the 2010 elections and the 2010 Census.38 On the local level, state level victories have similarly enabled the Republicans to alter state level laws that have major impacts on the nature of municipal elections in ways that systematically advantage them.39
Republicans’ state level electoral successes have led to policy victories for economic conservatives on a range of issues— particularly cutting government spending, lowering taxes, and weakening labor unions, which are of special interest to wealthy campaign contributors who have invested a
lot of money in state politics.40 Conservative activists— particularly those associated with AFP and the Kochs— have been especially successful at
diminishing collective bargaining rights of public sector workers and in resisting Medicaid expansion as part of Obamacare.41 Billionaires like
John and Laura Arnold, who made billions of dollars in energy trading,
have successfully led efforts in several states to chip away at pensions for public sector workers.42
Public sector pensions have also been a focus in Illinois, where the election as governor of near billionaire Bruce Rauner (who poured more than $30 million into his own campaign and was aided by generous funding from
Ken Griffin and several out of state billionaires43) led to a long and bitter
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stalemate with the Democrat dominated state legislature. Illinois repeatedly failed to enact a state budget, failed to pay employees and contractors on time, and faced downgrades in its bond ratings.44 As of this writing in late 2017, Rauner is highly unpopular among Illinois voters. But two of the leading Democrats seeking to oppose him in the 2018 gubernatorial election are themselves extremely wealthy. They are J. B. Pritzker (#219 on the 2017 Forbes list, worth $3.4 billion) and Chris Kennedy of the famous Kennedy family. The Kennedy family’s net worth is still estimated to be in the billions.45
A dramatic success for wealthy donors came in Kansas, where Governor
Sam Brownback and the Republican dominated state legislature gutted
spending on public education and altered the state’s tax system in extremely regressive ways that benefited the wealthy and burdened the poor.46
Similarly, in Wisconsin, billionaire backed Governor Scott Walker (who,
as noted in chapter 3, received large contributions from vehemently anti
union billionaire John Menard Jr.) largely dismantled the collective bargaining rights of public sector workers and signed right to work legislation into law to shrink already embattled unions in the private sector.47
In North Carolina, the Republican led state government elected in 2013—
which the Kochs and near billionaire Art Pope played a large role in
funding— has made the state’s tax code more regressive, cut unemployment
benefits, turned down federal dollars to expand Medicaid, and reduced
public education financing.48
In Michigan, billionaire Betsy DeVos (who later became US Secretary
of Education in the Trump administration), along with other members of
her family, helped slash financial support for public schools.49
In some instances, Republicans’ electoral successes on the state level
have enabled them to pass laws that have dramatic effects on the local level. In Tennessee, for example, an AFP state director worked closely
with a Republican state legislator to write and then pass a law expanding the state government’s control over transit projects. The explicit purpose of this law was to enable the state to kill an already approved Nashville mass transit project that would have been highly beneficial to members
of Nashville’s working class.50 (AFP took this action despite its supposed dedication to federalism.) Various “preemption” bills that would reduce
or eliminate local control (especially urban governments’ control) over
particular issues were introduced in at least twenty nine states in 2015.
They covered such matters as paid sick days, minimum wages, protections
for LGBTQ persons, environmental rules, gun control, and immigration.51
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We have focused on Republicans, but other conservative successes at
the local level appear to have resulted from the actions of Democratic officials who get large contributions from wealthy conservative donors. Such contributions may either influence the positions of the Democratic officials or may help conservative rather than liberal Democrats get elected in the first place. In Chicago, for example, Rahm Emanuel’s conservative donors, when asked about their support for a Democrat, point to his stances on education policy.52 Emanuel has repeatedly sparred with the
Chicago Teachers Union,53 has slashed the city’s education budget, and
has closed dozens of public schools.54 Emanuel has also invested public
pension funds in hedge funds and other financial vehicles— some of which
are connected to his wealthy donors55— and privatized various aspects of
city infrastructure.56
Wealthy conservative contributors have also achieved policy successes
by cultivating state level administrative officials, especially state attorneys general— who are the highest law enforcement officials in each state.
According to a New York Times investigative report, Oklahoma Attorney General (later chief of the US Environmental Protection Agency) Scott Pruitt received substantial financial support from oil and gas billionaires, particularly Harold Hamm, who served as chairman of his reelection campaign. Pruitt, in turn, worked in ways that benefited oil and gas interests. For example, Pruitt signed and sent on to federal regulators a letter written by an energy company’s lawyers claiming that the feds had
overestimated the air pollution associated with oil drilling and discouraging the regulators from intervening in Oklahoma. The Times report made clear that the relationship between the state attorney general and
wealthy, business oriented contributors in Oklahoma was not unique
to that state, but has also characterized other states, like North Dakota and West Virginia, that have extensive energy resources and Republican
attor neys general.57
It should be noted that a smaller number of relatively liberal bil lionaires— despite many election losses— have also scored some state and local level policy victories, especially by using state level referenda to mobilize ordinary voters and establish policies that the state legislatures might not enact. The late insurance billionaire Peter B. Lewis, for example, successfully bankrolled several marijuana legalization referenda.
Quite a few billionaires, including Bill Gates and Jeff Bezos, have contributed large sums in support of same sex marriage.58 These successes have mostly concerned social issues, on which many billionaires prefer liberal
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or libertarian policies. Since billionaires (even pro Democratic billionaires) tend to be economically conservative, they are much less likely to ride to the rescue of ordinary Americans who want help with jobs, wages,
health care, public schools, or retirement pensions.
The Boundary- Control Strategy
Certain billionaires employ strategies at the state level that are more subtle and sophisticated— and often even less visible— than simply supporting
like minded political candidates or organizing referenda on favored policies. One such strategy can be called “boundary control”: a coordinated effort to use and preserve one party dominance of state politics to win special favors at the state level, while at the national level working to prevent federal regulation or other interference with the spoils.
In this section we lay out a theory of boundary control. We then quantitatively test some expectations about what sorts of billionair
es tend to engage in boundary control strategies, and we go on to use several systematically selected cases for qualitative analyses that further test the theory.
We find that the regulatory structures of the industries in which billionaires are active— along with the billionaires’ party affiliations— affect the use of this strategy. We also find indications that the boundary control strategy can produce lucrative results for those who use it.
The Boundary- Control Theory of US Campaign Contributions
Our theory of boundary control is extended from comparative politics
scholar Edward Gibson’s boundary control theory of national and subnational governments59 to apply to US electoral and lobbying politics. Specifically, it addresses ways in which US billionaires may coordinate their federal and state level political contributions to win direct state level benefits while warding off federal level interference.
As applied to US campaign contributions, a boundary control strategy is
necessarily limited to extremely wealthy individuals— or cohesive groups of wealthy individuals with similar financial interests— who are willing to contribute millions of dollars to political campaigns in more than one election cycle. Such large investments are likely to reflect optimistic expectations about results: an unusually “high return” on investments, as a members only ALEC newsletter once boasted.60 According to the theory, billionaires
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deploying boundary control strategies primarily seek financial gains from state policies: state tax breaks, subsidies, government contracts, favorable regulations, and so forth.
The boundary control strategy involves trying to weaken the role of
the national government while maintaining and/or increasing the scope
and degree of subnational jurisdictions— both in general and on particular crucial issues. Boundary controlling billionaires thus deploy concepts related to “protecting states’ rights,” “preserving federalism,” “ending big government,” or “fighting against Washington insiders” to describe their
national political goals. Under a boundary control strategy, the main goal of national level political contributions is not to benefit directly from the federal government, but rather to limit the extent of the federal government’s control over public policy. Boundary control at the federal level, therefore, may involve making significant contributions to a number of
candidates who are running for national office (whether from a billionaire’s own state or from other states)— particularly candidates who hold or may gain powerful, agenda setting committee positions. The national
part of the strategy may also focus on encouraging legislators to take
hard line positions against federal action and shun compromise, as some
billionaire backed Tea Party members of Congress did during the Obama
administration. No problem if that causes gridlock. In fact, that may be
the point. Gridlock on the national level can be an effective way to prevent the federal government from increasing the scope of its authority or even from exercising ordinary policy making powers.61
At the state or local level, boundary controlling contributors attempt
to achieve political influence in places where a single dominant party currently controls (or has a good shot at controlling) a state’s or a locality’s politics. In such places, boundary controlling donors often make contributions directly to candidates in attempts to “capture” the support of members of the dominant party in order to receive favorable action on
issues of importance to them.
The theory suggests that the logic of contributions to issue- oriented groups, or to political parties as a whole, is different from the logic of contributing to candidates. Boundary controlling contributors are more
likely to donate to outside “issue” groups or to general party funds on the national level than on the subnational level. In order to benefit from policy or patronage at the state or local level, contributors need to purchase the loyalty of individual political officials. On the national level, though, billionaires pursuing boundary control do not need loyalty. All they need
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table 5.1 Boundary- Control Expectations
Boundary Control May Be More Likely When . . .
Regulatory Structure
Exposure to regulation is high + regulation is mostly subnational
Market Structure
Barriers to entry are high
Public costs are geographically concentrated
Party
Contributors are Republicans
is inaction. Their objectives can be met so long as national level election victors are ideologically dedicated to small government— regardless of whether those victors are loyal to the contributors. For example, boundary
controlling billionaires may be willing to run vicious negative advertisements against “big government” opponents, even contrary to the wishes of the small government candidates that they favor.62 They care much
more about undermining big government than about buying the influence
of those who advocate small government.
In recent years, boundary controllers have benefited from the Citizens United Supreme Court decision— which held that it is unconstitutional to limit independent political spending by corporations and unions— and
from the McCutcheon case, which struck down long standing limits on the total amount of money individuals can donate to campaigns in a single election cycle. Those decisions enhanced the ability of campaign contributors to engage in boundary control by expanding both the methods they can use to make contributions and the amount they can contribute.
Boundary control as a contribution strategy should not be equally attractive to all wealthy individuals. We expect that some are more likely to use it than others, based on their financial interests and certain personal characteristics. Table 5.1 summarizes our expectations about which sorts
of billionaires are most likely to use the strategy.
Expectations about Boundary Control
We expect that the most important determinant of the use of boundary
control is likely to be the regulatory structure that affects industries in which a contributor is active. Boundary control should be most common
among billionaires actively involved in industries that are both highly
regulated and regulated mostly on the subnational level. People with a
big stake in heavily regulated industries have more to gain from political contributions, because the monetary value of controlling government
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increases as the intensity of regulation increases. Heavy regulation alone, however, is not sufficient to make a boundary control strategy attractive.
If most regulation of an industry occurs on the national level, individuals active in that industry have little incentive to focus on state politics.
(Instead they may be forced into the higher cost and higher risk national arena.) State or local level regulation is key.
A second set of factors that could potentially increase or reduce the
attractiveness of boundary control to different billionaires concerns the market structure or the public impact of industries in which a billionaire is heavily invested. We expect boundary control strategies to be more
common among wealthy individuals who are active in industries with high
barriers to entry (that is, industries in which they are protected against competition by other firms). Boundary control should also be common
when billionaires’ industries impose net costs on the public (that is, when industries produce geographically concentrated public costs like pollution or toxic waste, without creating offsetting public benefits).
High barriers to entry— whether they consi
st of high capital requirements, limited access to scarce or protected resources, or exclusionary regulations— tend to increase the value of government benefits for a given firm and to reduce “free rider” problems, in which other firms may benefit from a billionaire’s political activities. (Boundary controllers presumably do not want to spend a lot money winning friendly policies and then have their
competitors share the benefits.) High barriers to entry reduce the number of firms within an industry and increase the market share of individual firms, thereby decreasing the number of potential free riders.
Social costs created by firms or by public policies related to them—
whether financial costs (e.g., when taxpayers lose because firms receive
unfair tax breaks or inappropriately generous state or local contracts),
or cultural or moral costs (e.g., when gambling is encouraged by governments subsidizing casinos), or environmental costs (e.g., environmental devastation and pollution from coal mines)— should tend to increase the
attractiveness of boundary control strategies. The contribution side of
boundary control (giving money to state and local politicians) provides
a way to overcome resistance from officials when voters do not want to
waste tax dollars or bear the burden of social or environmental damage
without substantial offsetting benefits.
We expect, however, that public costs and market structure will have
smaller effects than regulatory structure: possibly no detectable effects at all.
Wealthy contributors generally have an incentive to use boundary control
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whenever government regulation of an industry in which they are active is heavy in intensity and primarily located within subnational government—
regardless of barriers to entry or net costs to the public. High barriers to entry do tend to make use of the boundary control strategy more valuable.
And net costs to the public do tend to increase the chances that the strategy is needed to overcome public opposition. But even in the absence of those factors, there may well be gains to be had for owners and investors in any industry operating within a primarily subnational regulatory structure. Thus we expect that factors related to regulatory structure will have larger effects than those related to market structure.
Billionaires and Stealth Politics Page 17