The fog hangs especially heavy over attempts to forecast what the commercial printing industry will see in terms of economic, regulatory, legislative, and postal trends in 2021. This time around, past isn’t prologue: it’s mostly an index of what not to count on as our industry tries to come back as nearly as it can to the normalcy of pre-pandemic days.
COVID-19 and, to a different extent, the 2020 presidential and congressional elections were the main developments that set the industry on the new path it will follow in 2021 and beyond.
Marcia Kinter, VP of government and regulatory affairs, PRINTING United Alliance, says she expects to see “COVID, COVID, everything COVID” keynoting efforts to update workplace safety rules in the new administration’s first 100 days.
Lisbeth A. Lyons, the Alliance VP of government and external affairs, calls the political contests that took place under COVID’s shadow “pretty extraordinary” for the record-setting voter turnout they drove. But, she doesn’t think the results will dramatically change the pace or the focus of lawmaking in the next session of Congress.
A Collective Sigh of Relief
“The fact that the election is behind us is a positive — it removes uncertainty,” observes Andrew Paparozzi, the Alliance chief economist. He says that apart from anything the government does or fails to do, the forces moving the national economy ahead will be driven strongly by “a tremendous, pent-up demand for everything that we haven’t been able to do for the past 18 months.”
COVID vaccines will give a “game-changing” boost to the economy, according to Paparozzi, and economic stimulus programs under the Biden administration could accelerate recovery as well. He cites a Wall Street Journal survey of 60 prominent economists who agree that gross domestic product could grow by 3.7% in 2021 — an estimate Paparozzi deems conservative.
Given his belief that the forces propelling the economy forward are stronger than the ones holding it back, “I’m convinced that those projections will be revised upward as the year progresses,” Paparozzi declares.
However, he also acknowledges the severity of the economic damage done to the printing industry by the downturn the pandemic triggered.
According to the November edition of the Alliance’s ongoing COVID-19 Print Business Indicators Research Report, which Paparozzi oversees, total industry sales — spanning commercial printing, graphic and signage production, apparel decoration, functional printing, and package printing and converting — were down 16.9%, on average, through the first three quarters of 2020 compared with year-earlier levels. Full-year sales should be down by about the same percentage, for a loss of $14.3 billion.
The shrinkage of revenue has had a corresponding effect on employment. Paparozzi says Bureau of Labor Statistics data indicate that the industry laid off more than 81,000 employees in March and April of 2020, only about 31,000 of whom had been rehired at the time of this writing. The sales and employment losses “are far in excess” of what the industry has experienced in previous recessions, Paparozzi notes.
Pain Felt Across the Board
The damage has been broad as well as deep. Sales declined for the great majority (82.2%) of survey respondents, dropping by 20% or more for 53.5%, and by 30% or more for 30.7%. Sales were up for just 16.8%, and were unchanged for 1%.
Paparozzi points out that even if sales were to rebound by 8% in 2021 — double the high end of the 2.5% to 4% growth range he forecasts for the year — it would restore only about 40% of what the industry lost to COVID-19 in 2020. “We’ve got a long, long way to go” to get back to full economic health, he advises, adding that no company should be banking on a general recovery to solve all of its problems.
This is because recoveries, nowadays, don’t raise all boats the way they used to. “They are exclusive, not inclusive,” Paparozzi says. “You really have to prepare for them.” He points out that the 16.8% of the survey group who grew their sales during the pandemic did so by an average of 25.7%, thanks to being “aware, entrepreneurial, and agile” as they confronted the crisis.
“They didn’t wait for growth — they created growth,” Paparozzi notes. Their strategies included manufacturing personal protective equipment (PPE) and moving aggressively into sectors such as health care, where the pandemic generated strong demand for products and services. They also excelled at market analysis and project execution, skills Paparozzi says will be essential for competitiveness in a post-COVID world.
Asked to say what they thought likely to attract demand from buyers in 2021, survey participants most often identified personalized, targeted, high-ROI print communications supported by data analytics. “Print that has ‘wow’ power” through sophisticated press and finishing techniques is another application to watch, according to Paparozzi. He adds that greater e-commerce capability is high on the shopping lists of respondents who are planning to make capital investments this year.
Capital investments are private decisions. Compliance with regulations governing workplace conditions and the environment is a public obligation. Look for significant change on these fronts as a regulation-averse administration in Washington, yields to an incoming presidential team who may be much more inclined to clamp down, Gary Jones, the Alliance director of environmental, health, and safety affairs, advises.
Not likely to be continued by the Biden White House is the Trump administration’s policy of requiring federal agencies to eliminate two existing regulations for each new one they adopt. The Environmental Protection Agency (EPA) was particularly aggressive in pursuing this goal, Jones notes, with 69 deregulatory actions and another 33 pending actions to its credit.
‘Complete Polar Opposite’
The Biden White House will probably be the “complete polar opposite” of its predecessor when it comes to regulation, Jones predicts, adding that the incoming team will have tools to block or rescind Trump-era rules they don’t like. But this won’t happen overnight. Kinter, who shares responsibility with Jones for monitoring federal and state regulatory activity on behalf of the Alliance members, points out that the federal system “is a very large beast, and it takes a lot to move it.”
Nevertheless, both are bracing for what Jones says could be a “dramatic turnaround” of policy at the Occupational Safety and Health Administration (OSHA), the U.S. Department of Labor organization whose workplace safety rules impact every print and graphics business.
Kinter foresees a “battle” between congressional progressives and centrists over appointing an assistant secretary of labor to head the agency (a post left open by the Trump administration). One reported contender for the top job at OSHA, a deputy assistant secretary of the agency during the Obama administration, is “no friend of business,” according to Jones.
He says that while OSHA was “generally more favorable” to the private sector under Trump than it had been previously, the tone of the relationship will not be the same under Biden. The change in direction could bring more “naming and shaming” enforcement of safety regulations, as well as more action by inspectors on lockout/tag-out, a machine inspection protocol that isn’t practical for late-model, digitally controlled print and graphics equipment.
Jones and Kinter also think OSHA could release an emergency technical standard for COVID-19 prevention in workplaces, which would require employers to file written plans for implementing the safeguards required by the standard.
As for environmental regulation, “the stage has been set for quite a bit of activity at the state level,” Kinter says. With federal EPA standards as their baselines, many states can be expected to tighten rules about industrial solvents, shop towels, hazardous waste, and ozone emissions — all representing compliance burdens for the printing industry.
EPR: ‘Print and Packaging Tax’
What Jones and Kinter see as the biggest potential regulatory red flag for the industry is the states’ rising interest in extended producer responsibility (EPR): an environmental doctrine that says manufacturers of products that end up as waste should bear the cost of managing them at the end-of-life stage.
According to the Product Stewardship Institute, there were about 115 EPR policies in effect across 33 states in 2019, covering a range of products such as mattresses, carpeting, paint, and fluorescent lighting.
EPR hasn’t touched the printing industry so far, but the fear is that the policy could be broadened to include “anything printed that goes into the waste stream,” according to Kinter. States taking this step would effectively impose a “print and packaging tax” along the lines of the per-ton-of-paper recycling fees collected by the Canadian province of British Columbia, which has had EPR programs in place since 1994.
Kinter says that if American states haven’t been moving forward lately with EPR plans for print, it’s probably only because their legislatures have been shut down by COVID-19. Imposition of EPR fees would particularly hurt “the burgeoning industry of digital packaging,” she adds.
Monitoring and responding to state-level EPR initiatives will be a priority for the Alliance’s regulatory affairs team this year. Jones points out that states trying to close gaps the pandemic opened up in their budgets will be looking keenly at EPR fees as a revenue source. Print and graphics firms obliged to pay these fees, he warns, will have to pass the expense through to customers who can find alternatives to ink on paper if the cost of print is more than they want to pay.
Please, Mr. Postman
No organization understands the toll taken by alternatives to print better than the U.S. Postal Service (USPS), which continues to lose ground to electronic communications in almost all the categories of mail that it handles. Additional declines linked to COVID-19 made a bad situation worse, causing the USPS to report a net loss of about $9.2 billion for its 2020 fiscal year.
Leo Raymond, managing director of the Mailers Hub professional community and the publisher of Mailers Hub News, says the loss of volume was “quite staggering” in marketing-related mail for retailing, hospitality, and other sectors of the economy hit hard by the pandemic.
But he notes that the overarching problem for the USPS continues to be one that no other government entity or private corporation faces: the obligation to prepay the future health care costs of every one of its 497,000 career employees.
This is the consequence of a law passed in 2006 that required the USPS to create a fund that would pay for post-retirement health care costs 75 years into the future. 2006 was also the last year in which the USPS operated at a net profit.
In November, the Postal Regulatory Commission (PRC), which governs what the USPS can charge for its services, approved rate increases for its market-dominant products: first-class letters, periodicals, and other items over which the USPS has a monopoly on delivery. The same month, the USPS separately announced rate increases for boxes, parcels, and envelopes that it competes with private carriers to deliver.
The new rates, which were subject to caps, go into effect on Jan. 24, 2021 — but they won’t be anywhere near sufficient to return the USPS to profitability. According to Raymond, it wouldn’t be possible to raise postal rates to a point where they would cover the USPS’ financial obligations “unless you want to drive away every bit of mail.”
What’s more, the PRC isn’t permitted to factor the prefunding liability into its rate-setting calculations. This means “the PRC is not empowered to say what the real problem is,” Raymond observes.
In All Fairness
Last year, a bill called the USPS Fairness Act tried to address the problem by calling for the repeal of the USPS’ mandate to annually prepay future retirement health benefits. Introduced by Rep. Peter DeFazio (D-OR), H.R. 2382 passed in the House of Representatives but failed to do the same as S.2965 in the Senate.
Raymond notes that the case for postal reform hasn’t been helped by “frenzied accusations” surrounding the USPS’ supposed role in influencing the 2020 elections (an allegation he calls baseless). In some cases, Raymond says, “mailers have had to deal with calming down their clients” who were spooked by the bad publicity.
Raymond says he hopes to see more support for the USPS under a Biden administration than the Trump administration was willing to give it. But, he acknowledges that getting the help remains “speculative” for now.
“The political climate has to change for anything to happen,” he contends. However, change in Washington may not come as quickly as the drama surrounding the 2020 presidential election might suggest.
Lyons, who manages legislative affairs and advocacy for the Alliance, says that because the close contest did not produce a strong mandate for the Biden team, “wild swings in policy” probably will not occur as the new administration pursues its agenda. A loss of seats in the House by Democrats and a likely razor-thin majority by one party or the other in the Senate will also temper the pace of lawmaking on Capitol Hill, Lyons adds.
As she sees it, political calculation will move many lawmakers closer to the center than to the left or the right wings of their parties. Republican senators up for reelection in “purple” states in 2022 will push for moderation. In the House, centrist Democrat members shaken by the GOP’s gain of seats will become “even more vocal” in opposing their views to those of the progressives.
Three Ts of Priority
Lyons thinks the Biden administration’s first 100 days will feature some “made-for-TV policy announcements” such as reentry into the Paris Agreement for controlling greenhouse gas emissions. Then, taxation, trade, and transportation will emerge as the administration’s top three legislative priorities, with climate change as an additional focus of special attention.
Efforts to change tax laws will be “close down the middle of the lane” rather than radical, as lawmakers “nibble” at the tax structures they want to change. There could be, for example, attempts to return estate tax rates to their pre-Trump levels — an issue of concern, Lyons points out, for the 60% of printing businesses that are family-owned. The industry should also be vigilant about preserving 100% deductibility of advertising expenses for print and direct mail, she advises.
Bipartisan action on transportation and infrastructure could include changes to reduce the cost of shipping raw materials; there also could be electric vehicles and similar types of assistance for the USPS. Lyons says that while the Biden administration will take a protective “Buy American” stance on securing supplies of things like PPE, its trade policy probably will rely less on the Section 232 tariffs that the Trump administration invoked to slap duties on aluminum, newsprint, and coated freesheet.
President Biden, Vice President Harris, and their counselors will not be shy about pushing for programs to counter climate change, which Lyons identifies as “a very passionate issue” for them. She says that although grand schemes like the Green New Deal will be “dead on arrival” in a sharply divided Congress, the White House won’t always have to wait on the passage of bills to get what it wants.
The SEC as Climate Champion
Expect to see major executive order announcements and regulatory action to circumvent congressional gridlock on climate change within days or weeks of the inauguration, Lyons predicts. And, government agencies can take their own actions on climate change that accord with the White House’s strategy. For example, the Securities and Exchange Commission can, and under a Biden administration likely will, require publicly traded companies to disclose their climate risks and greenhouse gas emissions.
Helping its members digest the sausage made in Congress and the state legislatures is a primary mission of the Alliance, which combines and coordinates decades of expertise in legislative, political, and regulatory affairs to advocate for the printing industry as a whole.
Lyons says that the recently conducted “Legislative and Regulatory Priorities Survey” of the Alliance membership will enable the association to better target its advocacy efforts. A forthcoming report will publish the results, along with an overview of the governmental landscape for print and graphics businesses.
It’s important for owners of these businesses to help politicians understand the impact of their actions on local economies and industries, according to Lyons. She notes that many elected officials, especially newcomers to Congress and state legislatures, have only a “cursory, elementary” knowledge of printing.
Thus, they’ll need a lot of education from their constituents who do it for a living.
*This article was written prior to the Senate run-off races in Georgia, which declared Democrat Senators Jon Ossoff and Raphael Warnock the winners.