Dark Money

by Jane Mayer

  Even before the new congressional session began, Eric Cantor, a lawyer from Richmond, Virginia, who was about to become the new minority whip in the House, told a handful of trusted allies in a private planning meeting in his Washington condo, “We’re not here to cut deals and get crumbs and stay in the minority for another forty years.” Instead, he argued, the Republicans needed to fight. They needed to unite in opposition to virtually anything Obama proposed in order to deny him a single bipartisan victory. The group, which included his deputy, Kevin McCarthy, called itself the Young Guns. The strategy of obstruction that they adopted won the Republicans the nickname the Party of No.

  At their first official leadership retreat in January 2009, the model that the House Republicans chose to emulate was the Taliban. The Texas congressman Pete Sessions, the new leader of the Republican House campaign committee, held up Afghanistan’s infamous Islamic extremists as providing an example of how they could wage “asymmetric warfare.” The country might be in an economic crisis, but governing, he told his colleagues, was not the reason they had been elected. As he flashed through a slide presentation at the Annapolis Inn, he asked his colleagues, “If the Purpose of the Majority is to Govern…What is Our Purpose?” His answer was simple: “The Purpose of the Minority is to become the Majority.” That one goal, he said, was “the entire Conference’s mission.”

  John Boehner, the new minority leader, wasn’t himself part of the Young Guns, but it was increasingly clear that if he didn’t yield to them, they might depose him. As power shifted from the parties to outside money, much of which came from donors more extreme than the electorate at large, moderates had to fear primary challenges and internal coups from their right flank.

  Steve LaTourette, a longtime Republican moderate congressman from Ohio who was a close friend of Boehner’s, explained, “In the past, it was rare that someone would run against an incumbent in their own party. But the money that these outside groups have is what gives these people liquid courage to run against an incumbent.” He described the outside donors as “a bunch of rich people who you can count on maybe two hands who have an inordinate impact. One or two might have been the guy in high school with the pocket protector picking his nose, but now he’s inherited $40 million and has his chance to be a player. Once they were able to infuse massive amounts of money, they got a disproportionate amount of influence. It’s not one man one vote anymore,” he said with a sigh. “It’s all about the money. It’s not a function of anything else.”

  LaTourette was astonished, he said, when he went to the first meeting of the Republican caucus after Obama was elected. “When the question came up, about why we lost, these folks were saying, ‘It’s because we weren’t conservative enough.’ Well, I looked at the numbers, and we lost 58 percent of the independents!” Yet moderates like himself were getting frozen out. He became so frustrated he eventually retired, becoming a lobbyist and starting an organization aimed at battling the forces of extremism in his party. “I left,” he said, “because I was sick of it. I couldn’t take it anymore. I was there eighteen years. I understood it was a contact sport, but whether it was transportation or student loans, there were things you’d do without thinking. Now you can’t get anything done. Some people don’t want the government to do anything,” he concluded.

  The Republican leadership, according to an anecdote related by Grunwald, told GOP members of the House that as one of them, Jerry Lewis, a member of the House Appropriations Committee, put it, “We can’t play.” David Obey, the Democratic chairman of the House Appropriations Committee, was incensed at the lack of cooperation. “What they said right from the get-go,” he said, was that “it doesn’t matter what the hell you do, we ain’t going to help you. We’re going to stand on the sidelines and bitch.”

  The Republicans of course saw it differently. They accused Obama of being too partisan and took umbrage when he flaunted his election mandate and reminded Cantor during one tense session, “I won.” In Lewis’s view, the Democrats were arrogant, intolerant, and overbearing.

  Obama nonetheless continued to seek bipartisan support. His experience with what Hillary Clinton labeled the “vast right-wing conspiracy” was limited. He had vaulted in only five years from the Illinois State Senate to the White House. He turned out to be unrealistically confident that he could transcend partisan rancor as he had while editing the Harvard Law Review. So when he received an invitation from Boehner and the others in the House Republican caucus to come up to Capitol Hill to consult with them about the stimulus package, Obama accepted, with much fanfare.

  On January 27, he climbed into his armored limousine for his first presidential motorcade to the Hill. Meeting exclusively with Republicans was unusual, as was a president coming to their turf to lobby. But the administration had promised to discard narrow partisan division. In fact Obama’s economic advisers thought they had tailored the stimulus plan for Republican support by deriving one-third of it from tax cuts. Liberals were dismayed by the compromise, warning that government spending would do more to revive the economy than tax cuts and that the overall stimulus spending numbers were too small to really jump-start the economy. Despite these concessions, Obama’s meeting on the Hill nonetheless turned out to be a demeaning disaster. Shortly before he arrived to pitch his plan, news leaked that the Republican leadership in the House was already instructing its caucus to vote against it. Obama was left to speak to a roomful of firmly closed minds. Afterward, he was left facing the gathered press corps looking lame and empty-handed.

  “It was stunning,” David Axelrod, Obama’s longtime political adviser, later admitted. “Our feeling was, we were dealing with a potential disaster of epic proportions that demanded cooperation. If anything was a signal of what the next two years would be like, it was that.”

  The next morning, readers of The New York Times and The Wall Street Journal opened their papers to see a full-page ad paid for by the Cato Institute, the think tank that Charles Koch had founded and on whose board David Koch sat. The ad directly challenged Obama’s credibility. It quoted Obama saying, “There is no disagreement that we need action by our government, a recovery plan that will help jump start the economy.” In large, boldface letters, the ad copy retorted, “With all due respect, Mr. President, that is not true.” The statement was signed by 203 individuals, many of whose careers had been subsidized by the largesse of the Kochs, the Bradley Foundation, the John M. Olin Foundation, and other right-wing family fortunes.

  Bill Burton, the deputy press secretary for Obama in the White House, looks back at the level of obstruction in the administration’s first month as a complete shock. “They turned on Obama so early,” he later recalled ruefully. “Not only did we not have the answers yet, we barely knew where to sit down. The chairs in the White House were still spinning from the people who had left them.” Looking back, Burton shook his head at the administration’s naïveté. “No one at the time saw it coming.”

  Specifically, he said, “We didn’t really see the force, the outside money, until after he was elected. Then the first thing he had to do, the only thing he could do, was spend trillions and trillions of dollars, passing the stimulus bill first, and that led to Stimulus Two, and TARP, and the auto bailouts. The right-wing plutocrats really fed off of that. They tapped into this anger about spending.” He admits, “No one saw the Kochs or the Dick Armeys out there.”

  Within two months of Obama taking office, he recalled, the political environment had been transformed. “In January, we were working with the Republicans on an economic recovery package grounded firmly in centrist thinking,” he recalls. “The mainstream economic view was that the size of the calamity required massive economic spending. We asked the Republicans for their ideas. We were getting cooperation. Letters from all sorts of members of Congress were coming in with their heartfelt ideas. One high-ranking member of the House Republicans even suggested high-speed rail! But by early February, it started to shift. They were no longer sending
letters. They were all expressing doubt about any kind of spending at all.” Senator DeMint, who was headlining the Kochs’ No Stimulus campaign, began a floor speech by proclaiming, “I like President Obama very much.” He then went on to call the stimulus bill “a trilliondollar socialist experiment” that was “the worst piece of economic legislation Congress has considered in a hundred years.” As Burton put it, “DeMint was saying ‘One-Term President’ within six weeks of Obama taking office.”

  On February 17, Obama signed the Recovery Act into law. It had squeaked through Congress with only three Republican votes in the Senate and none in the House. Five years later, a survey of leading American economists chosen for their ideological diversity and eminence in the field, taken by the Initiative on Global Markets, a project run by the University of Chicago, found nearly unanimous consensus that the Recovery Act had achieved its goal of reducing unemployment. Only one of the thirty-seven economists surveyed disagreed. The free-market orthodoxy that dominated the Republican Party in Washington had completely veered from rational, professional expertise, yet the extremists nearly prevailed. As it was, Obama’s opponents forced the administration to adopt a smaller stimulus package than many economists thought necessary, undercutting the recovery. One month into his presidency, extreme opponents, fueled by outside money, had already wounded Obama. The day after signing the stimulus bill, Obama announced the $75 billion homeowner rescue plan.

  The next morning, Santelli delivered his rant, and within moments it went viral. Matt Drudge, the conservative news aggregator, linked to it under one of his Web site’s rotating red siren emblems, promoting it to the site’s three million daily readers as a pulsating political emergency.

  Within hours, another Web site called TaxDayTeaParty.com appeared on the Internet, spreading the rebellion under the Tea Party label. Its domain name was registered by Eric Odom, a young member of the Libertarian Party of Illinois who lived in Chicago. Odom had been working until recently for an organization called the Sam Adams Alliance, whose chief executive had long and close ties to the Kochs. The strange story of the Sam Adams Alliance was yet another demonstration of the way that years of private funding by a few wealthy ideologues had created an underground political infrastructure.

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  The Chicago-based tax-exempt organization was named for the original 1773 Boston Tea Party activist Sam Adams. While the group’s title evoked the Founding Fathers, its chief executive officer was a Wisconsin investor named Eric O’Keefe who had been involved with the Kochs since his days as a young volunteer in David Koch’s Libertarian Party campaign for vice president. O’Keefe eventually became the national director of the Libertarian Party. By 1983, however, like the Kochs, he had moved on to promoting free-market fundamentalism through other means, often joining forces with the brothers through their donor seminars and other ventures. Influenced as a child by The Wall Street Journal and the Conservative Book Club, O’Keefe, as The Washington Post wrote, “had money. He grew up with some and made a lot more as an investor, allowing him to devote decades to a series of ambitious political crusades, nearly all of them failures.”

  The founder of the Sam Adams Alliance, according to one account, was a balding, publicity-shy Brooklyn-born real estate tycoon named Howard Rich. Known to friend and foe as Howie, Rich had also been involved in numerous far-flung political ventures with the Kochs. Impressed early by the writings of Hayek and Milton Friedman, he became a tireless supporter of long-shot libertarian causes while amassing a fortune buying apartment buildings in Manhattan, Texas, and North Carolina. Both O’Keefe and Rich served on the Cato Institute’s board of directors with David Koch. They had years’ worth of ties, as well as ups and downs, with Charles Koch as well. Relations were good enough that the Institute for Humane Studies at George Mason University, whose board Charles Koch chaired, placed some of its thirty or so chosen Charles G. Koch fellows in summer internships with the Sam Adams Alliance.

  For decades this small, wealthy, and intense circle had been trying to advance their fervently held libertarian ideas, almost always working in secret, cloaked behind layers of shell groups, so that their role couldn’t be detected. Rich in particular rivaled Houdini for sleights of hand, having obscured his role behind a positively dizzying number of name-changing, shape-shifting, interlocking organizations. He almost invariably declined to talk to the press or debate opponents. Until the Tea Party, however, the results had been disappointing. “My 32 years of engagement has been a long and expensive lesson in frustration,” his frequent political partner, O’Keefe, admitted.

  Among this group’s earlier political efforts was a stealth attempt in the early 1990s to get voters to approve ballot measures imposing congressional term limits. Experts suggested that term limits would hurt Democrats, who had more congressional incumbents at the time, and also strengthen the power of outsiders with money, like themselves. As was true of the later Tea Party movement, the supporters of term limits described their movement as a grassroots outpouring fueled by populist outrage at entrenched power. In California, the Kochs were rumored to be behind a 1992 referendum on whether to impose them, but a spokesman denied they had any direct role. But after the referendum succeeded, the Los Angeles Times discovered that the true organizers and much of its funding traced back to a secretive group run by Howie Rich and Eric O’Keefe, U.S. Term Limits. There were ties to the Kochs, too. Fink admitted when confronted by the paper that they had in fact provided “seed money.”

  Similarly, in Washington State a congressional term-limits ballot initiative nearly passed in 1991 until The New York Times exposed what Murray Rothbard, the irreverent libertarian theorist who had split with the Kochs, called “the Kochian deep pockets behind the ‘grassroots’ movement.” The paper discovered that what supporters billed as “a prairie fire of populism” was in fact the product of a Washington-based group calling itself Citizens for Congressional Reform, which was started with hundreds of thousands of dollars from David Koch. “I ignited the spark, and the fire is raging on its own,” he claimed once his role was exposed. Fanning the flames, however, was his checkbook. His group contributed nearly three-quarters of the campaign’s budget, paying for professional signature gatherers to collect enough names to get the issue on the ballot.

  Eventually, the Supreme Court ruled that federal term limits were unconstitutional. This finished off the movement at the congressional level for good, though not its backers’ penchant for ersatz populism.

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  The patrons of libertarianism kept on trying to buy at least the aura of public support. In 2004, one of the first ventures of the Kochs’ newly formed advocacy group, Americans for Prosperity, was a radical antitax measure called the Taxpayer Bill of Rights. The measure placed drastic restrictions on state legislators, requiring all tax increases to first be approved by public referenda. The group chose Kansas as its first battleground for the Taxpayers Bill of Rights just as the Kochs were fighting a proposed tax increase in their home state. Despite an outcry about shadowy spending, AFP spent a record amount of money on television ads, and the tax increase was defeated.

  Two years later, in 2006, a group created and run by Rich called Americans for Limited Government spent some $8 million promoting a variety of other ballot drives, including one that demanded that owners get compensated for the impact of land-use laws on their property. Supporters again claimed to have widespread grassroots support. But an investigation by the Center for Public Integrity revealed that in fact just three donors, none of them disclosed, accounted for 99 percent of the organization’s funding. Despite the heavy spending, the fringe antigovernment measures were voted down almost everywhere.

  Soon afterward, the State of Illinois suspended Rich’s group of its charitable license after it failed to supply required financial statements, and in 2006 the group shut down its Chicago headquarters. At this point, Americans for Limited Government moved to Fairfax, Virginia, where several other nonprofit organizations run b
y Rich were based. Back in Chicago, meanwhile, a new tax-exempt group sprang up at its former address, calling itself the Sam Adams Alliance.

  Eric O’Keefe, who had served on the board of Americans for Limited Government, was now the chairman and chief executive officer of the new organization. “We’re not going to be shut up,” he had vowed when previously investigated in Wisconsin for campaign-finance violations. Tax records showed that some 88 percent of the Sam Adams Alliance’s funding that year came from a single gift of $3.7 million from a mysterious undisclosed donor.

  In the summer of 2008, as Barack Obama grew closer to capturing the presidency, Eric Odom at the Sam Adams Alliance started experimenting with some of the online communications methods that would later help to organize the Tea Party movement. He tested out the use of Twitter to trigger a right-wing flash mob in the House of Representatives in Washington. He and a friend, Rob Bluey, a twenty-eight-year-old blogger who described himself as “a card-carrying member of the vast right-wing conspiracy,” created something they called the DontGo movement. They sent out Twitter messages demanding that the Democratic leadership in the House schedule a vote on legalizing offshore oil and gas drilling, or else Republicans would refuse to go home for the summer recess.

  The Twitter experiment worked remarkably well. That August, conservative congressmen, oil lobbyists, and other supporters of offshore drilling poured into the House, creating a wild and seemingly spontaneous protest. They chanted, “Don’t go!” and “Drill here! Drill now!” They didn’t succeed in lifting the restriction on offshore drilling, but one leader of the revolt, the Arizona congressman John Shadegg, a conservative Republican, exalted that the protest was “the 2008 version of the Boston Tea Party.”