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Businesses' Bets on the GOP May Be Backfiring

Big business groups like the Chamber of Commerce spent millions of dollars in 2010 to elect Republican candidates running for the House. The return on investment has not always met expectations.

Even though money for major road and bridge projects is set to run out this weekend, House Republican leaders have struggled all week to round up the votes from recalcitrant conservatives simply to extend it for 90 or even 60 days. A longer-term transportation bill that contractors and the chamber say is vital to the recovery of the construction industry appears hopelessly stalled over costs.

At the same time, House conservatives are pressing to allow the U.S. Export-Import Bank, which has financed exports since the Depression, to run out of lending authority within weeks. The bank faces the possibility of shutting its doors completely by the end of May, when its legal authorization expires.

And a host of routine business tax breaks — from wind energy subsidies to research and development tax credits — cannot be passed because of Republican insistence that they be paid for with spending cuts.

Business groups that worked hard to install a Republican majority in the House equated Republican control with a business-friendly environment. But the majority is first and foremost a conservative political force, and on key issues, its ideology is not always aligned with commercial interests that helped finance election victories.

“Free market is not always the same as pro-business,” said Barney Keller, spokesman for the conservative political action committee Club for Growth.

There could be real-world consequences to the conservative rebellion. The 90-day extension of the highway trust fund that House Republican leaders say they will pass this week in lieu of a broad highway bill would keep existing projects moving for now. But business groups say few new government-funded infrastructure projects can get under way without longer-range certainty about federal backing.

“The majority of the work is supposed to go out in spring and get done by the fall,” said Jeff Shoaf, senior executive director of government affairs at the Associated General Contractors, a group that donated $1 million to candidates in 2010, 80 percent of that to Republicans. “Instead of spending 60 or 70 percent of their budgets, they’re going to cut back to 50 or 40 percent to make sure they have some cash in the fall.”

Exports have been one of the bright spots of the fragile recovery, but without Export-Import Bank financing, companies could struggle to complete contracts with overseas buyers. Those buyers will most likely turn to foreign competitors whose governments have more robust versions of the bank, businesspeople say.

“There’s not a bank in the United States that’s going to loan money to that customer of mine in Argentina to buy my airplane,” said David Ickert, vice president of finance at Air Tractor, which makes crop-dusting and firefighting airplanes in Olney, Tex. “There is not a free-market system that operates like that. It does not exist. We need the Ex-Im Bank, period.”

Like so much else in Congress these days, it is not that simple.

With its charter set to expire in May, the bank is the target of conservative groups. They are making the case to Republicans that the bank, created in 1934 to finance sales to the Soviet Union, has no place in a free-market system. Club for Growth is holding it up as the next Fannie Mae or Freddie Mac, crowding out private lending and offering dangerous loans that ultimately could be left in the laps of the taxpayer.

“Those groups are just wrong, period,” said Jay Timmons, president of the National Association of Manufacturers and a generous personal contributor to Republican candidates.

Business Community 'Cannot Understand'

The bank is financed with a small percentage of each loan it makes to foreign buyers of American exports, producing $3.4 billion in profits for the federal government over the last five years.

Drew Greenblatt, president and owner of Marlin Steel Wire Products, in Baltimore, said he recently got a rush order for wire baskets from a firm in Singapore, assuming he could finance the sale. He went to the Export-Import Bank and paid a one-half-percent fee on the loan. The bank guaranteed 95 percent of the loan. He kept the plant working through the weekend and completed the sale.

“Think about all the winners in this transaction,” he said. “Ex-Im got half a point. Baltimore City steelworkers got extra hours. I got extra profits to meet payroll, and hopefully I got a client who will reorder from me.”

If anything, the anger over the stalled transportation bill is even more acute, business lobbyists say. The Senate, in a bipartisan vote, has passed a surface transportation bill that would keep money flowing for two years. The House, however, appears stuck.

Republican leaders first tried a five-year bill that would be financed in part by opening land to oil drilling. But division over the drilling provisions and its scant funding for mass transit brought opposition from moderate Republicans, while conservatives objected to the amount of federal largess in the bill. Business lobbyists, contractors and local government officials from both parties have pressed the House to move forward, so far to no avail.

John Engler, president of the Business Roundtable, which represents the chief executives of major American corporations, said in an era of scarcity, anything that cost money was receiving a high level of scrutiny. And the highway bill is more contentious than those in the past. Previous bills have been financed mainly by the federal gasoline tax, but rising fuel efficiency is depleting gas tax receipts as infrastructure needs increase.

Difficulty is no excuse, said Mr. Engler, a former Republican governor of Michigan. “We’re letting people say it’s hard and so we won’t go forward,” he said. “That is what the business community cannot understand.”

To conservative groups, fresh eyes on issues have produced fresh, small-government thinking. The Export-Import Bank, for instance, wanted a new, long-term authorization with an expanded loan limit and broader authority. Instead, Representative Eric Cantor of Virginia is drafting a 13-month reauthorization that would demand the Obama administration begin international talks to phase out export-lending subsidies globally, force the bank to be more transparent in its lending practices and rein in its loan portfolio.

Some Republicans are growing worried about the ramifications of these fights. Senator Lindsey Graham, Republican of South Carolina, has pressed to reauthorize the Export-Import Bank, but at the insistence of Senator Mitch McConnell of Kentucky, the Republican leader, he joined his party in opposing Democratic efforts to add reauthorization to a small-business finance bill. Now Mr. Graham says his party has to find a way to move a stand-alone bill, and fast.

“Come June, if this program dies, it will be the end of job creation for thousands of businesses for no good reason,” he said. “And it’ll happen on our watch, with our fingerprints on it.”

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