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  Phillips said it was also attractive because it had the advantage of enjoying bipartisan support. “It was a Republican idea,” he said.

  The cap-and-trade policy was made famous under President George H. W. Bush, who used it as a way to combat acid rain. The concept was simple. The government capped the total amount of a certain pollutant that could be released. But then it gave companies a license to release that pollution. A company could pollute as much as it desired, but it paid the price to do so by purchasing pollution “credits.” If a company cut the amount of pollution it released, it could earn credits for doing so and turn around and sell them. This created a “market” for pollution. Polluters paid to pollute, companies earned money by cutting pollution. All the while, government determined how much total pollution was allowed by setting the cap. The government could turn the screws and push the caps downward, making a stronger and stronger incentive to cut emissions.

  Cap-and-trade gained support after Bush imposed it on power plants that released sulfur dioxide, which created acid rain. By 2008, emissions were 60 percent lower than they had been in 1980. More importantly, the cuts were made at much lower costs than people had predicted. The cap and trade system on sulfur dioxide was imposed in 1990.

  With their bill, the Markey committee aimed to create the largest cap-and-trade system in history. The limit on greenhouse emissions affected virtually every corner of the modern economy, from automobiles, to power plants, to factories. The policy mechanisms to do so, laid out in the bill’s thousand pages, were almost impossibly complex.

  Ed Markey unveiled the bill in May of 2008, giving it the consumer-friendly name of “iCAP.” After Obama became president, Nancy Pelosi became emboldened. She helped initiate a coup in the Energy and Commerce Committee. A usually perfunctory vote on the chairmanship went against Dingell. He was replaced by the California liberal Henry Waxman, who vowed to pass a law to control carbon emissions. Ed Markey and his committee, after years of agitating from their basement office, were now in a position to do more than agitate. They were in a position to govern. They had opened a pathway to push their bill through Waxman’s committee.

  The iCAP bill was put on the legislative operating table in 2009 and opened back up. It would become known as the Waxman-Markey bill, an ambitious cap-and-trade system that quickly became a centerpiece of Obama’s legislative agenda. The bill had been in the works for years and had been the subject of hundreds of hours of congressional hearings. In the early days of the Obama era, even more hearings were held. The select committee worked even harder as it drafted new language and met with members of Congress and lobbyists from the energy companies and environmental groups.

  The long days of grinding work in the basement office were thrilling, in a way, for Phillips. He had the sense that he was a part of history. And he wasn’t the only one. At night, Phillips and his friends went out to drink at cheap bars. They must have felt something like the young staffers back in the 1930s, when the mighty legislative pillars of the New Deal were being put into place. They were laying the governing framework of future generations.

  They were part of the strongest governing coalition in years, or perhaps decades. An acquaintance of Phillips’s, a young speechwriter named Dylan Loewe, wrote a book during that time entitled Permanently Blue: How Democrats Can End the Republican Party and Rule the Next Generation. Galley copies were passed around Washington. People read Loewe’s prediction that the Democratic Party was in a position to hold the White House and Congress for the next quarter century, and this prediction seemed entirely believable. The Republicans had been reduced to a factional minority with no clear path back to power. The Democratic Party had the force of history at its back, pushing it forward.

  * * *

  Koch Industries’ lobbying office was located on the eighth floor of a majestic stone building two blocks from the White House. In early 2009, David Hoffmann—the environmental attorney who’d helped impose Koch’s “10,000 percent compliance” doctrine at Invista’s factories—was still relatively new to Washington, DC. After working for several years in Wichita, he requested a transfer to Washington in 2007 so that he and his wife could enjoy more big-city culture. He moved into an office at Koch’s lobbying shop, even though he was still a compliance attorney. If Hoffmann sympathized with certain elements of the Obama revolution, he also saw the ugly side of the federal government—the complex bureaucracy, and the overbearing paperwork to comply with environmental laws. The Clean Air Act, he said, was a prime example. To comply with the law, there are “literally thousands of items that you need to go over to determine compliance. It takes a full-time staff, working around the clock, to get some of these compliance reviews completed.”

  Even though he wasn’t a lobbyist, Hoffmann helped his peers in Koch’s public affairs division by lending his expertise on compliance matters. That’s why he got dragged into the largest lobbying fight Koch had ever waged, against the cap-and-trade bill that Phillips and his team were then constructing.

  Before 2008, Koch’s lobbying efforts had been fragmented. There was a team of lobbyists working for Invista, one for Georgia-Pacific, and another for the oil refining division, Flint Hills Resources. This fragmentation reflected Koch’s commitment to maintain its corporate veil, organizing its various divisions under a legal structure that categorized each division as an independent business. This structure helped Koch contain its legal liabilities, but it also hobbled its corporate lobbying efforts. Because Invista and Flint Hills didn’t coordinate closely, they might be duplicating their efforts or sending mixed messages to lawmakers. In 2008, Koch Industries consolidated its lobbying operations into a single, newly formed company called Koch Companies Public Sector. Now all of Koch’s lobbyists worked side by side, sharing information and strategies as they worked toward common goals.

  Hoffmann led an internal committee at Koch, studying how the company might not only adapt to a cap-and-trade regulatory scheme but how it might prosper from it. He came to this role almost accidentally. The newspapers were full of stories about the Waxman-Markey bill. Hoffmann knew that if the law passed, it would instantly become the most significant law that he and his compliance team at Invista would need to contend with. He formed the committee to study the issue. He thought that Invista might find novel ways to comply with the law that could be copied by other divisions at Koch Industries. He was steeped in the ways of Market-Based Management and believed that adapting to a cap-and-trade regime fit perfectly within the MBM framework. “Charles Koch wants to empower his employees to project where industry is going,” Hoffmann said. “We felt like we were doing exactly what the Koch philosophy meant to us. Which is: hope for the best but prepare for the worst.”

  Hoffmann enlisted a handful of fellow Invista employees to help him. He consulted with Koch’s lobbyists. And he quickly realized that there was reason to be optimistic about Koch’s future in a cap-and-trade world—or at least there was reason to be optimistic about Invista’s. Invista was already making investments that cut its carbon output. The company was refitting older factories with new furnaces, for example, fired by natural gas rather than coal. Such efforts saved money and increased efficiency, but they could also be transformed into carbon credits that Invista could sell. Koch Industries also operated smaller divisions that made pollution-control equipment. If cap and trade passed, those divisions could see a boost in business.

  Hoffmann labored under the assumption that some sort of cap-and-trade bill was inevitable. What he didn’t know then was that he held the minority opinion within Koch’s lobbying office.

  * * *

  Every Monday morning, Koch’s team of lobbyists gathered in a large meeting room just down the hallway from the office’s main reception area. As the lobbyists filed in for their weekly meeting, they took their seats around a large wooden table in the center of the room. The table was set with thick leather coasters with the Koch Industries logo embossed on them. Other than that, the decorations w
ere spartan. A pad of white paper stood on a tripod near the window, on which to write ideas and sketch out strategies. The only artistic adornment in the room was a small metal sculpture on the shelf of a lumberjack, an apparent homage to Georgia-Pacific and its past workforce.

  The weekly meeting was led by Koch’s top lobbyist, Philip Ellender. He didn’t share the habits of a typical lobbyist. He lived in Atlanta, working out of Koch’s offices there, and commuted to DC by airplane. While most lobbyists arrived for work around nine thirty or ten in the morning after spending late nights at dinner parties, Ellender operated on Wichita time. He arrived early and spoke frequently on the phone with colleagues in Kansas. He was also a true believer in Charles Koch’s philosophy. “We’re a bit philosophically more pure,” Ellender explained, “in that we recognize that we are unabashedly free traders, that we believe in profiting by the economic, not political, means. We’re against cronyism. We’re against subsidies. We’re against mandates.” He peppered his speech with the vocabulary of Market-Based Management.

  As Koch Industries became more politically influential, it became increasingly insistent that its lobbyists were pursuing a purely ideological mission. Koch’s lobbyists and public relations teams said their goal wasn’t to boost Koch Industries’ profits, but to champion the ideas of freedom and prosperity. Ellender and others were quick to highlight the times when Koch lobbied against subsidies or tax breaks that might benefit the company. Still, Ellender and his team focused overwhelmingly on the issues that did matter to Koch’s business, such as arcane rules about chemical safety, rate billing, and taxes on oil companies. Koch Industries also accepted the subsidies and tax breaks that were in place for it—Ellender said that refusing to do so would put Koch at an unacceptable disadvantage to its competitors.

  For all the talk about ideological purity, Ellender’s operation reflected a more complicated reality. The lobbying business didn’t operate along clean partisan lines. There was a cartoonish image of a Washington lobbyist that most Americans held in their mind—the image of a well-dressed influence peddler who took politicians out to expensive dinners and cocktail cruises on the Potomac River. With enough steak dinners, enough cruises, and enough campaign contributions, the thinking went, any politician eventually succumbed to the lobbyist’s wishes. If this view of lobbying was ever accurate, it was certainly irrelevant by 2009. The reason for this was structural: the number of corporate lobbyists had exploded over the previous thirty years. Thousands of lobbyists were trying to push their message, but the messages could only be received by a very narrow audience. There were only 435 members of the House of Representatives and 100 members of the Senate, a total of 535 channels into which all of America’s special interests were forced to funnel their message.

  The competition for those channels was more intense with each election cycle. In 1983, groups seeking to influence Washington policy spent about $200 million. By 2002, these groups—including corporations, labor unions, and advocacy groups representing retirees or environmental activists—spent $1.82 billion on lobbying, a sevenfold increase. By 2010, spending on lobbying had nearly doubled again to $3.55 billion. And this figure captured only a share of all lobbying expenditures—the share that was reported under public disclosure laws, which didn’t account for campaign contributions or issue-related advertising.

  The rise in lobbying spending was not spread evenly across interest groups. Corporations and business groups far outspent other interests, like labor unions and consumer advocates. By 2012, corporations, trade associations, and businesswide associations were responsible for 78 percent of all lobbying expenditures, according to an analysis by the political scientist Lee Drutman. Business interests outspent other interest groups by a ratio of 22 to 1 in 1998, and 35 to 1 in 2008, Drutman found.

  Even within these ranks of big corporate spenders, Koch Industries stood apart. The biggest corporations far outspent everyone else. About 90 percent of all US corporations did not even have one full-time lobbyist, and were only represented through trade associations. The biggest companies, like Koch, had a significant advantage.

  In this environment, the primary job of Koch’s lobbyists was to gather and analyze information. Inside information was perhaps even more important in the market for influence than it was in the market for crude oil. Congress was an impossibly opaque system, a complex pipeline network of policy ideas that flowed between 535 offices in the House and Senate. Minute-by-minute updates on the inner workings of Congress were extraordinarily valuable, and out of reach for most companies. Koch’s lobbyists, like most other corporate lobbyists, spent their time gathering detailed intelligence. They determined which bills were originating from which offices, which bills had momentum and which didn’t, which politician needed help with a campaign and where that politician stood on issues that were important to Koch. This need for inside information explains why so many lobbyists are former congressional staffers. The former staffers have personal relationships with lawmakers and their staffers. They know which bills will be debated and moved forward through the system. A lobbyist’s value comes just as much from knowing about this process as it does from being able to influence it.

  Ellender’s team was small, considering the size of their job. Koch Companies Public Sector had only five full-time registered lobbyists in 2009. The defense contractor Lockheed Martin, by contrast, had an in-house team of thirty lobbyists that year.

  Ellender’s permanent team of lobbyists knew a great deal about Republicans in the House and Senate. Koch Industries had given generously to Republican candidates and conservative causes over the years—in the 2008 election cycle, Koch Industries gave $1 million to Republicans and just $186,500 to Democrats.

  When Ellender and his team met in 2009, they needed to figure out a way to learn more about the newly empowered Democrats. This might seem like an impossible task for Koch’s small cadre of lobbyists—the entire Koch team could fit around the conference table, with chairs to spare. But their lobbying power was bigger than their numbers might suggest. Each Koch lobbyist was like the regional manager of a franchise. They built expertise on certain policy issues, like climate change legislation or derivatives trading, and they had the ability to hire contractors from outside firms if they needed to beef up staff. This allowed Koch to build up or reduce its expertise on different topics as they arose in Congress. Sometimes, the outside contractors joined Koch’s team for its Monday meetings.

  One of the lobbyists at Ellender’s meeting table was a woman named Kelly Bingel, a contractor with Mehlman Vogel Castagnetti, a bipartisan lobbying shop. Firms like Mehlman Vogel were a shock absorber that protected corporations from populist passion. When conservatives took over Congress, Mehlman Vogel hired out its Republican lobbyists to help negotiate the new environment. When liberals took over, Mehlman Vogel hired out its Democrats.

  Koch Industries first retained Mehlman Vogel in 2007, when Democrats gained control of Congress, paying the firm $10,000 a month through 2008. By the end of 2009, Koch was paying the firm $20,000 a month and retaining thirteen of its lobbyists, including Bingel. She was a former staffer for Senator Blanche Lincoln, the Arkansas Democrat, and was on a first-name basis with many Democratic senators and staffers.

  Bingel was part of a hidden political movement in 2009 that could be called “Democrats for Koch Industries.” She spent time hanging around the cheap congressional cafeterias, like the one in the basement near Jonathan Phillips’s office. When Bingel saw a staffer she knew, she sat down and traded gossip. She spent time on the phone, collecting tips. When her staffer friends wanted to get out of the office, Bingel took them out to lunch. Bingel became a liaison between Koch Industries and the liberal politicians whom the company had spurned for so many years. “My job was to introduce them to Democrats,” she said.

  There were two ways for a lobbyist like Bingel to get the attention of a politician. The first was to work for that politician and remain close to their staffers after leavin
g, as Bingel had done. The second way was to raise money for the politician. This is why lobbyists frequently host fund-raising lunches, banquet dinners, and other events. The issue of fund-raising had to be treated delicately. Bribery is illegal in the United States. If a lobbyist offered money to a legislator in return for a vote, then both people could end up in prison.

  To compensate for this fact, an elaborate system of etiquette had taken root in Washington. A lobbyist showed up, made an impassioned pitch to a legislator, and then left. Later, the lobbyist called the legislator’s office to say how thrilled the lobbyist would be to hold a fund-raising dinner for the legislator. If the lobbyists mentioned fund-raising in the middle of a pitch meeting, it would be akin to going shirtless to a formal dinner. Everyone in the room would be shocked.

  When Bingel brought her colleagues from Koch Industries to meet Democratic politicians, they followed the well-honed lobbyist playbook. They focused on three factors that could sway the legislator’s thinking. The factors were:

  1. The Preferences of a Legislator’s Voters. This was the most important factor to a lawmaker. A legislator cares, more than anything, about winning the next election. They seek to stay safely within the zone of voter approval.

  2. The Broader Political Impact of the Vote. Because every legislator belongs to a political party, they also obsess about their standing within the party and their political future. A good lobbyist points out how any given vote fits into the party’s goals.