Week 5. The Shellacking and The States

Week 5: The Shellacking: Dark Money's Midterm Debut, 2010; and The States: Gaining Ground

Outline Chapter 10. The Shellacking: Dark Money’s Midterm Debut, 2010

[240] The first Koch summit of 2010: Sean Noble was the behind-the-scenes organizer, employee of the Kochs. A torrent of contributions helped elect Scott Brown in Massachusetts, the first Republican from that state in 38 years. His election transformed the balance of power in the Senate, and was calamitous for Obama. It deprived the Democrats of the 60 vote minimum necessary to overcome a Republican filibuster. Scott Brown had outspent opponent $8.7 to $5.1 million. $3 m. of this came from out-of-state nonprofit groups. Noble had redirected money from other efforts into the effort to elect Brown. The intent was to defeat the Affordable Care Act.

[242] Ed Gillespie, who had made a fortune in lobbying, was originally a Democrat, formed the bipartisan firm Quinn Gillespie & Associates, had clients such as Enron. After Citizens United, passed 2 days after Scott Brown’s election, Gillespie set out with Karl Rove to pitch oilmen at the Dallas Petroleum Club to fund a new kind of political machine: Instead of funding just the Republican Party, they could fund to “outside” organizations that could pursue multiple objectives. Because this was a year for redrawing the boundaries of congressional districts, Gillespie put together an ambitious strategy aimed at a Republican takeover of governorships and legislatures all across the country.

[243] Gillespie called the plan “REDMAP”. To implement it, he took over the Republican State Leadership committee (RSLC), a nonprofit group that functioned as a catchall bank account for corporations interested in influencing state laws. By the end of 2010, funded by tobacco companies, Walmart, and donors from the Koch summits, the RSLC would have $30 million, 3 times the Democratic counterpart. Joining Gillespie and Noble at a panel at the Koch summit was James Arthur “Art” Pope, CEO of Variety Wholesalers, and a charter member of the Koch network. He transformed the Pope family foundations into a remarkable political force. He also had served on the board of Americans for Prosperity (the Kochs’ main public advocacy group. He wanted donors to help him turn North Carolina into a laboratory for REDMAP. He had run for office in NC, but was a terrible candidate.

[245] The 4^th member of the panel was Jim Ellis, an old friend of Noble’s. He had a history of creating fake movements in support of unpopular corporations and causes, particularly for the tobacco companies. He had become the “right-hand man” to Tom DeLay (the powerful House Republican leader from Texas who was infamous for his “K Street operation,” which serviced corporate lobbyists while shaking them down for campaign contributions.) Both Ellis and DeLay had been indicted for campaign-finance violations in 2005, and Ellis was convicted.

The donors at the conference were optimistic about overturning Obama care, but the Democrats eventually came up with a plan to get the bill through.

[247] Noble helped build the Koch network. $61.8 million in funds were collected. The TC$ Trust raised an additional 442.7 million. Sean Noble’s kitty grew up to almost $75 million.

After Citizens United, the Kochtopus sprouted a 2^nd set of tentacle: The first set was the think tanks, academic programs, legal centers, and issue advocacy organizations that provided the ideological production line.

[248] Added to this was a 2^nd cluster of “social welfare” groups. These groups had to be certified that they would be “operated exclusively for the promotion of social welfare,” even if this was not their primary purpose. The loophole became very stretched.

The Kochs were part of a national explosion of dark money. In 2006, only 2% of outside political spending came from “social welfare” groups that hid their donors. In 2010, this number rose to 40%, masking hundreds of millions of dollars.

All this new, dark money was a challenge. Gillespie invited Republican operatives to meet in Karl Rove’s living room.

[249]. 2010. What transpired was a war council in which the 20 assembled chieftains coordinated their plans of action and divided up their territory. It was the “birthplace of a new Republican Party” – one steered by just a handful of unelected operatives who answered only to the richest activists who funded them.”

Two organizations emerged as virtual private banks run by these operatives. (1) American Crossroads and its 501(c)(4) wing Crossroads GPS, initiated by Rove. (2) Center to Protect Patients Rights, with donations coming from the Koch donor summits. Working closely was the U.S. Chamber of Commerce which spent millions aimed at defeating Obama's health-care act.

Each of the players' roles was clearly differentiated. Noble focused on House races, Gillespie on governorships and state legislatures. Funds were steered to obscure, smaller groups, to satisfy the legal requirement that no single public welfare group spend more than half of its funds on elections. Soon a rash of attacks on Democrats broke out all across the country.

[250] (Methods of targeting Democrats is discussed. Mentioned are the 60 Plus Association (a right-wing version of the senior citizens' lobby AARP), Americans for Job Security, The American Future Fund, the Center to Protect Patient Rights.

[251] Millions of $$ were directed into other races [listed]. The system was tested out by Americans for Prosperity to launch an assault on Tom Perriello, a freshman Democrat Congressman from Virginia, who had defied the fossil fuel interests over the cap-and-trade bill. He was redefined by a barrage of negative ads paid for by unrecognizable outsiders.

[252] Also attacked was a conservative Democratic congressman, Rick Boucher, who had been crucial to passage of the cap-and-trade bill in the House. Luntz used focus group results to link Democratic targets to Nancy Pelosi, who was not liked by Republican voters.

[252] The attack ads were created by Larry McCarthy, a veteran media consultant who could distill a complicated subject into a simple, potent, and usually negative symbol. The funding by outside groups was disguised.

[253] The House Democrats passed a bill to eliminate the so-called carried-interest loophole, designed to eliminate the special tax break enjoyed by private equity and hedge fund managers.

[254-255] Stephen Schwarzman, CEO of private equity firm the Blackstone Group, with a fortune of $6.5 billion opposed the bill, likening it to Hitler's invasion of Poland. Schwarzman's fortune, and the cost to government of the hedge fund loophole, is described on these two pages.

The June Koch summit held in Aspen, brought hedge fund managers together with other donors.

[256] Other hedge fund managers present at the summit are listed. The concentration of wealth at the Koch summit was extraordinary. Of 200 participants, at least 11 were on Forbes's list of the 400 wealthiest Americans. The combined assets of this group amounted to $129.1 billion.

[257] Noble previewed a sample ad slamming Obamacare, and Tim Phillips, pres. of Americans for Prosperity, showed his plan for spending $45 million on a few targeted midterm races. The meeting raised another $25 million.

By July, Democratic strategists began to feel a strange undertow, as if an offshore tsunami were gathering force. About $200 million had been assembled for the ads against the Democratic candidates. The number caught the Obama administration off guard.

[258] 2010, As late as May, Axelrod had barely known who the Kochs were, and Obama's political team was almost clueless. [Description of some of the anti-Democrat ads.] Bruce Braley, a Democratic candidate in Iowa, barely held on in the election, unlike his winning by 30% in 2008.

[259] In North Carolina. Congressman Bob Ethridge, a 7-term Democrat, fared worse. Americans for Job Security had spent $360,000 on media against Etheride, but no one knew who was behind the group. Etheride lost in November in a stunning upset to a Tea Party sympathizer, Renee Ellmers. Eventually, the National Republican Congressional Committee acknowledge that it had been behind the ambush video.

[260] Unidentified videographers ambushed Democrats Braley, Etheridge, Perriello and others . Instructions on how to do ambushing videos were eventually put on the web, then it spread to the Democrats too. Other media attacks by other wealthy members of the Koch network were made as well. Several of these are described. Robert Mercer, co-CEO of the Long Island hedge fund Renaissance Technologies, all contributed to negative ads in Oregon.

[261] His ads manipulated voters' fears about terrorism and Medicare. As the congressional races grew nasty, Gillespie's Republican State Leadership Committee began to channel dark money into on local state legislature race after another. Well-coordinated projects to take over the statehouses in Wisconsin, Michigan, Ohio, and North Carolina as well as elsewhere were mounted.

Art Pope's outsized role in North Carolina is described, in beating John Snow, a retired Democratic judge who had represented the district in the state senate for three terms. He was the target of two dozen mass mailings, one of them reminiscent of the Willie Horton ad.

[262-265]. Descriptions of the various strategies used in North Carolina in the 2010 election races by dark money interests. Last sentence on p. 265: The conventional wisdom among professional political consultants was that Americans either didn't get it or just didn't care.

[266] The Democrats' setbacks were huge at almost every level. In the US, the Republicans picked up half a dozen Senate seats, and at the state level gained 675 legislative seats, won control of both the legislature and the governor's office in 21 states; and Democrats had similar one-party rule in only 11. As a consequence, Republicans now had 4 times as many districts to gerrymander as the Democrats.

[267] The payoffs of the new strategy were impressive. "The gift that keeps on giving." Newly Republican states like Michigan, Wisconsin, Ohio, and North Carolina soon became breeding grounds for attacks on Obama's core agenda. They undermined his policies on health care, abortion, gay rights, voting rights, immigration, the environment, guns, and labor.

Outline of Chapter 13. "The States: Gaining Ground."

[ 333] Republicans were happy with the 2012 election results, even though Obama was reelected. Ed Gillespie's REDMAP plan had worked very well. Republicans gained control of the state legislature in NC, and redrawn boundaries of districts in NC so that they won more congressional seats.

NC had become a test kitchen, a creation of model statues, as Tim Phillips, the president of AFP explained.

[334 ] Discussion of the gerrymandering process. Gerrymandering is an old tradition, but what was new was that it was funded by the unelected rich.

[335 ] As David Axelrod said, "It's smart. There's no equivalent on the Democratic side." A dark-money group called the State Government Leadership Foundation was hired to do the gerrymandering. In theory, redistricting was supposed to reflect the fundamental democratic principle of one person, one vote. But the results were that the new map severely reduced the number of congressional seats that Democrats could win, by packing minority voters into three districts that already had a high concentration of African-American voters.

[336 ] Progressive groups filed suit, the case was heard in the state's supreme court where the Republicans held a 4-3 majority. Discussion of the re-election campaign of one supreme court judge. "By channeling donors' money to largely overlooked state and local races, Republicans succeeded in wiping out a generation of lower-level Democratic office holders who could rise in the future.

[337 ] This happened elsewhere, so that midterm losses in 2010 and 2014 cost the Democrats more than 900 legislative seats and 11 governorships. Gillespie's REDMAP plan was a stunning success, give the governorship and majorities in both houses in NC to the Republicans, for the first time since Reconstruction. This was a big benefit to Art Pop, who became a very central public power, and the state's budget director. Pope was widely respected but not beloved. Cutting government spending had long been his dream.

[338 ] Within a few months, the legislature had overhauled the state's tax code and budget from top to bottom, following the rightwing playbook. Discussion of a think tank, Civitas Institute, founded by Pope and his family's $150 million John William Pope Foundation. In the 1980s, Pope and his family foundation had invested $60 million in the systematic development of a conservative infrastructure in NC.

[ 339] Pope and his family foundation gave more than $500,000 to state candidates and party committees in 2010 and 2012. Pope's company, Variety Wholesalers, gave $1 million more to outside groups running independent campaigns during that period.

The NC legislature slashed taxes on corporations and the wealthy while cutting benefits and services of the middle class and the poor, gutted environmental programs, limited woman's access to abortion, backed a constitutional ban on gay marriage, and legalized concealed guns in bars and on playgrounds and school campuses. It erected new barriers to voting. Income inequality was increased. It eliminated the earned-income tax credit for low-income workers, and repealed NC's estate tax.

[ 340] The state also spurned the expanded Medicaid coverage for the needy that it was eligible for at no cost under the Affordable Care Act, denying free health care to 500,000 uninsured low-income residents.

To make up for the low of income from lowered taxes, savings were gained from reduction of support for the public education system. Details given about how they did this.

[ 341] North Carolina's esteemed state university system also took a hit. This caused tuition hikes, faculty layoffs, and fewer scholarships. But Pope offered to privately fund academic programs in subjects he favored, like Western

civilization and free-market economics. The treatment of history also was altered, downplaying the roles of social movements and government while celebrating what it called the "personal creation of wealth." Pope's network also funded academic programs in subjects he favored, like Western civilization and free-market economics.

[342 ] Republicans in the state passed a bill requiring North Carolina's high school students to study conservative principles as part of American history in order to graduate in 2015.

But Pope became a lightning rod. The NAACP began holding weekly "moral Monday" protests in the state capital, and started picketing the chain stores owned by Pope's company, Variety Wholesalers.

[343 ] Pope argued that the country's growing economic inequality was not a worry because "wealth creation and wealth destruction is constantly happening." All Americans had a fair chance at success.

The poor, he argued, were largely victims of their own bad choices. The constellation of nonprofit groups supported by Pope's fortune echoed this tough-luck message.

[ 344] Gene Nichol, the director of the Center on Poverty, Work, and Opportunity at the University of NC School of Law, pointed out that 1/3rd of the state's children of color lived in poverty, long before they were old enough to make choices on their own. But Pope's network successfully pressured the university to eliminate the Center

Pope's own experience of poverty was limited. He grew up in a wealthy household, attended a private boarding school before the U. of NC and the Duke School of Law, and joined his family's discount store business. Pope believed he had advanced to the helm of the company on his own merits. David Parker, the chair of the NC Democratic Party, accused Pop of glossing over the fact that he was born privileged.

[345 ] The ideological machine that Pope bankrolled in NC was unusually powerful. States' rights had been a conservative rallying cry, particularly in the South. During the Reagan years, the movement for states' rights took on a pro-corporate cast. Thomas Roe was active, and founed the State Policy Network in 1992, a national coalition of conservative state-based think tanks. By 2012, it had 64 separate think tanks , at least one hub in every state. It provides a "catalogue" of "raw materials" and "services" for local chapters to use. In 2011, its budget was $83.2 million. It coordinated with other conservative nonprofit groups like AFP, Cato, Heritage, Americans for Tax REform, -- all of which the Kochs also funded.

[346 ] Adding clout was the American Legislative Exchange Council (ALEC), which is a corporate "bill mill," producing on average 1000 new bills a year, 200 of which became state law. Lawmakers made sure not to mention the corporate origins of model bills. The Kochs were early funders of ALEC activities, which included numerous bills promoting the interests of fossil fuel companies. While the Kochs said they were for criminal justice reform, but while they were active in ALEC, it pushed for draconian prison sentences that helped the for-profit prison industry, very active in ALEC. It also promoted mandatory-minimum sentences for drug offenses.

[347 ] In 2009, the State Policy Network added its own "investigative news" service, sprouting new bureaus in some 40 states. It partnered with a new organization, the Franklin Center for Government and Public Integrity, which produced news stories and promoted the legislative priorities of ALEC. Professional journalists soon took issue with the Franklin Center's labeling of its contents as "news". Cumulatively, ALEC, the State Policy Network, and the Franklin Center for Government and Public Integrity created what appeared to be a conservative revolution bubbling up from the bottom to nulllify Obama's policies in the states, but the funding was largely top-down. Much of the money went through DonorsTrust. Fewer than 200 rich individuals and foundations accounted for the $750 million pooled through Donors Trust and Donors Capital Fund, since 1999.

[348 ] An obscure Republican freshman congressman, Mark Meadows, elected after gerrymandered districts were set up, led to the shutdown of the federal government. He sent a letter to the Republican leaders of the House demanding they use the "power of the purse" to kill the Affordable Care Act, by refusing to appropriate any funds for its implementation, or shut down the government. 79 Republican congressmen signed on to the plan.

[349 ] When radicals in Congress refused to back down, they brought the federal government to a halt for 16 days. This removed the impetus for political extremists to compromise. The 80 members of the so-called Suicide Caucus were an unrepresentative minority, representing only 18% of the country's population, and 1.3rd of the Republican caucus in the House. Lizza noted that in previous eras ideologically extreme minorities could be controlled by party leadership, but in the current House, party discipline had broken down. Party bosses no longer rules. Ted Cruz, whose 2012 victory had been fueled by right-wing outside money, orchestrated much of the congressional strategy.

[350] Several schemes were devised by conservative activists opposed to the Affordable Care Act, one to hold up funds for the health-care program, another was a massive "education" capaign to stir noncompliance with the federal law. These efforts were largely financed by the Freedom Partners Chamber of Commers, the Koch network's "business league."

[351] In 2013, Americans for Prosperity spent an addtioanl $5.5 million on Anti-Obamacare television ads. They also pressured states and state officials to set up their own health-care exchanges.

[352] The Heritage Foundation also played a major role, creating a dark-money 501(c)(4) arm called Heritage Actin that could engage directly in partisan warfare, into thwich the Koch network put $500,000.

[353] In 2013 there was another futile fight over Obamacare.