After the passage of the $787 billion stimulus bill in mid-February, the Obama administration entered what we might call its second phase in that month’s final week, when the President spoke to a joint session of Congress on February 24 and, two days later, unveiled his first draft budget of more than $3.5 trillion. Rudolf Goldscheid, an early-twentieth-century Austrian Jewish sociologist and reformer, once said, “The budget is the skeleton of the state stripped of all misleading ideologies.” Although we don’t really talk that way anymore, the remark’s meaning still holds true today: the budget is the document through which an administration announces just what sort of polity it envisions, and which fights it is willing to take on to realize that vision.
The Obama vision, in sum, is for a much more activist government that would spend large sums on health care—chiefly, at first anyway, to reduce costs—and preventing climate change, and would finance those ambitions through higher taxes on the wealthy and the elimination of some tax breaks for certain categories of powerful interests: insurers, oil and natural gas companies, large farmers, and banks, to name a few. Although Republicans spoke of tax increases on “hardworking American families,” in the words of Senate Minority Leader Mitch McConnell the day the budget was released, the budget proposal would raise taxes only on American families earning more than $250,000, and even then only starting in 2011, when the Bush tax cuts are set to expire.1
Republicans can be counted on to conflate the wealthiest 2 percent or so of households2 with the more generic and universal “hardworking American families.” That rhetoric constitutes the usual sophistry we’ve heard since Ronald Reagan’s time. But their coming defenses of their corporate benefactors will be in earnest. The Obama budget really does take on several of them. For example, the plan would levy an excise tax on Gulf of Mexico oil for an anticipated $5.3 billion in revenue over ten years. It would impose a fee on nonproducing energy leases, bringing in another $1.2 billion during the same period. It would also close several other smaller oil and gas loopholes.
In proposing to spend $634 billion over ten years on various health care provisions, billed as a mere down payment on larger reform to come perhaps this year, the budget calls for $316 billion in Medicare and Medicaid savings. A significant amount of this would come from reduced government payments to private insurers serving the elderly (many analysts over the years have argued that these insurers have padded their bills and received inflated reimbursements). The plan also calls for the establishment of a so-called cap-and-trade system for the regulation of greenhouse gas emissions, which will force companies that exceed new emissions targets set by the government to purchase credits from companies that stay under those targets. Finally, the budget would cut around $5 billion in payments to agribusinesses and farmers with more than $500,000 in annual revenue, and about $4 billion in subsidies to private banks that make college loans (the number of Pell Grants would be increased to offset this cut).
In other words, the budget takes on oil, gas, insurance, banks, and utilities, among others. Obama, in his Saturday radio-video address at the end of that final week in February, said:
I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this: So am I.
A central aspect of Obama’s entire approach to governance has focused on reducing the power and influence of these lobbies. The near-universal assumption appears to be that while he will score wins here and there, and perhaps some significant ones, the lobbyist culture of Washington is a permanent and intractable feature of life. But as I read Robert G. Kaiser’s excellent book, I was surprised to find myself thinking that maybe that culture is not so intractable after all.
So Damn Much Money ends in the twilight of the Bush era and doesn’t even so much as mention Barack Obama. Nevertheless, it is illuminating on the question of the system that Obama is trying to change. Kaiser, the managing editor of The Washington Post during much of the 1990s and now that paper’s associate editor and senior correspondent, traces the story of the rise of the “corroded culture,” as he calls it, largely through the story of one firm and one man, Gerald S.J. Cassidy, who has been one of Washington’s top lobbyists for thirty years.
Cassidy began as a young idealistic liberal with a tough Brooklyn background who investigated hunger and nutrition issues for George McGovern. But Kaiser traces his evolution into a power broker whose personal fortune exceeded $100 million and whose clients included General Electric, Wal-Mart, the Business Roundtable, and Rupert Murdoch’s News Corporation. As he does so, he shows how the lobbying business in Washington grew, along with other developments like the dramatic increase in the cost of election campaigns, leading to the present-day mess.
Cassidy was finishing law school at Cornell in the mid-1960s when he decided to work in a legal aid program for itinerant farm workers in Florida (CBS’s famous Harvest of Shame documentary had made a profound impression on him). He was sent to Fort Myers, where his colleagues included Mickey Kantor, later Bill Clinton’s trade representative. In due course he befriended another young idealist, Kenneth Schlossberg, who worked for the Senate Select Committee on Nutrition and Human Needs. Schlossberg helped Cassidy get a job on the committee’s staff.
McGovern, after his 1972 presidential defeat, began to lose interest in Cassidy and wanted him replaced by another young idealist with a more political turn of mind by the name of Bob Shrum, later famous as a political consultant. In 1975, Cassidy and Schlossberg left Congress and went into business together in the basement of Schlossberg’s Capitol Hill townhouse for the purpose of providing
a broad range of services to industry and government including but not limited to research, counseling, evaluation, planning, policy making and analysis of agricultural, food, nutrition and health programs, policies and products.
As Kaiser notes dryly: “No lobbying there.”
How is a background in matters like poverty and food stamps parlayed into lobbying riches? Well, you start with what you know. A California businessman whose company provided ingredients for school lunches had complained that he had not been paid by the Department of Agriculture. The son of the man who owned the business had met Schlossberg “from the industry side of child nutrition programs” when Schlossberg was on Capitol Hill. Cassidy knew the person to call at the department. The business got its check, and the firm its first fee.
The Kellogg Company then came calling, looking for help to get breakfast cereals included in the school lunch program. The National Livestock and Meat Board wanted a report on how anticipated changes in nutrition policy might affect the cattle industry. The National Frozen Food Association needed a report on congressional attitudes toward supermarkets. “After six months in operation,” writes Kaiser,
Schlossberg-Cassidy was a going concern. Pillsbury, Nabisco, and General Mills had joined its roster of clients. Schlossberg and Cassidy had real income, several thousand dollars a month each.
The cherries really started lining up on the slot machine in 1976, when a Frenchman named Jean Mayer, who had gained attention as a nutritionist at Harvard by chairing a White House conference on nutrition, was appointed president of Tufts. Mayer, sensitive to Tufts’s low status compared to Harvard, wanted to start a world-class nutrition center at the university. Could Cassidy and Schlossberg help somehow? As Kaiser points out throughout the book, one of the first things a resourceful lobbyist does for a paying client is to comb the statutes and regulations looking for an angle. And so:
Cassidy found a law on the books “that you could say authorized a national nutrition center,” as he put it. It had been sponsored by Senator Quentin Burdick of North Dakota, and money had been appropriated for a project in North Dakota under the authorization. As Cassidy realized, its wording seemed to allow room to fund the facility Mayer hoped to create at Tufts.
What Mayer sought was something quite unusual at the time—a specific appropriation for a specific institution to use for a specific purpose. Sound familiar? It should. It was an earmark. Perhaps, Kaiser writes, one of the first. The team’s efforts were not hurt by the fact that the local congressman in Boston was Tip O’Neill, who in short order would succeed Carl Albert as the speaker of the House of Representatives. The Tufts center was funded and built.
No one had quite been aware that a single university could petition Congress on such a matter. But once it happened at Tufts, other universities quickly took notice. Soon Georgetown and then many others were angling for their piece of the action. Cassidy and Schlossberg had invented something. They were delivering. And soon, they were getting rich.
An occasional matter pricked at their consciences. They signed up Ocean Spray, which wanted cranberry juice included in the school lunch program. Schlossberg played a round of golf with members of the board, one of whom “delivered a diatribe against FDR and his works—you’d have thought it was 1932.” The money kept coming, though, from Ocean Spray and many others. The firm’s revenue rose from $700,000 in 1982 to $17.5 million in 1987. But Cassidy was much the more hard-driving, and according to Kaiser he split with Schlossberg at the Democratic Convention in 1984, when long-simmering matters came to a head, the unlikely breaking point being a dispute over whether Schlossberg and his wife could use a limousine the firm had hired to drive about an hour north of San Francisco to look at some Brittany spaniel puppies.
This history is interesting for its own sake, and Kaiser’s narrative skills are formidable. He can make a suspenseful story out of a twenty-five- or thirty-year-old dustup over academic earmarks involving John Danforth, a solemn former Missouri senator. He had ample access to Cassidy, Schlossberg, and all the other principals, and he clearly spent his share of time in the archives looking up the firm’s old contracts.
But where So Damn Much Money really stands out is in the chapters that trace the broader trends that Cassidy’s rise represented. Kaiser explains how earmarks became routine. He describes the explosion in the number of political action committees after the post-Nixon campaign finance reforms of 1974. He surveys the astounding increases in the costs of campaigns, from $77 million for all Senate and House campaigns in 1974 to $343 million just eight years later, with costs for television ads accounting for much of the difference.3 He discusses the rise of the new class of political consultants and the new technologies they began to use, the incessant polling and focus-grouping we know so well today. He analyzes the appearance of what the journalist Sidney Blumenthal termed, in 1980, the “permanent campaign,” which turned lawmaking into a nonstop battle for partisan advantage. He chronicles the rise of Newt Gingrich, who employed these techniques to lead the Republican takeover of the House of Representatives in the 1994 election. And he assesses the towering impact all of this had on the political culture of Washington.
If the outlines of this squalid story are familiar, the details (such as the costs cited above) still have the power to shock, and the corrosive influence of high-powered lobbying is clear. Kaiser tells the story of how, in 1982, Mississippi Democratic Senator John Stennis was facing his first potentially strong challenge in ages, from the Republican Haley Barbour, now that state’s governor. Stennis had never raised more than $5,000 for a campaign. But this time, some Senate friends pressed a consultant on Stennis, who encouraged the senator—the ranking Democrat on the Armed Services Committee—to seek contributions from LTV and McDonnell-Douglas, two major defense contractors. Stennis demurred at first: “I hold life and death over those companies. I don’t think it would be proper for me to take money from them.”
In the end, though, he did, and he beat Barbour nearly two-to-one. In recent years, politicians haven’t even feigned Stennis’s attempt at restraint. When, in 2007, House Democrats initiated an effort to raise the tax rate on the earned income of hedge and equity fund managers from 15 percent to 35 percent, New York Senator Charles Schumer sprang immediately and publicly into action to oppose it. For the 2008 elections, Schumer ran the Democratic Senatorial Campaign Committee. Under his leadership, congressional Democrats raised $4.9 million from hedge funds, twice the amount raised from hedge funds by Republicans in Congress.
Such stories happen to involve Democrats, and responsibility for the rise of this system lies to some extent with both parties. But Kaiser clearly believes, without quite saying so, that the Republicans are much more to blame—especially Gingrich and longtime Republican Majority Leader Tom DeLay. Gingrich, he writes, got rid both of old customs that produced a degree of collegiality and of the idea that members of Congress should have any meaningful expertise on issues, assigning them to committees based less on their knowledge of and interest in issue areas than on their ability to raise money from groups with business before the committees in question.
Kaiser quotes Bob Livingston, the former Republican congressman from Louisiana who briefly served as Speaker of the House during the Monica Lewinsky madness until news of his own infidelity forced his resignation. Naturally, he’s a lobbyist now, but his insights about Gingrich are valuable:
One of Newt’s biggest mistakes was to tell members to leave their families [back in their districts]. I think that so many of the problems today stem from that effort. Once they started doing that, they wanted to stay home not only Saturday and Sunday, but on Mondays and Fridays…. They’d come into Washington Tuesday night, work Wednesday, and leave Thursday…. So what you had was ninety subcommittees, and all of the political committees, and all of the leadership committees, all meeting Wednesday morning between nine and twelve. You can’t run Congress like that. You can’t run any institution like that. And the institution broke down….
He believed that the more committees and subcommittees a person can be on, the more attractions they can acquire to present to contributors and to voters, to say “Look what I’m doing for you.” The problem is, they don’t know anything about anything that’s going on in any of those committees, because they can’t be in more than one place at one time….
When the Republican House of Representatives did attempt to legislate, it was often in blatant service of its corporate guarantors. This was the famous “K Street Project,” the DeLay-led effort—fabulously successful, too, at least for a while—to coerce major lobbying shops and trade associations to hire people approved by the GOP and freeze out Democrats. (Since many influential law and public relations firms have offices on K Street, it has come to stand for the power of the lobbies.)
The story of the K Street Project has been told often, but Kaiser gets a first-hand account from Chuck Hagel, the now retired Republican senator from Nebraska, who, while conservative, had an independent streak and was resistant to the permanent campaign mentality. Recalling how the partisan efforts of Gingrich and DeLay to control K Street had exerted an influence on weekly policy lunches, Senator Hagel told Kaiser:
They wanted to build a triad: the White House, K Street and business, and Congress, and just lock up the issues…. Our role, the Republican Congress, was to do the bidding of the Republican business community as represented on K Street. That K Street Project was about as blatant as anything I’ve ever seen.
It all came crashing down, at least for a while, around the figure of Jack Abramoff, the lobbyist who swindled Native American gaming interests out of millions of dollars and is now in jail. The Abramoff scandal implicated several aides of DeLay. It led ultimately to DeLay’s downfall (he’d gone on an Abramoff-sponsored golf junket to Scotland) and sent an Ohio GOP congressman to jail and two other legislators to defeat, while one decided to retire.
Cassidy, meanwhile, had tried to swim with the tide. At heart, he remained through all these years and millions a liberal Democrat. But business was business, so, in 2003, with Republicans riding high, Cassidy offered a job to a well-connected Republican House aide named Gregg Hartley, who took over much of the visible management of the firm. When the Democrats took back control of the House in 2006, Cassidy lost some clients. His “fantastic journey…hadn’t ended,” Kaiser writes, “but his magic carpet was slowing down.”
What could I possibly have found hopeful about this sordid tale? While it is true that lobbying has been around forever, what is striking as one reads through So Damn Much Money is how recent these more toxic developments are. Kaiser writes that some of the main trends he describes—such as earmarks and political action committees—began in the 1970s, and that’s true. But the really big money didn’t start infiltrating the system until the mid-1980s. The most blatant excesses didn’t arrive until a decade later, and many of the Republicans responsible for them are now at worst in jail and at best out of power. And unless Obama really screws up or the economy gets even worse than most experts imagine, they appear unlikely to be back in power again anytime soon.
The Democrats, while a long way from having clean hands on these matters, have taken some positive steps. In January 2007, both the House and the Senate, now in Democratic hands, passed impressive reform packages. Gifts from lobbyists were banned, as was most subsidized travel. Efforts to influence the hiring practices of private firms for partisan reasons (that is, the K Street Project) were made subject to criminal penalties, including removal from office. Kaiser thinks these changes have had an effect:
Lobbyists did stop picking up [dinner] tabs, according to many of them. Parties that lobbyists and their clients used to throw at national conventions were strictly limited and mostly did not occur in 2008, a real change.
One change Nancy Pelosi and Harry Reid could not push through was a two-year “revolving door” ban on lobbying Congress after members and staff had left. Too many members—of both parties—had enviously seen too many of their colleagues go from making the member’s $162,500 a year, or the staff person’s $95,000, to a salary of $300,000, or far more, on K Street overnight.
But here, Obama has stepped in with what are almost certainly the most stringent ethics and lobbying rules that any administration has applied to its officials. On his first full day in office, Obama issued an executive order forcing “every appointee in every executive agency” to observe a list of stringent rules. They can’t accept gifts. They can’t participate for two years in any matter they worked on in prior employment. They can’t lobby Congress for two years upon leaving the administration, and they can’t lobby the Obama administration ever.4
These regulations should, over time, have some kind of positive impact. As Kaiser notes, 283 former Clinton administration officials became lobbyists, along with 310 Bush appointees. Obama can’t do anything about those people, but his executive order should strongly discourage applicants who might have mercenary motivations in joining government and thereby reduce the pool of people who can sell their inside knowledge to the highest bidder.
In addition, the Obama transition team’s famous questionnaire for job applicants is surely the toughest ever promulgated. Notwithstanding the failure to vet the appointments of Timothy Geithner, Tom Daschle, and Hilda Solis, its sixty-three questions are part of a vetting process that longtime Washington observer Norman Ornstein called “the equivalent of full body cavity searches.”5 The questions are broken down into eight sections: professional background (nine questions); publications, writings, and speeches (five); relationships and affiliations (six); financial information (twelve); tax information (nine); legal and administrative proceedings (eleven); domestic help (four); and miscellaneous (seven).
Question number thirty-two, asking if the applicant or spouse had ever received a gift greater than $50 outside of normal family/holiday circumstances, seems especially onerous. I would have flunked out at number one (“please furnish copies of all resumes and biographical statements issued by you or any other entity at your discretion or with your consent within the past ten years”).
Obama is trying to change the lobbying culture. He recognizes that doing so is not only a question of good government but also one of advancing his progressive policies. If he is to pass major health care reform or a comprehensive cap-and-trade system to regulate greenhouse gas emissions, the power of various corporate lobbies must be curtailed. It is after all the lobbies, and their servants on Capitol Hill, who typically defeat such measures. Public opinion often supports them.
It’s impossible to make such changes overnight, or in two or three years. It will take more reform legislation, especially in campaign finance, on something like free television time for political campaigns (the activity on which they spend most of their money). But it will take still more than that. On a range of fronts, the Obama administration and Congress have to follow a process that lobbyists don’t control and produce outcomes that lobbyists did not pervert. A health care bill that passes against the major lobbies’ opposition and then actually works to deliver better health care to people will go a long way toward diminishing the power of all large lobbies. Even Cassidy told Kaiser that he anticipates “a day of reckoning coming” against his own kind. When the crises are so severe and the system so inadequate to the task of addressing them, he says, “people will really come to understand that they are stakeholders.”
Are we at that moment? The upcoming budget fight will tell us a lot about how close we are. There are certain encouraging signs. The Washington Post reported in early March that Obama’s $634 billion health care proposal “has attracted surprising notes of support from insurers, hospitals and other players in the powerful medical lobby.”6 Of course, some of these interests are going along in part because Obama’s health care ambitions, so far, are relatively modest—he and his aides speak, for example, of moving toward universality, but are not yet insisting on a plan with universal coverage. And the same Post piece notes that some opposition is already taking shape: the head of a chain of Florida urgent-care clinics has launched a group called Conservatives for Patients’ Rights, which promises a $20 million campaign to fight Obama’s lurch toward “socialized medicine.”
Obama’s approach on health care and other matters is to bring all interests together and tell everyone up front that they’ll be heard but won’t end up getting everything they want. This openness may well end up being a weakness. The President’s bet—and he might be overestimating his own powers of persuasion—is that he can use his high approval ratings and popular support for reform on these matters to force outcomes that are negotiated in more-or-less good faith. History gives us ample reason to be skeptical. But if he can do this on health care or energy policy, there may be reason to believe that the culture of Washington will change, and that the Gingrich-Bush era represented not the permanent new face of business as usual but a nadir from which we might yet emerge.
—March 11, 2009
April 9, 2009
Further, the press usually doesn’t bother to explain that the higher rate paid by wealthy taxpayers—which will vary from 36 to 39 percent, as opposed to the current 33 to 35 percent—is a marginal rate that will apply only to every dollar earned above the $250,000 mark. Income up to $249,999 will continue to be taxed at the lower rate. ↩
See this Census Bureau chart at pubdb3.census.gov/macro/032008/hhinc/new06_000.htm. Roughly 2.245 million households, or the top 1.9 percent, had incomes greater than $250,000 in 2007. ↩
The full order can be read at www.whitehouse.gov/the_press_office/ExecutiveOrder-EthicsCommitments. ↩
See Dan Eggen and Ceci Connolly, “In Health Plan, Industry Sees Good Business,” The Washington Post, March 5, 2009. ↩