It took less than 72 hours after his election for Kevin McCarthy to reveal an unambiguous and extremely consequential way he’ll be different from his predecessor.
In what’s looking like the year’s hottest dispute between small-government crowd and the business community, the incoming House majority leader took a surprising side on Sunday. The Californian is joining the hard core fiscal conservatives who want to close the Export-Import Bank, which for eight decades has been one of the main tools at the government’s disposal for helping American businesses.
The agency steps in when private credit is scarce or expensive. Using money borrowed from the Treasury, it either makes or guarantees loans so U.S. companies can expand their exports of aircraft, farm machinery, power generation equipment, telecommunications hardware and even gourmet food. The right reviles this as a prime example of corporate welfare and derides the Ex-Im Bank as an agent of crony capitalism.
During his time in the Republican leadership Eric Cantor was an anchor for the opposite side, which argues that such credit financing is a no-risk way to leverage taxpayer dollars in the interest of creating jobs and sustaining the nation’s manufacturing base. The Virginian was more responsible than anyone else for steering the Ex-Im Bank to temporary safety two years ago, when the waves of conservative criticism first got big enough to pose a potential threat. He was so well known as a defender of the bank that stock in one of its biggest customers, Boeing, plunged 3 percent the day after Cantor lost his primary , wiping away all its gains so far in the year.
The anxiety was fueled in part by anticipation that the Ex-Im Bank’s most influential House critic , Financial Services Chairman Jeb Hensarling of Texas, would run for majority leader. When he demurred, allowing the majority whip to secure his promotion with ease, the big companies relaxed a bit — because McCarthy had been on Cantor’s side in 2012 in supporting the current reauthorization of the agency.
But all elections have consequences, and two of them were on display when McCarthy revealed his 180-degree change of position on “Fox News Sunday .” The winner’s pivotal bloc of supporters will need to feel rewarded sooner than later, so it was only a matter of time before the new floor leader would need to stake out a strong position on legislation that’s a top priority of his allies in the tea party faction.
Not to mention an important rival who took a pass this time around could change his mind as soon as November, when leadership elections for the 114th Congress will be held. So it made sense for McCarthy to act quickly to shrink some of the ideological daylight between himself and Hensarling. Asked if he would like the Ex-Im Bank’s charter to expire, McCarthy was quick to say yes, “because it’s something that the private sector can be able to do.”
He volunteered that, “One of the biggest problems with government is they go and take hard-earned money so others do things the private sector can do. That's what the Ex-Im Bank does.”
The pronouncement from the House's new No. 2 sounds like a potential death sentence for the agency — or foreshadowing of a period in limbo, at a minimum. In the absence of congressional action, the bank would not be allowed to back any new financing after the end of September and would have to begin winding down its loan portfolio.
The new majority whip, Steve Scalise of Louisiana, was among the 93 GOP members who voted against reauthorization last time. So did Paul D. Ryan of Wisconsin, who is becoming a main voice for the party on trade policy as the presumptive next chairman of the Ways and Means committee. Among the 19 Senate Republicans who voted in 2012 against keeping the bank going: Minority Leader Mitch McConnell.
Speaker John A. Boehner has signaled he will not seek to impose an outcome either way, although if he were to bend the informal “majority of the majority” rule a reauthorization bill would very likely pass with the votes of almost all Democrats and several dozen Republicans with would-be loan recipients in their districts. Solid bipartisan support for the bank also still seems certain in the Senate. And on Monday the new White House press secretary, Josh Earnest, said that the bank's a good deal because it “helps American companies create and support jobs here at home at no cost to taxpayers.”
It’s impossible to imagine the U.S. Chamber of Commerce, Business Roundtable or National Association of Manufacturers will permit the bank to get shuttered without an intense and potentially expensive fight. (The contours of such a campaign could become clear as soon as Wednesday at a hearing on the agency’s future that’s been in the works at Hensarling's House Financial Services Committee for a couple of weeks.)
Saving the Ex-Im is not the only reason those K Street powerhouses will go all-in on this fight. The outcome is also a proxy for whether big business is going to see its collective clout diminished under the new House power structure. It’s an urgent matter for corporate interests because also hanging in the balance this election year are several other priorities. Principal among them is a renewal of the federal backstop for property and casualty insurers after significant losses because of terrorism, which conservatives also label corporate welfare, and the belated renewal of several dozen tax breaks for businesses.
With Wall Street favorite Cantor now in exile, the leadership is going to be more sensitive to the populist, anti-corporate sentiments that have been building in the House Republican Conference since the tea party takeover election of 2010. The only questions are how much more sensitive, and for how much longer.