Eric Cantor's Defeat Is Bad News for Big Business

Photo by Gage Skidmore via Flickr

House Majority Leader Eric Cantor lost his Republican primary in Virginia last night in a stunning upset that has sent GOP leaders into a panic, scrambling to figure out how one of the party’s rising stars—and the presumptive Speaker-in-waiting—could lose to an obscure libertarian economics professor with an unfortunate last name.

For those of you who don’t follow politics closely, it’s hard to overstate the shock and confusion that has rattled the Washington establishment over the past 12 hours. No one saw this coming (and anyone who says otherwise is lying). No sitting House majority leader has ever lost a primary. And Cantor didn’t just lose—he got creamed, losing to unknown and unfunded Randolph-Macon College professor David Brat by 12 percentage points.

So far, the boilerplate takeaways are (a) that Cantor’s loss likely kills any chance there may have been for immigration reform and (b) that despite recent Establishment victories, the Tea Party still packs a punch. Both of those things may be true: One of the main lines of attack on Cantor, leveled by Brat, as well as talking heads like radio hosts Mark Levin and Laura Ingraham, was his supposed support for “amnesty,” and his loss is likely to deter other Republicans from ever touching reform legislation; he’s also the second Republican incumbent to lose a primary challenge from the right this year, and others, including Mississippi Senator Thad Cochran, are expected to follow.

But all this obscures the broader significance of Cantor’s loss, and the ripple effects that it could have not only for the GOP, but also for the business interests that have long enjoyed cozy relationships with Republicans in Washington. Since 2010, Cantor has politically existed at the nexus of Big Tea Party and Big Business, two dominant, and often warring, factions of the Republican Party. A prominent fundraiser, Cantor helped usher in the Tea Party takeover of the House in 2010, and until recently, conservatives considered him an ally, if not one of their own. At the same time, Cantor was a go-to ally for business, and Wall Street in particular, consistently protecting industry interests even as his party moved further and further to the right.

In the process, he sided with business on some unpopular issues, including extending the government’s terrorism-insurance program and taxing private-equity income at lower capital-gains rates. Cantor raised close to $5.5 million this election cycle, drawing in cash from trade groups like the American Chemistry Council, the NRA, and the National Association of Realtors. According to data from Open Secrets, Cantor’s top five campaign contributors were Blackstone Group, Scoggin Capital Management, Goldman Sachs, Altria Group (the parent company of Phillip Morris), and Charmer Sunbelt Group, a major liquor distributor.

Brat, on the other hand, was a Tea Party candidate in the truest sense, reflecting the right-wing populist sentiments—the xenophobia, the hatred of both big government and big business—that first propelled the movement back in 2009. Tellingly, his campaign did not receive any money from professional Tea Party groups like FreedomWorks and the Club for Growth, but instead ran on just $200,000, which is about the same as what the Cantor camp spent on steak dinners for donors.

Academically and politically, Brat is best described as a libertarian, and an unabashed champion of “free-market economics,” in the vein of other Tea Party libertarians like Sens. Rand Paul and Mike Lee, and Michigan Republican Rep. Justin Amash.  On the campaign trail, though, Brat couched these positions within the context of the increasinly resonant themes of crony capitalism. He relentlessly criticized Cantor’s cozy ties to Wall Street and groups like the US Chamber of Commerce, as well as his unwillingness to go after Big Banks after the financial crisis.“If you’re in big business, Eric’s been very good to you, and he gets a lot of donations because of that, right?” Brat said at a Republican Party meeting in April. “Very powerful. Very good at fundraising because he favors big business. But when you’re favoring artificially big business, someone’s paying the tab for that. Someone’s paying the price for that, and guess who that is? You.”

He elaborated at a town-hall meeting last month: "All the investment banks in the New York and DC—those guys should have gone to jail,” he said. “Instead of going to jail, they went on Eric’s Rolodex, and they are sending him big checks.”

“I'm not against business,” he added, summing up the central theme of his candidacy. “I'm against big business in bed with big government."

The race was another example of the Free Market vs. Business battles that have divided the Republican Party on issues like the debt ceiling and balanced budget amendments. And in this case, business lost—badly. In the House, GOP leaders announced that Cantor will step down from his post as majority leader in July, opening up the door for more conservative members to take his place. Of particular concern to business interests is Representative Jeb Hensarling (R-TX), the chairman of the House Financial Services Committee, who has recently clashed with Cantor and industry lobbyists over flood insurance, and who is the Tea Party favorite for the majority-leader spot. Hensarling said Wednesday that he is "prayerfully considering" whether he will make a bid for a leadership position.

In the long run, Brat’s win is being viewed by conservatives as a proxy victory for the growing libertarian wing of the Republican Party—a triumph of limited government, Ayn Randian principles over Cantor’s more moderate “Making Life Work” plans. And the fact that Brat pulled off his upset victory over Cantor with such a distinctly anti–Wall Street message suggests that right-wing anti-government populism continues to thrive, at least in Virginia’s Seventh Congressional District.