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Business groups see loss of sway over House GOP

Eric Lipton,Nicholas Confessore,Nelson D. Schwartz
J. Scott Applewhite

WASHINGTON -- As the government shutdown grinds toward a potential debt default, some of the country's most influential business executives have come to a conclusion all but unthinkable a few years ago: Their voices are carrying little weight with the House majority that their millions of dollars in campaign contributions helped build and sustain.

Their frustration has grown so intense in recent days that several trade association officials warned in interviews Wednesday that they were considering helping wage primary campaigns against Republican lawmakers who had worked to engineer the political standoff in Washington.

Such an effort would thrust Washington's traditionally cautious and pragmatic business lobby into open warfare with the tea party faction, which has grown in influence since the 2010 election and won a series of skirmishes with the Republican establishment in the last two years.

"We are looking at ways to counter the rise of an ideological brand of conservatism that, for lack of a better word, is more anti-establishment than it has been in the past," said David French, the top lobbyist at the National Retail Federation. "We have come to the conclusion that sitting on the sidelines is not good enough."

Some warned that the default could spur a shift in the relationship between the corporate world and the Republican Party. Long intertwined by mutual self-interest on deregulation and lower taxes, the business lobby and Republicans are diverging not only over the fiscal crisis, but on major issues like immigration reform, which was favored by business groups and party leaders but stymied in the House by many of the same lawmakers now leading the debt fight.

Joe Echevarria, the chief executive of Deloitte, the accounting and consulting firm, said, "I'm a Republican by definition and by registration, but the party seems to have split into two factions."

While both parties have extreme elements, he suggested, only in the GOP did the extreme element exercise real power. "The extreme right has 90 seats in the House," Echevarria said. "Occupy Wall Street has no seats."

Moreover, business leaders and trade groups said, the tools that have served them in the past - campaign contributions, large memberships across the country, a multi-billion-dollar-lobbying apparatus - do not seem to be working.

"There clearly are people in the Republican Party at the moment for whom the business community and the interests of the business community - the jobs and members they represent - don't seem to be their top priority," said Dan Danner, the head of the National Federation of Independent Businesses, which spearheaded opposition to President Barack Obama's health care law among small businesses. "They don't really care what the NFIB thinks, and don't care what the Chamber thinks, and probably don't care what the Business Roundtable thinks."

The lawmakers seem to agree. Rep. Randy Neugebauer, R-Texas, a tea party caucus member, said in an interview Wednesday that if U.S. corporations wanted to send their money elsewhere, that was their choice.

"We have got to quit worrying about the next election, and start worrying about the country," said Neugebauer, who sits on the House Financial Services Committee and is a recipient of significant donations from Wall Street.

Few of the most conservative House lawmakers draw substantial support from business political action committees, and business lobbyists acknowledged that the mere suggestion they were considering backing primary challenges next year could enhance grass-roots support for the very lawmakers they want to defeat.

But the dysfunction in Washington has turned so extreme, they said, that they had few other options.

"What we want is a conservative business person, but someone who in many respects will be more realistic, in our opinion," said Bruce Josten, the top lobbyist at the U.S. Chamber of Commerce, the biggest lobbying organization in Washington.

In the two previous battles over the debt limit, many corporate chief executives were reluctant to take sides, banding together in groups like Fix the Debt, which spent millions of dollars on a campaign urging Democrats and Republicans to work toward a "grand bargain" on the budget.

But with shutdown a reality, and the clock ticking toward default, some of those same executives now place the blame squarely on conservative Republicans in the House.

"It's clearly this faction within the Republican Party that's causing the issue right now," said David M. Cote, the chief executive of Honeywell and a steering board member of Fix the Debt.

The rift, these industry executives acknowledge, reflects longstanding tensions that sometimes emerge between the agendas of corporate executives and those embraced by the conservative wing of the Republican Party.

"We ask them to carry our water all the time," said one corporate sector lobbyist, who demanded anonymity in order to speak frankly about the relationship with Republicans. "But we don't necessarily support them 100 percent of the time. And what has happened is the rise of an ideological wing that is now willing to stand up to business interests."

Despite their diminished leverage, business leaders said they would step up their appeals for an agreement.

Most of the officials said they agreed in principle with conservative lawmakers about the need to cut federal spending or roll back parts of Obamacare, but said using the threat of shutdown - or worse, of a debt default - to extract those concessions was both ineffective and dangerous.

Josten said he had been on Capitol Hill every day this week counseling compromise.

"The name calling, blame gaming - using slurs like jihadist, terrorist, cowards, that kind of language - it does not get you to a deal," Josten said of the advice he is giving to Democrats and Republicans. "The problem is everybody is in the same corner here and everybody has to try to save some face."

To some extent, the Chamber itself, along with other lobbying groups, helped create the conditions for Washington's impasse.

After the 2010 elections, the Chamber and other business interests funneled millions of dollars into Republican redistricting efforts around the country, helping draw overwhelmingly safe Republican districts whose occupants - many among the most conservative House members - are now far less vulnerable to challenges from more moderate Republicans.

The Chamber spent more than $32 million on the 2012 election, nearly all of it backing Republicans. Similarly, the American Banking Association sent 80 percent of its $2.6 million in political action committee donations to Republicans in the last election cycle, compared with 58 percent in 2008, according to data compiled by the Center for Responsive Politics, out of dissatisfaction with Democratic efforts to impose more financial regulations.

Now the group's president, Frank Keating, a former Republican governor from Oklahoma, is among those lamenting Congress' failure to achieve a deal to avert default. On Thursday, he will testify before the Senate banking committee that "ordinary Americans will bear the brunt of the damage if our leaders do not prevent the United States from defaulting on its debt for the first time in history," according to an advance copy of his remarks.

To break through to lawmakers, some national trade groups are deploying local business owners, who they believe may have more clout with conservatives than big-name chief executive officers. The National Retail Federation has already begun such efforts in states like Oklahoma and Kentucky, where the Republican Party dominates.

A spokeswoman for the National Association of Manufacturers, Erin Streeter, said the group had decided to sponsor a fundraising event for Rep. Mike Simpson, R-Idaho, who is among the 20 House Republicans who have said they will support a budget bill - or at least a temporary measure to reopen the government - without removing funds from the health care program. Simpson is facing a primary challenge from a more conservative, tea party-backed Republican.

"We need to be more aggressive," Streeter said.

Michael J. Driscoll, a former managing director of Bear, Stearns & Co. and a lifelong Republican from New York, said he would not be surprised if Wall Street executives began to shift some of the giving away from House lawmakers.

"One thing about Wall Street, it is very aware of who is working in their best interest," he said.

But other lobbyists cautioned that, while individual Republican lawmakers may lose financial support, the business community was unlikely to turn its back on the party overall and that donations would continue to flow to campaign committees set up by Republican leaders in the House, including from Wall Street.

"The reason the business community is overwhelmingly pro-Republican is because of the policy positions generally held by the Democratic Party," said Dirk Van Dongen, president of the National Association of Wholesalers-Distributors. "But there's a lot of talk around town about the need for Republicans to get into primaries and protect people who are being attacked because they are only 96 percent pure."

"I for one think that would be a healthy exercise," he added.

 


By ERIC LIPTON, NICHOLAS CONFESSORE AND NELSON D. SCHWARTZ
The New York Times