By Robert Nelson, BASC Research Assistant
Free traders and business interests are usually ecstatic when Republicans win electoral victories, but this most recent triumph might be a change from the norm. While this new Republican majority in the House will likely prove to be just as anti-regulation and anti-taxation as previous Republican majorities there is reason to believe that in areas of international commerce this group will be far more protectionist.
Unlike previous conservative victories, this one was orchestrated by a populist Tea Party movement driven not only by an anti-government ethos, but also by a desire to return America to its glorious days as an industrial superpower. They feel like the country has taken a rapid change for the worse. And while most of blame lies with Obama and his progressive polices, some of the responsibility belongs to trade deals like NAFTA, the influx of illegal immigrants, and the profligate spending by both political parties. It is these other enemies of the Tea Party movement that might prevent Republicans from being as supportive of free trade as they normally are.
There are four areas of chief concern that might spell trouble for traditional Republican business interests: immigration policy, trade agreements, relations with China, and the debt ceiling. Tea Partiers have positions at odds with the establishment Republicans on all of these issues.
Illegal immigrants are the perennial bogeymen of the Tea Party movement. Business groups, on the other hand, tend to see them as important contributors to the American economy. This tension probably will result in a stalemate for the foreseeable future, as the Tea Party members of the Republican party will block any sort of immigration bill that creates a pathway to citizenship for illegal immigrants. A compromise on illegal immigration was not likely before the Tea Party movement took power, but with the Tea Partiers in greater number it will also be difficult to pass less contentious policies like an expansion of H-1B visas, something business lobbies directly support.
Trade agreements will also be an issue of contention for these new Republican members of Congress. While the Tea Party is nominally a free market movement, Tea Partiers are not exactly eager to outsource more jobs to Asia. The line here will probably depend on public awareness. If a trade deal like the Koreas-U.S. FTA can fly under the general public’s radar, then it will probably go through. If, on the other hand, it becomes a major issue, it will probably stall. The more complex and obscure a trade deal, the more able business interests will be able to co-opt Tea Partiers and get them to vote for it.
Relations with China are not an obscure issue and Congress has always been more apt to be tough with China than the White House. This might be one of the few areas of bipartisan agreement in the next two years. Both sides were unrelenting in accusing each other of shipping jobs to China during the election. Long before the Tea Party movement began, Democrats were considering hitting China with a tariff to punish it for its currency suppression. This will not change in the new Congress, and Tea Partiers will be just as eager to get tough with China as their Democratic predecessors.
The area of largest concern and one where hopefully cooler heads will prevail is the national debt ceiling. This spring Congress will have to vote to approve a rise in the debt ceiling. This act is much like a family paying its monthly credit card bill, and Congress has historically passed the measure with bipartisan support. This year, however, was the first time in recent history that no Republican voted to raise the debt ceiling. If Republicans continue with this policy and either fail to pass a rise in the House or filibuster a rise in the Senate, the U.S. will default on its debt and a global financial crisis could occur. This is unlikely, as the Republican leaders will probably whip up enough votes to ensure passage along with the Democrats. But if one takes the Tea Party at its word, it is a possibility.
Overall, the next few years will probably be defined by policies favorable to business or at least a neutral stalemate. But in some areas, business interests will find more resistance than they are used to from Republican members of Congress and on some issues business leaders might experience outright hostility.