The Only Way Big Business Turns Against the Tea Party

The Washington Post had a terrific story yesterday that examines which companies funded the campaigns of Ted Cruz and other Republicans who supported shutting down the government and fueled the debt ceiling brinksmanship. It turns out that a lot of major banks and firms gave big to those candidates:

The American Bankers Association gave more money over the past two election cycles to GOP lawmakers who in effect voted to allow the United States to default on its debt than those who voted against that scenario.

The ABA contributed $2.2 million to lawmakers who ultimately ignored the group’s warnings

The story reveals that Ted Cruz and other lawmakers who voted against the final debt ceiling deal received substantial donations from financial services companies. Yet, big business was adamant that the debt ceiling had to be raised. The Chamber of Commerce urged lawmakers to vote yes on the final deal, even making it a “key vote.” A number of CEOs took to the media to warn of the consequences of breaching the debt ceiling. They had no interest in messing around with it. Now that the business community has seen the willingness of Tea Party congressmen to cause an international financial crisis, will they begin funding the campaigns of moderate Republicans or even Democrats? It’s unlikely.

Big business shouldn’t be surprised by the debt ceiling brinkmanship. Many candidates ran on a commitment not to raise the debt limit. No one was surprised that Cruz and Tea Party conservatives were willing to let us default. Why did the Chamber and other large companies support these candidates if they knew that they were willing to cause an international financial crisis? The answer is that there are many other issues that big business cares about. They want fewer regulations and lower taxes, both policies that Republicans favor. On organized labor, big business and the Republican party have never been far apart.

As Alex Pareene notes, where the Republican Party and business community actually differ is on tactics, not policy (except immigration). The Chamber wants Obamacare repealed just like the Tea Party does. They differ on how to accomplish that. That’s why big business is so supportive of the Republican Party, Tea Partier or not.

The Tea Party has also proven to be a terrific vehicle for the business community to advance its agenda. It provides grassroots organizing and a vocal base that forces lawmakers to stick to an ultra-conservative platform. Then, the lobbyists come in and use that anger to push for ideas popular amongst big business. Look at how the debt ceiling deal unfolded. The policy concession the Republicans were pushing for on Obamacare was the repeal of the medical device tax, a huge win for that industry. Remember when Congress was fighting over the sequester and its immediate harmful effects? The Tea Party jumped on the flight delays as an area where the Obama administration was intentionally inconveniencing travellers to draw attention to sequestration. Eventually, Congress approved a bill to give the Department of Transportation more flexibility with its funding to alleviate the delays. Who would benefit most from that relief? Business travellers jetting around the country each week. It all began with Tea Party anger.

In addition, the Tea Party has dragged the policy conversation to the right. Despite its harm to the economy, spending cuts have been a prime goal of the Tea Party and big business. The Chamber knows that if it the government doesn’t cut spending significantly, it will be forced to raise taxes on the rich. Even if the austerity hurts the economy in the short-term, it’s an acceptable cost in order to keep taxes low in the long-term. More than any other constituency, the Tea Party is responsible for the laser-like focus on deficit reduction. The members most committed to cutting spending are the ones who are most conservative.

This gives Republicans little reason to challenge or turn against the Tea Party. But this alliance is not unbreakable. If the Tea Party begins pursuing strategies that actively harm and set back the goals of big business, it could cause them to rethink their support of conservative candidates. The main way this happens is if the Tea Party’s tactics endanger the GOP’s majority in the House. The government shutdown and debt ceiling brinksmanship have sent approval of the Republican Party to historic lows. Yet, thanks to gerrymandering, Republican districts are mostly safe. It’s still highly unlikely that Democrats take back the House. But if that becomes more likely, big business could start pushing for more mainstream Republican candidates, especially in competitive districts where a Tea Partier faces a moderate challenger in the primary,

It’s tough to imagine a situation where the Tea Party’s tactics become so extreme so as to directly put the business community’s goals at risk. Is there anything the Tea Party could do that would result in higher taxes or increased regulation? The debt ceiling is the one area where the Tea Party could put the economy at risk, but Boehner was never going to allow us to default. It wasn’t going to happen and big business knew it. They weren’t scared of Cruz and Co.’s tactics, because they always knew that Boehner was bluffing. Indeed, the only risk the business community sees in the Tea Party is that its radical stances could alienate so much of the electorate that Democrats take back the House and enact a string of liberal policies. Until that becomes a real possibility though, don’t expect big business to break off from the Tea Party. It’s way too valuable a partnership for them.

Here’s Where the Tea Party’s Power Comes From

Sam Stein and Ryan Grimm have a great article at the Huffington Post that gives the behind-the-scenes of the shutdown and debt ceiling fights. It begins with how President Obama and Harry Reid mended their relationship and decided over the summer that they were going to play hardball. Obamacare wouldn’t be touched and they wouldn’t negotiate over a government shutdown or the debt ceiling. The piece then walks through how the negotiations unfolded and Reid and McConnell eventually came to their deal.

But there’s one minor part that exemplifies why the Tea Party has so much power in the Republican Party. Here it is:

The speaker was juggling the demands of multiple factions. His moderate members had been complaining in private that the standoff was crushing them. But they hadn’t bolted, much to the delight of the conservative wing. “At one point,” a senior House GOP aide said of one caucus meeting, “Michele Bachmann stood up and thanked the moderates for standing with us.”

Remember when the moderates were fed up with the Tea Party and ready to revolt? That fizzled very quickly. We’re not talking about the mainstream conservatives here. Instead, it’s Peter King and the 20-30 other House GOPers who could have joined up with House Democrats at any time and brought an end to the shutdown. These are the members that the Tea Party is most worried about, because they can reduce the Tea Party’s power by siding with House Dems.

But this never happened. The moderates refused to betray the Tea Party, despite repeated threats. Why? It’s not entirely clear. Maybe they fear a primary challenge. Maybe they have a deep belief in caucus unity. Whatever the reason, Boehner was rightly more afraid that the Tea Party would break off and declare war on the Republican Party than the moderates would. If the moderates were willing to commit electoral suicide by starting an intra-party civil war, they would have the power to dictate the House strategy to Boehner. Time and time again we’ve seen that’s not the case. The moderates won’t wage war against the establishment. The Tea Party, on the other hand, is more than willing to do so. If they break off from the Republican Party, it will have grave electoral effects on both. Neither would survive. But the Tea Party either isn’t considering the consequences or don’t care about them. The same dynamic exists with moderate Republicans, but they care about the consequences. The Tea Party’s blind recklessness is what gives it its true power.

Were Mainstream Conservatives To Blame for the Shutdown?

The post-mortem of the McConnell-Reid deal to open the government and avoid a default has focused a lot on who is to blame on the Republican side. Many have laid the blame at Speaker Boehner’s feet – something I have pushed back against a number of times. House Republicans blame Senate Republicans. Senate Republicans blame Ted Cruz and Co. The Tea Party blames the establishment. The Washington Post’s Jonathan Bernstein has narrowed it down more, specifically focusing on mainstream House Republicans:

There’s plenty of blame to go around for the shutdown and debt-limit fiasco, but any account which focuses mainly on Boehner is probably letting both the moderates and the mainstream conservatives — in other words, most House Republicans — off far too easy.

Bernstein has named this group the ‘Fraidy Cat Conference:

These 175, too, are mostly paranoid about renomination, even if they want reporters to know that they’re not actually nuts. They’re the ones who drive what Boehner does. They’re the ones who have to bear the brunt of the responsibility for this shutdown. They’re the ones who are the ‘fraidy cat conference — so paranoid about renomination, and more broadly about allowing any distance to appear between themselves and the “conservatives” who they probably honestly have contempt for, that they’re willing to run their party right into a ditch.

The problem with this argument is that the ‘fraidy cat conference is right to be afraid. They have seen the power of the Tea Party and how tough primaries can be. They’re right to be paranoid about renomination.

This gets to a larger problem with diagnosing who is to blame for the shutdown. It’s important to look at the incentive structure for all of the actors involved.

Mainstream conservatives – the ‘fraidy cats – have an incentive to put as little distance as possible between themselves and the right wingers. Many are part of the “hope yes/vote no” conference that is glad the shutdown is over with and a clean CR passed, but couldn’t vote for the legislation themselves for fear of conservative blowback. I imagine that for many, this was an easy decision. Stick with the Tea Party through and through.

Like Boehner, these members had the power to end the shutdown anytime they wanted. Like Boehner, they had both individual and group incentives to keep the shutdown going until the 11th hour. Supporting the shutdown reduced the chances that these mainstream conservatives would face a primary challenge while also keeping the party unified. This point cannot be repeated enough: the GOP cannot allow a civil war to break out between the establishment and the Tea Party. It must do everything in its power to avoid that.

The reason that Boehner and the mainstream conservatives are incentivized towards making extreme demands and shutting down the government is because the Tea Party sets those incentives. The far-right members are the ones willing to jump ship from the Republican Party and commit political suicide. In doing so, they would take the Republican Party down with them. That gives them the power to set the framework of the House Republican strategy. If the Tea Party wants to fight, then Boehner and mainstream conservatives must listen. They have every incentive to do so. These are rational decisions.

The Tea Party is being irrational. They chose a strategy guaranteed to fail, forced their fellow Republicans to use those futile tactics, and caused needless suffering and economic harm. Their incentives are shaped not by outside forces, but by themselves. Yet, they decided on this radical plan to shut down the government if the president did not make drastic alterations to his greatest legislative achievement. It was bound to fail and blow up in their face. Yet, the Tea Party irrationally chose to take this route anyways.

Ultimately, they are the ones to blame.