By James Kwak
Jonathan Weisman of the Times wrote an article about the reluctance of many Republicans in Congress to extend policies that are traditionally favored by big business (and the Chamber of Commerce), such as infrastructure spending and funding for the Export-Import Bank. This points to a split between the traditional corporate wing of the GOP and the newer, ultra-conservative tax revolt wing.
My guess is that this will blow over and the Republicans will figure out a way to keep big business happy without upsetting the Tea Party too much. But it points out a potential shift among the people who fund the GOP.
Historically, the Republicans were the party of business. Businesses like to make money. That can mean a lot of different things for government policy. In some cases, they want less regulation, since regulatory compliance costs money. On the other hand, large companies often want more regulation, since they can absorb the costs of compliance better than small competitors. (See The Economist on tax preparers for a recent example.) Regulation can also be a mechanism for price fixing, as with the old Interstate Commerce Commission, which functioned as a legal cartel for railroads. Businesses definitely want lower corporate tax rates, since that increases their net income. But they also like some types of government spending. Most obviously, defense contractors like lots and lots of defense spending. Less obviously, businesses have historically been major beneficiaries of free public education, since it gave them a more skilled workforce. So in general, the business community is not obviously in favor of lower taxes or lower spending.
Contrast this with the interests of billionaires. The super-rich do have a lot of wealth tied up in company stock, so to some extent they share the interests of businesses. But as rich people, they have their own interests. In this case, they unequivocally gain from lower taxes and lower government spending; they get to keep more money and they don’t need government services, as individuals. Besides, once you’ve made your first billion, it doesn’t really matter how your business does after that point.
With increasing inequality and the relaxation of contribution limits, the balance of power within the Republican Party may be shifting from big business to billionaires. As USA Today reported, 25 percent of all super PAC money in this election cycle has come from five people. Furthermore, super PACs are accelerating an ongoing trend of decreasing party control over spending. Note that while major trade organizations like the National Association of Manufacturers and the Business Roundtable favor government spending that supports businesses, the Club for Growth, an antitax organization, is against.
As I said, I think the party will figure out a way to paper over its differences ahead of the elections in November. But in the long term, how long will it be before the business community figures out that the new Republican Party has fallen into the hands of antitax, antigovernment zealots who are willing to put low personal income tax rates ahead of high corporate profits?