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Republicans Can Take On Crony Capitalism

Albert R. Hunt is a Bloomberg View columnist. He was the executive editor of Bloomberg News, before which he was a reporter, bureau chief and executive Washington editor at the Wall Street Journal.
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Congressional Republicans are off to an inauspicious start in their first two months in control of both chambers.

Instead of showing they're capable of governing, a group of House hardliners tried to make the killing of President Barack Obama's liberalized rules for undocumented immigrants a condition for funding the Department of Homeland Security. The inevitable result: chaos, capitulation and more alienation of Hispanic voters.

This and other recent actions have undercut House Speaker John Boehner, and to an extent, his Senate counterpart, Mitch McConnell.

Some Boehner allies even worry there's a (slight) chance the right-wingers could create such a mess that the speaker would be toppled; there are no better alternatives to fill the post.

QuickTake Speaker of the House

This indicates how difficult it will be to get any measures through Congress. For example, will the hardliners sabotage a trade bill that could pass with the support of a majority of Republicans and the Obama White House? Corporate tax reform may be a goner, too.  

There are other dangers: the debt ceiling may be reached this spring, and the Highway Trust Fund expires in May. Republicans have a little leverage with the debt ceiling, but not much.

With an eye to the presidential race and tough Senate contests next year, McConnell and Boehner know they need some achievements. Given the tone and temper of the first couple months, big stuff may be off the table.

There are, however, some small bites that could pay off politically. More than a few Republicans have railed against corporate welfare or crony capitalism, a message that resonates with an increasingly populist electorate. The test will be whether they can match the rhetoric with action. This isn't big money; it could be big symbolism.

A good place to start would be the tax break for so-called carried interest, which enables private equity and hedge-fund executives to treat what really is a performance fee as capital gains and thus pay taxes at a lower rate. Critics such as Warren Buffett have suggested this is indefensible. There's not much money there, but if Republicans could kill a dubious tax loophole, almost all of which goes to the wealthy -- and one that Democrats refused to change -- it'd give real bragging rights.

There are other tax breaks Republicans could target, from the elimination of relatively minor but difficult-to-defend loopholes for offshore investments to lowering the ceiling on home mortgages eligible for write-offs from $1 million.

There's low-hanging fruit on the spending side, too, starting with agriculture. The cost of the federal crop insurance program has soared over the last decade, mostly to the benefit of wealthy operations. Several years ago, more than two dozen farms reportedly received more than $1 million in subsidies.

Then there's the market access program, which subsidizes overseas advertising for some huge food companies; both the General Accounting Office and Congressional Budget Office have detailed its inefficiencies.

There also is an abundance of programs benefiting energy industries, such as sweetheart leasing deals on federal lands. These should be appealing targets for a party that stresses fiscal frugality.

After taking control of both houses of Congress, expectations for a robust Republican agenda never were realistic, with a Democrat in the White House and fewer than 60 members in the Senate. If government shutdowns are off the table -- and congressional Republicans believe they must be -- the party's power over the purse is limited. 

The only way for Republicans to change this would be to win the presidency next year and retain, even enlarge, their Senate majority.

That may depend on this Republican Congress, after a very rocky start, getting something done. Demonstrating they are not protectors of the privileged is not a bad place to begin.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Albert R. Hunt at ahunt1@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net