When Did the GOP Turn Against Big Business?
From tearing up trade pacts to slapping tariffs on Chinese goods, the party of Trump and Rubio sounds more Democratic than Republican.
Republican front-runner Donald Trump wants to raise tariffs on Chinese goods by 45 percent. He, along with his closest rival, Sen. Ted Cruz of Texas, would scrap the Trans-Pacific Partnership (TPP), a 12-nation trade deal that covers nearly 40 percent of the global economy. Sen. Marco Rubio of Florida, who is running third in the polls, wants to scrap a government-backed bank that helps businesses finance overseas exports.
Before the 2016 presidential race began, that type of anti-corporate rhetoric would seem more likely to come from Vermont Sen. Bernie Sanders, a strident liberal challenging Hillary Clinton for the Democratic nomination. But due to the fierce populist streak that’s threatening to undermine the traditional GOP order, Republican candidates have discovered bashing big business plays well with working- and middle-class crowds, faced with years of stagnant wage growth and angry over the growing divide between everyday Americans and the rich.
This anti-business sentiment is not just present on the campaign trail, but also on Capitol Hill. Last summer, Tea Party Republicans teamed up with liberal Democrats, including Rep. Nancy Pelosi of California, in an attempt to derail President Barack Obama’s ability to quickly approve trade deals. Kentucky Sen. Mitch McConnell, who helped Obama defeat the uprising from Democrats and far-right Republicans, now will not commit to TPP. Sen. Rob Portman, the Ohio Republican who once served as U.S. trade representative, also opposes the deal. There’s a growing chance Obama’s signature trade deal could slip to the next president.
To be sure, one area where Republican presidential hopefuls abandon populism is in their proposed tax codes. Rubio has proposed eliminating the capital gains levy for investors, something that favors people with enough money to invest in the stock market. He would lower the top rate on wage income from 39.6 percent to 35 percent. Rubio claims his tax cuts would spur enough economic growth to make up the shortfall.
Trump’s plan would slice into federal revenue by $9.5 trillion over a decade, a 22 percent drop. It would also increase the after-tax incomes of the wealthiest households by an average of more than $1.3 million a year, according to the nonpartisan Tax Policy Center, despite Trump’s dislike of wealthy hedge fund managers, who he has accused of “getting away with murder.” It would lighten Trump’s tax bill; according to Forbes, he’s worth $4.5 billion.
But changes to the tax code that benefit the wealthy have taken a back seat to fiery rhetoric on the campaign trail. It’s becoming clear that the party of Ronald Reagan, who proposed a free-trade zone between the United States, Canada, and Mexico that would eventually become NAFTA, and George W. Bush, who once bragged that he had 17 free-trade agreements in place by the time he left office, is gone. A party that rails against big business and free trade while quietly wanting to line the pockets of the wealthiest Americans has taken its place.
“For the last 50 or 60 years, it’s been the GOP that’s been the backbone of trade deals,” James Kolbe, a former Republican congressman from Arizona, told Foreign Policy. “You’re now seeing Republicans opposing the reauthorization of the Ex-Im Bank, and there are growing numbers that are against trade deals, something Republicans traditionally have been supportive of.”
Kolbe, who is now a senior transatlantic fellow at the German Marshall Fund of the United States, is referring to the Export-Import Bank, otherwise known as the Ex-Im Bank, which has for decades enjoyed rock-solid Republican support. It’s meant to help U.S. companies do business overseas by lending them money and serving as a guarantor of repayment of loans by foreign purchasers of U.S. products. Republicans almost killed the bank last year, when they allowed the charter of the then-81-year-old institution to expire. The closure came despite opposition from the National Association of Manufacturers, U.S. Chamber of Commerce, Small Business Exporters Association, and large companies like Boeing.
In fiscal year 2014, the latest for which data is available, the Ex-Im Bank said it provided $20.5 billion in financing to support $27.5 billion of U.S. exports worldwide. And it did this while turning a profit of $1.06 billion in 2013 and $675 million in 2014, all paid into the U.S. Treasury.
“There’s a certain part of the very right-wing Republican Party that would like to see a smaller government. They picked a government institution that they thought they had a chance of killing,” Caroline Freund, a senior fellow at the Peterson Institute for International Economics, who is also on the Ex-Im Bank’s advisory committee, told FP. “It ended up being the Ex-Im. They wanted a feather in their cap for smaller government.”
Their victory was short-lived. Five months later, in December 2015, Congress passed a bill reauthorizing the bank through 2019, which Obama promptly signed into law. But it continues to find itself in the crosshairs of establishment candidates like Rubio. Three of the five spots on its board of directors are vacant, meaning the bank can’t make loans of more than $10 million because it doesn’t have a quorum.
Obama nominated former Ex-Im Bank board member Patricia Loui-Schmicker to a second term on the board last year, but the Senate Banking Committee has yet to hold a hearing on the appointment. That panel is chaired by Sen. Richard Shelby, a Republican from Alabama, who opposes the bank.
He has been joined by Rubio. On his website, the Florida Republican has called for eliminating the bank entirely and derides it as “a crony-capitalist New Deal-era subsidized bank, which dished the lion’s share of its loans to huge corporations that didn’t need the help.”
Rubio’s not alone. Last August, Trump called the Ex-Im Bank “feather bedding” for politicians and others.
“I don’t like it because I don’t think it’s necessary,” he said on Bloomberg TV’s With All Due Respect. “It’s a one-way street also. It’s sort of a feather bedding for politicians and others, and a few companies. And these are companies that can do very well without it. So I don’t like it. I think it’s a lot of excess baggage. I think it’s unnecessary. And when you think about free enterprise, it’s really not free enterprise. I’d be against it.”
That could be bad news for companies like Boeing, even though the plane manufacturer employs thousands of people in states the candidates need to win.
Take South Carolina, whose Republican voters head to the polls on Saturday. The state is home to a final assembly and delivery facility for Boeing’s 787 Dreamliner plane program, in North Charleston. Boeing says it supports at least 7,500 jobs in South Carolina.
Elizabeth Merida, a Boeing spokeswoman based at the North Charleston site, told FP that approximately 75 percent of 787 orders and deliveries from the company’s South Carolina and Everett, Washington, factories go to airlines outside the United States — meaning they’re dependent on Ex-Im Bank financing.
“All of our competitors have export credit agencies supporting customer financing, so Ex-Im financing is a critical tool that ensures we can compete on a level playing field in a fierce global market,” Merida said.
Tellingly, Boeing’s PAC has only contributed to one presidential PAC in the 2016 cycle so far: “Security Is Strength,” aligned with the short-lived, long-shot presidential campaign of South Carolina Sen. Lindsey Graham, according to OpenSecrets.org. All of the other remaining candidates oppose the Ex-Im Bank.
According to Freund, GOP anti-trade rhetoric, and threatening to shutter a bank whose function is to facilitate American business overseas, has consequences beyond the ballot box.
“We need this bank to compete,” she said. “The U.S. is going to start looking like an unreliable trading partner.”
Photo credit: Joe Raedle/Getty Images
David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis