Week 2. Richard Mellon Schaif, John M. Olin and the Bradley Brothers

Synopsis of Chapter Two: THE HIDDEN HAND: RICHARD MELLON SCAIFE.

[Page numbers are in brackets.]

[60] Richard Mellon Scaife’s forebears (who founded the Mellon Banking, Alcoa aluminum, and Gulf Oil empires) were a financial mainstay of the Republican Party in PA for more than a century. But Scaife was described as a recluse. Over 50 years, he spent upward of $1 billion from his family fortune on philanthropy. Most of it was aimed at influencing American public affairs.

[61] However, in 2009, 5 years before Schaife was diagnosed with inoperable cancer, Schaife wrote a private, still-unpublished memoir “A Richly Conservative Life”, that serves as a secret tell-all about the building of the conservative movement.

He describes how he and a few others began meeting to plot against the country’s liberal drift. They compared it to the fall of Carthage, in North Africa. It wealthy elites failed to adequately back their military leader, the enemy triumphed, burying the noble Carthaginian culture forever. Out of this grew the League to Save Carthage, a network of influential die-hard conservatives. It was incorporated at the Carthage Foundation. Their standard-bearer, Barry Goldwater, had been badly defeated at the polls. Lyndon Johnson was gorging ahead.

[62] Richard Mellon Scaife, stepped up to take on the challenge. He was born into extraordinary wealth, his mother was Sarah Mellon Scaife. But he himself was not particularly note-worthy. Schaife’s great-grandfather Judge Thomas Mellon founded Pittsburgh’s Mellon Bank.

[63] Scaife’s mother was an alcoholic. The family had chips on their shoulders, and were tinged with resentment. His father, Alan Scaife, rode well to the hounds and attended elite schools, but his forebears had run the family metalworking company into the ground. Richard Scaife’s uncle R.K. Mellon treated the Scaife family with scorn. Alan Scaife was given ceremonial titles in the various Mellon business concerns but no real power. During WWII, Alan Scaife served in the OSS but was described as “a lightweight.” But this brush with the spy service ignited Richard Scaife’s lifelong infatuation with intelligence intrigue. And it gave rise to his strongly anti-Communist views.

[64] He said “My political conservatism which eventually unmasked me as the villain being the ‘vast right-wing conspiracy’ of Hillary Clinton’s imagination – but only her imagination, began before I had reached my 12^th birthday.”

The family’s preoccupation with preserving its wealth was shared by previous generations. His great-uncle the Pittsburgh banker Andrew Mellon was a leading figure in the counterrevolution against the Progressive movement, and in particular he was an implacable foe of the income tax.

Before Congress instituted the federal income tax in 1913, America’s tax burden fell disproportionately on the poor. The passage of the income tax in 1913 was regarded as calamitous by many wealthy citizens, setting off a century-long tug-of-war in which they f ought repeatedly to repeal progressive forms of taxation.

[65] Over the next century, wealthy conservatives developed many sophisticated ways to wrap their antitax views in public-spirited rationales. They rarely mentioned self-interest, but they consistently opposed high taxes that fell most heavily on themselves. Andrew Mellon considered economic inequality to be a just reward for excellence and virtue. He helped define the 1920s as an era during which business succeeded in rolling back many of the Progressive Era’s reforms. In 1921, capital gains taxes were cut, and the stock market boomed. In 1926 Mellon succeeded in getting a bill passed that cut the tax rates on the richest Americans. But instead of creating greater growth and prosperity, the stock market crashed in 1929, and his legacy was tarnished. He was charged and acquitted of income tax fraud, but was required to pay back taxes. 3 years later, Richard Mellon Scaife was born.

[66] Scaife’s parents created the largest of the family’s tax-exempt charitable foundations, the Sarah Scaife Foundation, in December 1941. It perhaps was timed to shelter the family’s wealth from anticipated tax increases because of the impending war. The Scaife family planned to organize their wealth to avoid government confiscation.

Meanwhile, the Scaifes lived large. But Richard suffered a terrible head injury in a riding accident at the age of 9. The injury barred him from military service.

[67] Like his mother, Scaife became a drinker by the time he was sent off to Deerfield Academy at the age of 14. He almost didn’t graduate because of a drinking episode, but his parents donated funds for a new dormitory, and he did graduate. He was accepted at Yale, but was soon expelled following several drunken benders. He belittled the dean who was adjudicating his case, hastening his expulsion.

[68] He was given another chance but flunked out of Yale again. His father was chairman of the board of University of Pittsburgh, so Richard graduated from there, and soon entered the family business, Gulf Oil.

But alcoholism and freakish tragedy continued to dog his adult life. Suicides, shootings, and family conflict were a part of his life.

Then his father died when Scaife was 26, and he was put in charge of his mother’s finances (because she had “no experience managing it”), giving him responsibility for investing hundreds of millions of dollars. His mother set up 2 charitable trusts of $50 million each, the beneficiaries were Scaife and his sister. Like the Koch family, the Scaifes designed the trusts so that all net income had to be donated to nonprofit charities for the next 20 years. After that, the $50 million principal could pass to each of the Scaife offspring free from inheritance taxes.

[69] In 1961, Scaife’s mother set up a 2^nd pair of similar trusts for her children, this time with $25 million for each beneficiary, and they had to donate the net interests to charity over just 10 years. In 1963, another $100 million more in trusts was set up, for 21 years. Because Cordelia had no children, control of the entire $100 million reverted to Scaife. So for the next 21 years, until 1984, he directed all of the charitable donations stemming from the interest on all three trusts, which held assets of $250 million. These were remarkably large sums in those days.

A consequence of this pattern was that the tax code turned many very wealthy families into major forces in America’s civic sector. They were required to invent a public philanthropic role. And for both the Kochs and The Scaife’s, the tax law ended up spurring the funding of the modern conservative movement.

Private foundations have very few legal restrictions. They are required to donate at least 5% of their assets every year to public charities.

[70] In exchange, donors are granted deductions, enabling them to reduce their income taxes dramatically. Because of these advantages, private philanthropic foundations proliferated among the ultra-wealth during the last century. [History of the philanthropic practice here.] But they were considered by many to be deeply and fundamentally anti-democratic.

[71] By 2013, there were over a hundred thousand private foundations in the US with assets of over $800 billion. “These peculiarly American organizations, run with little transparency or accountability to either voters or consumers yet publicly subsidized by tax breaks, have grown into 800-billion-pound Goliaths in the public policy realm. Richard Posner, the iconoclastic libertarian legal scholar, has called perpetual charitable foundations a “completely irresponsible institution, answerable to nobody,” and suggested that “the puzzle in economics is why these foundations are not total scandals.”

After his mother died, Richard and his sister shared control of the much larger Sarah Scaife Foundations. But their different priorities soon created irreconcilable fights. Before long, they were no longer speaking to each other.

[72] Cordelia Scaife’s priorities were art, conservation, education, science, and population control. Richard Scaife’s priorities focused more on “public affairs.” He writes in his memoir, “This was the beginning of the legend of Richard Mellon Scaife as the dark spirit behind right-wing causes.”

The looming question was how all this money could best be spent. Scaife was attracted to the idea that the right needs to build its own establishment to counter that of the liberals. A leading voice of this cause was Lewis Powell, the future Supreme Court justice. He was the author of a brilliant plan about how conservative business interests could reclaim American politics. It called for a devastating surprise attack on the bloated and self-satisfied establishment, which regard itself as non-partisan, but which the conservative regarded as liberal.

Powell’s ties to corporate conservatives were manifold. He held seats on the boards of over a dozen of the largest companies in the country, including Philip Morris.

[73] In the Spring of 1971, Powell was agitated by student radicals, antiwar demonstrators, black power militants, and the liberal intellectual elite. He believe American capitalism was facing a crisis. He wrote a memo that was a call to arms for corporate America. Many leaders of corporate fortunes were poised to enlist their private foundations as the conservative movement’s banks. Few people controlled them, and they could move quickly on controversial projects; they provided the donors with tax breaks while conferring the aura of a high-minded cause. They created institutions for the cause.

[74] The late 1960s and early 1970s were a daunting time for corporate America and for those living off great corporate fortunes. The birth of the environmental and consumer movements spawned a host of tough new government regulations. A number of congressional acts were passed to protect the environment. Tobacco companies came under attack.

[75] Powell said that the greatest threat was posed not by a few extremist of the left but rather by perfectly respectable elements of society. The real enemies, he said, were the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences,” and “politicians.” Powell called on corporate America to fight back. Conservatives should demand “balance” in textbooks, television shows, and news coverage. Donors should demand a say in university hiring and curriculum and press vigorously in all political arenas.

[76] Powell was not alone. Irving Kristol became the godfather of neo-conservatism. Nixon’s White house aide Patrick Buchanan argued in 1973 that conservatives needed to persuade corporate America to find a think tank that would act as a “tax-exempt refuge,” a “talent bank,” and a “communications center.”

During this period, Scaife was growing disillusioned with more conventional political spending. He donated almost $1 million to 330 different front groups for the reelection of Nixon in 1972. But when Nixon was implicated in the Watergate scandal, Scaife turned against him and against the idea of funding candidates.

Scaife, like the Kochs, sought to finance political victory through more indirect means. He began to invest far more in conservative institutions and ideas.

[77] He helped bankroll at least 133 of the conservative movement’s 300 most important institutions. In 1975 the Scaife Family Charitable Trust donated $195,000 to a new conservative think tank in Washington, the Heritage Foundation. He became its largest backer. Previously, Scaife had been the largest donor to the American Enterprise Institute (AEI), the older, rival conservative think tank in Washington.

The Heritage Foundation was born out of 2 congressional aides’ frustration with the more conventional think tank mode. Edwin Feulner Jr. and Paul Weyrich had become exasperated by AEI’s refusal to weigh in on legislative fights until after they were settled. Instead, they wanted to create a new sort of action-oriented think tank that would actively lobby members of Congress before decisions were made.

Lewis Powell’s memo awoke the financial angels their project needed. Joseph Coors of the Coors brewery family, was stirred up, and he offered to invest. Weyrich saw Coors’s letter and pounced.

[78] Coor’s was enthralled by Weyrich’s plan, and enlisted. A supporter of the John Birch Society, Joe Coors regarded organized labor, the civil rights movement, federal social programs, and the counterculture of the 1960s as existential threats to the way of life that had enabled him and his forbears to succeed. As a regent at the University of Colorado, Joe Coors tried to bar left-wing speakers, faculty, and students on campus. He wanted faculty to take a loyalty oath. He soon became the first donor to the Heritage Foundation, which opened for business in 1973. Scaife’s money soon followed.

[79] Earlier think tanks strove to promote the general public interest, not narrow private or partisan ones. They professed to be driven by social science, not ideology. Best known: The Brookings Institution, which had mandated scholars of many viewpoints on it board. The Rockefeller, Ford, and Russell Sage Foundations likewise strove to deliver the facts free from partisan bias. In the 1970s, a whole new form of “think tank” emerged that was more engaged in selling predetermined ideology to politicians and the public than undertaking scholarly research.

[80] To succeed, however, some deception about the think tank’s true aims would be required. It needed to be disguised as neutral and nonpartisan. They called a libertarian think tank in London the Institute of Economic Affairs. Fisher would go on to found another 150 or so free-market think tanks around the world, including the Manhattan Institute in New York. The donations paid off, in Scaife’s viewpoint, when they helped launch the careers of the conservative social critic Murray and the supply-side economics guru George Gilder, whose arguments against welfare programs and taxes had huge impacts on ordinary Americans.

[81] An element of subterfuge was also discernible in Weyrich’s early planning. Earlier attempts by American tycoons to hide behind nonprofit front groups had proven both legally and politically toxic. The groups were thought to be big business’ pressure organizations. (Some examples given here.)

But in the 1970s, such concerns became outmoded. Powell and others redefined existing establishment organizations like Brookings and The New York Times as equally biased but on the liberal side. They argued that a ‘market” of ideas was necessary that would give equal balance to all views. They reduced the older organizations that prided themselves on their above-the-fray-public-service-oriented neutrality to mere combatants in a polarized war.

Brookings and the Times rushed to add conservatives to their ranks.

[82] The upshot was that by the end of the 1970s, conservative non-profits had achieved power that was almost unthinkable when the League to Save Carthage first formed.

The new, hyper-partisan think tanks had impact far beyond Washington. They introduced doubt into areas of settled academic and scientific scholarship, undermined genuinely unbiased experts, and gave politicians a menu of conflicting statistics and arguments from which to choose. . . . The hazard, however, was that partisan shills would create “balance” based on fraudulent research and deceive the public about pressing issues in which their sponsors had financial interests.

[83] David Brock wrote Blinded by the Right and said that the Heritage Foundation was almost completely under the thumb of its wealthy sponsors. He thought that Scaife was “by far the most important” in building the conservative movement and spreading its ideas into the political realm.

[84] Scaife returned to drinking, went to rehab, had an affair, and wrangled with his first wife. His family life was in tatters. Then he had a spectacular breakup with his second wife, followed by an epic fight over their divorce settlement.

[85] All of which calls into question how in 1990 the Scaife Foundation could justify pressing the Heritage Foundation to focus more on conservative social and moral issues and in particular on family values. Heritage Foundation complied and hired William J. Bennett. . . . Equally hard to fathom is how Scaife rationalized his foundations’ funding of an obsessive investigation of President Clinton’s marital infidelities during the 1990s that came to be known as the Arkansas project. He also succumbed to a far-fetched conspiracy theory positing that the death of the Clinton White House aide Vincent Foster, which police had ruled a suicide, was actually a murder. Scaife even instated in an interview that Clinton “can order people done away with at will . . .God there must be 60 people associated with Clinton who have died mysteriously.”

[86] Eventually, the Arkansas Project got so out of hand that Scaife found himself ensnared in a serious legal mess, subpoenaed to testify before a grand jury about possible charges of tampering with a federal witness. In a stunning turnaround in 2008, Scaife met with Hillary Clinton, and declared in an opinion piece in his own paper that his view of her as a Democratic presidential contender had changed and now was “very favorable indeed.”

Scaife’s vendetta against Clinton later because a dress rehearsal for the Kochs’ later war against Obama.

[87] Charles Koch too was galvanized by Lewis Powell. In 1974, he gave a speech urging his fellow business leaders to undertake radical new efforts to overcome the prevalent anti-capitalist mentality.” Koch Industries had just become the target of federal regulators, charging his company with violating federal oil price controls, and that a subsidiary had over-charged by $10 million for propane gas.

Soon after, Charles too set up a think tank, the Cato Institute.

[88] Ed Crane, a defeated libertarian candidate for president, became Cato’s president, but Charles retained rigid control. The Cato Institute soon hired a slew of scholars whom the mainstream media respectfully quoted as nonpartisan experts. But the Cato vision was that government’s only legitimate role was to “serve as a night watchman, to protect individuals and property from outside threat, including fraud”.

It is not known how much money wealthy families poured into the right-wing think tanks beginning in the 1970s and how effective it was. Gifts to non-profits could be concealed from the public. But in the early 1980s, a list of the Heritage Foundation’s sponsors found in the private papers of one of its early supporters suggested it was financed by Fortune 500 companies, such as Amoco, Amway, Boeing, etc. [18 more are listed here].

[89] James Piereson has suggested “that the think tanks and conservative foundations made conservative ideas respectable."

One measure is that starting in 1973 and for decades after, the public’s trust in government continually sank; another is the Republican wave that swept the 1978 midterm elections, gaining 3 Senate Seats, 15 House seats, and 6 governorships. The new conservative think tanks and other right-wing political organizations fanned the discontent and shaped the dominant narrative. Growing conservative clout was apparent in Congress, too. The labor movement suffered a series of devastating setbacks dealt by the ascendant business caucus backed by the expanding network of think tanks and outside lobby groups. Weyrich’s hand was evident here.

[90] Weyrich with Scaife’s financial backing, launched sever other ingenious political organizations during this period. One was the American Legislative Exchange Council (ALEC), a group aimed at waging conservative fights in every state legislature in the country. From 1973-1983, the Scaife and Mellon family trusts donated half a million dollars to ALEC, constituting most of its budget. Weyrich also co-founded with Jerry Falwell the Moral Majority, which brought social and religious conservatives into the pro-corporate field. Weyrich was particularly adept at capitalizing on white anger over desegregation.

The results were evident in 1980. Reagan overwhelmingly defeated Carter. Conservatives were stunningly resurgent. The upset include the Senate, where four liberal names were all defeated.

By creating their own private idea factory, extreme donors had found a way to dominate American politics outside the parties. Once elected, Reagan embraced the Heritage Foundation’s policy playbook and distributed a copy of it to every member of Congress. The Heritage Foundation had laid out 1,270 specific policy proposals. The Reagan administration adopted 61% of them.

[91] Andrew Mellon himself would have been pleased with the succession of hefty tax cuts that Reagan pushed through Congress. Between 1981 and 1986, the top income tax rate was cut from 70% to 28%. Meanwhile, taxes on the bottom 4/5s of earners rose. Economic inequality, which had been flat lined, began to climb.

The fossil fuel industry’s fondest wishes were also fulfilled. Reagan abolished the economic controls on oil and gas that Nixon had imposed in order to address the energy crisis. He also cut taxes on oil profits. Koch Industries’ profits, predictably, skyrocketed.

The new conservative nonprofits were thriving, too. By 1985, the Heritage Foundation’s budget equaled that of Brookings and AEI combined. Scaife, who by then had donated $10 million to the think tank, was contributing at a rate of $1 million a year.