While the high-stakes gambit places them squarely within the mainstream of anti-bailout public sentiment, at the same time it exposes the party to potentially devastating criticism that its failure to compromise doomed the Big Three automakers and deepened the economic recession.

Republicans argue that their rejection Thursday evening of a $14 billion loan package came in response to the concerns of angry taxpayers who are unwilling to pay for an auto industry bailout on the heels of October’s $700-billion financial bailout package.

"I think it would appear that the people who voted against this are carrying out the will of the voters as expressed through the phone calls to our offices," said Sen. Charles Grassley (R-Iowa).

But that sentiment betrays the deep rifts the issue has revealed within the party, pitting Rust Belt and auto-state senators who joined Democrats in a plea for federal aid against their Southern colleagues who represent states where foreign-owned automakers constitute a significant economic presence. All of this takes place against the backdrop of an intraparty debate over whether the GOP has lost its core value of limited government.

“I’m not even thinking about the politics of it, I’m talking about the substantive part of it, the people who are losing their jobs, the suppliers and the automobile dealers,” said Sen. George Voinovich (R-Ohio), who faces re-election in 2010 and was one of just 10 Republicans who voted to advance the bill Thursday night.

By opposing the automaker bailout, Republicans now find themselves vulnerable to charges that they are insensitive to ailing American auto companies and the millions of workers reliant on the domestic auto industry, a problem compounded by their inability to rally around a clear alternative to the $14 billion package of loans that had been backed by Democrats and the White House.

“Clearly, it’ll be on their heads,” said Sen. Kent Conrad (D-N.D.). “It passed the House, and Democrats in the Senate and the White House are on the same page. They’re the odd person out here. It will be on their shoulders if it doesn’t go forward.”

Republicans furious at the government’s intervention to prop up the economy say the vote against the bailout marks the beginning of the party’s return to its small government roots. But even those members acknowledged the downside risk.

Sen. Jim DeMint (R-S.C.), a fierce critic of the bailout, said the failure of the bill could hurt his auto-state colleagues, but noted, “politically, I think Republicans can show a real difference [with Democrats] here.”
The bigger risk, he said, was pumping more money into companies whose problems were bound to get worse and would likely return to Congress asking for more money.

“I think the public is going to turn on all of us as we go through a deeper recession over the next few months because they are going to see all of this money being thrown at this thing and more and more people realize that the foundations of the recession were based on bad government policy,” DeMint said.
Some strategists say rejection of the package could prove costly to Republicans in the industrial parts of the Midwest.

“The big question is what happens next, if the auto companies are still in business in January or March, whenever it happens to be, [there won’t be] much fallout,” Senate Majority Whip Dick Durbin (D-Ill.) told Politico. “But if something dire occurs, if one of the companies or more face bankruptcy or layoffs and that has a dramatic negative impact on communities, families or the economy, then I think there are some questions to be answered to think whether this might have been enough to keep them in business and help them survive.”

Administration officials have been warning for weeks that failure to pass the bill could lead to an even deeper recession.

That was the message Vice President Dick Cheney brought to a closed-door Senate GOP lunch Wednesday, reportedly warning that it’ll be “Herbert Hoover” time if aid to the industry was rejected, according to a senator familiar with the remarks. A Cheney spokeswoman would neither confirm nor deny the vice president’s remarks.

The White House could still use its authority under the financial bailout law known as the Troubled Assets Relief Program to provide aid to the industry, but the Bush administration has strongly resisted that approach. Meanwhile, Federal Reserve Chairman Ben Bernanke has warned that he could not be relied on as a backstop if additional loans were needed for the first quarter of next year.

That means the White House could take the blame both for spending money and failing to stabilize the auto sector.

Ron Bonjean, a Republican strategist, predicted “neither Republicans nor Democrats are going to get the blame because the White House will use TARP money.”

The Bush administration’s resistance to release the money has put the onus on Congress. But Senate Republicans stayed away from negotiating a bailout, allowing the White House to broker a deal with Democrats, which the House approved Wednesday night with 32 Republicans, mostly from auto-producing states, joining 205 Democrats in voting for the measure.

Minority Leader Mitch McConnell (R-Ky.), who has auto plants in his state, has been torn between the warring factions of his party. He had waited until Thursday to announce his opposition to the bill, then later embraced a proposal by Sen. Bob Corker (R-Tenn.) to beef up the administration bill by setting out specific steps for bondholders and labor to take to slash General Motors’ debt and operating costs by the end of March or see the company go into bankruptcy.

Republicans had hoped to use the Corker proposal to deflect blame that they had no viable alternative.

“If we’re viewed as being proactive and trying to solve this problem with a good solution … I’m not sure they can argue we weren’t trying to fix the problem,” said Sen. John Thune (R-S.D.).

But Republicans failed to rally around the Corker plan until late Thursday, preventing them from properly explaining it to the public. McConnell dispatched Corker to find a bipartisan solution with Democrats, but the talks stretched through the night, and Corker ultimately failed to sell a revised plan to the GOP caucus.

Republicans will now have to convince the public that they sought a middle ground, but ultimately decided to side with the taxpayer.

Otherwise, “they look like they’re in disarray,” said one top GOP strategist, speaking on the condition of anonymity because one of his auto clients backed the $14 billion in loans.