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  When Trump delivered his inaugural address, he made it clear that he was upending the political order. His voice was booming and severe.

  “Today we are not merely transferring power from one administration to another, or from one party to another—but we are transferring power from Washington, DC, and giving it back to you, the American people,” Trump said. His vision was near-apocalyptic, and he talked about “American carnage” that only his administration could stop. He managed to offend and alienate virtually every politician and former president sitting in the gallery behind him.

  “For too long, a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost,” he said. “Washington flourished—but the people did not share in its wealth. Politicians prospered—but the jobs left, and the factories closed. The establishment protected itself, but not the citizens of our country.”

  Charles Koch was considered part of this establishment. And everything Trump stood for was a threat to Charles Koch’s entire political project. Donald Trump’s presidency had the potential to destroy everything Charles Koch had built. Charles Koch’s political blueprints called for the federal government to retreat from virtually any intervention in the marketplace. But if Donald Trump had an underlying political philosophy, it was that the tools of government should be used aggressively to steer economic activity toward the benefit of the people who voted for him. Trump promised to tear up trade deals and impose tariffs to protect the white, working-class, and affluent voters who put him in office. Trump spoke in favor of punitive taxation on companies that thwarted this vision, and spoke favorably of entitlement programs that were funded by taxes on the rich. Alarmingly, Trump also lashed out in personal ways, at business leaders who antagonized him, using Twitter as his weapon of choice. Trump singled out as targets Jeff Bezos, CEO of Amazon, and the Carrier air-conditioning company, claiming that their economic decisions harmed America. It was clear that this same vindictive power could be used against Charles Koch. Based on Trump’s campaign rhetoric, it seemed entirely plausible that Trump would be willing to squeeze Koch Industries with all the available levers of government power, from the IRS to the EPA to the simple use of the White House Twitter account.

  Charles Koch responded to this threat with a strategy that bore his hallmarks: patience, persistence, and a reliance on his competitive advantages. To counter Trumpism, the Koch political machine employed a strategy that could be called “block-and-tackle.” Charles Koch would “block” Trump when Trump deviated from Koch’s wishes—when he imposed tariffs, raised taxes, or supported entitlement programs, for example. But Koch Industries would help Trump “tackle” the things that Charles Koch wanted to see demolished, helping the Trump administration when they did such things as dismantle regulatory agencies, cut taxes, or nominate economically conservative judges to the federal bench and the Supreme Court.

  For this strategy to work, however, Charles Koch needed to prove that his political machine was still relevant and still powerful within Donald Trump’s Washington. As luck would have it, Koch got the opportunity to do this very early in Trump’s tenure, just two months into the life of the Trump administration.

  In March of 2017, Donald Trump had no choice but to venture into territory where Koch Industries had the upper hand. It was time for Trump to turn his campaign promises into reality and to show that he really was the deal maker who could solve Washington’s dysfunction. This appeared entirely feasible—Republicans controlled the House, the Senate, and the White House. There was nothing standing in the way of Trump’s agenda. But to pass the agenda, Trump had no choice but to work through Congress. He had to engage in the complicated, maddening process of writing and passing laws. This is the terrain where Koch Industries was waiting for him.

  * * *

  The first fight was to repeal Obamacare. Republicans had been trying to do this for more than six years and now they had their chance. This seemed like the ideal project for Charles Koch to support. Obamacare, just as Charles Koch had feared, had become a massive government program that redistributed wealth from the very rich to the working class and the poor. The government estimated that Obamacare raised the tax bill of the top 1 percent of American earners by about $21,000, steering about $16 billion from the richest Americans to the poorest, largely in the form of health insurance subsidies.

  Throughout his campaign, Trump promised to both repeal the hypercomplex law and replace it with something else. And this is where the problem lay. In Charles Koch’s eyes, Donald Trump did not seem sufficiently dedicated to the job of tearing this system out, root and branch, and replacing it with nothing. Trump seemed open to compromise.

  Trump made statements along these lines that were particularly worrisome to libertarians, showing that his allegiance to free markets was questionable. After taking office, Trump made promises that were too large to fill without significant government intervention, promises more grandiose than even Barack Obama would have dared to make.

  “We’re going to have insurance for everybody,” Trump told the Washington Post during an interview in January. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.”

  While potentially offensive to Charles Koch, Trump’s statements were firmly grounded in political reality. Millions of people depended on Obamacare. The Congressional Budget Committee estimated that even a limited repeal of the law would take health insurance away from fourteen million people the first year, and twenty-four million more people the following decade. Trump and other Republicans sought to avoid such a political calamity. They planned to seek a middle ground that would retain some benefits and subsidies for the working class and the poor.

  There was another reason for Trump to compromise. It would help the Obamacare repeal effort move quickly. Trump wanted to achieve a legislative storm of greatness during his first hundred days in office that would rival FDR’s. He would repeal Obamacare, then pass tax reform, then pass an infrastructure bill, then pass an immigration law that included construction of a wall along the border with Mexico. With these accomplishments behind him, Trump would emerge as the most effective president of modern times.

  Charles Koch helped ensure that this agenda was derailed. The Koch political network would attack the effort to repeal Obamacare, and in doing so it would win a second victory by proving its power and ensuring a place at the bargaining table for Charles Koch.

  On March 6, the House of Representatives unveiled a plan to repeal and replace Obamacare with a bill called the American Health Care Act. The next day, Americans for Prosperity mobilized against the plan, just as it had mobilized against Obama. Large tour buses, chartered and paid for by Americans for Prosperity, arrived in Washington, DC, on March 7, unloading hundreds of passengers at an intersection near Union Station, within view of the Capitol dome. The crowd looked like tourists at Disney World. Most of them were older, congenial, and clearly enjoying the free trip to the nation’s capital. They were directed down the sidewalk by helpful employees in AFP windbreakers, who led them into the quiet, marble-tiled lobby of an upscale office building. The volunteers were ushered into elevators and sent to the building’s rooftop, where they walked into a lavish event space, covered by a party tent, with a beautiful view of the city. As they entered, the volunteers were given glossy placards with a sleek logo for the day’s event, reading “You Promised.” The message of the day was that these voters had been let down by Congress members who were balking on their years-long promise to repeal the health care law.

  The attendees sat in rows of chairs, in front of a stage that was bordered by large-screen televisions. The crowd was shown video testimonials, made by AFP, from everyday people who were purported victims of the ravages of Obamacare. The victim-impact statements were somewhat incoherent, from a policy standpoint. Most of their complaints were that health care was too expensive, or only available intermittently, p
roblems that other industrialized nations had solved by nationalizing the health care industry. But the overall tenor was consistent—Obamacare was a terrible burden, and Congress wasn’t doing enough to repeal it.

  After the presentation, the crowd was led out onto a terrace in the delightful spring weather and given free boxed lunches. They milled around and talked, and were later led to Capitol Hill where they met with congressional staffers and representatives to share their demands. The popular revolt against the American Health Care Act had begun.

  * * *

  Inside the US House of Representatives, resistance to Trump’s plan was led by the House Freedom Caucus, the group of lawmakers most aligned with Charles Koch’s worldview. Koch Industries was the second-largest contributor to Freedom Caucus members, according to Politico, ranking only behind the Club for Growth (which was partially funded by Koch’s political network). The caucus declared that the American Health Care Act was an unacceptable compromise of conservative principles.

  Mark Meadows, the North Carolina congressman who chaired the Freedom Caucus, led an effort. On the day the bill was introduced, Meadows published an editorial on the Fox News website, declaring his principled opposition to it. “We call on congressional leaders to keep their word to the American people, to push a real repeal of Obamacare, and to do it now,” Meadows wrote. The sin of the AHCA, as it was called, was the inclusion of tax breaks that would help millions of people pay for health insurance—“families will be given up to $14,000 of other people’s money,” Meadows complained. He pointed out that the bill also forced insurance companies to fine their customers if they dropped their health insurance, a sneaky way to perpetuate Obamacare’s mandate to purchase insurance. The bill also included subsidies to insurance companies approaching $100 billion, Meadows said. It was one thing for the Freedom Caucus to obstruct the Obama agenda. Now the caucus was obstructing its own party, its own president, and the bigger Republican agenda.

  Weeks dragged on, and Donald Trump began to look just as ineffective as Barack Obama had been. He couldn’t move the Freedom Caucus. The obstructionists in Congress knew that time was on their side; the longer the bill was delayed, the weaker Trump’s hand became. A left-wing resistance movement emerged, modeled on the Tea Party, that confronted Congress members at town hall meetings in school gymnasiums and auditoriums. New studies emerged showing the deep damage the bill might do by kicking millions off their insurance. With each day, the bill became harder to pass.

  The halting effort to pass it was carried forward by Paul Ryan, the Wisconsin Congressman who was the Speaker of the House. Ryan conducted his duties with the enthusiasm of a funeral director, impeccably dressed, unmovably calm, but with a deeply morose look in his eyes. He gave reasoned speeches and laid out the necessity of passing the AHCA quickly out of the House. He couldn’t move the Freedom Caucus.

  The crisis came to a head during the week of March 20. Ryan wanted to put the bill to a vote in the House. It wasn’t clear that the bill had enough votes to pass, but it seemed imperative to move it to the Senate before time dragged on much longer. Donald Trump made bold gestures to support the bill. He traveled to Capitol Hill and cajoled lawmakers. He said that they needed a win at all costs and needed to prove they could govern. Trump singled out Meadows in person and threatened to bring down the weight of the White House upon him if he wouldn’t bend. “I’m going to come after you,” Trump warned Meadows with a smile, according to media reports of the closed-door meeting.

  Nevertheless, Meadows persisted. That week, Trump gave the group an ultimatum—either they passed the health care bill, or he would abandon the effort altogether and lay the blame at their feet.

  This is when Charles and David Koch stepped in, to fortify the caucus. They did so in a way that was unprecedented. For forty years, Charles Koch prized his discretion in politics, funding candidates and lobbying groups through obscure cutout organizations with names like 60 Plus Association, Corner Table LLC, and PRDIST LLC. But on March 22, Charles and David Koch went public with their desire to change a legislative outcome. Americans for Prosperity and Freedom Partners (a clearinghouse organization for many of Koch’s donations) announced that they would support any member of Congress who voted against the health care bill. If the Freedom Caucus stood up against Trump, the Koch network would be there to protect them afterward. The two organizations announced they were compiling a “seven-figure reserve fund” that obstructionist Congress members could draw on if they voted no. “Republicans have been promising to fully repeal Obamacare since it became law. This bill doesn’t do that,” James Davis, the executive vice president of Freedom Partners, told Politico when the fund was announced.

  This tactic carried risks. When the US Supreme Court handed down its decision in Citizens United, the court emphasized that it was still illegal to engage in quid pro quo corruption, meaning the explicit trade of money for a vote. If the announcement from Freedom Partners and Americans for Prosperity was not a promise of money for a specific vote, then it is unclear what it was. Regardless of the risks, the Koch’s support stiffened the spines of the Freedom Caucus members. In a private meeting with Donald Trump at the White House, the members said they still were not ready to support the bill. On Friday, March 24, Paul Ryan admitted defeat. He pulled the bill and cemented Donald Trump’s failure.

  The bill showed passing signs of life over the summer as it was revived and changed in a minor way that ultimately won the support of Meadows and his caucus.I When the bill passed the House, Donald Trump hosted a televised celebration of the victory, alongside a smiling Paul Ryan and other House leaders. But the bill would meet a similar destiny as the cap-and-trade bill in 2010. It was sent to the Senate, where it languished. Eventually the bill was forced to a vote, even though support was weak and the leadership could only hope to pass it by the narrowest of margins. The bill was defeated by the Arizona Senator John McCain, who voted no.

  Donald Trump had been hobbled in the Congress. And once he was hobbled, the Koch network pressed its advantage. The fight over health care had been a proxy war, a way for the Koch network to prove its strength. The real fight was still looming.

  After he abandoned the Obamacare repeal, Donald Trump moved on to reforming the nation’s tax code. Trump had specific ideas about the ways to do this, and many of them ran counter to Charles Koch’s interests. The Koch network was ready for the fight. Once again, Americans for Prosperity chartered buses and paid for volunteers to travel to Washington, this time to protest against Donald Trump’s tax plan.

  * * *

  The Republican party had a once-in-a-generation chance to rewrite the American tax code. It controlled all three branches of government, giving it the freedom to write a tax bill that was true to Republican orthodoxy and untainted by the Democratic impulse to raise taxes and support the social safety net programs.

  Orchestrating the task fell to Paul Ryan. He made the mistake of helping write a bill that reflected Republican orthodoxy, but ran counter to the interests of Charles Koch.

  Paul Ryan’s mistake was caused by seemingly good intentions. He partnered with the Texas Republican Kevin Brady, head of the powerful House Ways and Means Committee. They wrote a bill that would dramatically cut income taxes for US corporations and middle-class families, while also remaining “revenue neutral,” meaning that it would not increase the national debt. This might have seemed eminently practical because lowering the debt had been the campaign platform of Republicans for at least seven years. But the approach was fundamentally flawed in Charles Koch’s eyes.

  This flaw arose because Paul Ryan was trying to do three things at once: avoid adding to the US deficit, cut corporate tax rates, and meet the desires of Republican voters who elected Donald Trump. Ryan thought he could meet all of these needs by using an obscure tax provision called the Border Adjustment Tax (technically it was a border adjustment to the federal income tax, but it became widely known as the Border Adjustment Tax, or BAT), which became
a vital pillar of Ryan’s tax plan. The BAT is what drew the Koch network’s opposition.

  It is easy to see why Paul Ryan would have been seduced by the logic of the BAT. A similar adjustment was already in place in more than 140 countries and wasn’t exotic or particularly controversial.II There was strong evidence that the BAT would accomplish one of Donald Trump’s most important campaign platforms—boosting economic growth inside US borders and discouraging companies from shifting their factories overseas. Creating a BAT would also help raise money to offset the massive cuts in corporate income tax that Ryan proposed, taking the rate from 35 percent down to 20 percent. If the corporate tax rate was cut with no other changes, it would dramatically increase the deficit. The BAT provided an elegant solution. It would allow the government to raise money—roughly $1 trillion over a decade—that could shore up the budget.