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U.S. President Barack Obama delivers remarks on the government funding impasse at M. Luis Construction, a local small business in Rockville, My. (JASON REED/REUTERS)
U.S. President Barack Obama delivers remarks on the government funding impasse at M. Luis Construction, a local small business in Rockville, My. (JASON REED/REUTERS)

Shutdown to slowdown? How Washington’s mess is hurting business Add to ...

The heads of Wall Street’s biggest banks met the President and congressional leaders to warn them about the damage their latest spat could inflict on financial markets. The intervention had little noticeable effect. More than 200 trade associations, including the Chamber of Commerce, sent a letter to lawmakers last month begging them to avoid a shutdown. Lawmakers didn’t listen.

Across the country, businesses large and small are exasperated by interruptions that management consultancy IHS Inc. estimates amount to $300-million (U.S.) a day. But they also are grappling with a deeper problem: Their influence in ending these fights looks limited and there may be more such battles ahead. A business community that prides itself on an ability to thrive without the help of government now is confronting the great irony that politicians that do nothing can cause the greatest harm of all.

The National Center for the Middle Market, a research group at Ohio State University, has been tracking executives who run companies with annual revenue between $10-million and $1-billion. Middle Market reckons these firms account for one third of the U.S.’s private sector gross domestic product.

For the past two years, respondents had signalled increasingly stronger intentions to invest. Those indications have now plateaued, an odd change given that economic data including initial jobless claims and factory production point to a recovery from the recession that started in 2008. Anil Makhija, a finance professor who leads the Middle Market group, blames Washington politics.

“Government has introduced uncertainty after uncertainty,” Prof. Makhija said. “Given the frequency with which we’ve thrown wrenches into the system, and then we act surprised that the economy hasn’t taken off? There is no question in my mind that it is having an impact.”

“This is the biggest mess yet,” said Richard McNeel, chairman of Lord Corp., a Cary, N.C.-based maker of industrial adhesives and parts with annual revenue of more than $850-million.

Mr. McNeel, a lifelong Republican and a member of the board of directors of the U.S. Chamber of Commerce, says he almost never agrees with Mr. Obama. But he’s come to support the President on one issue: The relentless games of chicken over budget making must end. That’s a view he also shares with many in the party he’s always supported.

“I can’t imagine myself ever switching parties,” said Mr. McNeel, who is 67. But “this whole Tea Party scene is driving me nuts,” he said, describing the frustration he feels about the business community’s impotence in the Republican-dominated House of Representatives as that party all but ignores the business lobby.

“I don’t think it ever has been this bad,” said Steve Caldeira, president of the Washington-based International Franchise Association. “It is a very difficult environment to navigate.”

The assumption that business controls the Republican Party and the unions control the Democratic Party no longer stands up. For years, each party has been redrawing the boundaries of congressional districts to their advantage, creating political fiefs for whoever wins the dominant party’s nomination. Because moderate voters generally ignore primaries, more strident candidates who appeal to hyper-partisans have a distinct advantage.

Just this week, Taylor Griffin, a former staffer in George W. Bush’s administration, launched a campaign to unseat the incumbent Republican in a district in eastern North Carolina, declaring that the “federal government is growing and spreading like a virus and I intend to stop it.” Mr. Griffin called his opponent, Walter Jones, the “most liberal Republican” in the House. “The most liberal Republican in the House of Representatives should come from San Francisco, not from eastern North Carolina,” Mr. Griffin said in the statement announcing his campaign.

“There are Republican members today that are much more concerned about being primaried on the right flank than they are of losing in the general [election],” said Dan Danner, president of National Federation of Independent Business. “They might be determined by some group to be a 95-per-cent conservative and they’re concerned a 99-per-cent conservative by somebody’s measure is going to run against them in the primary.”

The root of the business lobby’s influence on politics is money. Groups such as the Chamber of Commerce and the National Federation of Independent Business single out candidates they like and shower them with public endorsements and financial support. But in Washington, trade associations are no longer the only game in town. Deep-pocketed and ideologically driven outfits such as the Heritage Foundation, which supports smaller government, have become an equally important source of campaign finance.

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