Who Stole the American Dream? (19 page)

As president of one of the coalition’s major business groups, the forty-thousand-member National Association of Wholesaler-Distributors, Van Dongen was a veteran of political wars. He was a shrewd lobbying strategist. “
Over the years, I got a reputation for knowing how to organize coalitions, how to run them,” Van Dongen explained to me. “My staff serves as the coalition bureaucracy. We call the meetings. We push the paper around. But this is not Van Dongen at the top of a juggernaut without anyone else. This is a team sport. You do not win these things on your own. You gather like-minded stakeholders and create a coalition.”

The like-minded stakeholders were in the Indian Treaty Room that morning to meet with the new president. The goal that day was to make sure that everyone walked out of that session singing the same tune. “
There’s a chorus out there,” said one White House official, “and we’re trying to make sure it’s heard as loudly and clearly as possible.”

Most of Corporate America had backed Bush in the tight election of 2000. Now, he was in his honeymoon period, but the fate of his tax proposal was uncertain. Moderates on Capitol Hill, Republicans included, worried that
Bush’s proposal for $1.78 trillion in individual tax cuts over the next decade risked runaway federal deficits.
At Treasury, Secretary O’Neill was warned by his communications director, Michele Davis, that the public was wary. In a memo, she told him: “The public prefers spending on things like health care and education over cutting taxes.”

That very morning, February 27, 2001,
The Washington Post
ran a poll reporting that 35 percent of the public thought Bush’s top priority should be higher spending on domestic programs such as education and health care. Another 25 percent favored strengthening Social Security; 17 percent wanted to spend budget surpluses inherited from Clinton on reducing the national debt; and only 22 percent—about one in five—wanted to cut taxes. And if there was going to be a tax cut, 53 percent favored a small cut over a large cut; and 47 percent worried that Bush’s tax cut would be tilted in favor of the wealthy.

An NBC/
Wall Street Journal
poll found that while most people welcomed a tax cut, a 52 to 41 percent majority said it should be only “for middle-and low-income taxpayers so the government has enough money for debt reduction and specific spending increases in priority areas such as education.”
An even stronger tilt toward a smaller, middle-class tax cut came in a
Los Angeles Times
poll on March 8. Even in polls that supported a tax cut in principle, the public wasn’t buying the scale or the financial tilt of the Bush tax cuts.

Enter Dirk Van Dongen and what he calls “the Gang of Six”—the heart of the Tax Relief Coalition—determined to override the public’s view.

In the three decades since Lewis Powell’s business manifesto of 1971, Van Dongen’s six groups had become the core of business political power in Washington: 1) the U.S. Chamber of Commerce; 2) the Business Roundtable; 3) the National Association of Manufacturers; 4) the National Federation of Independent Business; 5) the National Restaurant Association; and, of course, Van Dongen’s own 6) National Association of Wholesaler-Distributors. Together, Van Dongen says, they represent 1.8 million businesses, from the Fortune 1,000 to the multitude of small businesses. By 2001, the Gang of Six dominated Washington lobbying.

In Washington, the biggest political wars are invariably about money, especially taxes. “This is the ultimate Washington insiders-versus-America issue,” asserts Stephen Moore, president of the Club for Growth, a right-wing group that is passionate about cutting taxes. “
Washington derives so much of its power from the tax code—not just congressmen on the Ways and Means Committee, but lobbyists and lawyers.”

Dirk Van Dongen cut his political teeth on tax bills—fighting for President Reagan’s tax cuts in 1981 and 1986, trying to torpedo President Clinton’s tax increases in 1993. As a Republican loyalist and a canny operative with a golden Rolodex, Van Dongen has the inside track; he knows whom to call and how to move things. “
Dirk is always well positioned …,” said an admiring Chamber of Commerce official. “His political tentacles run deep.” Others talk about his talent for organization and his skill at leveraging business influence with Congress.

For the 2001 tax battle, Van Dongen’s Tax Relief Coalition ramped up with surprising speed. Even though corporations would not directly benefit from individual income tax cuts, individual business leaders in the Gang of Six coalition stood to reap huge personal windfalls from a drop of 5 percent in the maximum individual tax rate or a cut in capital gains taxes. Those with small businesses, where company profits pass through to their individual tax returns, got an added benefit. So they were all motivated to push a big tax cut.

“
That coalition was very important,” said Nick Calio, Bush’s chief
congressional liaison. “There were a lot of recalcitrant Democrats and some Republicans [in Congress].”

Van Dongen’s specialty is grassroots politicking. He is a strong believer in district-by-district face-to-face lobbying. His strategy was to mobilize thousands of CEOs of companies in his wholesalers group and in the National Federation of Independent Business to lobby senators and House members back in their home districts. The Chamber of Commerce and Business Roundtable flew in high-powered CEOs to meet with committee chairmen and pivotal lawmakers. Professional business lobbyists buttonholed fence-sitters on Capitol Hill. All pushed the big tax cut.

On the other side was a liberal coalition of organized labor, women’s groups, civil rights organizations, Common Cause (the nonprofit public advocacy group), and Ralph Nader’s Public Citizen. They favored a smaller, middle-class-friendly tax cut. In a TV ad campaign, the AFL-CIO attacked President Bush for spending the budget surplus inherited from Clinton on a tax cut tilted to favor the wealthy. “
The President has it backwards,” declared AFL-CIO president John Sweeney. The Service Employees International Union staged
protests in several cities, trying to mobilize the opposition. “Let’s call it what it is,” Georgia State Democratic senator Vincent Fort shouted to a union rally in Atlanta. “This is reverse Robin Hood. [Bush] is stealing from the poor to give to the rich.” Although opinion polls showed a majority of Americans against the Bush tax cut formula, there was little evidence that much of the public was writing or calling Congress with their views. In fact,
Bush was the one urging voters to press Congress—to back his plan. On a swing through the Midwest promoting his tax cuts, the president told audiences time and again, “You’re just an e-mail away from making a difference in somebody’s attitude.”

In the nitty-gritty of Washington lobbying, the opposition was
no match for the Gang of Six. Members knew that in one year, the six big business groups could spend
a staggering $2 billion on lobbying and hundreds of millions more on political campaigns, backing President Bush and members of the House and Senate who favored their tax-cutting agenda. Just one group from the Gang of Six,
the Business Roundtable, and its 208 corporate members and their executives poured $143 million into the 2010 congressional elections, according to the Center for Responsive Politics, which tracks political money. The business advantage was so great, observed Yale Law School professor Michael Graetz, “
you have an 800-pound gorilla battling no one.”

With a faltering economy in 2001 and rising unemployment, the Gang of Six made the pitch that large tax cuts would jump-start the economy and create jobs. The Bush White House said it would revive “our sputtering economy.” As it turned out, that economic logic was wrong, but it swayed Congress.

In terms of who wins and loses in a tax bill, ordinary voters get confused by the crossfire of claims and counterclaims.
Tax policy, as one academic study put it, is “a highly technical realm that is ripe for concealment and mystification,” and the Gang of Six and the Bush White House were not above
exploiting public confusion or gullibility. Democrats warned that 43 percent of the tax cut would go to the top 1 percent on the income scale. But the
White House highlighted the promise of a quick tax rebate for average taxpayers—$300 for single people and $600 for couples. But that pitch masked the larger truth that as the years rolled on, the lion’s share of tax cuts would go to the super-rich.

With a full court press by the Gang of Six reinforcing the White House push, the Bush bill, offering $1.35 trillion in tax cuts over a decade, passed the House by 240–154 in May 2001. In the Senate, Republicans sidestepped a Democratic filibuster by invoking the process of budget reconciliation—which required them to guarantee there would be no net loss of revenue, an impossibility with such a huge tax cut. The Republican majority ignored that requirement and the looming deficits and passed the bill 58–33.

No less a conservative than Arizona Republican
John McCain voted against the Bush tax cut. McCain had advocated tax relief for “millions of hardworking Americans.” But when he saw that the Bush package was stacked against the middle class, he voted no. “I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans who most need tax relief,” McCain protested.

When economists did the numbers, they found that
52.5 percent of the Bush tax cuts went to the richest 5 percent of U.S. households, while 80 percent of Americans got one-fourth of the tax breaks through 2010. Bush had abandoned the “compassionate conservatism” of his 2000 campaign. Backed by the Gang of Six, he had rammed through a tax bill that ran contrary to public opinion.

“
Far from representing popular wishes, the size, structure, and distribution of the tax cuts passed in 2001 were directly at odds with majority views,” noted political scientists Jacob Hacker and Paul Pierson. Instead, they observed, the Bush White House was rewarding its political base—“the partisans, activists, and moneyed interests that are their first line of support….”

What powered the business community’s ability to persuade Congress to buck public opinion on the Bush tax cuts was a political machine with unparalleled clout in political campaigns and influence deep in the tax-writing committees of Congress—a machine that far outstripped that first business coalition after the 1971 Powell memo.

The media still treat business and labor as rough equals in the Washington power game, but that image is forty years out of date. Business vastly outguns organized labor in its ability to marshal
money and political muscle. The gap between the two is far, far greater than the public realizes or than most political reporters reflect.

Not only did business respond to the Powell memo by dramatically expanding its lobbying presence in Washington, but it has moved aggressively into campaign politics. Unions were the first to form PACs, or political action committees, to funnel dollars to friendly candidates. But once corporate PACs got the green light, they surged ahead.

The explosive growth of corporate PACs dates from a 1975 ruling by the Federal Election Commission, which approved not only company PACs, but the right of corporate management to solicit funds from employees and to use company funds to manage their PACs. Before that, labor PACs outnumbered corporate PACs by 201 to 89. Today, business PACs have an overwhelming advantage. Companies and business trade associations have set up 2,593 PACs to 272 for labor unions.

Important as they are, PACs are only part of the story in the changing balance of power. PACs are subject to specific legal limits on donations from individuals to candidates. Really big donors look for ways to get around those legal limits. One way is through “bundling”—the kind of fund-raising that business lobbyists like Dirk Van Dongen specialize in. They gather lots of individual donations from their friends and business colleagues and put them together in a “bundle.” That gives them credit—and political chits with officeholders who receive those “bundles.”

But the biggest campaign donations come in the form of what is known in campaign argot as “soft money”—“soft” because the donations are not subject to fixed, hard, legal limits. Soft money donations cannot go directly to candidates, but they can be contributed to parties or to independent groups, including Super-PACs, which are not legally supposed to have any direct connection with candidates. Until the last couple of years, when Super-PACs took off in size and activity, soft money donations were typically designated for
organizational and educational efforts by the political parties—to the Republican National Committee or the Democratic National Committee, or to state and local party committees, or the party committees that back campaigns for the U.S. Senate, Congress, and so on, down the line, for get-out-the-vote efforts or TV issue ad campaigns. Party organizations at all levels are forever on the hunt for soft money, and with no legal limits on the size of donations, the financial floodgates are wide open. The checks can run into the hundreds of thousands and even the millions.

In the pivotal congressional elections of 2010,
business interests pumped in $972 million in soft money contributions mostly to the Republican Party vs. $10 million for labor—a staggering 97-to-1 business advantage. In PAC donations, the business tilt was significant, too: Business PACs outdid labor PACs by $333 million to $69 million, according to the Center for Responsive Politics. Add it all together, the center says, and business outspent labor 16 to 1 in the 2010 elections.

Corporate money has also fueled the explosive growth of the Washington lobbying industry. In fact, while most of America was mired in economic stagnation during the zero decade, lobbying enjoyed boom times. The banner years were 2009 and 2010, when Washington was busy doling out taxpayer bailout money to troubled banks and Congress was writing laws on health care and regulating Wall Street.
In all, $7 billion was spent on lobbying—$3.5 billion a year—in 2009 and 2010, and $6 billion, or more than 87 percent, was spent by business interests.
No other lobbying interest was even a close second. Business outspent labor on lobbying by 65 to 1. Not surprising, since business lobbyists as early as 2006 had outnumbered labor lobbyists by more than 30 to 1 (12,785 business lobbyists to 403 for labor). In fact,
business leaders did not even bother to
mention labor or public interest lobbyists when they were asked to name their primary targets or opponents. They seemed not to regard labor or public interest lobbyists as serious competition.