Tea party faces unusual opponent in national debt limit battle

Usually natural allies, the tea party and the business lobby are at odds over if and how to raise the national debt limit.

With Monday’s bond sale, the US Treasury maxed out on the current national debt ceiling limit of $14.294 trillion, stepping up pressure on Congress to raise the debt limit by Aug. 2, when Treasury officials estimate that funds will run out.

The prospect of a government default is sharpening lines of demarcation between Washington's business establishment, which wants Congress to simply raise the debt limit, and many tea party-backed lawmakers, who don't.

It's an uncomfortable schism for the two sides, and it has the powerful US Chamber of Commerce and other big business interests working overtime to try to come to terms with those lawmakers – led by the GOP freshmen and other tea party politicians – disinclined to raise the debt limit absent strong curbs on future spending.

After all, the two are usually allies on legislative matters. The tea party movement calls for lower taxes and less regulation – interests shared by corporate America. Tea party candidates called for defunding President Obama's health-care reform on grounds that it creates uncertainty for businesses and stifles job creation. Tea party supporters are also more likely to back private enterprise – and trust it to benefit the nation – than are most Americans, polls show.

But a rift over the debt ceiling sets up a deeper clash between these two primarily Republican camps. The tea party is all about chopping the size and scope of government, something that doesn't sit all that well with businesses that depend on government spending and contracts – especially if it means taking the country to the brink of a default over the national debt.

The White House hopes, of course, to turn this situation to its advantage. Mr. Obama and Treasury Secretary Timothy Geithner are reaching out to top business leaders to help them make their case for a prompt congressional vote to raise the debt limit, before international creditors get anxious. Besides the US Chamber of Commerce, the National Association of Manufacturers and the Financial Services Forum have been talking since January with the House freshman class to urge compromise.

"Raising the debt limit has traditionally always been a partisan-vote exercise – whatever party has the White House, it's their burden to find the votes," says R. Bruce Josten, the Chamber's executive vice president for government affairs. "But this time, I will bet you it will require 50-50 [effort from Democrats and Republicans] – or near 50-50 – to get it done. We are in a whole new realm of negotiation."

Lobbying lawmakers

On Friday, the Chamber released a letter to Congress from a coalition of trade groups urging a “yes” vote on raising the debt ceiling no later than Aug. 2. “Failure to raise the debt by that time would create uncertainty and fear, and threaten the credit rating of the United States,” wrote Mr. Josten.

He added that Congress must also address the growing debt and the nation’s finances: “It is imperative that any path to deficit reduction focus on growing the economy and the tax base and cutting spending, especially mandatory spending, rather than shortsighted tax increases,” he added.

Grass-roots tea party groups, meanwhile, are pushing to hold conservative lawmakers to their pledges to vote against raising the ceiling – or to do so only if Congress enacts new spending limits.

"Most of the grass-roots movement is becoming impatient with the big business community's insistence that the federal government must remain a trough in which we can sop up our goodies," says former House majority leader Richard Armey, a Texas Republican who helped launch the tea party movement as chairman of FreedomWorks.

Republicans oppose raising the debt limit by 70 percent to 8 percent and want their member of Congress to vote against the measure, according to a Gallup poll, released on Friday. Democrats favor raising the ceiling by 33 percent to 26 percent. Independents oppose raising the debt ceiling by a 47 percent to 19 percent margin, the poll concludes.

Another poll, released Monday and focusing on the impact of default, finds that most Americans see the prospect of a default on the national debt as “disastrous,” but Republicans and tea-party supporters less so. Only 49 percent of Republicans and 43 percent of strong tea-party supporters said that default would be “disastrous,” while 38 percent of Republicans and 43 percent of tea-party supporters said that consequences would not be serious, according to the Politico-George Washington University battleground poll.

In contrast with big business groups, the National Federation of Independent Business (NFIB), representing 350,000 small businesses, has opposed a big federal stimulus and is focused on cutting deficits and reining in the debt.

"Our members are very concerned about the deficit and the debt. They absolutely want Congress to figure out these issues," says chief executive officer and president Dan Danner, noting that 25 NFIB members were elected to Congress in 2010. "Certainly, small-business owners on Main Street, with 10 or 15 employees, are a lot different than General Motors or General Electric. The stimulus has not worked for small business."

Counting the votes

Getting an accurate count of where lawmakers stand on the debt ceiling is fast becoming a cottage industry in Washington. The US Chamber of Commerce cites estimates that no more than 27 GOP House freshmen are committed to voting against raising the debt limit, period. Budget analyst Stanley Collender of Qorvis Communications writes that "there could be at least 80 GOP votes against raising it, no matter what the impact might be on interest rates, stock prices, and the economy."

Conservative groups aim to hold Republican lawmakers to their campaign pledges to stand firm on the debt ceiling. "The debt ceiling ... is a crisis that Republicans should not waste," says former Rep. Chris Chocola, an Indiana Republican who is now president of the Club for Growth, best known for financing primary challengers to Republicans viewed as not conservative enough. "They need to change the fundamental rules – and it needs to be more than spending cuts," he says.

The most efficient way to rein in government spending, he adds, is a balanced budget amendment to the Constitution, along the lines proposed by freshman Sen. Mike Lee (R) of Utah, a member of the Senate Tea Party Caucus. "This will be the most important vote they take in this Congress," says Mr. Chocola.

In the Senate, all 47 Republicans are committed to a balanced budget amendment, along with some Democrats – but probably not enough to get the required 66 votes.

"The Chamber of Commerce has a legitimate point of view.... But we should not be so eager to jump on the bandwagon that bad things will happen if we don't raise the debt limit without asking what bad things will happen if we do raise it," says Senator Lee. "If we raise the debt ceiling, we have to ask what we are doing to make sure we do not face this problem again."