The recent fiscal crisis has opened a major rift between the tea party wing of the Republican Party and business groups that traditionally have backed Republicans, with many business leaders now vowing to get involved more in GOP primaries to try to counter insurgent candidates.
Tea party leaders are defiant, saying they will not change course despite criticism from the U.S. Chamber of Commerce, Business Roundtable and other top business groups.
But business leaders argue that the scorched-earth tactics used by tea party Republicans during the 16-day shutdown and debate over raising the federal government's borrowing limit marked the fourth time since the GOP took control of the House in 2011 that tea party adherents precipitated a governmental crisis that zapped consumer and business confidence, raised uncertainty and exerted a major drag on economic growth.
Besides encouraging more business-friendly candidates in primary contests, business groups are rallying behind establishment Republicans such as Senate Minority Leader Mitch McConnell, the Kentucky Republican who is being targeted by tea party activists for brokering a deal to temporarily raise the debt ceiling and reopen the government, while launching a negotiation with Democrats over budget cuts and proposed tax and entitlement reforms.
Business executives agree with many tea party goals such as cutting the deficit and reforming entitlement spending, but they argue that conservative lawmakers have erred in their tactics and wounded the economy by driving the government with increasing frequency into states of crisis and dysfunction — this time for the ultimately unsuccessful cause of trying to force President Obama to cancel his health care law.
"There's no question that this month's government shutdown saga has been a spectacular failure," said David French, senior vice president and lobbyist at the National Retail Federation, whose members constitute the nation's largest group of employers.
Retailers were particularly frustrated that the long-running feud and standoff between the parties — which has been postponed until early next year — threatens for the second year in a row to spoil the critical Christmas shopping season, when one-quarter of all U.S. retail purchases are made and an even larger share of retail profits are made.
Besides the retail federation, the U.S. Chamber of Commerce, the largest U.S. business lobby, "will be getting more involved in primaries this cycle," said Blair Latoff Holmes, the organization's executive director for media relations.
He said the Chamber of Commerce has kept tabs on legislators' votes on the debt ceiling and government shutdown as well as their positions on issues such as trade, immigration, and entitlement and tax reform, with an eye toward deciding which candidates to support.
Tea party independence?
Tea party leaders are defiant, threatening to run candidates as independents if business groups defeat them in next year's Republican primaries. Already, conservative primary challengers have emerged to take on Republican Senate and House incumbents in states such as Kentucky, Tennessee, Idaho, Texas and South Carolina.
Judson Phillips, the founder of Tea Party Nation, called business leaders who oppose the tea party "RINOs" (Republicans in name only) and "crony capitalists" who are "feeding at the government trough" and are interested only in "making the trains run on time" rather than changing the unsustainable course of government spending.
"Business is overreaching," he said of their plans to oppose insurgent candidates in Republican primaries.
"Business can bring a lot of money to the table, but they can't bring boots on the ground" in a way that rouses public support for Republican candidates the way the tea party does, he said.
But from Wall Street to Main Street, all of the major business associations, including the Chamber of Commerce, the retailers, the Business Roundtable and the National Association of Manufacturers lobbied for quick passage of an increase in the nation's debt limit and end to the shutdown to prevent another major economic slowdown at a time when many businesses hoped the economy would be picking up speed.
That pitted the business groups against activist conservative groups such as the Club for Growth and Heritage Action, which urged Republicans to stand firm with the tea party.
Caught in the middle was Koch Industries, the financier of many tea party-affiliated groups. Koch issued a letter distancing itself from the shutdown strategy.
Taking on the ideological conservatives could be a bruising task for the business groups, but it's something they say they now realize they have to do.
"Politics has always been a full-contact sport. The most active groups often command the most attention, and that's why the tea party has risen in its influence within the GOP," Mr. French said. "The shutdown has made it clear that the business community cannot afford to stay on the sidelines any longer. If you don't like what's going on in Washington, get in the game and make a difference."
The battle has been joined in a few races. Besides Mr. McConnell, the tea party is targeting Sen. Lamar Alexander, a pragmatic Republican from Tennessee, and eight-term Rep. Michael K. Simpson, Idaho Republican. Business proponents, in turn, are pledging to unseat Sen. Mike Lee, Utah Republican, who defeated Robert Bennett in 2008, in one of the first successful conservative primary campaigns against a GOP incumbent.
Business groups are increasingly joining forces with Defending Main Street, a group backing center-right Republicans. Should they succeed in defeating some tea party candidates, Mr. Phillips said, the tea party will run their candidates in third party campaigns where possible — a strategy analysts say likely would divide the Republican vote and make it easier for Democrats to win.
Exploiting the GOP divide
With the Republican rift breaking into the open, Democrats are trying to take advantage. Already, many big businesses have shifted into their column, Mr. Phillips said. More businesses may defect to the Democratic side if the GOP continues to veer to the right or splinter into warring factions next year.
Eager to try to exploit the split, House Minority Leader Nancy Pelosi, California Democrat, has spent the days since the shutdown pointing out that nearly every House Republican voted against business demands for an increase in the debt limit and end to the shutdown, while every Democrat supported it.
"This is the Republican Party," Mrs. Pelosi said last week. "You know, I used to say, 'Oh, the tea party has hijacked the main Republicans.' No. They now dominate. It used to be the tail is wagging the dog. Well, if that's still the case, this dog's got a mighty big tail."
The reaction from business associations to the debt crisis and shutdown ranged from subtle discontent to undisguised outrage.
Jay Timmons, chief executive of the National Association of Manufacturers, announced after the deal that he was "downgrading" Washington for once again barely avoiding an "economic catastrophe" — in a tongue-in-cheek reference to a threat Oct. 15 from one of Wall Street's top credit rating agencies to lower the nation's AAA rating.
The U.S. Chamber of Commerce, whose small-business members have been important backers for the GOP for decades, was relatively restrained and did not directly criticize Republicans' handling of the debt crisis even while laying out plans for primary battles.
But in a sign of how far the disgruntlement with the tea party goes, the National Federation of Independent Business, which represents mom-and-pop operations that are part of a grass-roots Republican constituency and a key engine of job growth in the economy, uncharacteristically departed from Republican orthodoxy in deploring the mess in Washington.
"Job creators are rolling their eyes and shaking their heads thinking, 'This is certainly not the way to run the largest enterprise in the world,'" NFIB chief economist Bill Dunkelberg said.
The dilemma for businesspeople is, they agree with many of the tea party's small-government goals but are put off by their tactics, said Jerry Jasinowski, former president of the manufacturing association.
"Like most everyone else in Washington, I was put off by the antics of the tea party conservatives and believed — and still believe — that shutting down the government was extremely poor judgment," he said.
Although the tea party's tactics may be "crude and ineffective," he said, "whatever else we may think about them, their concern about our fiscal affairs is legitimate and demands attention."
He faulted tea party leaders for getting sidetracked by the Affordable Care Act.
"There is nothing they can do about that law, at least not right now, and all of their ranting served mainly to obfuscate the disastrous launch" of the program Oct. 1, he said. "They should have just stood back and allowed the news media to tell that story. If the administration cannot clean up its health care law, Obamacare will sink under its own weight."
But Mr. Jasinowski was not confident that tea party legislators have learned any lessons from the debacle.
"They are bloodied but unbowed," he said. "We will soon be embroiled in this seemingly endless contretemps again."
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