When Boeing Co, General Electric Co and other companies wanted to show Congress last February the dangers of closing the Export-Import Bank, they turned to a time-tested Washington ritual: knocking on Capitol Hill office doors. Working together, they mobilized executives from more than 650 companies to descend on Washington in a two-day "fly-in". In over 400 meetings they warned lawmakers that thousands of American jobs would be lost if Congress failed to reauthorize the agency, which helps foreign firms buy US exports.
The goal was to refute conservative critics who charge that EXIM provides "corporate welfare" to elite multinationals. Eight months later, that objective still has not been met. EXIM's charter expired on June 30, stunning the Washington business establishment. The bank has stopped providing new financial assistance to US companies and efforts by moderate Republicans and Democrats to revive it face uncertain prospects. (See graphic, http://link.reuters.com/wyj85w)
A dogged and well-organised campaign against EXIM by conservative groups allied with billionaire industrialists Charles and David Koch has starkly highlighted new limits on the power of traditional corporate lobbying. Exploiting a lack of knowledge about the obscure trade finance agency, the right-wing groups succeeded in elevating EXIM to the national stage and turning thousands of conservative voters against it.
In doing so, they rode a rising tide of resentment at business-as-usual in Washington, the same force that is driving House Speaker John Boehner from office and propelling outsider Republican presidential candidates Donald Trump and Ben Carson. The EXIM story holds lessons for the Washington power center known as K Street, where many advocacy firms are based. If the trend continues, Congress will become less receptive to the work they do for companies or industries seeking specific changes to legislation.
"These are members (of Congress) who are being guided by deeply held beliefs," said Paul Sracic, professor of political science at Youngstown State University in Ohio. "It's only going to be worse for K Street." Just two days after the EXIM fly-in, Republican candidates for president stood before wealthy conservative donors at The Breakers luxury resort in Palm Beach, Florida and said the 81-year-old trade bank should be closed for good.
The declarations by Jeb Bush, Marco Rubio, Ted Cruz, Rand Paul, and then candidate Scott Walker at the Club for Growth winter meeting were part of a game-changing strategy that targeted key conservative leaders, flipping them one-by-one. "We intentionally asked them about this, to test where they stood on crony capitalism," said Doug Sachtleben, spokesman for the conservative club, which wants EXIM closed.
The group followed up with television ads in many home districts of past Republican EXIM supporters, telling voters to urge them to change their minds about the bank, describing it as "a petri dish of corruption and graft." Koch Industries, with businesses ranging from oil refining to carpet fibers, is 84 percent owned by the Koch brothers, who together are fifth on Forbes magazine's Richest People in America list. Koch companies have accessed about $2.4 million in loan guarantees in the past two years, including the Georgia-Pacific paper unit and energy and petrochemical equipment subsidiaries, according to EXIM's website.
"We oppose all forms of corporate welfare - including all forms of subsidies, such as cash payments, loan guarantees, anti-competitive regulations, restrictions on trade, mandates, import tariffs, and tax breaks - even if they currently benefit us," said Ken Spain, a spokesman for Koch Industries.
Americans for Prosperity, a group founded and still supported by the Koch brothers, unleashed its volunteer network and phone banks on the EXIM issue, patching over 33,000 voter calls through to lawmakers' offices since March. A coalition of EXIM users claims that supporters have sent 180,000 letters to members of Congress via the group's website.
Among those who turned against the bank were Representative Bill Flores of Texas, who is now running for House Speaker, and former Texas governor Rick Perry, less than a year after he urged renewal of its charter to aid Texas exporters. With Boehner's top two deputies also opposed to EXIM, Republican House Financial Services Committee Chairman Jeb Hensarling seized an opening to block renewal legislation.
A staunch EXIM opponent, Hensarling said he is "gratified, if not amazed" that EXIM is still closed in the face of a massive corporate lobbying effort to save it. He attributed part of this to the steady replacement of older Republican moderates in the House with younger, more conservative members who believe in free enterprise, but not necessarily big business. "A huge percentage of our conference has been here for two terms or less. They're not wedded to the old way of doing things," Hensarling told Reuters.
The conservative groups spent time telling voters about the bank's operations, touting high-profile loan fraud investigations at the institution. They said US taxpayers would be "on the hook" for billions of dollars in loans made to China and Russia. And they played up the bank's heavy support for aircraft maker Boeing, whose overseas customers got more than $8 billion of the $20.5 billion in new EXIM loan authorisations in fiscal 2014.
Excluded from that message was that the bank routinely earns a taxpayer surplus, $675 million last year, has a low default rate and aids thousands of small firms. "If you misrepresent what it is, then it's easy. It's tough to compete against that," said one business lobbyist seeking an EXIM revival, speaking on condition of anonymity. Another long-time Washington lobbyist said Boeing overestimated Boehner's ability to overrule the conservatives and put EXIM to a vote. Boehner, a longtime EXIM supporter, announced his resignation last month after struggling with repeated right-wing rebellions, but with no clear successor he may stay on longer.
General Electric (GE) Vice Chairman John Rice acknowledged that conservative groups wield outsized power over Congress. The company has begun to move some manufacturing jobs out of the United States so it can access other countries' export financing support. "Let's face it, you've got a system in the United States now where a significant majority of the members of Congress can support something and it won't move forward because of the perspective of a few and the money behind that perspective. And I think that's a big problem," he told Reuters.
The House will finally get a chance to test the level of EXIM support on October 26 due to a rare procedural maneuver to overrule Hensarling and Republican leaders. But the effort faces challenges in the Senate, where Majority Leader Mitch McConnell opposes EXIM and wants the issue laid to rest. EXIM might get some help in House-Senate negotiations over a transportation funding bill. But some of the negotiators may be EXIM opponents, such as House Ways and Means Committee Chairman Paul Ryan, who is under pressure to replace Boehner as speaker.
One powerful tool wielded by the conservative groups is a threat to support more conservative challengers in primary elections next year against sitting Republican lawmakers. The Koch brothers-backed Americans for Prosperity (AFP) is already poring over the list of the 42 Republicans who signed the House "discharge petition" to force the October 26 House vote.
"We're talking about our options to hold them accountable," said AFP spokesman Levi Russell. The US Chamber of Commerce, a business lobbying group that supports EXIM, has begun to fight back on the same terms used by the anti-EXIM side, funding pragmatic, pro-business candidates. It spent some $35 million in the 2014 election cycle with some success in defeating Tea Party candidates. It has started its 2016 effort six months earlier.
"The Chamber works to elect pro-business candidates who have the courage to govern when they get to Washington," said Chamber spokeswoman Blair Latoff Holmes. First-term Republican Representative Bradley Byrne, who benefited from $185,000 in Chamber funding in his 2013 special election in Alabama, said the pro-EXIM campaign would have been stronger if smaller companies had been more prominent.