The fiscal cliff may mean short term gains for law firms, though any outcome that hurts corporations will undoubtedly mean pain for the legal industry as well. As a result, law firms await the outcome of negotiations between President Obama and Congressional Republicans with baited breath, alongside their corporate clients.
This week, the Blog of the Legal Times covered the 2012 National Law Journal Regulatory Summit, where law firm leaders spoke frankly about how they are being affected by the uncertainty created by the looming fiscal cliff. As is often the case with the legal industry, the present uncertainty about the future of the tax code and other major regulatory areas has led to more work for firms:
[Bobby] Burchfield [co-head of McDermott Will & Emery’s Washington office] said that tax lawyers are being kept busy as they present different fiscal cliff tax scenarios to clients. He said the high activity in healthcare, regulatory, investigatory and advisory law would likely continue into the coming year.
Burchfield is also projecting that the Obama administration will lean more heavily on regulation in its second term in order to avoid getting bogged down in Congressional politics. An increase in rulemaking would result in more work for regulatory lawyers as well as litigators, as legal disputes over regulations would also likely increase.
However, many firms are cautious about 2013, particularly with regards to a potential leap off the fiscal cliff, should Washington law makers fail to reach a deal by year’s end. Although the legal industry is often countercyclical, the last five years have proven once again that the financial fates of law firms are closely tied to those of their clients. Thus, uncertainty about the corporate climate in 2013 means firms are likely to see more falling demand, coupled with pricing pressure.
One concern many large law firms may have regarding the fiscal cliff, particularly in the Washington region, is the effect it would have on the defense and aerospace industries. Unless a deal is reached, severe cuts to defense spending could result in as many 500,000 job losses in the sector, according to economist Stephen Fuller of George Mason University. For law firms that represent the many defense and aerospace contractors that regularly compete for lucrative government contracts, the prospect is likely worrying.
However, there is some promising news on the horizon. President Obama and House Speaker John Boehner apparently re-opened negotiations yesterday, indicating that a deal is still possible. And this morning, the U.S. announced better than expected jobs numbers for November; 146,000 new jobs were added, resulting in a jobless rate of 7.7%, the lowest since 2008. For law firms and their clients, these are signs that they might have something to celebrate in 2013.
Posted by Emily Fisher