So well established is that pattern that Philip Stern, a Washington writer, filed suit in 1986 attacking PAC donations as a political charade. Stern’s suit charged that PAC contributions violate the Federal Election Campaign Act, which restricts them to “political purposes,” not lobbying. Stern’s argument is that campaign contributions are made not to elect legislators but to “buy influence and build goodwill for legislative purposes,” often with lawmakers who have little risk of losing. In short, it’s lobbying money, not campaign money.
As a sizable stockholder in General Electric Company, Stern singled out GE and its Non-Partisan Political Support Committee as examples of the general pattern. In the 1983–84 period, he pointed out that GE’s PAC had made contributions to 27 House incumbents who had no opponents in the general election; to 103 who had no serious opposition (that is, they won by seventy percent or more of the vote); and to only three challengers out of 210 races.
He contended that the GE PAC’s payments went to incumbent House members “without regard for their voting records or public positions on business issues,” citing the low probusiness ratings of eighty-six incumbents. In the Senate, Stern pointed out that the GE PAC contributed to every single senator seeking reelection and to three challengers working both sides of tight elections in Illinois, North Carolina, and Iowa. GE was getting smart; two of those challengers won, and the third nearly did. Moreover, donations were made to eighteen other senators who were not even up for reelection in the 1983–84 cycle.53
Stern’s exposure of the bogus rationale for the PAC game was underscored by the actions of 150 PACs after the 1986 senatorial election. Together, these PACs had supported seven incumbent Republican senators who lost, and right after the election, they donated $268,700 to the Democratic challengers who won, according to Common Cause.54 In short, being on the right side of the winner was the critical motive for giving funds. PACs commonly help winning candidates liquidate campaign debts after elections—a particularly effective way of making the officeholder feel beholden.
In short, PAC funding and lobbying go hand in hand. Most organizations, whether labor, corporate, consumer, or other interest groups, had lobbying divisions before they had PACs. Now, PACs have become the money arm of lobbying.
Stern’s suit, tossed by the courts to the Federal Election Commission in 1987, pointed to the serious danger that PAC financing poses to our political system. Even those such as political scientist Michael Malbin who contend that PACs cannot buy votes worry about the heavy “proincumbent bias” of PACs. Individual donors also lean toward incumbents, but it is early PAC money that scares off would-be challengers, reducing the number of genuinely competitive elections, especially in the House of Representatives, where there is a genuine challenge to sitting incumbents in less than one in seven races.
The political money system operating since 1974 has sharpened that negative trend. In 1986, for example, PACs gave six times as much money to House incumbents as to their challengers. But challengers who cannot raise enough money are never really in the race. The challengers’ friends and ideological allies may support their cause, regardless of the uphill odds; but PACs see no value in helping a relatively unknown challenger. Without the help of PACs, the challenger has little chance—the PAC game is a catch-22 for challengers.
Another charge against PAC politics, pressed by Common Cause and some members of Congress, is that PAC money and PAC interests tear down cohesive influences and unifying concerns in our national politics and make Congress less workable—by pressing members to narrow their focus. Their argument is that PAC donations and lecture fees paid by trade associations, corporations, and other groups generally follow the congressional committee structure. The investment and commercial banking industries concentrate on members of the banking committee. The tobacco, cotton, dairy, cattle, and grain industries concentrate on members of key agriculture subcommittees. Labor money goes for its key committee members. The television networks, cable systems, and broadcasting industry concentrate on the communications subcommittees of the Commerce Committees. And so on.
Fred Wertheimer, president of Common Cause contends that the narrow focus of PACs distorts the perspective of Congress by pressing each member to think parochially. “PACs think differently from voters,” he argues. “Voters are complex. They think about a number of issues. They have some things they care very much about, but they balance a whole variety of things. PACs balance far less.”
“PAC money is like a laser beam,” he asserts. “It helps a particular interest group play out very powerful influences on the issue that it cares about, while the general public is kind of diluted and left out of it. And you don’t have the classic notion of interest groups competing with each other. They’re worrying about their own thing here. This is not a question of, ‘Well, we’ll let the interest groups compete, and the public interest will prevail.’ The banks are worrying about the banks. They’re not over paying attention to what the dairy groups are doing in the agriculture committee or what the defense contractors are doing in terms of defense policy. In the case of the insurance industry, there may be two items. Period. A member of Congress can do everything else under the sun, it’s not going to matter to them.”
“So when you define representation in terms of one or two things for the insurance industry, three or four things for labor, and so on, you’re just fragmented,” Wertheimer concluded. “The question then becomes, What are the balance wheels? The issue is one of weighing. That whole balancing process is done by representatives. That’s their job. If they are not free to balance, then our system’s not working.”55
In Governing America, Joseph Califano, former White House aide to Lyndon Johnson and a cabinet secretary in the Carter administration, writes that the PAC game is undermining representative government. “The members become more responsive to the special interests that are interested in what their subcommittee is doing than they are to their own constituents, because these interests are financing them,” Califano complained to me. “I bet if you did a survey or a computer run, you’d find out that there’s far more money coming to people from out of their state and out of their district than ever before.”56
The risk, of course, is that out-of-state interests distort a member’s ability to represent his own state or district. Ed Roeder of Sunshine News Service, which specializes in following political money, says the statistics support Califano. “Many states have become America’s third world,” Roeder remarked. “Politics is largely controlled by people who don’t live there. Most of the Great Plains and sparsely populated poor states can’t afford to compete with national special interests.”57 Heavy out-of-state funding has indeed become important to many members of Congress, especially those on House and Senate tax and appropriating committees. For example, Senator Dave Durenburger of Minnesota told me that he received more than $900,000 in out-of-state PAC contributions for his 1982 reelection campaign compared to home-state PAC giving of $90,792.
Durenburger claimed that his out-of-state money came from roughly the same groups as his in-state money, and therefore did not distort his priorities. However, Durenberger’s records showed something different. His most generous home-state PAC contributions came from farming, food processing, manufacturing, and local power systems. His out-of-state PAC giving included some of those interests; but it was also heavy from health-related industries and the insurance industry—obviously motivated by interest in his role on the Senate Finance Committee (which handles taxes) and as chairman of its Health Subcommittee (which oversees Medicare and Medicaid).
Indeed, the Finance Committee is a mirror of special interest influence—its first version of the 1986 tax bill epitomized special interest politics. With or without PACs, there would have been intense lobbying on a bill worth so much money to so many people; PAC donations highlighted the lobbying. Nothing galvanizes special interests like a major tax bill.
In 1985, Common Cause released studies showing how the
Finance Committee and its House counterpart, the Ways and Means Committee, were plastered by donations from groups with major interest in tax legislation. In 1985, for example, the twenty senators and thirty-six House members collected $67 million in PAC money, nearly two and a half times what they got in 1983, when they had no major tax bill to work on—indicating clear efforts to buy influence.58 Another Common Cause report in February 1986 showed the 1985 PAC contributions of the most generous lobbies: labor PACs, $1,153,857; insurance industry PACs, $969,213; and energy PACs, $956,742—and that excludes bundling. Those are all powerful constituencies with strong influence among Finance Committee members in any circumstance. PAC contributions reinforced existing political linkage.
As Senator Eagleton suggested, it is hard to demonstrate the quid pro quo of vote buying because the expectation is often implicit. The oil-and-gas PACs were out to protect the oil depletion allowance and tax write-offs for intangible drilling costs and to avoid about $5 billion in new taxes over five years included in the original Reagan plan. Labor and the insurance industry were fighting to keep the tax-free status of fringe benefits (life insurance, health insurance, and pensions) for tens of millions of workers, which the Reagan plan would have stripped away. In addition, the life insurance industry was fighting the administration plan to start taxing the interest buildup on the cash value of insurance policies. Overall, the original administration plan would have put more than a $50 billion tax bite on the insurance industry, the unions, and their clientele over five years, according to congressional estimates. In a new-breed lobbying campaign par excellence, the life insurance industry combined a high-powered, five-million-dollar lobbying-and-media blitz with PAC giving. Under that pressure, the Reagan administration dropped its tax bite in this area to $25 billion, and Congress cut the bite to $12 billion.59
In fairness, the administration and the congressional tax-writing committees did shift more than $100 billion in taxes from private individuals to business, mainly by stripping away the 1981 investment tax credit. That big move hit business hard; it was an across-the-board shift that appealed to ordinary voters and gave the legislation a reform image. But in hundreds of pages of fine print, the politicians also took care of many special interests; the initial Senate Finance Committee tax bill was the most egregious. In fact, Bob Packwood, the committee chairman, made no bones about having tried to corral votes by deliberately catering to the “parochial interests” of his members.60
Now, as always, the Finance Committee has heavy membership from big natural-resource states: Texas, Louisiana, Oklahoma, Kansas, Idaho, Wyoming, Oregon, and Maine; and the committee has a history of protecting the important interests of those states. So the committee’s bill naturally contained favorable provisions for the oil, gas, and timber interests from those states. Hard-hit smokestack industries championed by John Heinz of Pennsylvania got the right to sell back to the federal government $500 million in unused investment tax credits, at seventy cents on the dollar. Missouri’s Jack Danforth, a protector of McDonnell Douglas, the aircraft manufacturer, won restoration of a favorable method of tax accounting, worth $5 billion to defense contractors over five years. Iowa’s Charles Grassley inserted a deduction for health-insurance costs for self-employed people, such as farmers. New York’s Pat Moynihan helped save deductions for symphony orchestras, universities, and charities. Packwood, personal patron of labor and the insurance and timber industries, smiled on small business, too, by inserting a deduction for small-business investments worth $20 billion in tax savings over five years. And so it went.
Back in Oregon, Packwood was attacked as “Mr. Special Interest,” a man who topped the Senate with more than $5 million in campaign donations in 1985. As the committee debated granting more lenient tax write-offs to the tuxedo-rental business, Packwood was getting a bad press in Washington. The New Republic headlined an article SENATOR HACKWOOD. John Chaffee, a moderate Rhode Island Republican, warned that if the committee continued to “loosen, loosen, loosen [the tax code] all the way, it’s going to be a disaster.” The last straw for Moynihan was a committee vote in mid-April 1986 that decided that, for tax purposes, the depreciable life of an oil refinery should be five years, obviously far short of its real life.
“What on earth are we doing?” Moynihan bellowed to his colleagues. “This system is collapsing. We’re showing we’re here representing quite narrow economic interests. That’s the notion of Madison—contending factions. It’s my steel company against your ranches. But we’re not reforming the tax law. We’re making it worse. And we’re putting in jeopardy the trust of the American people.”61
Packwood, a master of the tax code but still unproven as a strong committee leader, was embarrassed. Worried about the committee’s image, he stopped its work on April 18, fearing the loss of another $100 billion in giveaways that would have sunk the tax bill financially and left his committee standing nakedly as the captive of special interests. “Clearly we were voting egregious exceptions [to the tax law] that were not justifiable economically, substantively, or politically,” Packwood conceded to me.
The White House was getting embarrassed, too. “We were thinking we were going to have to jettison the whole idea,” Chief of Staff Donald Regan told me.62 “because the bill was getting to be just nothing but logrolling and a bill for special interests.”
Within a week, Packwood dramatically shifted course, slamming the door on $50 billion worth of tax loopholes for wealthy individuals and imposing a stiff minimum tax on business and individuals. This provided the money for a dramatic cut in the top personal tax rate from fifty percent to twenty-seven percent. When the bill finally passed by a 26–0 vote in May, committee members applauded Packwood, but an overflow of lobbyists, listening on an audio system in a basement room, broke out in hisses.
The press and other senators gave Packwood credit for a 180-degree turn against the special interests. Unquestionably, Packwood rescued not only the possibility of a tax bill but the notion of reforming the individual side of the tax code. He was creative and daring beyond anyone’s expectations, snatching a brilliant personal victory from the jaws of disaster. But he did not turn sharply against special interests.
With the major exception of the real estate industry, the package developed by Packwood and his core group of senators—Bill Bradley, John Chaffee, Jack Danforth, Pat Moynihan, Malcolm Wallop, and George Mitchell—did not revoke the industry privileges adopted earlier. The real estate industry, which had pumped nearly $1.3 million in PAC contributions to Finance Committee and Ways and Means Committee members, felt furious and betrayed. “It’s kind of like the mating habits of the black widow spider,” Wayne Thevnot, president of the National Realty Committee, protested to reporters. “The female has her fun, then she kills the male and devours him.”
But other industries came off pretty well. The special nuggets treasured by the oil and timber industries, the insurance industry, small businesses, the smokestack industries, and others remained in the bill. Packwood also kept favorable depreciation rules, important to many corporations. Later, House Democrats forced some corporate concessions: depreciation write-offs were stretched out, and defense contractors lost the special accounting rules that Danforth had won for them (causing Danforth to turn against the bill). What revived the tax bill was the general impression that Packwood had held the special interests at bay—though actually he was not as hard on them as on the loopholes of the wealthy. Unquestionably, the tax bill was an improvement on the existing system, but it still had plenty of nuggets for special interests—testimony to effective lobbying.
Nouveau Riche Lobbying
The lionizing of Packwood by his Senate colleagues in 1986 signaled not only admiration at his legislative craftiness, but relief among other politicians that Packwood had kept them all from going over the brink of greed. As Moynihan suggested, political Washington was troubled about its appearance of venality.
Jitters about the potential for scandal explain much
of the derision that rival lobbyists and politicians heaped on Michael K. Deaver, who made the cover of Time magazine on March 3, 1986, as Washington’s newest high-flying influence peddler. Deaver was pictured, suggestively, phoning some high-level contact (the president?) from the back seat of his chauffer-driven Jaguar XJ6 limousine. In less than a year after resigning as President Reagan’s White House deputy chief of staff, Deaver had lined up six-figure contracts representing Canada, Mexico, Singapore, Korea, Puerto Rico, CBS, TWA, Phillip Morris, and Rockwell International. Deaver later landed a $500,000 contract with Saudi Arabia. A British company was dickering to buy his firm for $18 million.
In the White House, Deaver was a public-relations wizard. He was also the closest confidant of both the president and Mrs. Reagan. I remember watching Nancy Reagan break down in uncontrollable tears at a small Rose Garden ceremony on the day that Deaver formally left the White House staff. It was as if she were losing a son.
The closeness of that relationship was widely known. Nearly a year after he left the president’s staff, Deaver still played tennis on the White House court, kept his White House security pass, and received the president’s daily schedule. Those were extraordinary privileges that made him attractive, especially to foreign clients, and also made him a mark for jealous rivals. His angling for a splashy Time cover photo with the boast “There’s no question I’ve got as good access as anybody” only intensified criticism. By taking a high profile, Deaver made himself a target. When his publicity turned sour, Deaver lost his White House privileges as well as contracts with Canada, Mexico, and Singapore. The British firm backed away from buying him out.
In an official investigation, Deaver faced accusations that he had violated laws against lobbying former government officials within a year of leaving office and against dealing with officials on matters in which Deaver had had substantial involvement while he was in government. In one incident, Deaver, as Reagan’s right-hand man, was accused of having taken part in a dozen government meetings about problems with Canada over acid rain, and having helped arrange the appointment of a special presidential envoy to Canada and then stepping into a $105,000 lobbying contract with Canada. A second accusation was that within that first forbidden year, Deaver had lobbied National Security Adviser Robert McFarlane about Puerto Rico’s interests in American tax laws. A third contention was that he had contacted another national security official on behalf of the Korean Broadcasting Corporation, and helped set up a meeting with President Reagan for a South Korean trade envoy. A fourth was that he had lobbied Budget Director James Miller on behalf of Rockwell International, builder of the B-1 bomber, again within the forbidden year and that he improperly used high-level government contacts in behalf of Trans World Airlines. The affair led to formal charges that Denver had lied to a grand jury and a congessional committee investigating his activities and his conviction in mid-December 1987 on three charges of perjury involving the Korean, Puerto Rican, and TWA incidents.
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