Kochland Page 54

  “You have stated that we’re the party of ‘no.’ Well—that’s true. We say ‘no’ to higher energy costs. ‘No’ to subsidizing the East and West Coasts at the expense of the heartland. ‘No’ to more bureaucracy and red tape. ‘No’ to the largest tax increase in American history and ‘no’ to sending our manufacturing jobs to China and India,” Inhofe said.

  Inhofe’s embrace of the word no telegraphed to the Senate that Democrats were on their own. The Democratic Party held a supermajority of votes in early 2009, but the supermajority was fragile. Max Baucus, for example, had voted against a cap-and-trade bill in the past. Claire McCaskill of Missouri said in 2009 that she would vote against the measure. In this environment, getting to sixty votes would be difficult.

  During July and August, Inhofe and Americans for Prosperity cleared the playing field of any Republican participants. By the fall, all the Republicans on Barbara Boxer’s committee were boycotting the proceedings. One afternoon hearing, Boxer sat alone at the center of the dais. Arlen Specter of Pennsylvania, a conservative Republican on the committee who’d switched his affiliation to the Democratic party in April, told the Pittsburgh Post-Gazette that the boycott was an act of “really excessive partisanship,” which surpassed what he had seen before in the Senate. “I have been a party to some very heated disagreements, but they have been disagreements on the merits, on the substance. . . . But you can’t disagree with an empty chair,” he said.

  The chairs remained empty. Barbara Boxer initially said that her committee would pass a bill and put it before the entire Senate for a vote by September 8. Then, in late August, that date was extended to late September. And then it was delayed into October.

  The bill fell under the shadow of larger, more visible legislative fights. The Senate was simultaneously debating the Affordable Care Act, which drew Tea Party protestors out in crowds to town hall meetings and parades. Americans for Prosperity fed these efforts, arranging for bus rides and compiling e-mail lists to inform its members of the time and location of the public meetings they could attend. The fight over Obamacare drained the time, attention, and resources of Harry Reid, the Obama administration, and the rest of the Democratic Party leadership. Everyone knew that there was only so much momentum, so much political energy to be spent in Washington. This was the key advantage that was given to Koch Industries. In the Senate, the advantage always went to the opponent who wanted to stop something rather than build something.

  In October, Barbara Boxer and Harry Reid employed something called the nuclear option: putting the bill to a vote in the committee over the objections of Republicans. The bill passed without a single Republican vote. The bill was tainted now, stained as being partisan. Each passing week made it easier for other senators to stand aside and let the bill sink.

  When the cap-and-trade bill moved to the Senate floor, it set off a frantic race among senators who sought to shape it, support it, or kill it. During this period, Koch Industries sought to raise the temperature even higher on any senator who considered supporting the bill. To do this, Koch employed a tactic known as the “echo chamber,” of which it had become a master. The echo chamber allowed Koch to amplify its message while hiding its hand.

  The strategy originated from the network of think tanks and academic programs that Charles Koch had been building for almost forty years. In 1974, when Charles Koch laid out his strategy for launching a libertarian revolution in the United States, he listed education as the first of four pillars in his strategy.III He had pursued this strategy with great success, building the Cato Institute think tank and academic centers like the Mercatus Center at George Mason University. These efforts had a philosophical, almost noble, feel to them. The stated goal was to fund scholars and big ideas that would slowly move society toward an understanding of Charles Koch’s political vision. By 2009, the educational enterprise had become a network of shell enterprises and hidden funding streams that gave immediate tactical support to Koch Industries’ lobbying goals.

  Ideas are the raw material of all legislation. In Washington, DC, there is a surprisingly small congregation of think tanks, policy shops, media outlets, and academic institutions that shape the daily political conversation. Over the decades, Koch Industries became adept at seeding this territory with its own ideas, and its own thinkers, in a way that hid its influence.

  The echo chamber tactic began when Koch’s lobbyists would commission and pay for an academic study, without claiming credit for it. That study, seemingly independent of Koch, was then fed into a series of think tanks and foundations that Koch controlled. Finally, the work of those think tanks was weaponized into the raw ammunition of political campaigns. Taken together, it had the effect of making the message from Koch Industries’ lobbying shop seem far louder, and far more popular, than it really was. This, in turn, had a surprisingly strong effect on senators and other lawmakers, who paid close attention to public sentiment.

  In 2007, for example, Koch Industries quietly funded the work of a Democratic-leaning think tank called Third Way. The think tank promoted “New Democrat” policies such as those embraced by Bill Clinton: neoliberal policies that sought to combine New Deal goals with free-market methods. Lobbyists at Koch’s office knew that Third Way’s economic study program supported free-trade policies such as NAFTA. Such trade policies were under attack in 2007 because they did not deliver the economic benefits that they had promised to huge swaths of the American population. The textile industry of South Carolina, for example, was decimated by trade agreements, such as NAFTA. This was stoking opposition to such trade agreements among both Democratic and Republican politicians.

  Koch Industries supported free-trade agreements and wanted to ensure the passage of future trade deals, while blocking any reversal of existing deals. The possibility of any trade war was dangerous for Koch Industries not just because the company had extensive business holdings around the world. To take one specific but very high-stakes example: Koch’s Pine Bend refinery, still a major profit center for the company, was deeply dependent on oil imports from Canada. Any trade disputes ignited by renegotiating NAFTA could dramatically hurt Koch’s profitability. Koch’s lobbyists knew that they wouldn’t get much of a hearing from Democratic politicians. Very few liberals saw an upside in 2007 in carrying water for Koch. That’s why Koch used Third Way to make its point: liberals listened to Third Way.

  The Koch lobbying office directed money to support a Third Way report that was published in November of 2007, entitled “Why Lou Dobbs Is Winning.” Dobbs was a cable television personality who carved out a niche railing against free trade deals that he said harmed the middle class. The Third Way report cast Dobbs as part of a dangerous “neopopulist” movement that threatened to harm America’s future by making the country turn inward. The report did not cite the support from Koch Industries, nor does it appear that Third Way acknowledged Koch’s support anywhere in its publicity materials. The report’s acknowledgments did give thanks to Rob Hall, a lobbyist for Koch’s Invista division, thanking him for “his support in helping us conceive of and design Third Way’s trade project,” without disclosing Koch or Invista’s funding. Third Way was not obligated to disclose its support from Koch Industries in its tax filings, and did not. Koch successfully pushed its view on trade while barely leaving a fingerprint.

  In 2009, Koch’s use of the echo chamber was more targeted and better amplified. The operation began at Koch’s lobbying office, where a senior manager directed lobbyists to pay for a third-party economic report that would undermine support for the Senate’s cap-and-trade bill, according to a person familiar with Koch’s political operations.

  To produce the report, Koch’s lobbyists selected a reliably conservative economic think tank called the American Council for Capital Formation. The ACCF didn’t hide its free-market leanings, and tax filings showed that it was funded by ExxonMobil and other corporate interests. But Koch Industries took pains to hide its involvements in the report it commissioned
in 2009. Koch enticed another lobbying group, called the National Association of Manufacturers, to “sponsor” the report, with the understanding that Koch Industries would pay for it.

  The Koch network had funded the ACCF for years, although it disguised its contributions by using the Claude R. Lambe Charitable Foundation, which the Koch family controlled. In 2006, the Lambe Foundation gave ACCF $40,000. It gave $50,000 in 2007. Koch hired the ACCF to produce a study looking at the economic damage that a cap-and-trade bill would cause the US economy. A person familiar with the arrangement said that a study of this kind would cost roughly $100,000. In both 2008 and 2009, the Claude R. Lambe Charitable Foundation gave $100,000 to the ACCF. Then its contribution dropped back to $50,000 in 2010.

  The report was released in August of 2009. It carried the kind of dry academic title that conveyed a sense of credibility and seriousness in Washington, DC: Analysis of the Waxman-Markey Bill “The American Clean Energy and Security Act of 2009.” The report’s lead author was a long-time ACCF economist named Margo Thorning.

  The study was announced with a press release from the National Association of Manufacturers. The announcement made no mention of Koch Industries’ involvement. Instead, the study appeared to have the backing of a trade group with the interests of a wide range of manufacturing companies at heart.

  The study was brutal in its assessment of Waxman-Markey. “Unfortunately, this study confirms that the Waxman-Markey Bill is an ‘anti-jobs, anti-growth’ piece of legislation,” NAM’s executive vice president, Jay Timmons, said in the press release.

  The study’s predictions were dire, in part because the ACCF used a set of economic assumptions underlying its analysis that most other studies did not use. The group, for example, predicted that renewable sources of energy would be slower to come online than many analysts predicted, which would leave the United States in an energy crunch. The ACCF estimated that the Waxman-Markey bill would destroy 2.4 million jobs between 2012 and 2030 if it was passed. It estimated that electricity prices would jump 50 percent by 2030, while $3.1 trillion in economic activity would be lost.

  Once the ACCF’s study was published, Koch Industries carried out the next phase of its echo chamber system. The study was quickly promoted by a think tank called the Institute for Energy Research, which sent out a press release on August 13 that highlighted the study’s findings. The IER was an outgrowth of the Institute for Humane Studies, the libertarian think tank cofounded by Charles Koch.IV By 2009, the IER was funded by Koch Industries and other companies, and a former Koch Industries lobbyist named Wayne Gable sat on IER’s board of directors.

  After the study was promoted by the IER, it was then recycled by another Koch Industries–affiliated think tank. This one was called the American Energy Alliance, and it was essentially the political action arm of the IER. The AEA was organized under the tax code in a way that it could be directly involved in politics, while the IER was organized as an “education” foundation that could not lobby or get involved in political campaigns. Where the IER was high minded, the AEA was something more of a street brawler. The AEA was headed by a former Koch Industries lobbyist named Thomas Pyle, who remained in close contact with his former colleagues at Koch’s lobbying shop.

  The AEA produced a series of political radio advertisements that were based on the new ACCF findings, along with other statistics that highlighted the potential economic threat of a cap-and-trade bill. A narrator in one of the radio ads intoned: “This tax will further cripple our already struggling economy—costing more American jobs. . . . Higher taxes and more job losses—what could Congress be thinking?” A corresponding fact sheet for the ad cited the ACCF for this claim. The AEA political ads were targeted in a way that benefited from keen knowledge of how the Waxman-Markey bill was then working its way through the Senate. Lindsey Graham of South Carolina was a particular target. “Why would Senator Lindsey Graham support a new national energy tax, called cap and trade?” one advertisement began. Citing the ACCF study, the advertisement claimed that “cap and trade . . . could significantly increase electricity bills, gas prices, and cost American jobs.”

  In all of these statements and advertisements, the same set of numbers were used again and again: More than two million jobs lost. Electricity prices would be 50 percent higher by 2030. These facts were also carried into Congress in the form of direct testimony. When the Senate Finance Committee sought to learn more about the economics of climate change, the committee invited Margo Thorning to testify. The ACCF study was submitted as evidence beforehand.

  “It’s pretty clear the costs outweigh the benefits,” Thorning told the committee. Chairman Max Baucus, the conservative Democrat from Montana, pointed out that the ACCF findings were far more negative than most. “You’re a bit of an outlier,” Baucus said.

  “We tried our best to build in realistic assumptions,” Thorning had said earlier.

  Inside Koch Industries, the ACCF report was seen as a tremendous victory. Koch’s point of view had been carried out into the world in real force—in press releases, Senate testimony, think tank discussions, and political attack ads. And Koch’s name wasn’t anywhere to be seen.

  Koch Industries wasn’t the only company to use these tactics. ExxonMobil also funded third-party groups that sought to raise doubts about the science behind climate change and to fight the cap-and-trade bill. But Greenpeace, the environmental activist group that fought hard to limit air pollution, found that Koch Industries fought to undermine the scientific consensus around climate change for longer, and more fiercely, than even Exxon. A 2010 Greenpeace analysis of spending on climate-denial groups between 2005 and 2008 found that Koch Industries and its affiliates spent $24.9 million to support such groups, almost triple Exxon’s $8.9 million in spending.V And Koch was more uncompromising than Exxon, whose lobbyists made it known that Exxon might support some sort of carbon emissions plan, such as a carbon tax.

  The efforts to undermine popular support for a cap-and-trade bill were effective. In late 2009, 57 percent of Americans believed there was strong evidence that global warming was real, according to a poll from the Pew Research Center. While this was a majority, it was a slimmer majority than in 2008, when 71 percent of Americans believed it. In 2006, 77 percent believed it.

  * * *

  As the Senate debated, Koch Industries applied yet more pressure. While punishing Congressmen who voted for Waxman-Markey, then tarnishing the bill through its echo chamber, Koch employed another tactic. This tactic was informed by the insight that Abel Winn had derived from his study of beating holdouts: When there’s competition, that completely blew the problem away. . . . Everybody behaved much better. Koch Industries would intensify competition among lawmakers by promoting competitors to challenge them.

  In 2009 and 2010, Koch Industries’ political network created new Republican candidates, seemingly out of nowhere, who rose up and challenged sitting congressmen and senators. Koch’s chosen candidates attacked the incumbents from the right, claiming that the Republican Party was insufficiently conservative and too accommodating of the Obama agenda. The overwhelming message was that compromise with Democrats must end.

  Bob Inglis was more surprised than anyone to find himself challenged by one of Koch’s candidates. Inglis earned an 84 percent rating from the American Conservative Union, which tracked lawmakers’ votes. He discovered that voting in line with the union 84 percent of the time was not enough. Inglis was seen as a holdout against Koch’s agenda because he stubbornly continued to advocate for controlling greenhouse gas emissions.

  Inglis’s competition came in May, and it arrived in the form of a prosecuting attorney from Spartanburg named Trey Gowdy. Inglis and Gowdy had been longtime allies and even friends. Inglis heard the news about Gowdy’s candidacy one morning when a friend called and told him. He collapsed back into bed. Gowdy was a formidable opponent. Koch Industries gave no money to Inglis during that campaign cycle, but contributed at least $7,500 to Gowdy. America
ns for Prosperity promoted Inglis’s town hall meetings to Tea Party activists so that they could arrive to protest, but there is no evidence that AFP directed such actions against Gowdy or questioned his conservative credentials. Gowdy, in turn, proved that he would support Koch Industries’ most important policy concern in the summer of 2009.

  Inglis and Gowdy met at a candidate forum to debate the issues that summer, held under a large tent next to a highway. The moderator was a conservative talk-radio host. There were two other candidates with Inglis and Gowdy, but Inglis considered Gowdy to be his only true competitor.

  The moderator asked all the candidates if they believed climate change was man-made and then added: “Would you support a bill that taxes carbon emissions?”

  This drew a hearty laugh from the crowd. They knew exactly how painful Inglis’s squirming must be. Inglis took the microphone and proceeded to alienate almost the entire audience:

  “I do believe that humans contribute to climate change. And, actually, let me strike that. I don’t believe it. It’s not an article of faith for me. My faith tells me to look at the data. The data says that’s happening. And that’s why I have a proposal that’s not cap and trade.” He explained the details of a carbon tax bill and how it would be “revenue neutral” by cutting taxes on wages.

  When Gowdy rose to speak, he said succinctly, “No on cap and trade, no on carbon tax.”

  “I’ve been a prosecutor for sixteen years,” Gowdy continued. “I’m used to having things proven to me and proving it to other people. Global warming has not been proven to the satisfaction of the constituents that I seek to serve.”

  Gowdy was interrupted by loud applause. The crowd kept applauding and hooting while Gowdy took his seat.