Friday
Sep032010
US Politics: Obama's Battle with the Conservative Foundations (Haddigan)
Friday, September 3, 2010 at 9:18 
Lee Haddigan writes for EA:Within the large mansion called "The History of the United States" there resides a little-known band of historians: those who study the "Public Authority of Private Institutions". To the uninitiated, that is the influence of philanthropic foundations and their related think-tanks upon the government.
If you doubt the importance of this scrutiny, consider that these historians make a solid case that America’s strategic philanthropy (the funding of studies to directly shape public policy on a certain issue) is the most compelling evidence for the contention that the US is an "exceptional" nation. No other country, they maintain, approaches the money spent by American private institutions to promote a political agenda.
It is not only the amount of money spent that interests scholars, it is also the results achieved by some of the organizations. The Heritage Foundation is the most important conservative think-tank in America, a reputation built largely on its contribution to the Presidential agenda of Ronald Reagan. Heritage helped to shape Reagan's successful 1980 campaign and provided the blueprint for many of the policies pursued by his administration. At the first meeting of his Cabinet, Reagan gave every member a copy of Heritage's Mandate for Leadership: Policy Management in a Conservative Administration. This 1,093-page document contained 2,000 policy recommendations, of which nearly two-thirds were implemented while Reagan was in office.
The measures included the across-the-board income tax cuts which, according to Heritage, “wiped out America's economic ‘malaise', producing the biggest economic boom in U.S. history". In 1982, Heritage produced a study that suggested the use of a missile defense system to protect the United States from nuclear attack. Six months later Reagan made the speech that advocated the establishment of the Strategic Defense Initiative (SDI), and "Star Wars" was born.
Although the Heritage Foundation has not regained the influence it wielded in the Reagan years, it is still the most prominent think tank on the right-wing. On 17 August, it released Solutions for America, a statement of 128 recommendations for Congress covering 23 policy areas.
This includes a proposal to limit the growth in welfare spending by requiring “able-bodied adults to treat a portion of certain welfare benefits as loans to be repaid rather than as an open-ended grant from taxpayers”. It is an idea that will receive little support from conservative candidates in the mid-term election, as they eschew contentious ideological policies in favor of more immediate and practical concerns. Butif the recent past is a reliable indicator, Heritage’s proposal will receive serious consideration in the Republican presidential primaries.
President Obama has recently made the issue of the corporate financing of political organizations, and the related failure of Congress to pass the DISCLOSE Act, a major part of his efforts to establish an ideological difference between Democrats and Republicans in November. And he is not alone. While the president was attacking the "harmless-sounding" Americans for Prosperity (AFP) for launching an attack ad campaign against Democrat candidates, The New Yorker published the article "Covert Operations", a negative report by Jane Mayer on the funding of conservative causes --- including AFP --- by the two brothers who have made a fortune from the family-run Koch Industries.
On 27 August, the Democratic Congressional Campaign Committee submitted a request to the Internal Revenue Service to investigate the tax-exempt status of the foundation which funds the AFP. The thrust of the DCCC’s complaint is that Charles and David Koch are donating money to the Americans for Prosperity Foundation, who then funnel the money into campaign ads provided by the conservative political action group Americans for Prosperity.
Liberal concerns with the use of private money to sway political opinion are nothing new. Charitable foundations were granted tax-exempt status by Congress in 1913 as part of the introduction of income tax, and progressives immediately questioned, through a Commission on Industrial Relations, the "economic power" this action gave organizations, most notably the Carnegie and Rockefeller Foundations, to influence politics. Ironically, the Cox and Reece Committees of the early 1950s applied the same rationale to attack the subversive aims of tax-exempt foundations in promoting Communist propaganda, but the biggest change in regulating foundations came as a result of liberal frustrations with the impact of conservative organizations in the early Kennedy years.
In autumn 1961, labour leaders Walter and Victor Reuther (leading labor leaders) produced a secret memorandum for Attorney General Robert Kennedy on measures the administration could use to muzzle the Radical Right. One of the five proposals was that the IRS investigate tax-exempt conservative organizations and find reasons for revoking their status. As a result, the tax-exempt status of the Christian Echoes Ministry of Billy James Hargis, who gained national notoriety in the mid-1950s for attaching bibles to balloons and sending them over the Iron Curtain, was revoked in 1964 as punishment for its support of the campaign of Barry Goldwater.
After several years of Congressional investigation, the Tax Reform Act of 1969 was passed. This radically altered the rules, which still pertain today, regulating the ability of private foundations to influence political campaigns.
The criticism in recent weeks of corporate and wealthy individuals’ funding of conservative political organizations strikes a sour note with Republicans in what is becoming an increasingly bitter campaign. Historically, at least since the New Dealof the 1930s, Democrats have been able to use union support to outspend Republicans in election years. Allied with the recent addition of the millions spent by George Soros to finance liberal causes, and the recent tendency of Big Business to financially support the Democrats, conservatives are becoming somewhat bemused at President Obama’s emphasis on the influence of corporations on democratic politics.
Quite where the Democrats are going with the attention they are paying to organizations like the Americans for Prosperity, and individuals like the Koch brothers, is as yet unclear. They may drop the issue next week if it is seen as a failure, or they might parlay any success into an attempt to change the tax codes and further restrain the influence of foundations. Perhaps President Obama has an agenda equivalent to the "Reuther Memorandum" guiding the Democrats’ latest attempts to nullify the political impact of the Radical Right/Tea Party.
Whatever happens, the significance of private institutions for public authority will continue to define America as an "exceptional" nation.
Reader Comments (8)
In 1950 almost 40 percent of the private sector American labor force was unionized (similar to many European countries today).
Over the past 15 years that number was less than 10 percent.
So equating union spending in the U.S. 50 years ago is irrelevant.
These days are a heck of a lot more like pre-Great Depression America where deep-pocketed interest groups owned the U.S. Congress, the Presidency, and the Courts than they are the 1940s-1960s.
As a case in point, conservative tycoons were able to easily outspend organized labor almost three to one fighting against an issue like Card-Check in 2009 (a rule change that would have made it easier to organize private unions and harder for employers to slow-walk and intimidate unionization efforts).
The differences in the health care battle were even more stark -- and this even after the Dems accommodated the pharmaceutical industry (i.e. allowed themselves to be "bought-off").
In a country where the gap between rich and obscenely rich and everyone else has grown tremendously over the past 30 years, the issue of campaign financing and politicking has become a serious issue.
Do we believe in the principle of one person one vote, or do we believe that the government is for sale to the highest bidder?
That question is always in tension, but in recent years the tensions have been exacerbated by huge income gaps.
With respect to Soros and every Dem actor, producer, exec in Hollywood, you're talking about chump change compared to the Conservative oligarchs. The Koch's alone have personal fortunes that are more than twice Soros's. Throw in the Walton family -- which has been infamously anti-labor -- and you get a 5 to one ratio compared to Soros.
Add into the mix that the GOP is much easier to buy off -- in part because its members tend to occupy in-expensive media markets -- and throw into the mix a greater inclination to reward corrupt business practices, and you have a toxic mix.
Even a paltry measure like the DISCLOSE Act which would have required greater transparency disclosure of funding sources for phony grass-roots organizations (and limited foreign sources of money) was too much for the GOP.
The GOP is happy to take all kinds of money, they just are embarrassed to admit to the American public where their money is coming from.
With respect to the Koch family, if they are indeed cheating the tax-code and violating the rules by operating a nakedly partisan operation under the cloak of a non-partisan one, they should be held to account.
Hello JPRVS,
thanks for your views. It is an issue that provokes passions on both sides.
One defense of my argument though. I don't disagree with your figures on private sector unions, but I was talking mainly about the public sector unions like the National Education Association (NEA) and the Service Employees International Union (SEIU). For an anaylsis of their 1950s style enormous spending on elections, including 2010, see http://educationnext.org/the-long-reach-of-teachers-unions/
For those who don't link through, the figures show that the NEA is by far the biggest organization financing pollitics in the US today. (SEIU is 5th).
When you factor in ALL unions – public and private – you’re talking about less than 13 percent of the American labor force (public sector is about 5 percent, private sector is less than 8 percent). That’s a very distant cry from the 35-40 percent rates of 40-50 years ago.
I’d have a lot more sympathy for your argument if you were some corporate executive complaining about the undue influence of the largest political lobby over the largest political party in 1950-1960’s. Those days are long since gone. We’re passed the 1950s and we’re now back to the future of the 1920s these days.
A fine point of reference that highlights lobbying at the federal level can be found here:
http://www.opensecrets.org/lobby/top.php?indexType=s
Note the Chamber of Commerce – which in DC represents the largest shareholders of the largest Fortune 500 companies. It has spent over $650 million since 1998 on behalf of its corporate members influencing policy at the federal level.
I would be very surprised in fact, if the NEA's lobbying spending at all levels of government rivaled the spending of just two individuals -- Charles and David Koch -- of $100 billion privately held Koch Industries conglomerate.
The key is not to look at the spending through just one organization, but to look at the money that flows through thinks tanks, 527s, 501c (phony grass roots orgs and otherwise), and direct contributions to the to political parties and established lobby shops (like the U.S. Chamber of Commerce). Even then it can be tough to track all of the sources where the money flows.
Jane Mayer had an excellent piece about the Kochs in the New Yorker this month.
Alternet did a fine article as well with respect to the Koch family's political history as well (albeit one that puts their family history in the most unflattering light possible):
http://www.alternet.org/economy/146504/the_roots_of_stalin_in_the_tea_party_movement?page=entire
To return to the original idea though, the notion that the NEA is “the biggest organization financing politics today” is patently absurd. Maybe the statement is “true” if it’s parsed very narrowly depending on the meaning of “biggest” and “organization.” In a very real sense though there are other organizations with much smaller membership who spend a lot more money and have much more success influencing policy – this is especially true at the federal level. The U.S. Chamber of Commerce alone spent over $140 million lobbying against the Employee Free Choice Act. Total anti-union spending in that one legislative battle was likely more than the entire union movement spent in the U.S. lobbying all levels of government over the past decade. If the tables were turned and the money AND the membership were on labor’s side, the EFCA would be law. That’s how politics works at the federal level. In 2009, labor had the numbers -- it did not have sufficient financial resources to achieve the outcome it sought, in part because the adversaries on the other side of the issue had much, much deeper pockets.
The NEA is nowhere near the "biggest organization financing politics in the US today". From 1998 to the present the U.S. Chamber of Commerce based in DC, which tends to represent the biggest shareholders of the biggest corporations, spent over $650 million supporting its pet issues lobbying at the federal level (source: OpenSecrets.org). The NEA probably doesn't rank in the top 10 in terms of politics at the federal level where the most dollars are collected and where most of the public dollars are spent. The NEA does wield substantial influence in some states and in some local jurisdictions, but in Washington it's not even a top 10 player these days.
Part of the challenge here too is that people like the two Koch brothers who control the privately held $100 billion Koch Industries conglomerate put their money into think-tanks, 527s, 501cs ("tax exempt 'non-partisan' groups), as well as direct contributions to politicians. It can be difficult to trace issue advocacy when the money is flowing into so many different channels, but I've seen reports including Jane Mayer's article in the New Yorker which suggest that they've spent close to $200 million over the past decade. This is the spending of just two individuals lobbying largely on behalf of themselves (not an organization with a few million members and elected leadership representing the interests of their membership).
The ultimate measure of an organizations impact can be found in terms of the issues that get Congressional attention and become law. The biggest sectors are FIRE -- Finance, Insurance, and Real Estate. Trial lawyers and energy companies are in the running too along with unions, but these are second and third tier players.
I would have much more sympathy for your views if you were a business executive bemoaning the influence of unions and collective bargaining on your bottom line anywhere from 1936 to the very early 1970s. Since that time though, the most influential and biggest money players haven't been labor unions (private and public combined make up less than 13 percent of the U.S. labor force compared to 40 percent in their hey day).
To the extent that history is relevant the current situation is much closer to the 1920s when the large corporate trusts ruled the land, as opposed to the 1950s when unions were able to raise wages to a point where the median wage actually correlated with increases in GDP.
Even the source that you cite "Education Next" is a publication that's run by the Hoover Institute, which is funded by large corporate benefactors. Almost out of nowhere we're having discussions these days about for-profit charter schools. These for-profit charter schools didn't arise out of some grass-roots movement. Basically, they're being backed by very wealthy donors and interest groups who see big $$$$$$$$$$$$ by privatizing more public services. Perhaps some genuinely think that "parental choice" will yield improved educational outcomes, but for the most part it appears to be a bit of a taxpayer boon-doogle. The verdict on private charter schools is mixed at best.
Hello again JPRVS
I should have been more explicit in defining the terms of what I was trying to explain. I am talking about the issue of the money spent on electoral campaigns by think tanks, foundations and other organizations, where the NEA is the largest spender. I accept your arguments about the Chamber of Commerce and lobbying, because I know little about those activities. An ignorance that might explain why some of the language I use could apply to lobbying groups. So, thanks for that, if with a somewhat ironic tone. Your comments have forced me to go away and consider the impact and history of lobbying in more detail.
And I'll try not to talk at cross purposes here. Scholars of philanthropic history argue the 1920s saw foundations (including Rockefeller and Carnegies'), ran by progressives who used these corporate fortunes to reform society in favor of a corporate welfare state (at least that was the consensus view ten years ago) Conservatives hated them, especially in the 1950s - hence the reece/cox committees. Anyway, the founding document (or at least the best starting point) of philanthropic history is Barry D. Karl and Stanley N. Katz's 'The American Private Philanthropic Foundation and the Public Sphere, 1890-1930.' An 18 page article I would recommend heartily to a general reader or expert on that period. It includes some contemporary criticisms of these early foundations you may find interesting. They mirror the arguments you make about the 1920s.
available at http://www.princeton.edu/~snkatz/papers/minerva.pdf
Lee
Lee,
Thanks for the Karl and Katz article -- it covers quite a bit of ground, and on balance most of the narrative jibes with my own understanding of the history proceeding the Great Depression and WWII. I think they give short-change the role of religious organizations, which played a fundamental role in assisting with the passage of the 16th, 18th, and 19th amendments to the Constitution (income tax; women's right to vote; and prohibition of alcohol -- respectively). Income tax collection played a pivotal role in the centralization of state powers in the federal government -- changes in technology and transportation were also likely a major driver of increased federal power.
University of California-Davis labor history David Brody also touches on the emergence of the federal government into the realm of social welfare during the Depression -- specifically citing the failure of private "welfare capitalism" in the early years of the Depression (e.g. initially large companies initiated programs such as unemployment insurance and pensions in the aftermath of WWI as a means of heading off unionization efforts-- they were unable to sustain these programs as the Depression gained momentum). The notion that FDR drew ideas from charitable foundations is an interesting one, and sounds plausible.
With respect to the various lobbying groups today, it's worth noting that most of the major think-tanks do not directly lobby Congress, and all of the major think-tanks are funded by private funds -- usually by individuals with deep pockets.
Think-tanks provide Congressional representatives with talking points on behalf of favored measures of donor members, and members of the think-tank also play a role in advancing measures in the media. They engage in issue advocacy indirectly through the media and press, but they do not directly contribute to political campaigns. I would draw a bright line between think-tanks and charitable foundations. (e.g. the Gates Foundation may finance issue advocacy -- e.g. with respect to private charter-schools in primary and secondary education. On balance its efforts seem to be directed more towards funding research and international humanitarian efforts more in keeping with the Carnegie Endowment and Institute for Peace).
527 organizations tend to be more overtly political and partisan organizations and are funded by private citizens and special interest lobbies.
501c organizations do some lobbying and issue advocacy, but they are supposed to be non-partisan in nature. (The Koch brother's organization "Americans For Prosperity" has come into the cross-hairs of Democrats precisely for this reason -- the Kochs could have engaged in private advocacy without a tax-benefit, or alternatively they could have formed a 527 specifically in order to engage in overtly partisan activity). "Americans for Prosperity" which is basically funded by two people to advance their own agenda across a wide-swath of issues stands in contrast to a 501(c) organization like the Sierra Club which has over 1 million dues paying members and tends to have a more narrow focus. Many 501(c) also have political action committees that do engage in partisan activities. However, these PACs are subject to donation limits and other disclosure requirements. Additionally, donations are not tax-deductible.
Hello JPRVS,
good to see we have reached a stage where we are not talking at cross purposes. I have looked at the history of 501(c)(3) organizations, on and off, for the last 10 years and am still uncertain as to what tax laws regulate them. I've got some primary source material from the 1960s that would make a good article on 501(c)(3) foundations and audits by the IRS, but can't get my head around the legal arguments. I am not too embarassed at that failure as the IRS is as unclear as me. In revenge for making me look in detail at these 527 organizations, and special interest lobbying in general, the link below is the IRS abbreviated guidelines (32 pages) for charitable and religious institutions to keep their tax-exempt status. Horrid reading!
http://www.irs.gov/pub/irs-pdf/p1828.pdf (warning, goes straight to pdf download)
Within the next couple of weeks I will be posting an article on the current campaign by some religious organizations to become overtly political. I look forward to your comments on that as controversial an issue
Lee
Lee,
I look forward to reading the next installment. There's definitely quite a bit of material available for consideration in the recent past -- I'm not as familiar with some of the current actions.
e.g. The involvement of the Mormon Church in the Proposition 8 battle in California concerning banning gay marriage. The LA Times did an excellent job organizing information regarding the fundraising side of this issue (e.g. can be found via a Google search "Prop 8 fund").
With the recent health care debate you also had the United Conference of Catholic Bishops coming down against the health care legislation while the Catholic Health Association, and nuns publicly favored the enactment of the law. In that particular case its worth noting that most of the support was simply done through statements through the media and an attempt to move public opinion through these statements. To the best of my knowledge it didn't encompasses financial lobbying and political action committee contributions to politicians (typically a very effective way of getting the attention of politicians).
Convicted lobbyist Jack Abramoff's involvement with conservative religious lobbying organizations also may be relevant in terms of historical background (e.g. his involvement with the Council for National Policy (CNP) and Ralph Reed's Christian Coalition).
Also, there are a whole class of organizations which seem to exists primarily to raise money for outrage campaigns against "moral decay" -- e.g. the American Family Association and the Catholic League.
I'll be curious to see what your investigation finds. That IRS document is definitely a bit of a snoozer and vague in particulars. Loyola Law Professor Rick Hansen's Election Law blog might be a useful reference source (e.g. electionlawblog.org).