Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (51 page)

As part of that effort, Americans for Prosperity pressured states to refuse the free, expanded Medicaid coverage included in the program, which meant denying health-care coverage to four million uninsured adults. They also pressured state officials across the country into refusing to set up their own health-care exchanges, as anticipated by the law.
Meanwhile, the Cato Institute and the Competitive Enterprise Institute promoted the theory that it was illegal for the federal government to step in where the states failed to act—an interpretation of the law contradicted by both the Republican and the Democratic legislators who drafted it.
This nonetheless formed the basis for the second legal challenge to the Affordable Care Act to reach the Supreme Court,
King v. Burwell
, which in the summer of 2015 also proved unsuccessful.

(The Kochs and their allies had already played a largely unnoticed role in quietly financing the first legal challenge to the health-care law to reach the Supreme Court. Officially, the lawsuit was brought by the National Federation of Independent Business.
But the NFIB was talked into signing up as the plaintiff at a Heritage Foundation event in 2010. Afterward, the Kochs’ organization Freedom Partners, DonorsTrust, Karl Rove’s dark-money group Crossroads GPS, and the Bradley Foundation all helped to fund the NFIB.)

Phillips maintained that the conservative groups were vastly outspent in the health-care fight by the law’s supporters. “
It’s David versus Goliath,” he claimed. But according to Kantar Media’s Campaign Media Analysis Group, which tracks spending on television ads,
$235 million was spent on ads demonizing the law in the two years following its passage. Only $69 million was spent on ads supporting it.

In the run-up to the government shutdown, the Heritage Foundation played a major role too. In 2013, Senator Jim DeMint of South Carolina had resigned his Senate seat to become president of the organization, and under his leadership it became an increasingly radical and aggressive faction within the Republican Party. As part of the new aggressiveness under DeMint, Heritage created a dark-money 501(c)(4) arm called Heritage Action that could engage directly in partisan warfare, into which the Koch network put $500,000. (John Podesta, the head of the liberal Center for American Progress, came up with this new wrinkle, which he called a way to create “a think tank on steroids.” In 2010, Heritage copied it.)

Heritage Action stunned Republican moderates by attacking those who declined to sign Congressman Meadows’s open letter to “defund Obamacare.” The internecine warfare was so heated that Heritage Action was kicked out of a Republican congressional caucus in which the think tank had long been welcome. But the pressure tactics were “hugely influential,” David Wasserman, a nonpartisan expert for the respected
Cook Political Report
, told the
Times
. “
When else in our history has a freshman member of Congress from North Carolina been able to round up a gang of 80 that’s essentially ground the government to a halt?”

After the 2012 election political leaders in both parties had expressed hope that the partisan battles would subside so that the government could finally tend to the serious economic, social, environmental, and international issues demanding urgent attention from the world’s richest and most powerful nation. Speaker of the House Boehner made it clear to the extremists in his party that it was time to back off. “
The president was reelected,” he reminded them. “Obamacare is the law of the land.”

Yet less than a year later, the country was held hostage in another futile fight over Obamacare. As congressional leaders met with Obama at the White House on October 2, 2013, in what turned out to be an unsuccessful effort to reach a deal that could avert the disastrous shutdown, Obama pulled the Speaker aside.

“
John, what happened?” the president asked.

“I got overrun, that’s what happened,” he replied.

A bipartisan compromise eventually enabled the government to reopen. Boehner, in a rare moment of candor for Washington, then singled out the real people responsible for the meltdown. Self-serving, extreme pressure groups, he said, were “misleading their followers” and “pushing our members in places where they don’t want to be. And frankly I just think they’ve lost all credibility.”

But if their fortunes were radicalizing American politics from the roots up, the Kochs and Art Pope saw it as progress. In North Carolina, Pope had a message for his growing chorus of critics: “
I am not going to apologize for making the decisions on how I spend my generation’s money.”

As the houselights dimmed and the introductory country music faded to an expectant hush, four aging white men in dark business suits appeared from behind the curtains in a large auditorium and one by one took their turns at the lectern to prove that they were in fact, as the title of the program that day advertised, “the smartest guys in the room.”

It was March 16, 2013, and at the annual Conservative Political Action Conference the heads of Washington’s most influential conservative think tanks—the closest thing the movement had to wise men or witch doctors—were gathered on one stage to diagnose how the election of 2012 had gone so wrong and deliver a cure. Edwin Feulner was there, with a dapper gold pocket square, the grand old man of the Heritage Foundation. So was Lawson Bader, the bald and bearded leader of the scrappy Competitive Enterprise Institute. John Allison was there too, looking every inch the southern banker he had been until recently, before leaving the helm of BB&T for that of the Cato Institute. The scene-stealer, though, was Arthur Brooks, the president of the American Enterprise Institute.

Gaunt, with a salt-and-pepper beard, a receding hairline, and the heavy black-rimmed glasses of an intellectual, Brooks had traded an earlier career as a French horn player for a job hitting just the right conservative notes. He had a knack for phrasing and timing and for boiling down complicated material into engaging and accessible nuggets, as he did that day.

“There’s only one thing you need to know,” Brooks said about 2012. “I know it makes you sick to your stomach,” he added. But one statistic, he said, explained why conservatives had lost: only a third of the public agreed with the statement that Republicans “care about people like you.” Further, only 38 percent believed they cared about the poor.

Conservatives had an empathy problem. This mattered, Brooks explained, because, as a recent study by Jonathan Haidt, a psychologist at NYU’s Stern School of Business, had shown, Americans universally agreed with the statement that “fairness matters.” In a nod to his conservative audience, Brooks repeated, “I know it makes you
sick
to think of that word ‘fairness.’ ” But Americans, he said, also universally believed that “it’s right to help the vulnerable.”

Unfortunately, in the view of the American public, Brooks explained further, the Democrats were “the ‘fairness guys.’ They’re the ‘helping-the-poor’ guys. Who are we? We’re the ‘money guys’!”

If conservatives wanted to win, he exhorted his audience, they had to improve their image. It wasn’t a policy problem, he assured everyone. Conservative policies, he maintained, still offered the best solutions. It was a messaging problem. To persuade the public, they needed more compassionate packaging. “In other words,” Brooks said, “if you want to be seen as a moral, good person, talk about fairness and helping the vulnerable.” He added, “You want to win? Start fighting for people!…Lead with vulnerable people. Lead with fairness!…Telling stories matters. By telling stories, we can soften people. Talk about people, not things!”

Some sharp-eyed conservatives, such as Matthew Continetti, gently mocked Brooks’s prescription, suggesting that “
maybe it’s also the content of the message” that was a problem. Perhaps, he suggested archly in
The Weekly Standard
, the public wasn’t wrong to question whether “corporate tax reform” of the type backed by the business elite “would allow the poor to operate on a level playing field with Alcoa and Anheuser-Busch.” But as the Kochs assessed the damage after 2012 and began planning their next moves, they embraced Brooks’s advice. They then launched what was essentially the best public relations campaign that money could buy. Underlying it all was the simple point that Brooks had stressed. If the “1 percent” wanted to win control of America, they needed to rebrand themselves as champions of the other “99 percent.”

By supplying the research necessary for this political makeover, Brooks was providing one of the key services for which AEI and the other
conservative think tanks in Washington were founded. “Conservative think tanks, which are almost exclusively funded by very wealthy people, are the front line of the income-defense industry,” observed the political scientist Jeffrey Winters. Brooks, in his CPAC session, put it another way. As he faced an audience filled with the defeated foot soldiers of the conservative movement, he said, “We in the think tanks assist you. We run the idea guns to you!”

After the humiliating presidential defeat of 2012, there was no doubt that the Kochs and the other outsized spenders in their club were in desperate need of new ammunition. Opponents had vilified them relentlessly. One Koch Industries employee recalled, “We had such serious image problems and morale problems, when you said ‘Koch,’ you might as well have said you work for the devil.”

These problems worsened at the start of 2014 as Harry Reid, the Democratic majority leader in the U.S. Senate, began attacking the Kochs almost daily from the Senate floor for, as he put it in one outburst, “trying to buy America. It’s time that the American people spoke out against this terrible dishonesty of these two brothers, who are about as un-American as anyone that I can imagine.”

Many would have backed down in the face of such public pressure, but the Kochs were determined to double down. “
We’re going to fight the battle as long as we breathe,” David Koch had declared in
Forbes
.

Around the time that Reid began his attacks, the Kochs hired a new chief of communications, Steve Lombardo, a former chair of Burson-Marsteller’s U.S. public affairs and crisis practice in Washington, who had previously burnished the image of tobacco companies, among others. At the time, they were still in the midst of a rigorous postmortem, trying to pinpoint where their political operation had gone wrong.

The Republican National Committee was also assessing its failings. In an unusually candid and self-critical public exegesis, it found among other things that out-of-control spending by outsiders was overwhelming the candidates, giving rich donors too much influence. “
The current campaign finance environment has led to a handful of friends and allied groups dominating our side’s efforts. This is not healthy. A lot of centralized authority in the hands of a few people at these outside organizations is dangerous for our Party,” it warned.

The Kochs’ analysis was kept secret, but in May 2014 a hint of their thinking surfaced when
Politico
got ahold of a “confidential investor update” sent by Americans for Prosperity to its big donors. It tracked closely with Arthur Brooks’s view that the problem had more to do with packaging than content. “
We consistently see that Americans in general are concerned that free-market policy—and its advocates—benefit the rich and powerful more than the most vulnerable in society,” the memo from Americans for Prosperity lamented. “We must correct this misconception.”

Soon after, more information leaked out. On June 17, 2014, a young, little-known blogger and Web producer named Lauren Windsor, who hosted an online political news program called
The Undercurrent
, began posting a series of audiotapes of the secret sessions that had taken place just days before, during the Kochs’ semiannual donor summit. Windsor had been libertarian herself. But she had lost her job in the 2008 financial crash and, with it, her faith in free markets. By the time the Kochs and their circle gathered at the St. Regis Monarch Beach resort outside Laguna Beach, California, on Friday, June 13, Windsor had become a crusader against the corrupting influence of big money in politics. Working with an unnamed source who attended the conference, she was eager to spill the Kochs’ secrets. The tapes she began revealing didn’t disappoint.

A number of news stories resulted from these tapes. But as it turned out, there was at least one more that Windsor didn’t release because of its poor audio quality. If anything, it provided an even more stunning picture of the scope and audacity of the Kochs’ designs on the country, as well as their effort during this period to recast themselves, in order to appear less threatening.

On Sunday, June 15, the donors came together in the Pacific Ballroom of the five-star oceanfront resort for a confidential post-lunch seminar titled “The Long-Term Strategy: Engaging the Middle Third.” As he took the floor, Richard Fink, who was introduced as Charles Koch’s “grand strategist,” provided a fascinating and at times startling tour through the new political plan. In some ways, no one in the Koch empire was more on the hook for the failures of 2012 than Fink, the brothers’ longtime consigliere. Fink was executive vice president and a director of the board of Koch Industries, as well as a board member of Americans for Prosperity. After the election, he had thrown himself into the kind of unsparing internal review for which the company was known. It included an analysis of twenty years of research into political opinions, based on 170,000 surveys taken both in the United States and abroad, as well as many meetings and focus groups. Its conclusion, Fink told the donors, was that if they were to win over America, they needed to change.

“We got our clocks cleaned in 2012,” Fink began. “This is a long-term battle.” The challenge, he said he had learned, was that the country was divided into three distinct parts. The first third already supported the Kochs’ conservative, libertarian vision. Another third, the liberals, whom he referred to as “collectivists,” using the old John Birch Society term, were beyond the Kochs’ reach. “The battle for the future of the country is who can win the hearts and minds of the middle third,” Fink said. “It will determine the direction of the country.”

The problem, he said, was that free-market conservatives had lost the all-important “middle third.” This segment of the American population tended to believe that liberals cared more about ordinary people like themselves. In contrast, he said, “big business they see as very suspicious…They’re greedy. They don’t care about the underprivileged.”

Assuming that he was among friends, Fink readily conceded that these critics weren’t wrong. “What do people like you say? I grew up with pretty much very little, okay? And I worked my butt off to get what I have. So,” he went on, when he saw people “on the street,” he admitted, his reaction was, “Get off your ass and work hard, like we did!”

Unfortunately, he continued, those in the “middle third”—whose votes they needed—had a different reaction when they saw the poor. They instead felt “guilty.” Instead of being concerned with “opportunity” for themselves, Fink said, this group was concerned about “opportunity for other people.”

So, he explained, the government-slashing agenda of the Koch network was a problem for these voters. Fink acknowledged, “We want to decrease regulations. Why? It’s because we can make more profit, okay? Yeah, and cut government spending so we don’t have to pay so much taxes. There’s truth in that.” But the “middle third” of American voters, he warned, was uncomfortable with positions that seemed motivated by greed.

What the Koch network needed to do, he said, was to persuade moderate, undecided voters that the “intent” of economic libertarians was virtuous. “We’ve got to convince these people we mean well and that we’re good people,” said Fink. “Whoever does,” he said, “will drive this country.”

Fink was brutally honest about how unpopular the right-wing donors’ views were. “When we focus on decreasing government spending,” he said, and “decreasing taxes, it doesn’t do it, okay? They’re not responding, and don’t like it, okay?”

But, he pointed out, if anyone in America knew how to sell something, it should be those in the Koch network. “We get business—what do we do?” he asked. “We want to find out what the customer wants, right? Not what we want them to buy!”

The Kochs’ extensive research had shown that what the American “customer” wanted from politics, alas, was quite different from their business-dominated free-market orthodoxy. It wasn’t just that Americans were interested in opportunity for the many, rather than just for themselves. It also turned out, Fink acknowledged, that they wanted a clean environment and health and high standards of living, as well as political and religious freedom and peace and security.

These objectives would seem to present a problem for a group led by ultrarich industrialists who had almost single-handedly stymied environmentalists’ efforts to protect the planet from climate change. The extraordinary measures that the Kochs and their allies had taken to sabotage the country’s first program offering affordable health care to millions of uninsured citizens might also seem to be problematic. Their championship of tax breaks for heirs, hedge fund managers, offshore accounts, and other loopholes favoring the rich, along with their opposition to welfare, the minimum wage, organized labor, and funding public education, also would seemingly fly in the face of the middle third’s interest in widening opportunity.

These political problems would seem to have been compounded by new statistics showing that the top 1 percent of earners had captured 93 percent of the income gains in the first year of recovery after the recession.

But rather than altering their policies, those in the Koch network, according to Fink, needed a better sales plan. “This is going to sound a little strange,” he admitted, “so you’ll have to bear with me.” But to convince the “middle third” of the donors’ good “intent,” he said, the Koch network needed to reframe the way that it described its political goal. What it needed, he said, was to “launch a movement for well-being.”

The improved pitch, he said, would argue that free markets were the path to happiness, while big government led to tyranny and fascism. His reasoning went like this: Government programs caused dependency, which in turn caused psychological depression. Historically, he argued, this led to totalitarianism. The minimum wage, he said, provided a good example. It denied the “opportunity for earned success” to 500,000 Americans who, he estimated, would be willing to work for less than the federal minimum standard of $7.25 per hour. Without jobs, “they’ve lost their meaning in life,” said Fink. This, he warned, had been “a very big part of the recruitment in Germany during the ’20s.” Thus, he argued to an audience that included many of the country’s billionaires, minimum wage laws could be described as leading to the kinds of conditions that caused “the rise and fall of the Third Reich.”