Is The Gop Still The Party Of Big Business?

The clash between Republican merchants and moralists is taking a heavy toll

"The chief business of the American people is business." -- Attributed to Calvin Coolidge, 30th President of the U.S. (1925)

"Republicans' allies are the Moms and Pops, the entrepreneurs. The rich are not.... [That's why] Big Business can no longer trust the Republican Party--and vice versa." -- J. Patrick Rooney, Indianapolis insurance executive and conservative activist (1998)

Most days in America, business is conducted on the manicured turf of exclusive country clubs much as it was in Silent Cal's day. The titans of industry and masters of the money universe now have cell phones in their golf bags--along with $600 drivers. But the ancient ritual of stroking and socializing goes on as the seeds of tomorrow's deals are planted amid languid strolls on the links.

But there is one place where this quaint world of clubby Republicanism has changed big-time: Capitol Hill. Ask one of the new social conservatives about Corporate America's clout, and you're likely to get a lecture about Big Business' misguided priorities--from replenishing the International Monetary Fund, to expanding trade with China, to setting national performance goals for America's struggling schools.

Quiz Republican Hill leaders about their archetypal business exec, and you'll never get a mention of Jack Welch of General Electric or Sandy Weill of Travelers Group. Instead, you'll hear about folks like Ernie George, a feisty grandmother who heads Sidewinder Pumps, a six-employee outfit that builds chemical pumps in Lafayette, La.

George goes to church every Sunday, teaches Bible classes, and gets regular mailings from the Christian Coalition. And instead of belonging to an old-line business lobby like the U.S. Chamber of Commerce, she is a member of the more militant National Federation of Independent Business (NFIB). She could care less about the IMF. Her concerns are doing away with estate taxes, protection from product-liability suits, and fending off government regulators.

While most big-company CEOs steer clear of social issues, George wants to sanction school prayer and kill the secularist Education Dept. And she wants Capitol Hill Republicans to be more radical, not less. "They look like they're afraid of the Democrats," she complains.

Increasingly, entrepreneurs like George are holding sway in a new, more intensely ideological Republican Party--one that reviles Big Business pragmatism and considers CEOs corporate Quislings. So where is the Boardroom Set supposed to turn? Many execs have been pleasantly surprised by the Clinton Administration's fiscal restraint and pro-export tilt. But the Monica Lewinsky scandal has rendered the one-time Salesman-in-Chief hors de combat just as global markets are swooning.

Thomas J. Donohue, president of the U.S. Chamber of Commerce, has vowed that Corporate America will support those candidates who help promote a pro-business climate--no matter what their party affiliation. But while Big Business can point to a growing cadre of New Democrats that shares its economic goals, the day when the Democratic Party can be considered an ally is many elections away. House Minority Leader Dick Gephardt of Missouri and other leaders of the Hill Democrats remain in thrall to Big Labor and liberal interest groups.

"BUNCH OF RUBES." Executives who instinctively turn to Republicans for help have been caught off balance by the GOP's shift. "Used to be, if you were a corporate guy, you could fly to Pebble Beach with the chairman of the House Ways & Means Committee, play some golf, and get things taken care of," says Dan Danner, the NFIB's top lobbyist. "That's changed. Congress has become more populist. Corporations are having a difficult time figuring out how to deal with that."

The Republican tilt toward folks like Ernie George isn't new, but it's accelerating. That's partly a reflection of the party's growing base in the South and West, where hostility to Washington runs deep. Anticorporate, antiglobalist populism has also blossomed as the GOP has expanded to include millions of religious fundamentalists and culturally conservative blue-collar workers.

"Deep down, a lot of business leaders think these Religious Right guys are a bunch of rubes," says Georgetown University political scientist Clyde Wilcox. "That's a mistake. They might wake up one day and discover they've lost control of their party."

To some, that day seems in sight. Conservatives are festooning trade bills with human rights requirements, despite business objections. GOP tax policy focuses on "pro-family" breaks sought by religious activists, at the expense of corporate tax relief. And Religious Righters have linked an $18 billion IMF bailout to a ban on late-term abortion. Meanwhile, the global economic malaise deepens. "Businesspeople don't understand what abortion has to do with job creation," says Representative Amo Houghton (R-N.Y.), former CEO of Corning.

It's not just international policies that are under attack. On July 10, religious activists struck a blow against Walt Disney Co. when a Texas Board of Education dominated by the Religious Right voted to divest $43 million in company stock. Disney's sins: offering "domestic partner" benefits to gay employees and promoting sex and violence in some of its films. Conservative crusaders are urging other school boards and pension funds to follow suit.

GODSPEED. Most CEOs are economic conservatives. Still, many are troubled by the mixture of moralizing and commerce. "I talked recently to a prominent Republican in my district who has reregistered as an independent," says House Republican Tom Campbell, who represents Silicon Valley. "He was driven away by the dominance of conservative social issues over economic issues. I've got other friends in the venture-capital community who have bolted."

Bolt away, reply religious activists. Crusaders such as Gary L. Bauer, president of the Family Research Council and a possible 2000 Presidential candidate, feel that a purifying break from the country-club elites may be just what the GOP needs. "I don't think there's any doubt," Bauer charges, "that some corporations have put profits in front of virtually everything else"--patriotism included.

Case in point: U.S. multinationals' rush into China. Organizations such as Bauer's are teaming up with unions and liberal human rights groups trying to slap trade restrictions on Beijing. Exporters feel the sanctions are futile gestures that will cost the U.S. jobs.

Many new Republicans are repulsed by the pragmatism of Big Business. Rather than fighting for conservative principles, they charge, CEOs are quick to compromise with Democrats--and, worse, write fat checks to Democratic incumbents. "Big Business doesn't have a party," scoffs Michele Davis, a top aide to House Majority Leader Richard K. Armey (R-Tex.).

House Speaker Newt Gingrich (R-Ga.), for one, is livid over corporate political giving. Although business committees sharply shifted donations to the GOP after the 1994 Republican takeover of Congress, he is furious that they continue to contribute to the opposition. "Business is being ill-served by its K Street lobbyists, many of whom are former Democratic staffers," says Grover G. Norquist, a Gingrich adviser who heads Americans for Tax Reform. "They hate the Republican leadership and don't like all those Christians running around the Capitol."

Certainly, old-line lobbies such as the National Association of Manufacturers and the Business Roundtable are feeling a distinct chill these days from GOP populists. A leading scourge: House Budget Committee Chairman John R. Kasich (R-Ohio), who delights in putting Big Business' pet programs on his "corporate welfare" hit list. Says GOP consultant Ed Gillespie: "Republicans are much quicker to return phone calls from the NFIB or the Christian Coalition than the Roundtable."

That's why the tension will crackle on Sept. 16, when Gingrich is set to address a Washington meeting of the Roundtable. He wants companies to stop whining and cough up the $37 million he has budgeted for a new crusade: an issue-advocacy campaign designed to counter an AFL-CIO offensive this fall. Well in advance of the session, the word is out that execs can expect a cold shoulder in '99 if they don't dig deep.

SLUGFEST. Hostilities broke into the open this summer when the Republican leadership found itself in a slugfest with the Business-Industry Political Action Committee (BIPAC), one of the business community's oldest political arms. Upset that some Republican legislators opposed measures such as IMF funding and fast-track, trade-negotiating authority, the PAC's leaders suggested that the GOP could no longer be counted on to deliver business' agenda. Says BIPAC President Charles S. Mack: "I know of some PAC managers who have already told [GOP] candidates, `Sorry, not this year."'

Hard-liners demanded the ouster of BIPAC Vice-President Bernadette Budde, who co-authored the memo. But the apostates also include R. Bruce Josten, top lobbyist of the U.S. Chamber. A man with impeccable conservative credentials, Josten blasted the GOP's "isolationism" and flagging attention to business issues.

Fearing an open rupture, GOP leaders in June opted for what wags dubbed the Treaty of K Street. They met with chief executives and lobbyists and agreed to halt the public squabbling. Gingrich followed up by announcing support for a capital-gains tax cut and liberalized immigration quotas for high-tech workers. And he pledged to push for a vote on a bill that gives the IMF $3.4 billion in short-term cash.

But few of the combatants think the conflict is over. Coming in the waning days of a congressional session, sniffs one business lobbyist, the gestures seem hollow. Many wonder whether Gingrich can deliver on his pledge of IMF money. Conservatives aren't mollified, either. "They're trying to paper it over and say we all want to cut taxes," says Kevin Kearns, president of the U.S. Business & Industrial Council, a coalition of small and midsize companies.

While GOP leaders try to downplay the split, skirmishes between Big Business and social conservatives continue. Among the fundamental differences:

-- Globalism. Of all the shifts in the Republican coalition, the one that disturbs CEOs most is the party's drift away from enthusiastic support of free trade. They were shaken by last year's defeat of the Administration's fast-track bill, which saw the defection of a small but significant group of Republicans. Despite support from GOP leaders, populists balked because fast-track would bar Congress from amending trade deals--thereby denying social conservatives the option of adding anti-abortion and religious-rights requirements. Gingrich now favors a late-session vote on fast-track, but many execs thinks it's mainly a ploy to divide Democrats and embarrass Clinton.

On issues such as trade and the IMF, social activists are hanging tough. They want restrictions on international family planning before they will provide cash for the fund, while others demand reforms to make the international lending agency more accountable. "It's unfair to say social conservatives are antitrade," says Senator John D. Ashcroft (R-Mo.), a Christian Coalition favorite in early jockeying for the 2000 GOP Presidential nomination. "They're not for trade at any price."

Exporters counter that by failing to shore up the IMF, the GOP heightens the risk that the Russian and Asian crises could wreck the U.S. economy. "We've got bleeding patients in the emergency room, and we're debating procedures," snaps William J. Hudson, CEO of AMP Inc., a Harrisburg (Pa.) manufacturer of electronic connectors.

On economic engagement with China, even the Religious Right is split. Christian Coalition founder Pat Robertson, who has business ties in China, favors expanded trade. Bauer and religious broadcaster James C. Dobson, head of the powerful Focus on the Family group, oppose it and back legislation that would penalize Beijing and other regimes that persecute religious minorities. "Republicans ought to be the party of business," says consultant Ralph Reed, former executive director of the Christian Coalition. "But the Coalition is now being spread over barbed wire by other social conservatives for its pro-China trade stance."

One CEO firmly in the China camp is Amway's Dick DeVos--though that's not surprising given the millions he has bet on Beijing. "We want economic and political freedom in China," he says. "It's not a question of strategy, but of tactics. I prefer to focus on the issues and not attempt to attach extraneous riders" to China trade bills. C. William Zadell, CEO of Millipore Corp., a Bedford (Mass.) filter maker that has just opened a manufacturing plant in China, is just as adamant. "When Republicans ran the Administration, Democrats harped on human rights," he says. "Now the Religious Right is doing it. We'd make a giant mistake if we start putting sanctions on our business with China."

-- Social Issues. While some executives sympathize with conservative social crusades, others find them disruptive. The campaign to end affirmative-action preferences is a good example. Big-company CEOs are comfortable with the current system, which sets goals and timetables for the hiring and promotion of women and minorities. But the commitment to diversity clashes with social activists' demands for a "color-blind society." Conservatives led the fight for a 1997 California ballot initiative that ended state affirmative-action programs and want to take the battle nationwide. They're furious that business isn't backing them.

Immigration is another hot-button topic. Hill populists want to restrict quotas and reduce benefits for legal immigrants. High-tech industries worry that the drive will cut off the flow of engineers and software developers. They want Congress to grant a waiver for highly skilled workers.

Big Business and social crusaders also clash over education. The latter faction considers the President's plan to spend more on schools and set national education goals a Big Government abomination. But even execs who admire the GOP's call for school vouchers fear that greater choice alone won't produce the workforce of the future.

-- Tax Policy. Business execs hate the Internal Revenue Service just as much as GOP hard-liners--if not more so. Still, they differ over which tax policy makes the most economic sense. Concerned about boosting savings and investment, the boardroom crowd favors cuts in capital-gains taxes, liberalized write-offs for plant and equipment, and lower marginal rates.

But often the Republican majority seems to be more interested in mollifying the Religious Right than in listening to economic conservatives. Hill Republicans pay lip service to a "fairer, flatter" tax code while their energy is focused on a drive to cut the "marriage penalty" by $70 billion. And GOP lawmakers continue to champion a grab bag of "equity" tax breaks favored by religious conservatives--such as deductions for stay-at-home moms and a new tax-sheltered account for private and religious education.

"Republicans are betwixt and between," says former White House Chief of Staff Leon E. Panetta. "They're trying to decide whether their voting base is more important than their business-money base."

Indeed, the conflict between traditional Northeastern Republicans and Sunbelt populists predates the current dustup. In the Fifties, a rising politician named Richard M. Nixon spoke for a new generation of Western Republicans who blasted the Eastern Establishment. In 1964, Barry Goldwater routed the Rockefeller Republicans by harnessing rank-and-file hatred of Big Government and Communism. But Goldwater was a libertarian when it came to social issues, opposing federal intervention both in the boardroom and the bedroom.

SOUTHERN STRATEGY. A turning point came in 1980, when Ronald Reagan expanded the party base by attracting millions of blue-collar workers and conservative Christians, many of them from the South. The demographic shift accelerated in recent years with the collapse of the Democratic Party in many Southern states.

Before Goldwater, about two-thirds of Republicans lived north of the Mason-Dixon line and east of the Mississippi, estimates GOP pollster Christine Matthews. Now, only one-third do. That has led to a more polarizing ideological stance. "Republicans have lost a lot of [House] seats in the Northeast, which is traditionally for free trade," says Matthews. "They've picked them up in the South, which has tended to be more protectionist and anticorporate."

New-wave conservatives are comfortable knocking Big Business because their list of grievances is so long. They slam corpocrats for perpetuating Big Government by lobbying to protect subsidies and other forms of federal largesse. Complains Representative John Linder (R-Ga.), chairman of the National Republican Congressional Committee: "Entrepreneurs are truly free-marketeers. Corporate America wants the government to help out."

Hard-liners also fault their pin-striped brethren for failing to mobilize employees. CEOs excel at hiring pricey Washington reps to push pet causes, they charge. But when conservatives need to stoke opposition to, say, a boost in the minimum wage, the boardroom brigade is often AWOL. "Pro-family groups are very good at providing foot soldiers," notes a top Republican aide on Capitol Hill. "They show up with 300 volunteers to put up yard signs. I don't see too many executives out there on a Saturday afternoon going door to door."

Social conservatives' new muscle was evident this spring, when Focus on the Family chief Dobson threatened to bolt the GOP unless more heed was paid to moral issues. In a whirlwind tour of the Capitol, he got the red-carpet treatment from House leaders--and new pledges to stick to the pro-family script.

PICKING TARGETS. Now, there are signs that Big Business may be learning a lesson from the Religious Right's rise. One tactic is borrowed directly from the Christian Right's hymnbook: grassroots organizing. In June, the Business Roundtable began a major education campaign to stoke public support for free trade. The effort, which initially will focus on 12 congressional districts, involves television ads, educational speeches by CEOs, and meetings with local politicians and opinion leaders.

Other groups are expected to follow suit by airing more advocacy advertising. By concentrating on specific issues, business can control the message and guarantee that its money will not end up in the hands of candidates who oppose its priorities.

There are also hints that corporations may be tightening the screws on renegades. The share of business PAC money going to GOP congressional candidates dipped from 70% in 1995-96 to 63.4% As of June, 1998, according to the nonpartisan Center for ReSponsive Politics. "We keep track of votes and have six to eight key issues on which we rank possible recipients of PAC money before we make a judgment," says the lobbyist for a big high-tech company.

Procter & Gamble Co. also seems ready to play hardball. In what was seen as a threat to donations, P&G lobbyists have pointedly complained to at least one Republican lawmaker--Ohio Representative Robert W. Ney--about his opposition to granting China favored trading status.

"Some Republicans aren't going to be there on trade issues," notes Dan Schnur, a California GOP consultant who advises high-tech outfits. "Ultimately, business is going to form relationships with elements of both parties."

That's precisely what is happening. On business and trade issues, industry turns to Republican pragmatists such as Representatives Christopher Cox (Calif.) and Rick White (Wash.), along with Senators Spencer Abraham of Michigan and Chuck Hagel of Nebraska. And execs work well with Democratic moderates such as California Representatives Ellen O. Tauscher, Cal Dooley, and Zoe Lofgren. Democratic Senator Jeff Bingaman of New Mexico is a techie crusader. And Corporate America counts on pro-business Democratic centrists such as Senators Joseph I. Lieberman of Connecticut and John B. Breaux of Louisiana.

STUCK IN TIME. For all their coalition-building, though, execs continue to turn principally to Republicans to advance their agenda. Although it's been swell up to now, Bill Clinton's scandal-plagued reign can't be relied on to advance the pro-business cause with much vigor any longer. And while there are exceptions, top congressional Dems still seem ideologically stuck in Clinton's student radical days. The upshot is that on concerns such as slashing red tape, limiting the size of government, and pushing for legal reform, the GOP--shrill and unruly though it may be--is still the only game in town for Big Business.

Ultimately, the tug-of-war between the GOP's small-town moralists and its uptown merchants could come to a showdown in the 2000 Presidential primaries. Social conservatives are demanding that nominees embrace an agenda that includes abortion curbs, school prayer, and the "de-funding" of hated agencies such as the National Endowment for the Arts.

But such absolutism would marginalize many of the party's best-known national figures, among them retired General Colin Powell, New Jersey Governor Christine Todd Whitman, and New York Governor George Pataki. And it could pose a threat to the presumed candidacy of Texas Governor George W. Bush, a Big Business favorite in the 2000 sweepstakes. "If we have a party that's defined as moralist, we'll never be a majority party," frets Mike Johnson, a founder of the Republican Main Street Partnership.

The stakes for Corporate America in this brawl inside the GOP big tent could not be higher. With both parties' commitment to free trade in doubt and global economic crises mushrooming, business needs a Washington that works. Instead, corporate executives are forced to watch the gory spectacle of the Roundheads vs. the Roundtable. It is a battle in which, they fear, there are no winners.

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