April 2016 – Sifting and Winnowing

Volume 7 Number 1
by Audrey Newcomb

Koch brothers and others have turned our US democracy into a dystopia

Should anyone wonder why our political/economic system is so dysfunctional, investigative reporter Jane Mayer’s book, Dark Money, published in January, provides carefully-documented facts that she further updates in a New Yorker article later that month. The ﬁx that we’re in dates back to the 1920s, when Andrew Mellon, millionaire banker and Treasury Secretary sought unsuccessfully to strike down the 1913 graduated income tax, a law that had ended unfair taxation at a time of staggering inequality. But he did succeed in getting passed a bill with deep tax cuts, leading to a stock market boom, over speculation, and the crash of 1929. Mellon is sometimes said to be the father of supply-side economics. His grandson, Richard Mellon Scaife, who was to become heir to the Mellon fortune, grew up believing that government efforts to treat citizens equally posed a threat to the wealthy. Although those opposing FDR’s New Deal had limited inﬂuence in the depression years, Scaife’s parents carried on Mellon’s ideas, doing their best to avoid WWII taxes, choosing instead to invest in a 726-acre weekend estate with so many rooms that Richard later joked that when unable to get to sleep, he counted 60 rooms, not sheep. Scaife and his sister each inherited charitable trusts in the millions. Terms of the trusts required heirs to donate net income to non-proﬁt charities for 20 years, after which the principal would go to heirs tax-free. Scaife regarded multiplying his fortune as a full-time occupation, and equated government efforts to regulate his money as communism. Lewis Powell, an attorney with tobacco industry connections, issued a secret call-to-action known as the Powell Memorandum in 1971, in which he urged capitalists to insert their own views into textbooks and media by means of a well-ﬁnanced under-the-radar effort. In 1973, the Powell Memo was acted upon by Scaife, who had tried and failed to inﬂuence politics. He created Heritage Foundation (HF) and would follow up with 132 others. The ﬁrst actual foundation had been set up by John D. Rockefeller in 1913, its purpose to foster educational and scientiﬁc progress. Teddy Roosevelt correctly feared that a rich founder’s bias would interfere with a foundation’s social utility, but these groups reached a total of 200 by 1930. By 2014, 100,000 tax-exempt foundations had assets of $800 million, many of them with a far-right bias, including all the foundations initiated by Scaife. HF’s goal was to spread free-market ideas widely and to inﬂuence Congress to pass legislation that favored the rich. Other like-minded millionaires—John Olin, Joseph Coors, Lynde and Harry Bradley, and others—opened their own foundations, because free-market ideas were starting to catch on. Congress was taking the bait and starting to pass bills favoring the rich. These organizations became so inﬂuential, in fact, that when HF accused the mainstream media of a left bias, New York Times and other newspapers hastened to “balance” their staffs with neo-conservatives that moved further right what had previously been a balance between the 2 major parties. Scaife was seen as the unseen hand behind this initiative. But his personal life was scandal-ridden. His public drunkenness and extra-marital escapades were rarely as secret as his ﬁnancial adventures. It is ironic that a man whose personal life belied the “family values” that HF preached would dare accuse others. Yet, Scaife hired detectives to spy on Bill Clinton’s affairs and have them written up in American Spectator, Scaife’s own newspaper; and it was Scaife who ﬁnanced impeachment lawsuits and started Clinton-murdered-Vince-Foster rumors. Richard Nixon showed his apparent approval of Lewis Powell’s part in inspiring these unfortunate outcomes by naming him to the Supreme Court. Charles Koch, too, was a fan of the Powell Memo. Koch Industries were hit again and again with pollution violations and charged with causing more than 300 oil spills that released an estimated 3 million gallons of oil into lakes and rivers. In 1999, a jury found the corporation guilty of negligence and malice in the deaths of 2 Texas teenagers in an explosion resulting from a leaky underground butane pipeline. A year later, Koch Petroleum Group received a 97-count indictment for covering up a 91-ton benzene discharge from its Texas reﬁnery. Charles argued that the millions he paid in ﬁnes were “socialist” interference, and fought back by underwriting $10-20 million in tax-deductible donations to Cato Institute, the ﬁrst libertarian think tank. Cancer survivor David Koch served on the National Cancer Society’s advisory board while simultaneously lobbying to prevent EPA from setting strict measures on formaldehyde, an EPA-designated carcinogen. Koch Industries produce 2.2 million pounds of formaldehyde a year, for use in particle board, plywood, plastics, dyes, cosmetics, paint, paper, glue, adhesives, disinfectants, laminated ﬂooring, air fresheners, antiseptics, wrinkle-free clothing, carpet cleaners, et al. Family patriarch Fred C. Koch had invented an improved way to extract gasoline from crude oil. Failing to arouse interest from US investors, he turned ﬁrst to Stalin’s USSR, where he was hired to build oil reﬁneries; then to Hitler’s Germany to help manufacture fuel for the military. Archival records show that Fred’s company oversaw construction of a massive oil reﬁnery run by a Nazi sympathizer. The reﬁnery produced high-octane gas needed for ﬁghter planes that were probably used against the Allies. Fred’s work for Germany and the

USSR was instrumental in building the family fortune.

On returning to the US in the 1930s, he built a Gothic mansion in Wichita, Kansas, where sons Freddie, Charles, and twins Bill and David were raised. The children spent much of their time with a German nanny who was a self-proclaimed Nazi as well as an authoritarian taskmaster. That and the fact that their often-absent father was overbearing, led to so much bickering and rivalry that, in desperation, Scaife sent his sons to separate boarding schools, where they acted out their anger by being trouble-makers and getting expelled. Freddie’s artistic inclinations worried his brothers, who accused him of being gay. Bill was too independent to follow Charles, who emerged as leader, and David and Charles became business partners, the two of them known as the Koch brothers, who half-disinherited the other two, now estranged. It figures that Charles’ favorite childhood game was King of the Hill. Charles settled in Wichita, submerging himself in books on radical free-market theory. He embraced his father’s John Birch Society anti-government beliefs, but when he himself later joined, Charles concentrated on the society’s economics and let go of his father’s radical anti-communism. Like Scaife, Fred Koch’s estate was his major preoccupation. He saw taxes as socialism, and feared estate taxes would diminish his sons’ inheritance, so arranged for estate tax-free trusts requiring 20 years of charitable giving. Upon his death, his assets mostly included refining and pipe building, estimated at $177 million, which was to rise to spectacular numbers after he died in 1967, when Charles became CEO and David executive VP. In 1980, David ran for US VP on a Libertarian Party platform that was far to the right of Ronald Reagan and received only 1% of the vote. The brothers then decided to find a different way to spread their doctrine. The legal conflicts hanging over the Koch global network of industries only heightened their anger over regulations. Instead of facing the fact that Koch Industries pollution was causing employees and people living near polluting factories to become ill and sometimes die, the response the Kochs came up with was to declare war on government regulation. As lawsuits continued, they resorted to lying and faking reports. By 1981, Coca Cola, Dow, Pﬁ z er, Bank of America, and Union Paciﬁc were funding Cato; and Cato’s anti-government messages were beginning to persuade the public that government itself was the enemy. The billionaire image, formerly thought of as self-centered and eccentric, began to be replaced in the public mind by “the government.” These changed public perceptions no doubt accounted, in the 1978 midterms, for organized labor losing gains that had been made under Jimmy Carter. In 1980, Ronald Reagan distributed HF’s policy handbook to Congress, which passed 61% of libertarian wish list proposals, including Reagan’s now-famous tax cuts for the rich. Nixon’s energy crisis oil and gas controls ended, while proﬁts of Koch Industries and others went through the roof. John Olin incurred mounting ﬁ n es for his companies’ deadly DDT and mercury leaking into waterways. His opposition to regulation inspired him to spread his ideas by pushing right-leaning media celebrity William F. Buckley Jr. further right. Olin underwrote millions to Harvard law chairs, gave $8 million to faculty fellows, including John Woo, who wrote the torture memos for George W. Bush; David Brock, whose book defended Justice Clarence Thomas’ Anita Hill lies-accusation, and Charles Murray, who wrote The Bell Curve, arguing that whites are innately smarter than blacks. By 2005, 56 out of 88 Olin-funded Harvard fellows were on faculties at Chicago, Yale, Dartmouth, MIT, Cornell, and Georgetown. Publicly-funded George Mason University houses the Koch-funded Institute for Humane Studies, a libertarian 501(c)(3) group where tax-exempt rules are largely ignored. The institute was founded by free market fundamentalist F.A. “Baldy” Harper, who referred to taxes as “theft,” welfare as “immoral,” labor unions as “slavery,” as well as opposing court-ordered segregation remedies. Essays by IHS applicants were computer-programmed to count the times free-market icons Ayn Rand and Milton Friedman appeared in the essays.Think tank Mercatus, also housed at George Mason, was known to advocate exempting risky energy derivatives from regulation. Consequences were not entirely visible until the 2008 crash. Obama had considerable Wall Street support in 2008, but when he advocated the carried-interest loophole, hedge fund managers turned against him. Vulture capitalist Paul Singer bought up debts of countries and companies and threatened lawsuits if they didn’t pay up, making $9 million off further stressing the ﬁ nancially stressed. Stephen Schwarzman’s $8 billion hedge fund earnings were made visible by his ostentatious NYC residences. These hedge fund managers were not free-market fanatics, just anxious to keep all their money. But their collective $10 million contribution to the Koch organization automatically guaranteed that, radical or not, their money pushed the Republican Party rightward in 2010. At one point, Koch-subsidized pro-business, anti-regulation, anti-tax seminars were at 307 universities. BrownU received $147 million in 2009 for a freshman seminar taught by a libertarian professor. At WVirginiaU, Kochs donated $965,000 for a course for which Kochs stipulated picking the professors. The WV Republican Party transformed anti-regulation philosophy into a party platform blueprint. It didn’t take long before an under-regulated company, Freedom Industries, spilled 10,000 gallons of toxic chemicals into Charleston’s drinking water, the ﬁrst of WV’s many similar disasters. The Tea Party was not the grassroots, spontaneous uprising that proponents imply. In 2009, barely a month after Obama took ofﬁce, former futures trader and CNN commentator Rick Santelli spoke at the Chicago Stock Exchange denouncing Obama’s emergency proposal to help millions of homeowners facing foreclosures to restructure their mortgages, charging that it was “Cuban-style statism for losers who deserved their fate.” Events leading up to Santelli’s rhetoric were planned by an experienced, well-funded political elite. Minutes before Santelli’s rant, David Koch’s vulture-capitalist friend Wilbur Ross Jr., who was heavily involved in mortgage servicing, denounced Obama’s plan. Santelli did use the phrase “tea party” in his remarks; but the mass rebellion could not have expanded as it did without corporate billionaire funding. GOP Sen. Dick Armey helped ﬁnance the Birch-inspired views of Glenn Beck and Sean Hannity, reaching daily audiences of 2 million. Republican operatives and wealthy businessmen were anxiously worried that Obama would rain on the parade they had been marching in during the Reagan and Bush years. The disruptive summer town meetings, at which Congress members were ambushed and shouted at about death panels, fulﬁlled the dreams of Charles Koch, who had wanted to expand his ideas to the people, some of whom, it turned out, didn’t mind waving “nigger, socialist, and Hitler” picket signs. Kochs’ Americans for Prosperity (AFP) foundation funded a million-dollar ad featuring Canadian Shana Holmes saying she was denied brain surgery in Canada and forced to ﬁnd it in the US. Canadian authorities testiﬁed that Holmes’ benign pituitary cyst was a non-life-threatening condition. Fact checkers called it a stunt written for AFP by the Willie Horton ad writer who damaged the Dukakis 1988 campaign, implying that the candidate was soft on crime.

In late 2010, Center to Protect Patient Rights was an Arizona box number holding $62 million in secret funds raised through the Koch donor network. CPPR regarded ACA as a “government takeover.” The message stuck, driving fearful voters to Tea Party protests. Some picket signs had efﬁgies of Democrats being hanged; other signs depicted corpses from Dachau, all a brainstorm of an ex-tobacco writer, a $15 million blitz aimed at the 5 ACA bill-writer senators’ states. As non-partisan opinion mounted in favor of climate action, the fossil fuel industry ﬁnanced a counter-offensive. Greenpeace traced 2005-08 anti-climate change reform funds to asingle source, the Kochs. Total funds from several non-profits to create a common script for talking heads was 3 times that of ExxonMobil. A peer-reviewed study examining the tax records of the 199 non-proﬁts challenging the prevailing scientiﬁc consensus found that the money had come from a corporate lobbying campaign disguised as a tax-exempt philanthropic endeavor. These foundations gave out 5,299 grants costing
$558 million to 91 non-proﬁts, think tanks, advocacy groups, trade associations, universities, and legal programs in an effort to defeat carbon emissions regulations. Private donations from Kochs, Bradleys, and Scaife were funneled through an ordinary brick building in Alexandria, Virginia, via DonorsTrust, described by a Mother Jones investigative reporter as “the dark money ATM of the conservative movement.” Charitable tax-exempt advantage from 1999 to 2015 was gained because names were erased from the money trail through Donors Trust, which redistributed $750 million from the pooled contributions. The funds were used to disseminate doubt, just as Big Tobacco had done. The 2008 election posed a new challenge to fossil fuel industrialists, who knew that 80% of oil & gas would have to stay in the ground by 2050. Their strategy: destroy climate scientists’ reputations: William O’Keefe of Reagan Star Wars missile shield fame was hired to recruit skeptical scientists and train them to provide authoritative-sounding rebuttals. The $800 million in Koch money spent in 2000 on Bush and other Republicans expanded 20-fold during his 2 terms. By mid-2000, oil & gas had spent massive sums on Republican climate deniers like Sen. James Inhoff. Candidate Sen. John Kerry was “swiftboated” in 2004 by Scaife, Bradley & Olin money. Big Coal helped the usually-Democratic West Virginia go Republican by the small number of votes that were needed to defeat Gore. Dick Cheney took charge of energy policy, exempting fracking from the Safe Drinking Water Act. Bush’s energy policy gave $16 million for oil & gas subsidies and $9 million for coal. But Kochs’ loathing of government, taxes, regulations, and subsidies didn’t stop them from taking full advantage of the credits and subsidies they deplored.

Climate scientists were accused by talk show hosts and Fox News of pushing a partisan agenda. Think tanks contracted books and position papers whose authors denied climate change before Congress. Conservative evangelical leaders, already distrustful of government, were recruited. Tea Party rally speakers warned that water shortages would result from climate action. Then shortly after Obama’s 2-year ﬁght for a carbon tax failed in 2010, the Deepwater Horizon and the Massey coal mine both blew up. That same year, the Supreme Court ruled favorably on Citizens United, overturning a century of restrictions banning corporations and unions from excessive campaign spending. Republicans went on to spend

$6 million to switch the seat of former Massachusetts Sen. Ted Kennedy to an inexperienced Republican, depriving Democrats of the 60-vote majority needed to pass ACA. Republican Karl Rove took advantage of the new inﬂux of oil & gas money to gerrymander Congressional districts. Kochs, Big Pharma, Big Tobacco, and Walmart spent $30 million for the purpose of turning over state legislatures and governorships to anti-tax Republicans. Obama, up against an unyielding Congress, conceded unemployment compensation and reduced payroll taxes in exchange for extending Bush tax cuts on earned income, dividends, and capital gains, most of

which were about to expire. A person making $34,000 had a higher tax rate than one making $202 million. Republicans abolished estate taxes beneﬁ t ting only 6,600 people, costing Treasury $23 million. Lobbying by Kochs, DeVoses (Amway), Waltons, and Mars candy to end the “death tax” had been ongoing since 1998. Only 0.27% are rich enough to qualify. It seemed obvious that Big Money was behind the 2008 recession that wiped out some $9 trillion in household wealth and lost 24 million jobs, and that unbridled capitalism was the cause. Even former Fed Chair Alan Greenspan admitted he was wrong to have thought of Adam Smith’s invisible hand as saving business from its own destruction. Still, the people who caused the crash argued that it happened because of “too much government,” which once again caught on with the public. Phil Angelides, who chaired the bipartisan committee to ﬁnd causes, said, “It was the recklessness of the ﬁnancial industry and the abject failures of policymakers and regulators that brought the country to its knees.” By 2011, while most of us were still reeling, the rich bounced back. House Ways & Means Chairman Paul Ryan’s April 2011 budget vote shrank Medicare into voucher-like premium sup-

ports for seniors to buy medical insurance. Medicaid was cut and transformed into state-run bloc grants. Top tax rates were cut to 25%, half of what Reagan’s were. Massive cuts were also made to the social contract: 1.8 million people were dropped from food stamps and 280,000 children from school lunch subsidies. Newspapers accepted Ryan’s assessment that the deﬁcit was the problem, featuring 3 times as many articles about deﬁcits as were allocated to articles about workable ways to address the 9% unemployment. Kochs regarded Obama’s reelection as a disaster, but efforts they had underwritten succeeded in suppressing minority voters. By 2011, photo ID voting requirements passed in 37 state legislatures. Grassroots fear over people voting twice was spread by Tea Party activists, enhanced by AFP, whose founder Paul Weyrich, said, “I don’t want everybody to vote…Our leverage in elections goes up when the voting populace goes down.” UCal-Irvine’s non-partisan election law Prof. Richard Hasen searched in vain to ﬁnd a single case since 1980 that could plausibly have turned on voter impersonation fraud. He said that “using it as a way to deprive citizens of voting rights is the real fraud.” The new barriers to voting are an updated version of segregation-era poll taxes and literacy tests, intended to deny voting rights to minority voters, who often vote Democratic. By 2010, the GOP had accumulated 4 times the districts to gerrymander as Democrats had. Koch strategists chose North Carolina as a test case in an effort to turn swing states red. Gerrymandering once meant manipulation by political parties in smoke-ﬁlled rooms. In 2010, gerrymandering became a science in NC. The computer program Maptitude contained details, including race, of every NC citizen. After Citizens United, the gerrymandering process was funded and carried out by unelected rich donors and 501(c)(4) “social welfare” groups that concealed funder identity. When ﬁnished, the map rearranged minority voters into 3 districts with already-high minority concentrations, leaving remaining districts mostly white and Republican. Democrats were left with no chance to win the entire state. In 2012 and 2014, midterm losses in NC and other states cost Democrats over 900 legislative seats and 11 governorships. These newly-elected Republicans enacted laws that had been on think tank wish lists for years: slashing corporate taxes, cutting services for middle class and poor, cutting environmental programs, reducing abortion access, banning gay marriage, liberalizing gun access, decreasing voting access, eliminating earned-income tax credit for low-income workers, repealing estate taxes, cutting unemployment beneﬁts, and denying ACA Medicaid coverage to 500,000 qualiﬁed NC residents. Tuition cuts and faculty layoffs hit U-North Carolina. A new academic economics program stressing free–market economics was formed, and faculty voting records were scrutinized. High school teachers got online history revision plans containing free-market economic concepts. Ongoing Moral Monday meetings are currently protesting the NC takeover, which was funded through DonorsTrust by the Kochs, R.J. Reynolds, Atria, Microsoft, Comcast, AT&T, Verizon, Kraft, and others, and totaling $650 million. North Carolina’s 2014 takeover was, for the most part, a carbon copy of Wisconsin’s 2010 turnaround. NC’s list of anti-progressive programs was strikingly similar to Scott Walker’s Koch-funded austerity initiatives, carried out by AFP and the American Legislative Exchange Council (ALEC). In 2010, George Mason’s Prof. George Greve, chairman of the anti-regulatory think tank Competitive Enterprise Institute, said, “The bastard (ACA) must be killed as a matter of political hygiene, whether it’s dismembered, whether we drive a stake through its heart, we tar and feather it, or whether it’s dismembered or strangled. Any way, with any dollar, any brief ﬁled, any speech given…” This graphic, ugly rant inspired a graphic, ugly cartoon ad online of Uncle Sam jumping through a young woman’s legs. ACA cards were burned like Vietnam war draft cards, and death panels were invoked. AFP spent $5.5 million on anti-ACA TV ads. Anticipating the 2010 Supreme Court Citizens United decision, the Kochs had put in place donor and advocacy alliances opposing regulations, entitlements, and taxes, operating almost like a political party, so encompassing that in January they were found to be ﬁnancing Oregon government land rebellions and a Supreme Court challenge to labor unions. The Kochs plan to spend $889 million on the 2016 elections. Following their failure in 2012 to elect a president, they hired the best PR minds to advise them on how to inﬂuence election outcomes. They were told to seem more compassionate, so they set about donating to causes and appearing in public more often, acting like fun guys. The makeover hit a snag when the New York Times reported that Koch Industries had placed 30-ft. piles of petroleum coke mounds next to inner-city neighborhoods in Detroit and Chicago. The black junk stuck to everything, and neighbors were furious. After this rebranding setback, the Kochs redoubled their efforts, hiring some experienced tobacco PR people, who advocated reaching the public mind subliminally, presenting the free market ideology as an altruistic reform movement to enhance well-being and provide a path to happiness, while portraying big government as the road to tyranny, even fascism. Forging alliances with unlikely allies was also recommended, mainly African-Americans and Latinos. The Kochs also stepped up earlier efforts to associate themselves with criminal justice reform. Their support of reducing prison sentences for minor offenders won unexpected praise from Obama advisor Valerie Jarrett, who gushed about the prison effort. But the Kochs also supported tough-on-crime campaigns. Last fall, a bi-partisan criminal justice reform bill was amended to make it harder to prosecute corporate executives who knowingly committed crimes that had dire consequence for the public. It is unquestionably true that the Kochs have been using criminal justice reform as a Trojan horse to weaken environmental health and safety regulations. The Kochs have mastered the strategy of moving their neo-liberal to-do list from near-obscurity to mainstream. It was no small accomplishment to fool people into thinking that what beneﬁtted the wealthy would beneﬁt them. The Koch–ﬁnanced machine crippled a twice-elected Democratic president and inserted itself into the Republican Party. The 20 years we desperately needed to stem climate change were lost. The Kochs plan to spend $889 million on the 2016 elections, more than twice what they spent in 2012. In March 2009, their worth was $28 billion, and in March 2015, $83 billion, almost tripled in 6 years. They seek to ﬁ nish the job of transforming our government into a mockery of democracy by degrading the commons that binds us together while convincing us to take Ayn Rand’s advice that selﬁshness is good. Not the poor alone, but our whole society breathes the effects of the deceit, greed, and hubris exhibited by these two men and the like-minded followers who surround them. In what Jane Mayer refers to as French economist Thomas Piketty’s “zeitgeist-shifting” 2014 book, Capital in the 21st Century, Piketty warns that “without aggressive government intervention, economic inequality in the US and elsewhere is likely to rise to the point where a small portion of the world population would, in the foreseeable future, own half of the globe’s wealth, or more, and the fortunes of those with great wealth would increase at a faster rate than wages, resulting in patrimonial capitalism. This dynamic would widen the growing chasm between haves and have-nots to levels mimicking the aristocracies of old Europe and banana republics.”

Sifting & Winnowing is written and published quarterly by Audrey Newcomb

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audrey@ audreynewcomb.com