Business, right split over debt-limit debate

The fight over the debt ceiling has split business groups from conservative activists, leaving each side deeply frustrated with the other. 

The two factions typically align with Republicans, but Speaker John Boehner’s (R-Ohio) two-step plan to raise the debt ceiling has broken the pattern.

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Business groups are angry that their occasional allies in the conservative movement would risk a downgrade of the nation’s credit rating by urging the GOP to reject Boehner’s plan. Right-leaning activists counter that the trade associations have lost sight of the bigger fiscal picture and say now is not the time for compromise. 

 Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors (NAW), said conservative activists’ efforts to beat back Boehner’s proposal will not result in more cuts to government spending. 

“I don’t understand how defeating John Boehner’s plan results in a more conservative outcome,” West said. “I think defeating John Boehner’s plan will make [Senate Majority Leader] Harry Reid [D-Nev.] stronger.

Other lobbyists for major trade groups said conservative activists need to get on board with Boehner’s plan because  Aug. 2 — the deadline set by the Treasury Department for a default, in the absence of a debt increase — is only days away.

“This is a time to put aside politics and deal with the economic issues at hand. We all are subject to the economic conditions, and we will all suffer if the debt ceiling is not raised,” said one lobbyist for a business group. “Stomping your feet, crossing your arms and holding your breath won’t solve this problem.”

Business groups have rallied behind Boehner’s proposal, which would lift the debt ceiling, cut government spending by $917 billion over 10 years and create a commission to study how best to bring down the national deficit. 

Reid has vowed to defeat the plan in the Senate and President Obama has threatened to veto it.

Conservative activists have latched on to the “cut, cap and balance” proposal, which would slash more than $100 billion in spending in 2012, cap spending to a falling percentage of the gross domestic product over the next 10 years and stop federal borrowing until a balanced-budget amendment is passed.

The House passed “cut, cap and balance” last week, but the Senate rejected it.  

Business groups have been urging lawmakers to raise the debt ceiling for months with letters and personal appeals. Several lobbyists said business groups have prepped another letter, this time in support of Boehner’s plan.

 That missive will follow several other messages and alerts sent separately to Capitol Hill from the U.S. Chamber of Commerce, the Financial Services Roundtable, the National Association of Manufacturers and other business groups imploring lawmakers to increase the $14.3 trillion debt limit.

 “A concern is a debt crisis will materially affect the economy, and that is why we think all members should get behind” Boehner’s plan, said Johanna Schneider, executive director of external relations at the Business Roundtable. 

Despite the lobbying push, Boehner is struggling to secure enough votes to pass his plan due to holdouts on the conservative end of his caucus. The potential “no” votes have the support of activists who say the Speaker’s plan fails to deal with the deficit.

 “I don’t see how passing John Boehner’s plan is helpful either,” said Barney Keller, communications director for the Club for Growth, in response to business groups’ concerns.

 The Club is an aggressive player in Republican primary politics and has come out forcefully against Boehner’s proposal. The group sent out a key-vote alert on the bill, telling members to vote against it because it “cuts almost nothing immediately, it caps only discretionary spending and it does not require passage of a balanced-budget amendment.” 

Keller said business groups like the Chamber have to look after their member companies, while the Club and others are sticking to their principles.

“We are a pro-free market group. They are a pro-business group,” Keller said. “In a free market, there’s really nothing too big to fail.”

Blair Latoff, a spokeswoman for the Chamber, said the business group is focused on representing its members.

 “The Chamber is a lobbying organization, not a partisan organization,” Latoff said. “We are focused on advocating for the small, medium and large businesses that we represent. 

 Some conservative activists said trade associations have not rallied to the cause of debt reduction like they have in years past. 

Pete Sepp, executive vice president of the National Taxpayers Union, said business groups were vocal proponents of a balanced-budget amendment in the past, but not to the same degree this year.

 Others said business groups have been too shortsighted, focused on raising the debt ceiling rather than resolving the larger debt crisis. Mike Needham, CEO of Heritage Action for America — the sister advocacy organization of the Heritage Foundation — said now is the time to act on reducing federal debt.

 “In the short term, the avoiding-the-next-crisis mindset, you can miss the forest for the trees, and I think that has been true for some groups,” Needham said. “The problem in Washington is we have punted on the long-term problem too many times.”