Shutdown, debt fight highlight Republican distance from 'big business'

Reuters

* Groups like Club for Growth gain prominence with GOP

* Business leaders urge agreement on debt ceiling

* Chamber lobbyist says can no longer work with 16 in House

By Gabriel Debenedetti and James B. Kelleher

Oct 2 (Reuters) - Big business, a traditionally powerful butpragmatic player in Republican policy-making, has found itselfoutflanked and marginalized by smaller conservative groupsopposed to compromise in the country's current fiscal crisis andthe looming showdown over the debt ceiling.

As the shutdown of the government approaches its third day,business leaders and groups like the U.S. Chamber of Commerceare worried about the economic implications of a standoff overthe debt limit, but their pleas have not moved the Republicanleadership in the House of Representatives to action. Meanwhileright-wing groups like the Club for Growth and Heritage Actionhave gained traction, particularly as Tea Party-alignedlawmakers rise in prominence.

The U.S. Chamber's chief lobbyist said 16 House Republicansare now "out of earshot" for the Chamber, enough by his count tostymie legislation.

These lawmakers do not listen to their own Republicanleaders and are oblivious to national polls, said Bruce Josten,the Chamber's executive vice president for government affairs."They aren't going to listen to anybody except what they arebeing told from home."

Led by a group of conservative members, Republicans wantedto tie continued government funding to measures that wouldundercut President Barack Obama's signature healthcare law. Thedispute threatens to merge with an Oct. 17 deadline for Congressto authorize an increase in the government's debt limit, or riskan unprecedented default.

The Chamber, which has opposed long opposed Obama's healthinsurance reforms, on Monday sent a letter to lawmakers fromover 250 business groups, urging them to fund the government andraise the debt limit while cutting entitlement spending.

While the letter was addressed to all lawmakers, the messagewas clearly directed more at Republicans, with whom the Chamberhas historically had far more influence.

Despite the letter, the impasse continues, with both sidesblaming each other for intransigence.

The shutdown began on Tuesday after Democrats rejectedRepublican efforts to undercut the Affordable Care Act. Alsoknown as Obamacare, a key piece of the program went ahead onTuesday as people enrolled in new online insurance marketplaces.

The Republican Party is traditionally seen as supportingbusiness interests while maintaining strong ties to leadingindustry groups such as the U.S. Chamber of Commerce, whichhelps fund candidates' campaigns and lobbies forcorporate-friendly measures in Congress. In the 2012 electioncycle the Chamber spent nearly $28 million campaigning againstDemocrats, out of $32 million overall, according to Washingtonresearch group the Center for Responsive Politics.

In the budget dispute, the House Republican leadership hasaligned with lawmakers sympathetic to the Tea Party in opposinga deal to end the shutdown, despite the pleas of business groupslike the Chamber and Fix the Debt to avoid actions that woulddamage the economy.

With many Capitol Hill staff members off work because of theshutdown and Boehner meeting with Obama in the White House onWednesday evening, the speaker's office did not immediatelyrespond to questions about the Chamber's letter or the speaker'srelationship with the business community.

Former House Republican leadership spokesman Kevin Maddensaid party chairmen and big donors used to have a more exclusivelevel of access to persuading legislators. "It's become a muchmore competitive market for (leadership's) attention."

UNEASE AND FRUSTRATION

Paul Stebbins, executive chairman of the board at World FuelServices Corp in Miami, said the Republican willingnessto allow a shutdown created "a very deep unease" among hisfellow business leaders as they look ahead to the debt ceilingfight.

Honeywell International Chief Executive Dave Cote, aself-proclaimed "lifelong Republican," said he was frustratedwith the party's unwillingness to agree to a deal.

Major bank executives including Goldman Sachs' LloydBlankfein and JP Morgan Chase's Jamie Dimon met withObama at the White House on Wednesday to discuss the budgetimpasse and the debt ceiling, but they did not go as a group toCapitol Hill, and none were scheduled to meet with Boehner orRepublican Senate Minority Leader Mitch McConnell of Kentucky.

After the White House meeting, Blankfein said theexecutives, in Washington as part of the Financial ServicesForum, wanted lawmakers to understand "the long-termconsequences of a shutdown - we're already in the short-termconsequences of a shutdown - but certainly the consequences of adebt ceiling (not being raised), and we all agree that those areextremely adverse."

Blankfein implicitly criticized Republicans for usingObamacare as a weapon. "You can litigate these policy issues.You can re-litigate these policy issues in a political forum,but they shouldn't use the threat of causing the U.S. to fail onits ... obligations to repay on its debt as a cudgel," he said.

A short-term shutdown would slow U.S. economic growth byabout 0.2 percentage points, Goldman Sachs said on Wednesday,and a weeks-long disruption could weigh more heavily, at 0.4percentage points. If Congress fails later this month to raisethe $16.7 trillion borrowing cap, the United States would gointo default, likely sending financial shockwaves around theworld.

United Technologies Corp, which makes Sikorskyhelicopters and other items for the military, said it would beforced to furlough as many as 4,000 employees, if the U.S.government shutdown continues through next week, due to theabsence of government quality inspectors.

RISE OF CONSERVATIVE GROUPS

Much of the far-right antipathy for big business began in2008, with the passage of the Troubled Asset Relief Program thatcritics equated to a bailout of major banks and corporations.

While long-standing industry groups like the Chamber havelost some of their sway over House Republicans, conservativeorganizations like Heritage Action have taken their place, someobservers said.

Heritage Action is the political wing of the HeritageFoundation, a conservative think tank run by former Tea PartyRepublican Senator Jim DeMint of South Carolina since January.

Stebbins, of World Fuel Services, said single-issue groupslike Club for Growth, an anti-tax advocacy group with apolitical action committee, were playing an outsized role indriving the politics behind the impasse.

"I think that one of the things that pragmaticbusinesspeople resent is that these absolutist imperativesbecome the litmus test whether you get to succeed politically,"Stebbins said.

Led by former Indiana congressman Chris Chocola, Club forGrowth has heavily supported Texas Senator Ted Cruz, whose21-hour speech on the Senate floor last week helped set thestage for the budget fight.

In addition to lobbying members of Congress, Heritage Actionalso puts out a scorecard ranking lawmakers and funds aggressiveadvertising and publicity campaigns for its favored issues andofficials.

Club for Growth is a juggernaut campaign funder of fiscallyconservative Republicans.

Leaders from both Heritage Action and Club for Growthacknowledged that the Republican Party was indeed distancingitself from traditional business interests.

"The nature of the (House Republicans) has changed, and wethink we have had something to do with that, with our support ofsome of the candidates we've endorsed," Chocola told Reuters,noting that "our goal is to be cheerleaders rather thanobstructionists," and that he no longer speaks with Republicanleadership.

Heritage Action spokesman Dan Holler said his group is in"constant communication" with leading Republicans, and that thelawmaker movement away from big business interests showed moreattention is being paid to constituents.

Both Holler and Chocola pointed to their opposition toauthorizing the Export-Import Bank as an example of theirdisagreement with the Chamber.

"There's an awakening in the Republican Party that being infavor of free markets and less government doesn't mean thatyou're going to be pro-big business," Holler said.

"Now you're getting to the point where (members of Congress)are saying, 'I don't care if groups like the Chamber of Commerceare lobbying for a tax credit,' or something like that."

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