As evidenced during the Arab Spring, and earthquake in Japan, we are often unable to recognize the magnitude of events as they unfold. Such could be true of the Occupy Wall Street Movement.  Are world-wide protests an indicator of momentum into a global revolution of the people, or will it fizzle into a clash between local police and a group of poorly organized discontents? What effect will all of this have on the business climate?

Many remain skeptical. One analyst said that a friend of hers had mused that she could, “smell them through the TV.”

Yet this is no ordinary protest, and to dismiss “the movement” on its face would seem shallow and naive. Regardless of ones political leanings, we must all be conscious that the movement on Wall Street has struck a nerve on Main Street. It is clear there is a faction within America who believes that significant reforms are required, and they believe they represent 99% of Americans.  It is hard to know if Wall Street CEO’s are paying much attention, but  one must assume that legislators are watching the 6 o’clock news with some discomfort.

The most direct effect will be the influence all of this has on the Presidential election, not only in terms of the selection for President, but of the agenda, which will define his term. Seemingly, the protestors will embolden those who seek higher taxes on the rich and broader controls and regulations.  The inability for the Republican Party to provide a clear front-runner, with a populace message could only further the left’s ambitions to reallocate American wealth.

Regardless of the winner, it would appear that laissez-faire capitalism is the institution under greatest attack. There seems to be a belief that the corporation itself is an instrument for evil.  A tentacle of the movement seems to be that government should legislate or guarantee employment, a concept with deep implications for labor law, unions, and taxation.

In the year ahead, the executive branch will continue to drive on tighter regulation. While there are streams of regulations under review, some of the most noted include[i]:

• Stricter interpretation by the IRS on expenses related to meals and entertainment, and a new tax on self insured health plans.
• A revamp of the SEC, including greater oversight of “broker/dealers”.
• Labor Dept. enforcement on the use of “contractors” and more restrictions on the use of minors on farms.
• Environmental controls on “fracking” and similar activities.
• The revamp of Medicare by the “deficit panel, including the potential of extending the Medicare eligibility age.
• New rules by the Equal Employment Opportunity Commission that crack down on discrimination against disabled workers.
• The Occupational Safety and Health Administration focus on violence in the work place and protections required in “high risk” work settings.
• A push by the Consumer Financial Protection Bureau for new rules on banks offering high-interest direct deposit loans.

The spread of protests in Europe is of particular concern, as the degradation of fragile economies there could provide fuel to the fire.  Those feisty Europeans are not new to protest, and their governments are not immune to violence. One thing that is hard to reconcile is that governments (such as Greece) are completely broke, yet their residents seem to expect a preservation of services, a zero sum game for all.  The failure of banks in Europe poses a much greater threat than in the U.S. It is a situation ripening quickly.

The fact that tax rates will escalate for the wealthy is somewhat inevitable. The President is calling for an unfathomable increase in corporate tax rates to boot.  Let us hope that such impetus does not create much in the way of immediate stress on the U.S. economy in the short term.

Batten down the hatches; it could be a long winter.