Wall Street Can't Influence Tea Party to End Shutdown, DC Watchers Say

Can Wall Street influence the Tea Party to end to the government shutdown?

October 10, 2013, 2:17 AM
PHOTO: The exterior view of New York Stock Exchange building, Nov. 21, 2012 in New York.
The exterior view of New York Stock Exchange building, Nov. 21, 2012 in New York.
Slaven Vlasic/Getty Images

Oct. 10, 2013 — -- The government shutdown is bad for business, bad for the economy and bad for your 401(k). So why aren't the politicians listening to the overwhelmingly negative sentiments of Wall Street and the big-business lobby? After all, business titans like Goldman Sachs CEO Lloyd Blankfein and JP Morgan's Jamie Dimon have managed to get their way on financial regulations before Congress, so why can't they break the log jam and get government reopened?

Even with numerous lobbying groups calling for an end to the government shutdown, lawmakers are still at an impasse centered on the Affordable Care Act and the debt ceiling limit.

Lawmakers aligned with the Tea Party are holding out to squash if not delay for a year, the individual mandate of the Affordable Care Act, while President Obama said he would remain open to a short-term increase in the debt ceiling.

Wall Street and business efforts to persuade the Tea Party to end the shutdown have thus far been tepid and ineffective. Part of the reason may be that the Tea Party faction in the House has proved to be an immovable object.

"The only way that Wall Street can influence the Tea Party is by putting their money where their mouth is and selling stocks," Douglas Elliott, a fellow in economic studies with The Brookings Institution and former managing director with J.P. Morgan, said. "Congress would notice a 500 or a 1,000 point decline in the Dow."

Read More: Government Shutdown's Fiercest Feud: Boehner vs. Reid

Even then, Elliott said, the "real impact" would be felt by persuading Republicans in the House who are not die-hard Tea Party members that they have to push House Speaker Boehner to pass an increase in the debt limit.

"The more radical members of the Tea Party just do not see the world as the rest of us do," he said.

The vast majority of investors believe a failure to increase the debt limit would be a "disaster," but most of them believe, including Elliot, "that even our Congress is not stupid enough to force a default," he said.

"So you have the ironic situation that many are looking at the stock market to tell them whether action is necessary, yet the market signal will not come as long as the market thinks Congress will do the right thing in the end," Elliott said.

Dean Clancy, vice president for public policy at Freedomworks, which he describes as a grassroots advocacy network aligned with the Tea Party, agrees that Wall Street could do little to sway the Tea Party.

"I don't know if Boehner could be influenced by Wall Street, but I know the Tea Party would not be," Clancy said. "There really is a wide gap of world views between Wall Street and the Tea Party."

As K Street may be losing its hold on the GOP because of the Tea Party, Clancy said, "business interests are losing influence at the moment."

"So a Wall Street approach to the Tea Party is unlikely to be persuasive, because they come from such different perspectives," Clancy said. "Business wants certainty. The Tea Party wants policy change."

Clancy points out that the Tea Party arose in part as a reaction to Wall Street bailouts in 2008. He notes that "nobody can really speak for the party," which he calls a "spontaneous leaderless movement."

Clancy says the Tea Party has been "essential" in persuading the Republican Party to focus on spending and healthcare.

"The Republican Party won't be able to end the shutdown without the Tea Party, without risking a real disappointment in the grass roots movement," he said. "In a sense, the Tea Party has taken control of the steering wheel of the car and the Republican Party can't proceed without consulting the Tea Party."

He said he expects the Tea Party won't agree to a resolution "without some significant alteration to Obamacare." He says an "obvious compromise in this standoff" is a one-year delay of the individual mandate, which he calls the "least popular aspect of the healthcare law," to go along with a delay in the employer mandate.

"That would give both sides an honorable outcome and resolve the problem," he said.

When asked if most Tea Party members are concerned about the economic effects of the government shutdown, Clancy said the Tea Party is concerned just as much about the healthcare law's negative impact on small businesses as others care about the shutdown's impact on large businesses.

"We are fighting for economic reasons as well as ideological reasons. Obamacare hurts businesses," he said.

Some businesses disagree with the health care law, but haven't backed a horse in the current showdown. On Wednesday, Philip Ellender, president of Koch Companies Public Sector, said Koch Industries wants nothing to do with the shutdown.

"Koch believes that Obamacare will increase deficits, lead to an overall lowering of the standard of health care in America, and raise taxes," Ellender wrote in a letter to Congress. "However, Koch has not taken a position on the legislative tactic of tying the continuing resolution to defunding Obamacare nor have we lobbied on legislative provisions defunding Obamacare."

Neil Trautwein, vice president with National Retail Federation, a group that has long been vocal against the health care law as it concerns businesses, points out that businesses with more than 50 employees are considered big businesses according to the mandate.

The National Retail Federation is not involved in the debate on the individual mandate and doesn't support the current effort to defund the law, Trautwein said.

"We supported several but not all of the numerous efforts to repeal the law, mostly in the House but some in the Senate," he said. "We have not supported the current effort to defund the law and to hold up funding for the government and potentially threaten the debt limit increase."

The National Retail Federation represents retailers who operate more than 3.6 million U.S. establishments, the trade group says.

In a letter to Senate Majority Leader Harry Reid released on Wednesday, NRF President and CEO Matthew Shay said the federation "strongly" supports the passage of both a continuing resolution to provide for funding of the federal government into the next fiscal year and a measure to raise the nation's debt ceiling.

"There are warning signs that an extended shutdown will have serious repercussions for the U.S. economy," he said. "Gallup's Economic Confidence Index fell 12 points last week, making it the second largest weekly drop ever. Only the collapse of Lehman Brothers in September 2008 has done more damage to consumer confidence in such a short period of time. For retailers – who represent the sector of the American economy most closely tied to consumer attitudes – these numbers are deeply disturbing."

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