Business/GOP Spat Threatens Balanced Budget Goal

Dec. 21, 2004

It's not true that all business executives are Republicans. Nor is it true that all Republicans in Congress vote the straight pro-business line. Yet, an affinity between business and the Republican party undeniably exists. It's as longstanding--and real--as the affinity between Democrats and organized labor. That's why the current, curious falling out between top Republican leaders and the Business Roundtable (BRT), the organization of 200 large-company CEOs that has been the strongest lobbying voice representing big business, is so surprising. And why it has potentially harmful implications for the entire business community. Normally, the dispute would be no more than a gossipy tidbit for Georgetown cocktail-party conversations. But because it might become caught up in the debate over a balanced budget, it could--unless it's patched up--doom the once-high hopes of business leaders for passage of a positive, pro-business agenda in the new 105th Congress. Those hopes soared following last November's election. The GOP's continued control of Congress coupled with President Clinton's desire to secure a legacy, it was felt, would create a consensus at the center--a political climate conducive to business-backed legislation. But now, partly as a result of the BRT-GOP dust-up, it's looking as if business lobbyists may find themselves playing defense in the 105th Congress--just as they would have been had the Democrats won.

The Republican pooh-bahs are mad at the Roundtable because, in their eyes, many of its member companies in the last election campaign had the audacity to direct part of their Political Action Committee (PAC) funds to--gasp!--Democrats. Companies can't be blamed. Republican control of at least the House appeared in doubt, so it made sense for firms to establish ties to Democrats. But to GOP leaders, the support of Democrats smacked of treason. Small business, they pointed out, didn't waver in its loyalty to the Republican cause. Party chieftains openly warned that unless the defecting companies repent, they can expect a cold shoulder from Republican legislators. That threat becomes significant in light of the Congressional drive to balance the federal budget by 2002, one of the few issues with bipartisan backing in today's hyper-political Washington atmosphere. A balanced budget has long been a mantra for Republicans. Democrats, sensing that it is an issue that resonates with the public, lately have been at least devoting uncharacteristic rhetoric to it. And Clinton sees legacy potential in it. The difficulty arises, of course, in actually achieving a balanced budget. Because voters profess to want one, yet rebel against cuts in individual programs, legislators will have to wrench up heretofore unseen courage to do the necessary slashing. Democrats instinctively will want to protect programs. And Republicans, less unified and hard-edged than in the 104th Congress, won't be as enthusiastic about wielding a brutal budget ax. Thus both parties are seeking the elusive silver bullet. They may have gotten one in December when Michael Boskin's nonpartisan advisory commission recommended a change in the way the consumer price index is calculated. But that may not fly; although the change would provide political cover to cut entitlements, many legislators still regard the mere linkage of the words "entitlements" and "cuts" as political poison. But now there's a new silver bullet: eliminating or cutting many subsidies and tax breaks to business collectively known as "corporate welfare." The idea has support from all sides of the political spectrum--Ralph Nader and environmental groups on the left, and the conservative Americans for Tax Reform and the libertarian Cato Institute on the right. A leader in the movement is, of all people, Rep. John Kasich (R, Ohio), who on most issues is regarded as a hero by business. On various hit lists are such programs beneficial to business as the R&D tax credit, the Overseas Private Investment Corp., the Export-Import Bank, and the Advanced Technology program. Parallel with this assault on corporate welfare is the continued desire in Congress to create still new programs or expand old ones--and, because tax increases are politically taboo, stick business with the tab. The Family & Medical Leave Act enacted in 1973 is one example. So is the legislation passed late last year requiring 48-hour hospital stays for maternity care and mandating companies to include mental-illness coverage in their health-insurance plans.

Traditionally business has been able to count on its Republican friends in Congress to resist raids on company bottom lines. If these legislators are peeved at business, however, they'll be less inclined to do so. That's why the BRT matter is significant. It behooves both the Republican leadership and the BRT to cool it. Here's some advice to each: To the GOP--Recognize that companies have legitimate reasons to give bipartisanly. It is in the party's best interest as well. If business and Republicanism become too intimately identified, the party will be perceived as the lackey of a narrow interest, and thus lose the broad appeal necessary for electoral success. To the BRT and its member companies (and, for that matter, to all companies)--Don't give to any candidate--Democrat or Republican--solely because he or she chairs (or might chair) a key committee or otherwise influence legislation. Base your support not upon access, but upon how strongly a candidate supports free enterprise and the market system. And don't be afraid to donate to challengers, rather than incumbents, if they are pro-business. That, ultimately, is the way to build a business-friendly Congress that spans both parties.

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