The following is an excellent excerpt from the book “SO DAMN MUCH MONEY: The Triumph of Lobbying and the Corrosion of American Government “ by Robert G. Kaiser from the Epilogue on page 351 and I quote: “”I was filling a void,” [Michael J.] Fraioli remembered. “The thirst for money in campaigns has just grown and grown.” His former colleagues at the DCCC referred candidates looking for fund-raising help. Fraioli quickly realized there was going to be more business than he could handle. He developed his own system. First, “we size up the candidate.” An incumbent is relatively easy—his past supporters are the starting point. A challenger is more interesting. It is much easier to raise money for a challenger who is seen as having a fighting chance, so “the first question is, How will the conventional wisdom view their prospects?” Money can help shape that conventional wisdom; just getting some money into the candidate’s bank account can make a significant difference. Politicians study each other’s campaign treasuries (which have to be reported periodically to the Federal Election Commission). A big war chest can deter challengers; a surprising amount of cash on hand can scare an opponent, including an incumbent.
Of the four thousand registered PACs, “there may be five hundred that have serious money to spend” on Democratic candidates, the only kind Fraioli represents. He and his colleagues (who numbered six in 2008) will “keep cutting that list down until we come up with a legitimate target list for that candidate.” Usually it’s a long list: “There’s a lot of people giving away money in this city.” Then it’s Faioli’s and the candidate’s job to meet the PAC directors (another Washington subculture) and make their pitch. This isn’t like fund-raising for a charitable cause from people who aren’t sure they want to make any donation. PAC directors live to give, literally. The challenge is to persuade them to give to a particular candidate. Over the years Fraioli’s firm has built a database that in 2008 contained more than thirty thousand records of proven donors, prospects, and local contacts for corporations, unions, and trade associations. Using the computer, the firm has organized donors by the issues they care about and the kinds of candidates they tend to support. It isn’t the least bit awkward to go back to the same PAC directors and donors over and over again for different clients, Fraioli said: “No problem whatsoever. That’s the business they’ve chosen, and that’s the business we’ve chosen.”
Fraioli’s other regular target is the city’s lobbyists. “Many of them know my phone number by heart,’ he said, “because they’re tired of getting calls from us!” The lobbyists he aims at first are “the alumni, former Democratic members and staff that are now downtown. It’s not an absolute that they’re going to give, but of the however many thousands of lobbyists there are downtown, a lot will respond.”
In the early years of the firm, business was cyclical, and slow in non-election years. That changed in the 1993-94 cycle, which produced the first Republican takeover of Congress in nearly half a century. “It’s odd, but the fund-raising never stops anymore,” Fraioli said. “It never stops. You go all the way to election, and the day after the election begins a new cycle. If you have a debt, you get on the phone, start raising money for the debt.”
The phone is the basic tool of his trade. A member facing a competitive campaign routinely devotes eight to ten hours or more every week to dialing for dollars. Fraioli’s description of the process is sobering. His firm prepares a call list for every client. It usually includes the giving history of each person on the list, phone numbers to try, sometimes reminders of a spouse’s name or where the member met the potential donor. “It isn’t easy to get on the phone and to just start punching numbers, and to keep going through the list, because you get a lot of rejections, a lot of voice mail, whether you’re calling individuals or organizations.” This is how American’s elected representatives spend at least one day of their workweek, month after month, year after year.
Fraioli is paid by his clients’ campaign committees. Some of his competitors charge a percentage of the money they raise, but Fraioli charges a fixed fee of $3,000 to $6,000 a month. In 2008 he had twenty-one clients; his firm was taking in about $700,000 a year. So his line of work is not as lucrative as big-time lobbying, but Fraioli is making many times the salary he earned as an aide to Tony Coelho.
The market for his services is strong; at least three-fourths of the Democratic candidates for the House and Senate hire a professional fund-raiser, he estimated. Of course they don’t like to talk about fund-raising publicly, or to attract attention from the news media: “There’s never a good story about political fund-raising. Some are less objectionable than others, but there’s never a good story.”
Long-term prospects for the business are bright. Fraioli expects the cost of campaigns to keep climbing, assuring future demand. Could the price of running keep rising forever? “I don’t know,” he replied, “but I don’t see what would stop it.”
As we have seen, money changes public policy. All the participants in the modern system realize this to some degree, and many of them expect it. But in public all parties usually deny that money can influence votes or policy outcomes. Then in early 2008, the National Association of Home Builders (NAHB) confirmed the realities with a brazen display of public pique.
Congress had just approved an emergency “stimulus package”–legislation intended to persuade voters that the government was doing something to try to head off a recession. The largest part of the package gave a tax rebate—cash–to most taxpayers in the hope that its recipients would spend it and thus stimulate the economy. The home builders had pushed several ideas they thought should be included in this package, including tax breaks for builders and expanded authority for state governments to issue tax-free bonds to finance cheap home mortgages.
The Senate Finance committee drafted a version of the stimulus legislation that included the home builders’ ideas—gravy for themselves, obviously. But the final version of the bill dropped those provisions. The president of the NAHB then announced that its PAC would stop giving money to all politicians. BUILD-PAC was the seventh-biggest business PAC; it had given $1.5 million to candidates since the beginning of 2007, and had more than $825,000 in the bank, ready to be donated. The president’s statement made clear the home builders’ frustration; “More needs to be done to jump-start housing and ensure the economy does not fall into a recession.’” The suspension of political contributions “will remain in effect until further notice.”
The statement raised eyebrows all over Washington. The NAHB had broken one of the cardinal rules of the game. “Lobbies like to pretend that congressional action and their donations aren’t tied,” observed Melanie Sloan, executive director of a watchdog group called Citizens for Responsibility and Ethics in Washington. “But the home builders just confirmed that they are.”
The home builders’ suspension of contributions lasted just ten weeks. During that time housing legislation became a hot item in the House. The Banking Committee drafted a bill intended to stimulate the moribund industry. The NAHB announced that it had a new priority for this legislation, a $7,000 tax credit for first-time home-buyers. The House embraced this idea, including it in its housing bill. At the end of April, the NAHB resumed making political contributions. “Our message has been heard,” said Ed Brady, an official of the association’s PAC.
The home builders took on a challenging goal—to persuade Congress to act affirmatively on their behalf. One of the maxims of the lobbying business is that affirmative action in your own interest is always harder than blocking a proposal that helps somebody else. Managers of hedge funds and private equity funds confirmed this in 2007 and 2008.
These investment funds operate in partnerships, and pay low taxes. In 2007 Charles Rangel of New York, then the new chairman of the House Ways and Means Committee, proposed a simple change in the tax code that would have raised the tax paid by hedge and equity fund managers on their earnings, from 15 to 35 percent. The 15 percent rate, less than most working Americans pay on their income, was based on a loophole in the law that allowed these managers to define their earnings as capital gains (normally money earned on investments held for a year or longer) rather than ordinary income. These were people who earned some of the biggest salaries paid in America. Rangel proposed, in effect, to close their loophole.
Rarely if ever had a industry responded so dramatically to a perceived threat in Washington. The Center for Responsive Politics, which tracks these numbers, found that the hedge funds, private equity funds, and investment firms and their associations jacked up their spending on Washington lobbying from less than $4 million in 2006 to $20 million in 2007. The same category in interests increased political contributions to candidates from $11 million to nearly $20 million from 2005-06 to 2007-08.
Rangel’s plan was blocked. Its most effective opponent was the congressman’s fellow Democrat from New York, Charles Schumer. He became the investment industry’s leading advocate in the Senate, a role that benefited him in his job as chairman of the Democratic Senatorial Campaign Committee, which collected millions from investment company executives while Schumer staved off legislation the industry opposed.
Long before Rangel proposed the tax change, Schumer was arguing against any federal regulation of hedge funds. In June 2006, the Senate judiciary Committee held a hearing to look at the funds. Schumer, a member, came to the hearing to tell his colleagues that they had no business looking at this subject—the Banking Committee had jurisdiction over such matters. Schumer was a member of that committee as well, so he knew that it was well disposed to his New York constituents in the securities and financial industries, and not interested in new regulations for hedge funds.
This episode caught Gerry Cassidy’s attention, and stimulated his liberal instincts. After describing Schumer’s behavior at the Judiciary Committee hearing, Cassidy said: “It was the damnedest thing I ever heard of. . . . It’s mind-boggling that you can have a force like [hedge funds] in the market, have it be unregulated, and have members defending it being unregulated.” If a liberal Democrat had argued in favor of deregulating an important segment of the financial markets in the 1960s or 1970s, the idea “would have been laughed out of town. Now it happens and guys run to the committee to defend it. It’s just a remarkable change.”
When pressed, Cassidy readily acknowledged what had happened in the country and in Washington over the years he had been there. The well-off had become much better off, while working people’s incomes stagnated from the early 1970s into the twenty-first century. Didn’t this show, Cassidy was asked, how well the wealthy could defend their interests in modern America?
“I refuse to argue the obvious. It’s true. How could you look at it and say it wasn’t true?” said Cassidy. “There has been a huge redistribution of income and you can’t blame just the Republicans, because it has happened through Democratic presidencies, and through Democratic and Republican Congresses. It’s just true, largely because they [poorer citizens] have less representation—you look at the movements out there, there is no anti-hunger movement out there, there is no committee on the Hill looking into poverty.”
As Senator Bob Dole had said in 1982: “Poor people don’t make campaign contributions.”
Joe Rothstein was thirty-four when he came to Washington for the first time right after the 1968 election. He had just helped his old friend Mike Gravel win a seat in the Senate from Alaska. Rothstein had taken a leave from his job as a newspaperman on the Anchorage News to manage the Gravel campaign. Gravel had hired Joseph Napolitan, one of the first modern campaign consultants, who used a gimmick he had perfected in a Pennsylvania governor’s race in 1966. Napolitan made a slick, half-hour film about Gravel’s life that was shown on every television station in Alaska at the same time on a Sunday night nine days before the primary election. Thanks to the film, which depicted Gravel as a fighter for little people against the establishment, he defeated the incumbent senator, Ernest Gruening. Then he won the general election in November. Gravel sent Rothstein to Washington to hire a staff and organize his office.
“I’d never been to Washington,” Rothstein said. “I was green as grass about what happened here. And I started getting phone calls from lobbyists, union guys, and others. They wanted to take me to lunch, or have me come down to their office and have a chat, and so on. Washington didn’t really support Gravel in that election, he got very little Washington money. So I get to Washington, and I have lunch with one of these people who didn’t know Gravel and needed to catch up in a hurry, a guy from one of the unions. The guy says, Here, take this back to Mike—it was $5,000 in a brown paper bag, in cash.””
(QUOTING FROM PAGE 351: “Of the four thousand registered PACs, “there may be five hundred that have serious money to spend on Democratic candidates, the only kind [Michael] Fraioli represents.” “
IS THIS TRYING TO TELL YOU SOMETHING? IS IT BECAUSE THE REPUBLICAN PARTY IS REFUSING TO RAISE THE INDIVIDUAL INCOME TAX? JUST LIKE IN THE HOUSE, WHICH IS CONTROLELD BY REPUBLICANS, SUCH AS SPEAKER JOHN BOEHNER. IN FACT, THEY WANT TO LOWER THE TOP RATE DOWN TO 25 PERCENT. AND MANY REPUBLICANS WANT IT EVEN LOWER THAN THAT, SUCH AS THE CAPITAL GAINS RATE WHICH IS AT 15 PERCENT, WHICH THEY WOULD LIKE TO EVEN GET RID OF. JUST LOOK AT THE REPUBLICAN CANDIDATE THEY RAN FOR PRESIDENT, MITT ROMNEY, WHO IS A MULTIMILLIONAIRE AND MADE HIS MONEY THROUGH PRIVATE EQUITY, WHO SAID IN THE PRIMARY THAT IF THEY WERE TO GET RID OF CAPITAL GAINS TAXATION, WHICH WAS TALKED ABOUT BY OTHER REPUBLICAN PRESIDENTIAL CANDIDATES, THAT HE WOULDNT’ PAY ANY INCOME TAX. SO YOU CAN SEE WHY THE REPUBLICANS GET THE MOST MONEY FROM LOBBYISTS. POLITICS HAS SUNK TO A NEW LOW AND THE POLLS SHOW IT. IT’S NOT, WHAT CAN I DO FOR THE VOTER, BEING BASICALLY THE 99 PERCENT, BUT WHAT I CAN DO FOR BIG CORPORATIONS, SUCH AS GENERAL ELECTRIC, WHO PAYS NO INCOME TAX, ALONG WITH 20 OTHER COMPANIES AND GET TAX REBATES; BIG INVESTMENT BANKS, WHO ARE INEFFICIENTLY RUN, USING UNREGULATED HEDGE FUNDS AND TOXIC DERIVATIVES AND GET BAILED OUT BY THE TAXPAYERS; MULTIMILLIONAIRES, WHO WANT LOWER INCOME TAX AND MORE TAX LOOPHOLES BECAUSE THEIR GOAL IS TO PAY NO INCOME TAX, PUTTING ALL THE BURDEN ON THE 99 PERCENT. LOOKS LIKE WE’RE GOING TO HAVE A CLASS WAR.
LaVern Isely, Overtaxed Independent Middle Class Taxpayer & Public Citizen & AARP Members