The tea party had waged wars against President Obama’s health-care plan and government spending. But in early 2012, it was beginning to sound its next battle cry, one that is now deepening the split within the Republican Party: “crony capitalism.”
On the sixth floor of a Washington office building, Barney Keller, a 20-something communications director and researcher for the conservative group Club for Growth, was searching the Web for information about the Export-Import Bank. The little-known government agency provides tens of billions of dollars annually in financing to help foreign buyers purchase U.S. planes, trucks and other goods.
Every few hours, Keller would howl with news the bank had helped a special corporate interest: the corrupt energy giant Enron, or the solar-panel-maker Solyndra, or Hollywood studios. In the eyes of Keller and his bosses, Ex-Im was emblematic of a culture in Washington that puts corporate interests over ordinary people.
“I’m sitting in my office, and I hear Barney screaming, ‘This is unbelievable,’ ” recalled Chris Chocola, the former Indiana congressman who leads the group.
“It was like a treasure trove,” Keller said. “You could take any bad thing the government has done and put it into the Export-Import [Bank] and get hits.”
What began as a pet issue for a handful of conservatives is now turning the GOP on its head. The fight over the obscure agency has pitted traditional lawmakers backed by big corporations against tea party conservatives, who, still fuming over bank bailouts of 2008, insist that supporting free markets is not the same as supporting business interests.
The U.S. Chamber of Commerce and other business groups are mounting a major campaign to save Ex-Im, whose authorization expires Sept. 30 without congressional action, by contacting businesses that benefit from the agency and are based in Republican districts. “We have a ground game fully in place,” said Ned Monroe, the National Association of Manufacturers’ top political strategist.
The rift within the GOP could have consequences beyond internal party politics. Democrats are relishing the opportunity to back Republicans into an election-year corner over Ex-Im, whose authorization expires on the same day that legislation is required to keep the government open. Some on Capitol Hill fear the Ex-Im debate could become intertwined with the discussion over extending federal funding.
Opponents tend to seize on the most extreme stories about Ex-Im, such as loans that went to companies that struggled or allegedly behaved badly. But their broader ideological argument is that the agency represents the power of lobbying by big, wealthy companies, such as Boeing and General Electric, which are among those that benefit the most from the bank’s activities.
Supporters of Ex-Im, which government auditors say makes money for taxpayers, contend a few bad apples should not diminish the beneficial role the agency plays in the U.S. economy, helping hundreds of American businesses offer credit to foreign buyers in a world where many other countries subsidize their industries.
Concerns about giveaways to corporations helped fuel Virginia Republican congressional candidate Dave Brat’s successful tea party primary challenge to House Majority Leader Eric Cantor in Virginia. Cantor, with close ties to the Chamber of Commerce and other corporate groups, helped organize a deal in 2012 that saved Ex-Im despite growing criticism by conservatives.
His successor as majority leader, Rep. Kevin McCarthy of California, surprised constituents and many colleagues when he announced last Sunday that he would not support Ex-Im’s reauthorization.
“I was pretty shocked,” said Don Nelson, who runs an oil equipment company based in Bakersfield, Calif., in McCarthy’s district. He says his business needs Ex-Im support to sell overseas. “We have about 100 people, and if we lose the export business, that’s a lot of people we have to let go.”
McCarthy, who has voted for the bank in the past, is joined in opposition to its reauthorization by some key Republican figures, including Reps. Paul Ryan (Wis.) and Jeb Hensarling (Tex.), chairman of the House Financial Services Committee.
“Whether it is termed public-private partnership, mercantilism, industrial policy or crony capitalism, regrettably a great deal of economic activity that masquerades today as free enterprise is not,” Hensarling said in a high-profile speech at the Heritage Foundation last month. “For the sake of our republic, our movement had best unmask the imposters and come down clearly on the side of free enterprise.”
The opposition to Ex-Im has forced House Speaker John A. Boehner (R-Ohio) into a familiar if unwelcome spot, facing the choice of bowing to conservative forces in his party or overriding them by forging a compromise with Democrats.
In the past, “crony capitalism” has been used as a political mantra by some liberals. Its rise as a tea party issue raises questions about how Republicans who have relied on business support — and campaign donations — will respond to growing economic populism within their party.
Concerns about crony capitalism run deep among conservatives — especially young ones — nationwide. A major new Pew poll this week found that 69 percent of young, conservative-leaning voters and 48 percent of conservative voters overall say the economic system favors the powerful. Two-thirds of “business conservatives” think the economic system is fair.
Crony capitalism “is one of the core reasons that there’s a disconnect between Republican voters today and Republicans in Washington,” said Michael Needham, the 32-year-old chief executive of Heritage Action, which is pressuring Republicans to oppose Ex-Im and other corporate subsidies.
Needham became closely attuned to the issues of crony capitalism while studying at Stanford University’s business school in 2008 and 2009. He was required to take a course on “strategy beyond markets,” which the university describes as a response to the fact that “the profit-maximizing activities of firms often give rise to issues that involve governments and the public.”
“It was an explicit recognition by a top business school that to be a successful CEO, you have to be able to lobby Washington,” Needham said. “That distills everything that’s wrong.”
The first signs of the business-populist split in the GOP emerged in Washington during the 2008 bailout battle and the 2009 stimulus debate. Many big businesses supported the government’s efforts to rescue the financial system and the economy, fueling skepticism among hard-line conservatives who were wary of any government involvement.
That division abated during the rest of Obama’s first term, when both tea party and business conservatives found common cause in opposing the Affordable Care Act and efforts to raise taxes on the wealthy.
But conservatives kept their eye on issues that might have broader symbolic value. In 2012, organizations such as Heritage Action and the Club for Growth began to rail against Ex-Im and the Chamber of Commerce for supporting it.
“Ex-Im is a tiny little thing, but it’s creating a national debate,” said Andrew Roth, vice president for government affairs at the Club for Growth.
The effort against Ex-Im was also supported by the tea party group FreedomWorks. Max Pappas, who helped lead the drive against corporate subsidies for FreedomWorks, now works for Sen. Ted Cruz (R-Tex.).
Chocola, the Club for Growth president, said it is incumbent on conservatives to oppose business giveaways if they are also pushing for an overhaul of the social safety net. “There is a moral argument to be made,” he said. “How can you be out there talking about reforming social welfare if you’re not talking about reforming corporate welfare?”
Rebecca Robbins contributed to this report.