After being elected as a Democrat from Mobile to the state house and senate, he shifted to the Republican Party after losing a race for Lieutenant Governor of Alabama in 1982.

During this period since the social changes of the 1960s, which resulted in African Americans regaining their ability to exercise their franchise in southern states, many white former Democrats in the South were shifting to the Republican Party.

When the Republicans won control of Congress in 1994, Callahan became the chairman of the House Appropriations Subcommittee on Foreign Operations, Export Financing and Related Programs.

He served as campaign chairman for businessman Tim James' unsuccessful bid for the Republican nomination for Governor of Alabama.

In the Summer of 2004, Callahan wrote a letter to State Lands Director James Hillman Griggs, complaining that Federal Coastal Zone Management pass-through grant money, which had been entrusted to the City of Orange Beach for beach development, was not going to the intended recipients.

Griggs' office investigated and cancelled the grant and additional funding requested by Orange Beach Mayor Steve Russo and City Attorney Larry Sutley.

The United States Department of Justice initiated an investigation and indicted the two officials as well as developer Ken Wall.

In 2006, Russo, Sutley, and Wall were convicted of corruption and obstruction of justice related to a scheme to "enrich the mayor in exchange for favorable treatment [of developers] on large construction projects in the city.