Divided we stand: Why a Democratic Congress is good for business

Corporate America shouldn't fear the Democratic takeover of Congress, despite the party's anti-business reputation. The shift in power to the Democrats will actually make it easier for business interests to be heard in the capital, said Gerry Keim, professor of management at the W. P. Carey School of Business, in a speech in Washington the day after the election.

Corporate America shouldn't fear the Democratic takeover of Congress, despite the party's anti-business reputation. The shift in power to the Democrats will actually make it easier for business interests to be heard in the capital, said Gerry Keim, professor of management at the W. P. Carey School of Business, in a speech in Washington the day after the election. "Divided government, frankly, is better for business," said Keim, who has consulted for a wide variety of business and non-profit groups on government relations.

That's because it means firms no longer have to rely entirely on one party, the Republicans, to advance their agenda. With power to be split between a Republican White House and a Democratic Congress, Keim said, businesses seeking to influence public policy would have two choices in Washington instead of only one, increasing their chances of finding allies to advance their agenda.

Keim, who stayed up past midnight on election night monitoring the results, spoke to a bleary-eyed audience at XM Satellite Radio offices the next day, as Washington woke up to the biggest shift in power since 1994. When the new Congress takes office in January, Democrats will control 231 seats in the House of Representatives, compared to 198 for the Republicans, and 51 Senate seats to the GOP's 49.

Ethics was a major issue in the election, according to exit polls of voters, and Democrats have promised to tighten restrictions on lobbying, but Keim said the basic rules of seeking influence in Washington would remain the same. Keim compared lobbying to a marketplace, with politicians supplying policies and businesses consuming them. Two rival providers of policy in Washington instead of one, he said, would make it easier for businesses and non-profits to find politicians to support their goals.

Building coalitions

Lobbying the federal government, Keim said, is typically a two step process, starting with lobbyists and campaign contributions to gain access and then using that access to communicate concerns with politicians. With single-party rule in Washington, he said, it was easier for Republicans to reap contributions from businesses and then ignore them because they had a stranglehold on power.

Now, with Democrats set to take power on Capitol Hill but Republicans still running the executive branch at the other end of Pennsylvania Avenue, businesses are in a better position to benefit from competition between the two parties, he said. "Generally, competition is better than monopoly," he said. Keim said some businesses already seem to have decided there was an advantage to divided government.

Business groups contributed heavily to Democrats this year, especially after it became clear from opinion polls they would make major gains. Keim cited the financial services industry as one sector that made particularly large contributions to Democrats in this cycle. For most businesses the ultimate form of influence, Keim said, is a grassroots coalition to pressure lawmakers at home. One-party rule in the capital, however, had made it difficult to motivate Democrats to get involved with those efforts.

Now, with divided government, Keim said it would be easier for firms to motivate their employees to form such coalitions or contribute to corporate political action committees. "For corporations to be able to build grassroots organizations, it's much easier when you can invite both Democrats and Republicans," he said, "It's a fair assumption that in many organizations, probably about half the people are Democrats."

Look for pragmatists

Despite a reputation for hostility to business interests, Keim said, even the most liberal Democrats were usually pragmatists who would gladly work with businesses in their districts. "Most politicians will respond to people who are well organized in their district," he said. "Their label may be liberal or moderate or whatever, but they'll often represent the best-organized interest in their district."

Keim cited the example of former Speaker of the House Tip O'Neill, who was a favorite among big defense firms in his Massachusetts district despite his liberal politics. "If you talked to the defense contractors in Massachusetts about trading Tip O'Neill for a pro-business Republican, they'd laugh at you," he said. Still, Keim acknowledged there are limits to pragmatism, and that in some key areas a politician's personal or political beliefs would create unbridgeable differences with businesses seeking to influence them. The wine business is one example of a business that runs up against irreconcilable differences.

"The red wine industry is trying to get the health benefits of red wine placed on the label. You will not convince someone who is a Mormon to support that kind of legislation — doesn't matter whether they're a Republican or Democrat," Keim said. The new Democratic Majority Leader, Nevada Senator Harry Reid, is a Mormon. Still, Keim said that for businesses seeking allies in Washington, the partisan divide often mattered less than many of his clients assumed.

"At times firms will ask me, should we be giving money to both candidates in a tight race? You can decide whether to do that or not, but it's not a major problem if you support the wrong person," Keim said, because politicians usually quickly forgive businesses in their district for backing an opponent in the last election. "What most politicians realize very quickly is that by January, they're focused on the next election," he said, and more than willing to let bygones be bygones if they think that business may support them the next time around.

Avoiding partisanship

At the same time, however, Keim said it is crucial for businesses to remain pragmatic and bipartisan in their approach to lobbying. In order to take advantage of divided government, firms need to preserve the ability to work with both parties by spreading out their campaign contributions and taking pains to avoid becoming too closely associated with either party, he said.

Remaining bipartisan had been particularly difficult under the Republican Congress, when former Senate Majority Leader Trent Lott of Mississippi (recentky elected Minority Whip) and former House Majority Leader Tom DeLay of Texas sought to pressure lobbying firms into hiring more Republicans and ending contributions to Democrats, an effort to remake Washington known as the "K Street Project."

Keim said he had advised his clients to ignore the pressure, because becoming too closely tied to the Republicans would have left them vulnerable in the case of a political shift like this year's midterms and would also make it more difficult to build crucial bipartisan grassroots coalitions. "You guys don't ever want to be closely tied with one political party," Keim said he warned, "because, one, the landscape can change, and what do you do when the other party takes over?

And two, your employees are not entirely aligned with that political party. So to the extent that you're going to develop grassroots support, which is the ultimate political force, you've got to have associations with both political parties. Don't let them pressure you into supporting just one party." By the same token, Keim said that businesses now have to maintain their ties with Republicans under a Democratic Congress, and oppose any Democratic attempts at payback.

Lobbying reforms

Proposals to impose new regulations on lobbying would only make it more important for businesses to play both sides of the aisle, Keim said. Many Democrats ran on an anti-corruption platform, and were able to capitalize on Republican scandals involving the disgraced lobbyist Jack Abramoff. Many of their proposals are aimed at making lobbying more transparent.

Keim said he recommended to his clients that they use regular political action committees to fund candidates, rather than less conventional devices like so-called 527 groups. PACs allow companies to give enough to gain access to lawmakers while avoiding the appearance of ethical problems or creating actual ethical problems.

"Because you can't give more than $10,000 over an election cycle, you're not likely to have a huge influence on that person, but you're likely to be one of the people who will be on the list to get phone calls returned," Keim said, hopefully leading to influence. Keim spoke in general terms, but said his advice was applicable to virtually any businesses. "Quite frankly, it's hard to find an industry that's not affected by rules of the game created by the federal government," he said.

Bottom Line

• Pragmatic Democrats will be receptive to business interests, provided that business shows a willingness to work with Democrats and contribute money to their campaigns.
• Grassroots coalitions are the most effective way to lobby Congress, and are more powerful if they include supporters from both political parties.
• Proposed ethics reforms to restrict some kinds of lobbying will make it more important, not less, for businesses to spread contributions to both parties.
• Businesses must resist becoming too closely identified with a single political party, or else they will suffer setbacks if that party falters at the polls.