Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (9 page)

In hindsight, it seems that David Koch’s 1980 campaign served as a bridge between LeFevre’s radical pedagogy and the Tea Party movement. Indeed the Libertarian Party’s standard-bearer that year, Clark, told
The Nation
that libertarians were getting ready to stage “a very big tea party,” because people were “sick to death” of taxes. The party’s platform, meanwhile, was almost an exact replica of the Freedom School’s radical curriculum. It called for the repeal of all campaign-finance laws and the abolition of the Federal Election Commission (FEC). It also favored the abolition of all government health-care programs, including Medicaid and Medicare. It attacked Social Security as “virtually bankrupt” and called for its abolition, too. The Libertarians also opposed all income and corporate taxes, including capital gains taxes, and called for an end to the prosecution of tax evaders. Their platform called for the abolition too of the Securities and Exchange Commission, the Environmental Protection Agency, the FBI, and the CIA, among other government agencies. It demanded the abolition of “any laws” impeding employment—by which it meant minimum wage and child labor laws. And it targeted public schools for abolition too, along with what it termed the “compulsory” education of children. The Libertarians also wanted to get rid of the Food and Drug Administration, the Occupational Safety and Health Administration, seat belt laws, and all forms of welfare for the poor. The platform was, in short, an effort to repeal virtually every major political reform passed during the twentieth century. In the view of the Kochs and other members of the Libertarian Party, government should be reduced to a skeletal function: the protection of individual and property rights.

That November, the Libertarian ticket received only 1 percent of the vote. Its stance against war and the military draft, and in favor of legalizing drugs and prostitution, won it some support among young rebels. But as a market experiment, libertarianism proved a massive flop. The brothers realized that their brand of politics didn’t sell at the ballot box. Charles Koch became openly scornful of conventional politics. “
It tends to be a nasty, corrupting business,” he told a reporter at the time. “I’m interested in advancing libertarian ideas.”

According to Doherty’s history, the Kochs came to regard elected politicians as merely “actors playing out a script.” Instead of wasting more time, a confidant of the Kochs’ told Doherty, the brothers now wanted to “supply the themes and words for the scripts.” In order to alter the direction of America, they realized they would have to “influence the areas where policy ideas percolate from: academia and think tanks.”

After the 1980 election, Charles and David Koch receded from the public arena. “
They weren’t really on my radar,” recalls Richard Viguerie, whose hugely successful right-wing direct-mail company won him the nickname the “Founding Funder of the Right.” But during the next three decades, they contributed well over $100 million, much of it undisclosed, to dozens of seemingly independent organizations aimed at advancing their radical ideas. Their front groups demonized the American government, casting it as the enemy rather than the democratic representative of its citizens. They defined liberty as its absence, and the unfettered accumulation of enormous private wealth as America’s purpose. Cumulatively, the many-tentacled ideological machine they built came to be known as the Kochtopus.

The Kochs were not alone. As they sought ways to steer American politics hard to the right without having to win the popular vote, they got valuable reinforcement from a small cadre of like-minded wealthy conservative families who were harnessing their own corporate fortunes toward the same end. Philanthropy, with its guarantees of anonymity, became their chosen instrument. But their goal was patently political: to undo not just Lyndon Johnson’s Great Society and Franklin Roosevelt’s New Deal but Teddy Roosevelt’s Progressive Era, too.

In taking on this daunting task, they were in many cases refighting battles that had been lost by their fathers. Complacent liberals, and many Republicans also, assumed by the 1970s that the political pendulum in America had shifted permanently away from archconservative groups like the John Birch Society. Robust government was almost universally accepted as a necessary instrument for social and economic betterment. Redistributive taxes and spending were largely uncontroversial. Even Richard Nixon had proclaimed in 1971, “I am now a Keynesian in economics.”

Not everyone in the Grand Old Party, however, agreed. A small but deep-pocketed reactionary rear guard was already hard at work, devising plans to fight moderation and win the battle for the radical Right in an ingenious new way.

For many years, in the foyer of Richard Mellon Scaife’s Pittsburgh mansion stood a prized possession, a brass elephant on a mahogany stand. Visitors could be forgiven for mistaking it for the usual Republican mascot, because Scaife’s forebears, who founded the Mellon banking, Alcoa aluminum, and Gulf Oil empire, were a financial mainstay of the Republican Party in Pennsylvania for more than a century. But the elephant in question was instead an homage to Hannibal, the fabled military strategist who daringly scaled the Alps on elephant back to launch a surprise attack on the Roman Empire. It served as the inspiration for a private organization that Scaife founded in 1964. This little-heralded group was just the first small step in what would become an improbably successful effort by one of the richest men in the country, along with a few other extraordinarily wealthy conservative benefactors, to cast themselves as field generals, in Hannibal’s mold, in a strategic war of ideas aimed at sacking American politics.

For decades, Scaife was described as a recluse, mysterious even to the recipients of his largesse. Over a fifty-year period, he personally spent what he estimated to be upward of $1 billion from his family fortune on philanthropy, once the sum was adjusted for inflation. Most of it, some $620 million, he reckoned, was aimed at influencing American public affairs. In 1999,
The Washington Post
called him “
the leading financial supporter of the movement that reshaped American politics in the last quarter of the 20th century.” When he died on July 4, 2014,
The New York Times
carried a lengthy obituary, along with his photograph. Yet he gave almost no interviews or speeches on his motives and aims. He rarely spoke with those who ran the institutions he funded and was estranged from many former friends and family members, including two former wives and his two grown children. When Karen Rothmyer, a reporter for the
Columbia Journalism Review
, tried to ambush him into an interview in 1981, he warned her, “
You fucking Communist cunt, get out of here!”
In 2009, however, five years before he was diagnosed with inoperable cancer, Scaife penned a previously private, still-unpublished memoir, “A Richly Conservative Life,” that serves as a secret tell-all about the building of the modern conservative movement.

In his memoir, Scaife describes how he and a handful of other influential conservatives who shared the view that American civilization faced an existential threat from progressivism began meeting during the Cold War years, at first informally, to plot against the country’s liberal drift. At one such session, someone suggested that the threadbare cliché comparing America’s ostensible downfall to that of ancient Rome was inadequate. The group decided that a better analogy was to the fall of Carthage, in North Africa. Carthage ostensibly fell when its wealthy elites failed to adequately back their military leader, Hannibal, as he reached the gates of Rome. The passivity of the ruling class allowed the enemy to triumph, burying the noble Carthaginian culture forever. Out of this discussion was born the League to Save Carthage, an informal network of influential, die-hard American conservatives determined, as Scaife writes, “that America must not go the way of Carthage, that we must win the struggles of our time.”

In 1964, when this group incorporated itself formally as the Carthage Foundation, many conservatives felt like the remnants of a lost civilization. Their standard-bearer, the Republican presidential nominee, Barry Goldwater, had been badly defeated at the polls. The Democratic victor, Lyndon Johnson, meanwhile, was forging ahead with liberal civil rights legislation and ambitious Great Society antipoverty programs, radically expanding the reach of government and challenging the old order. Liberal dominance over arts and letters was so uniform during these postwar years that the cultural critic Lionel Trilling had declared with self-satisfaction, “
Nowadays there are no conservative or reactionary ideas in general circulation.” M. Stanton Evans, a leading intellectual on the right, captured conservatives’ sense of marginalization in his 1965 book,
The Liberal Establishment: Who Runs America…and How
. He declared that “the chief point about the Liberal Establishment is that it is in control.” In response, right-wing activists like Evans, who had studied with Ludwig von Mises, militated for a “counter-establishment.” Yet they lacked the wherewithal with which to build it.

Stepping into this void and up to this challenge was, as the engraved brass plate beneath his elephant proclaimed, “Field Marshall Richard Mellon Scaife, the Carthaginian hero of the half century, 1950–2000.” The plaque praised Scaife’s “Audacity, Fidelity and Persistence.” Christopher Ruddy, a conservative reporter and publisher who worked closely with Scaife for many years, sharing some of his political adventures, believes that Scaife was the progenitor of a new form of hard-hitting political philanthropy. “
He’s the originator” of the current model, says Ruddy. “I don’t know anyone who did what he did before. He’s a bit like Santa Claus.”

I
n his early years, few would have expected Scaife to exert major influence on politics, or much else. Certainly he was born into extraordinary wealth.
In 1957,
Fortune
ranked his mother, Sarah Mellon Scaife, and three other members of the Mellon family among the eight wealthiest people in America. But Scaife wasn’t notably distinguished in any other way. Until his mid-thirties, he had no real career or accomplishments. Even by his own estimation, his life was dissolute. In his memoir, he writes that one of his favorite authors was John O’Hara because no one has better captured the decadence and the disappointment that were rife in his own upper-crust circle. “
How beautifully he summed up Pennsylvanians of a certain class,” Scaife writes, “their country club values, the wrecks they made of their lives on too much money and alcohol.”

Scaife’s great-grandfather Judge Thomas Mellon, the founder of the family fortune, had worried about the corrupting influence that inherited wealth might have on future heirs. The son of an Irish farmer who settled in Pennsylvania during the first half of the nineteenth century, Mellon proved an uncannily good businessman. He leveraged real estate investments into a thriving loan business that became Pittsburgh’s stately Mellon Bank. During the Gilded Age, the family acquired huge stakes in a number of burgeoning industrial corporations, including Gulf Oil and Alcoa. Surveying his great fortune, however, in 1885, Mellon fretted that “the normal condition of man is hard work, self-denial, acquisition and accumulation; as soon as his descendants are freed from the necessity of exertion they begin to degenerate sooner or later in body and mind.”

By the time his great-grandson Richard Mellon Scaife was born in Pittsburgh in 1932, some of the patriarch’s darkest fears had been realized. Sarah Mellon Scaife, the mother of the boy who was known to his family as Dickie, by all accounts struggled to fight a losing battle with alcoholism. She was “
a gutter drunk,” according to her daughter, the late Cordelia Scaife May. “So was Dick,” Cordelia said of her brother. “So was I.”

If they were born with silver spoons, they were also born with chips on their shoulders. In his memoir, Scaife describes himself as fundamentally “anti-establishment,” which may seem puzzling given his heritage, but his place within the Mellon dynasty was tinged with resentment. His mother had married a handsome and well-connected local patrician, Alan Scaife, who rode well to the hounds and had attended all the most elite schools but whose forebears had run the family metalworking company into the ground. As a result, Richard Scaife’s uncle R. K. Mellon, who like his mother had inherited a large part of the vast Mellon fortune, treated the Scaife family with scorn. “
My father—he was suckin’ hind tit,” Scaife told Burton Hersh, who wrote a biography of the family in 1978. In his memoir, Scaife writes that his uncle, who was his closest Mellon relative and whom he and his sister dubbed Uncle Piggy, “treated my father like an errand-boy.” Alan Scaife was given ceremonial titles in the various Mellon business concerns but no real power, other than to oversee his wife’s enormous inheritance.

Alan Scaife briefly cut a dashing figure during World War II, when he enlisted in the Office of Strategic Services (OSS), the forerunner of the Central Intelligence Agency (CIA), as an army major. But while his tailor-made uniforms made a memorable impression, this was less true of his job performance. Richard Helms, who later became director of the CIA, recalled Scaife, who had been a colleague, as “
a lightweight.”

The family brush with the spy service, however, ignited Richard Scaife’s lifelong infatuation with intelligence intrigue, conspiracy theories, and international affairs. Scaife writes that it also gave rise to his strongly anti-Communist views. In his memoir, he recalls his father admonishing the family while on furlough from the war that the scourge of Communism loomed large, not just abroad, but at home in America. “
My political conservatism which eventually unmasked me as the villain behind the ‘vast right-wing conspiracy’ of Hillary Clinton’s imagination—but only her imagination,” he writes, began “before I had reached my twelfth birthday” over a lunch with his father at New York’s Colony Club in 1944. Alan Scaife warned the family that wealthy capitalists like themselves were under attack. He invoked images of labor riots and class warfare. “
He was concerned for the security of the country and gave us the feeling around the table that our entire future was at stake,” Scaife writes. A local newspaper editor, William Block of the
Pittsburgh Post-Gazette
, had similar recollections. He remembered Alan Scaife as overwrought during the 1940s about what he regarded as the growing threat that leftists posed to the rich. “
Alan Scaife was terribly worried about inherited wealth,” he later recalled.

The family’s preoccupation with preserving its wealth was shared by previous generations. Scaife was heir not just to one of the country’s greatest industrial fortunes but also to a distinctly reactionary political outlook rooted in the age of the robber barons. His great-uncle the Pittsburgh banker Andrew Mellon, who served as Treasury secretary under Presidents Warren Harding, Calvin Coolidge, and Herbert Hoover, was a leading figure in the counterrevolution against the Progressive movement, and in particular he was an implacable foe of the income tax.

Before Congress instituted the federal income tax in 1913, following the passage of the Sixteenth Amendment to the Constitution, America’s tax burden fell disproportionately on the poor. High taxes were levied on widely consumed products such as alcohol and tobacco. Urban property was taxed at a higher rate than farms and estates. “
From top to bottom, American society before the income tax was a picture of inequality, and taxes made it worse,” writes Isaac William Martin, a professor of sociology at the University of California in San Diego.

In his history,
Rich People’s Movements: Grassroots Campaigns to Untax the One Percent
, Martin notes that the passage of the income tax in 1913 was regarded as calamitous by many wealthy citizens, setting off a century-long tug-of-war in which they fought repeatedly to repeal or roll back progressive forms of taxation. Over the next century, wealthy conservatives developed many sophisticated and appealing ways to wrap their antitax views in public-spirited rationales. As they waged this battle, they rarely mentioned self-interest, but they consistently opposed high taxes that fell most heavily on themselves. And no figure was more instrumental in leading the early opposition than Andrew Mellon.

When Congress instituted the federal income tax, Mellon was one of the wealthiest men in America, with interests in dozens of monopolistic conglomerates then called “trusts.”
His Union Trust bank reportedly financed almost half the investments in Pittsburgh. In his view, the economic inequality that such arrangements produced was not only inevitable; it was the just reward for excellence and virtue.
In an effort to win popular support for this outlook, he wrote a mass-market book called
Taxation: The People’s Business
, in which he argued counterintuitively that cutting taxes on the rich would boost tax payments, not lower them, and so was a matter of broad public interest, not narrow private gain.
Sixty years later, Jude Wanniski, the father of “supply-side economics,” would pay homage to Mellon as his inspiration. At the time, though, Mellon’s antitax book sold poorly, despite bulk purchases by business leaders.

Once in public office, Mellon helped define the 1920s as an era during which business succeeded in rolling back many of the Progressive Era’s reforms. In 1921, capital gains taxes were cut, and the stock market boomed. After repeated efforts during his dozen-year tenure at Treasury, in 1926 Mellon finally succeeded in getting a bill passed that “
cut the tax rates on the richest Americans more deeply than any other tax law in history,” according to Martin. Mellon promised greater growth and prosperity. When instead the stock market crashed in 1929 after a frenzy of speculation, his legacy was tarnished.
Not only did his economic theories look self-serving and irresponsible, but it surfaced that Mellon himself had been secretly providing tax credits and subsidies to some of the country’s biggest businesses, including many in which the Mellon family had major investments. Eventually, Mellon was charged and acquitted of income tax fraud. He was required, though, to pay back taxes, which was a humiliation and indignity for the patrician family.

Three years after the 1929 stock market crash, against this backdrop of class conflict and financial chicanery, Richard Mellon Scaife was born. His family, and later he himself, would continue to portray their embrace of low taxes and limited government as matters of high principle, as Andrew Mellon had. But his parents’ elaborate estate planning in order to minimize their own tax bills suggests that they had more than an abstract interest in the subject.

Scaife’s parents created the largest of the family’s tax-exempt, charitable foundations, the Sarah Scaife Foundation, in December 1941, days after the Japanese attack on Pearl Harbor. It appears to have been timed to shelter the family’s wealth from anticipated tax increases. Scaife writes, “
I don’t know what my parents’ specific motives were,” but he notes that because of the impending war “there was talk…of a top income tax rate of above 90 percent.” Roosevelt and the labor unions argued that the wealthy should shoulder a greater share of the cost of the war buildup, to provide an “
equality of sacrifice.” Despite their hawkish views on national defense, the family nonetheless took steps to avoid paying its share for the military buildup. As Scaife writes matter-of-factly in his memoir, “The rich inevitably are going to organize their wealth to avoid government confiscation. They’ll do whatever the law allows to use their money as they see fit, out of reach of the tax collector.”