companies are starting to cut costs by imposing hiring freezes on their Washington offices, trimming contracts with outside firms and pulling back on participation in social events.
Lobbyists for industries acutely hit this year, either by the housing crisis or the chaos on Wall Street, have felt the pinch more than most.
Home Depot is one example. The home-repair giant announced in late January it was laying off roughly 500 employees at its Atlanta headquarters. The job cuts weren’t nearly as steep in Washington. But Kent Knutson, the head of the retail giant’s D.C. office, did have to let go of one person, reducing the lobbying team from nine lobbyists to eight.
“That was the job we felt we could divvy up amongst ourselves. We need to do more with less,” said Knutson.
Decisions by headquarters have also affected Home Depot’s roster of hired guns. Two firms — one known for its Republican ties, the other for its Democratic connections — were signed by Knutson to lobby on the company’s application for a banking charter with the Federal Deposit Insurance Corporation.
But when the housing market began its downward spiral, Home Depot decided against pursuing the application further. Though happy with the firms’ performances, Knutson canceled their contracts. (The contract terminations are not yet publicly available.)
“As a business decision, corporate headquarters decided to go to our core business and not to expand into new arenas,” said Knutson.
Other offices have felt the pinch, too, although many corporate lobbyists do not like to talk openly about the cutbacks.
“I don’t know a single corporate office that is not facing budget constraints,” said an in-house lobbyist for a Fortune 500 company.
The lobbyist said his office has looked at cutting its own payroll as well as reducing fees for contracts for outside firms. The lobbyist, who asked not to be identified because he is not authorized to talk to the press, said he has already reduced one contract by 20 percent.
The expense of doing business in Washington can be reduced in other ways, too, namely by limiting involvement in the city’s social scene of fundraising dinners and charity galas.
Knutson, for one, is being more careful about hosting tables and buying sponsorships for big events.
“It’s better to err on the side of caution and not go crazy and spend a lot,” he said.
Leslie Hayes, president of Hayes & Associates , an event organizer, said that charities are having to “work harder and cast a wider net” this year.
“We are making our numbers but it is much more difficult,” she said.
Hayes’s firm has organized huge events in the District, such as the March of Dimes Gourmet Gala and the USO World Gala, both typically $1 million fundraisers. When times get tight, charities tend to suffer.
“When companies are facing cutbacks, it is harder to justify that spending,” said Barb Witten, vice president for development for Hayes’s firm.
Penny-pinching in Washington corporate offices can actually be a good thing for contract lobbyists. Layoffs and open slots for in-house lobbyists leave a vacuum that can be filled by those not on the company payroll. And hiring a contract lobbyist is sometimes less expensive than hiring additional staff.
“When companies bring down the head count, they looked more to outside contracts,” said the Fortune 500 company lobbyist. “It’s not a permanent, built-in cost.”
Steve Elmendorf said the economic downturn has had little effect on his business. Elmendorf Strategies has registered 25 clients since opening in 2007, according to lobbying disclosure records filed with the Senate.
“People are going to be up and down because of what Congress does, not because of the economy,” said Elmendorf, a former aide to past Minority Leader Dick Gephardt (D-Mo.).
Even those industries in deep financial trouble, such as the housing and financial services sectors, will pay K Street to help them contend with the fallout on Capitol Hill, argues Elmendorf.
Overall, the lobbying industry’s bottom line seems to be recession-proof. In 2007, spending on lobbying reached $2.8 billion, making it another record year, according to the Center for Responsive Politics (CRP), a campaign finance watchdog group. Revenue has grown every year since 1998, according to CRP’s analysis.
But lobbyists representing America’s corporations think a potential recession will eventually take wider hold in Washington as well, though some aren’t feeling any symptoms just yet.
Contract lobbying firms “will start to feel it more once the economic times get worse,” said the Fortune 500 company lobbyist. |
