Debt ceiling fight threatens to deepen divide between GOP and corporate America

WASHINGTON – Corporate America’s warnings of financial disaster if Congress fails to raise the debt ceiling are falling on deaf ears among key congressional Republicans who are increasingly at odds with the party’s longtime allies.

Republicans, who for decades have been closely aligned with business, have largely downplayed the alarm bells sounded by business groups, corporate executives and Wall Street investors over the economic consequences of missing an early June deadline for action on Capitol Hill. Instead, many GOP lawmakers are promising to seek spending cuts in exchange for passing legislation that would let the U.S. government keep paying its bills.

The row over the debt ceiling is the latest example of deep rifts that have formed in recent years between Republicans and corporate America, leaving some of the nation’s biggest companies with a dwindling number of political allies in Washington at a particularly dangerous time for the economy.

“The importance and influence that many big business groups once had is no longer important to the people on the far right, as we saw in the speech race,” said a political consultant who asked not to be named because of their work with companies. clients involved in the debt ceiling debate. “Over the last few years, the debt ceiling has become this boogeyman for the far right that they can rally their supporters around and raise money on, and nothing the Chamber of Commerce or a Fortune 500 CEO or anyone other than maybe Donald Trump says is going to affect them.”

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The GOP-business relationship has been on the rocks since the Trump administration, when former President Donald Trump’s policies on trade and immigration clashed with those of business. Trump’s election in 2016 also shifted power in the GOP base to voters who were often more interested in turning Washington around than in focusing primarily on tax cuts and deregulation.

“The constituencies that the Republicans increasingly represent skew the working class and the poor. These constituencies want to disrupt the status quo and the establishment, which includes big corporations,” said Sam Geduldig, a partner with the lobbying firm CGCN Group, who previously worked for Republican lawmakers on Capitol Hill. “The establishment generally wants to maintain the status quo. So I think we have a class war, and it’s playing out right in front of us in Congress.”

Tensions rose during the 2022 election cycle after a number of big businesses and trade groups decided to withhold donations to Republicans who voted against confirming the 2020 presidential election and instead shift money to moderate Democrats, a Republican lobbyist working for a variety of business customers. As corporate donations declined, Republicans made up the difference with grassroots and small-donor fundraising — moving closer to severing the link between business and the GOP, the lobbyist said.

At the same time, many Republicans at the state and federal level have rallied support from their base by painting big business as villains for their positions on issues from abortion access to gender and racial equality. In Florida, Gov. Ron DeSantis went after Disney when it criticized his proposal to ban discussion of gender and sexual orientation in kindergarten through third grade.

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But perhaps the most visible form of the strained relationship between Republicans and business is on display in Washington, where GOP lawmakers have not hesitated to publicly shun the U.S. Chamber of Commerce after it began increasing its donations to Democrats.

Nearly a quarter of donations from the influential group, which for years worked in lockstep with Republicans on pro-business policies, went to Democratic candidates in the past two election cycles, compared with just 4% in 2016, according to data compiled by campaign finance tracking website Open Secrets.

Republicans who have publicly attacked the chamber of commerce include Rep. Jim Banks of Indiana and Sen. Tom Cotton of Arkansas characterized it as promoting “woke” policies, while House Speaker Kevin McCarthy, R-Calif., accused the chamber of having “sold out” on 2020.

Neil Bradley, the chamber’s chief policy officer, said he is particularly concerned about the risk of the US government defaulting on its debt, as many Republicans downplay the consequences and the White House signals the issue is not up for negotiation.

“Those two dynamics raise a lot of concern about how we’re going to get through to doing what needs to be done, which is raising the debt limit before we default,” Bradley said. “One of the things we’re trying to do is make sure people understand that default will be catastrophic.”

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The United States hit its statutory debt limit on Thursday, prompting the Treasury Department to begin using “extraordinary measures” to pay the federal government’s bills. These special financial tools allow the government to meet its payment obligations until at least June 5, after which Congress will have to act to prevent a default, Treasury Secretary Janet Yellen said in a letter to lawmakers.

Despite concerns about being able to influence House Republicans or bring the White House to the negotiating table, business associations are planning a messaging campaign similar to the one they used during the last debt ceiling debate in 2021, hoping to find a bipartisan solution. bypassing Republicans unwilling to budge unless their spending demands are met.

“The business groups and major economic players in this country will still be very influential in reminding Congress once again of the dire consequences the United States will face if the debt ceiling is not raised,” said the political consultant with business clients involved in the debt ceiling debate. “I think a lot of Republicans in the House, in the Senate, will understand that. They may not be politically vocal with some of the members in their own caucus, but they understand the risks and the consequences.”

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