Koch Brothers and Right Wing Political Network Overview

• Introduction
• Dark Money and the Koch Brothers
• Organization
• Activities
• Donors
• Distribution of Resources
• Consequences
• Morality
• Conclusions
• References
• Figures

Introduction

To casual observers without a right wing political network overview (most of us) many political occurrences of the last several decades have appeared to be disconnected, spontaneous, and random events, ostensibly in response to changing circumstances. These occurrences have included disruption of Democrats’ town hall meetings, the rise of the Tea Party, the rise of right wing media, the rise of big money in politics after Citizens United, the rise of right wing academic institutes and think tanks, right wing control of gerrymandering in most states, right wing takeover of state governments and Supreme Courts, dysfunctional national government with shutdowns, and increasing inequality from tax cuts and increased income for the superrich.

On closer inspection, an entirely different overall view of history for this entire period emerges. Multiple investigations have shown that, rather than being disconnected, these occurrences are to a large extent carefully planned and coordinated by a formidable right wing political network. This network has until recently mostly managed to fly under the radar due to secrecy and due to dark money that doesn’t reveal the sources of funding. Americans with limited familiarity with this network would do well to learn about it to see how it may have shaped perceptions of recent history and how it has actually changed the country.

This blog was started as a book report on Dark Money by Jane Mayer but was expanded to include information from other sources to become a right wing political network overview. There is nothing original in this blog; all information and statements come from the sources listed below. This blog merely tries to provide a digestible summary for those who don’t have the time or the inclination to go through the many well-written, but much more extensive and formidable, books and articles already in circulation.

Dark Money and the Koch Brothers

What is dark money? Dark money is Secret, special interest money.

In the politics of the United States, dark money is a term that describes funds given to nonprofit organizations—primarily [501(c)(3) (education, etc.),] 501(c)(4) (social welfare) and 501(c)(6) (trade association) groups—that can receive unlimited donations from corporations, individuals, and unions, and spend funds to influence elections, but are not required to disclose their donors. (Wikipedia) (contents of brackets added).

Right wing super rich donors use these supposedly charitable nonprofit foundations to provide dark money for the Philanthropic Plan that hides their role and avoids taxes while financing political outcomes highly favorable to themselves and unfavorable to everyone else. (19)

Who are the Koch brothers and what is their role in the right wing donor network?

Charles and David Koch are 80 and 76 year old libertarian extremist multibillionaires (combined net worth $84 billion) who established the Koch Network of secretive foundations, super rich individuals, and corporations, which rivals the Republican Party in resources and which has begun to control it. (19)

Fred Koch, the founder of the family fortune, was the father of Charles and David, as well as Frederic and Bill, his two other sons. Fred Koch was a MIT-trained engineer who developed an oil refining process (first deployed for Stalin and Hitler) that became the basis of Koch Industries headquartered in Wichita, Kansas. Fred Koch was a founding member of the John Birch Society, frequently ranted to his sons about the evils of government and taxation, and left them a family business with revenues of $177 million when he died in 1967. (19)

Charles Koch, the second oldest son, was domineering and mean to his bothers and was sent to military school, then MIT. After several years in Boston, he returned to Wichita to help his ailing father manage the family business, then took over management (along with David) after his father died. As a young adult, he briefly joined the John Birch Society. He began advancing his political views by supporting the extremist libertarian Freedom School, which taught that robber barons were heroes and that taxes were theft, and was said to advocate no government, no police department, no fire department, no public schools, no health or zoning laws, no national defense, no Medicare, no antipoverty programs, and no government-sponsored integration. He laid out the road map for the future takeover of American politics in a 1976 Center of Libertarian Studies conference, then spent several decades building the Koch political organization, an extensive national libertarian political network. (19)

David Koch, the youngest son, along with his twin Bill, was sent to an east-coast boarding school and MIT, then joined Charles in running the family business and promoting extremist libertarian politics, but chose to live more visibly in the social whirl of New York City. He ran for vice president as a libertarian in 1980 on an extremist platform that advocated ending campaign-finance laws, the FEC, all government health-care, including Medicaid and Medicare, Social Security, all income and corporate taxes, the SEC, the EPA, the FBI, the CIA, the FDA, the OSHA, and all laws impeding employment (minimum wage & child labor). After his crushing defeat, he spent several decades building the Koch political organization with Charles. (19)

The other two Koch brothers were estranged from Charles and David and were not associated with their extremist libertarian political activities. Frederick, the oldest, rejected the extremist views of his father, attended Harvard, quickly exited the family business, and lived a life devoted to art and anonymous donations. Bill, the youngest, along with his twin David, attended MIT, was forced out of the family business decades ago, and lived his life as an ordinary lessor billionaire, spending his money on Yachting, big houses, and more moderate Republican donations (as well as twenty years of legal battles with Charles). (19)

Organization

How did the Koch brothers go about building this secretive right wing political network?

In the 1970s, Charles drew on his experience with the John Birch Society to advocate stealth and marketing to create an impression of broad-based support for an agenda that benefited secretive special interest donors. In 1980, the Kochs entered national politics with David’s run for vice president as a Libertarian but learned that the general public had no stomach for their extremist libertarian platform when David received only 1% of the vote. Consequently, they regrouped and eventually elaborated a secretive, complex, three-phase, long-term plan (together with the usual campaign contributions, lobbying, etc.) to accomplish their goals:
 1. Investing in intellectuals whose ideas would serve as raw products.
 2. Investing in think tanks to turn the ideas into marketable policies.
 3. Subsidization of “citizens” groups that would, along with “special interests”, pressure officials to implement their policies. (19)

The plan was carried out using the “philanthropic strategy” that allowed anonymous contributions , tax exemptions, and eventually unlimited contributions for donors by employing a complex web of numerous nonprofit foundations, originally authorized for funding educational, social welfare, and trade association groups but technically not authorized for engaging in political activities. (19)

Academic studies show that this political spending  by the affluent and business groups gets them the policy outcomes they want—a study of 1779 policy outcomes showed a major impact of the policy preferences of the affluent and of business special interest groups but little or no impact of the preferences of the middle class and the poor (see fig. 1.). (11, 12)

In 2003, Koch group biannual donor summits were added to this strategy. These were secretive meetings that eventually attracted large numbers of super rich and corporate donors to coordinate contributions to their archconservative agenda. By 2014, the impressive list of 300 or so secretive donors in this group included 18 billionaires and numerous multi-hundred-millionaires, as well as right wing congressional leaders Paul Ryan and Mitch McConnell, Supreme Court justices Antonin Scalia and Clarence Thomas, and right wing media figures like Glenn Beck and Rush Limbaugh. For the 2016 elections, $889 million was pledged for use in the election cycle. (19)

The basic agenda of this political network was to overturn the post WWII popular view of government as a force for good (including regulation of business, progressive taxes, and worker’s rights) and to instead argue for limited government, drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry, particularly in the environmental arena. Ambitious goals to facilitate accomplishing this agenda included winning the presidency (and, after losing to Obama, blocking any accomplishments by him), capturing the House and Senate, gaining control of gerrymandering after the 2010 census, capturing state legislative bodies, governorships, and supreme courts, controlling the Republican Party, and creating a false consciousness in the general public against its own interest  by using university institutes, think tanks, the media, and contrived grass roots movements. All but the first of these goals have been achieved. (19)

Activities

What are the activities of this secretive network of super rich right wing donors?

• Coordination of spending to obtain maximal effect by the many right wing organizations and super rich individual donors at the Koch Donor Summits as well as at numerous lessor meetings in various components of the network. (19)
• Massive campaign donations, including by dark money, to right wing politicians at national, state, and local levels and to right wing candidates for elected state Supreme Court positions. (19)
• Massive lobbying efforts, including by dark money, against regulations for the environment, the workplace, and the economy and for advantages like tax loopholes and access to public natural resources. Lobbyists actually write some of the legislation early in the process so their contributions are difficult to remove when discovered much later. Obviously, a requirement for early disclosure of lobbyists’ contributions would be helpful. (5, 19)
• Funding numerous partisan university institutes with misleadingly neutral names created by right wing donors to gain entrance to elite universities for development of a generation of future supporters and for development of academic support for their narrow interests. (19)
• Funding numerous partisan ideological think tanks created by right wing donors to provide a rationale to the general public for policies that favor the narrow interests of the super rich. (19)
• Funding favorable media coverage—such as by creating media outlets and sponsoring righ wing media stars. (19)
• Promoting a pervasive pattern of false beliefs that change the worldview of the general public by the misuse of statistics and other deceptions that support simplistic bumper sticker thinking:  Danger!!  Danger!!  This is what right wing funding of university institutes, think tanks, and media stars is all about!! International economist Branko Milanovic has referred to this process as creating a “false consciousness” of incorrect conventional knowledge to gain public support for positions that benefit the super rich at the expense of everyone else, such as with the following claims (21):

1. Tax cuts will be broadly based rather than mostly for the super rich: Actually, the super rich have great success in displacing their share of taxes to the merely affluent such as professionals, whose incomes are from salaries rather than investments and are insufficient to support extensive wealth defense. Hence, average tax rates actually decline at the highest levels of income from about 30% for the top 1% to only 18% for the top 400 households. Ironically, many of the merely affluent are suckers who support the super rich who are taking advantage of them. (33)
2. Tax cuts for the rich will create growth and jobs: Actually, Congressional Research Service reports to congress show little evidence for this, particularly for the long term. These reports show that for short-term stimulation of an underemployed economy both spending increases and tax cuts temporarily increase employment and output through the demand side of the economy but with the largest effects from direct government spending and transfers to lower-income individuals and the smallest effects from cutting taxes of high-income individuals or businesses. For long term growth, which occurs through the supply side, historical data show little relationship between growth and top marginal rates and even tend to show a slight trend to lower growth in association with the decreasing tax rates of the last several decades (See figs. 2 & 3.). (13,17,31)
3. Income tax cuts (particularly for the rich) will actually increase government revenue: Actually, even the infamously misused Laffer curve does not make this claim for tax rates below the curve’s peak (the revenue maximizing income tax rate), which is estimated to occur at a rate of about 73 percent (combining federal, state and local taxes). Consequently, the Reagan tax cuts for the rich were associated with an increase of the national debt from 30% to 65% of GDP, and the Bush tax cuts for the rich actually resulted in a loss of $2.9 trillion in revenue between 2001 and 2009 according to the neutral Congressional Budget Office (See fig. 4.). (4,8,24,30)
4. Estate Taxes should be eliminated to save family farms and small businesses: Actually, not a single family farm that would be saved could be found, and only 0.27% of all estates were wealthy enough to be affected. From 1998 to 2006 just 17 families spent almost $1/2 billion lobbying for this change, which would have saved them $71 billion. (19)
5. The size of the federal government has increased markedly during the last seventy years: Actually, when compared to GDP, the relative size has been mostly stable at about 21% with peaks of 20% in 1953 (Korean War), 22% in 1983 (Reagan years) and 24% in 2009 (response to the Bush financial crisis), valleys of 16% in 1956 and 17% in 2000 (end of Clinton years), and a return to 20% in 2015. The number of federal workers relative to population has actually declined from 1/78 in 1952 to 1/110 in 1989, to 1/150 in 2015. However, the makeup of federal government spending has changed considerably as defense spending has declined and been replaced by spending on social security, Medicare, and Medicaid (See fig. 5.). (14,16)
6. Continuous growth of the national debt throughout the last seventy years has been steadily leading to disaster: Actually, consideration of growth of the debt in absolute terms is highly misleading due to inflation, population growth, and marked economic growth. When considered relative to GDP, the deficit actually decreased from 129% to 30% from 1946 to 1980, increased to 65% by the mid-1990s after Reagan’s tax cuts, fell to 55% by 2000, increased to 80% by 2008 after Bush’s tax cuts and 2007-8 financial crisis, and continued increasing with the following recession until leveling off just over 100% by 2013. These recent increases must be dealt with, but they are largely related to unfunded Republican tax cuts by Ronald Reagan and George W. Bush and the 2007-2008 crisis from financial excesses, rather than to long term profligate government spending on the needy (See fig. 6.). (30)
7. Government can’t do anything right and should be largely eliminated: This libertarian viewpoint is certainly convenient for those who own a polluting industry, don’t want to pay taxes, and don’t want to help the less fortunate. Super rich ideologues who espouse this viewpoint have fought  most highly successful government programs that might have affected profits, such as those for clean air, automobile fuel economy, automobile safety, worker safety, and financial safety (before deregulation and the 2007-2008 financial crisis). They continue to fight newer programs, such as those for limiting global warming, improving medical coverage, or renewing oversight of the financial industry. (19)
8. Free markets are superior to government for all aspects of the economy and much of life (Market Fundamentalism): Actually, Market Fundamentalism has been largely discredited due to research showing flaws in neoclassical economics assumptions about human decision-making and due to many obvious market failures.  The numerous market failures included negative externalities like pollution, market manipulations like monopoly and insider trading, corporate predation of small investors and others, excessive financial industry risk-taking (which led to the 2007-8 crisis), inadequate insurance protections for health care and retirement, and inadequate key collective goods like education, infrastructure, courts, and basic scientific research. The alternate approach that made America rich after World War II was the mixed economy, which relied on markets where they functioned best and on government investment and oversight where markets failed.(14,15,18,32)
9. Economic growth comes from the private sector and is damaged by government activity: Actually, the private sector is unable to support the basic research R&D that is the source of general purpose technology changes that drive most productivity growth because the time frame is too long (10-20 years) and the risk is too high. Government provided most funding for all R&D from the 1950s to the 1970s and still accounted for 57% of critical basic science R&D funding in 2008, although funding had fallen to 28% overall. In computing technology, 18 of the 25 biggest advances in the critical years from 1946 to 1965 were financed by government. For the Apple iPhone, the many technical components were developed by government funding before being cleverly packaged together by Apple to create a market (see fig. 7.).  In pharmaceuticals, 11 of the 14 most ground-breaking new drugs were financed by government. In addition, many earlier government programs contributed enormously to increased productivity and economic growth that transformed the nation.  These programs include factory assembly of interchangeable parts developed in early national armories, the transcontinental railway system, the extensive system of land-grant universities, the spread of electrification to all parts of the U.S.,  the federal interstate highway system, the St. Lawrence Seaway, the nuclear industry, contributions to aeronautics and communications from defense and NASA funding, and many more.  (14,20,25,26)
10. U.S. citizens with smaller safety nets are better off due to incentives than citizens of Europe with better safety nets:  Actually, this is only true for the rich, but misuse of statistics can be highly misleading. The U.S. average net worth, which is heavily skewed by the inclusion of the massive fortunes of the super rich, ranks fourth at $301,000 among developed countries. However, U.S. median net worth, which is not skewed because only the 50th percentile is included, ranks nineteenth at $45,000. Hence, due to greater U.S. inequality, its top 1% is better off, but its middle class and poor are worse off. (14)
11. The U.S. is the land of upward mobility (the American dream) so social support for the unfortunate is unnecessary: Actually intergenerational mobility in the U.S. is among the lowest of developed countries. This is shown by elasticity scores for which increasing scores indicate decreasing mobility.  These scores are 5.0 for UK, 4.7 for US, 4.1 for France, 3.2 for Germany, 2.7 for Sweden, 0.19 for Canada, 0.18 for Finland, 0.17 for Norway, and 0.15 for Denmark. (Wikipedia)
12. Meritocracy–or blaming the poor as responsible for their own poverty and undeserving of support: Let’s get real. 2/3 of Forbes list billionaires inherited their fortunes (1/3 pure entrepreneurs, 1/3 pure heirs, 1/3 heirs who further grew their wealth), and birth into very favorable circumstances contributes for much of the remainder.  In the US, parents’ income has become an almost perfect predictor of university access—average income of parents of Harvard students is currently about $450,000.  Clearly, those who do make their own fortunes are usually quite talented and hard-working. Still, luck and collective effort by others also play very important roles.  Thus it is ridiculous to claim  that differences in merit account for multi-thousand-fold differences in outcomes for billionaires compared to others with similar skills or for the relatively recent thirteen-fold increase in CEO’s salaries (from 20 to 300 times) compared to  those of workers.  This is particularly the case since CEO’s pay is increasingly tied to share buy-backs or luck from broad market changes beyond their control. These aspects of inequality are more readily explained by capture of the political process by the rich than by differences in merit. (8)
13. Restrictions that limit minority voting are necessary to prevent voter fraud: Actually, evidence is vanishingly small for voter fraud that would be prevented by requiring photo IDs or limiting voting access in minority neighborhoods. Studies and court documents have shown that new restrictions are more likely where there is a large minority population, where minority turnout has increased, and where Republicans control legislatures. (14)
14. The 2007-8 financial crisis was caused by Democrats pushing Fannie Mae and Freddie Mac to help undeserving low-income home buyers get mortgages: Actually, contrary to propaganda by the American Enterprise Institute, numerous nonpartisan studies, including by the Government Accountability Office, found that Freddie and Fannie were not a major cause, and a bipartisan congressional commission and numerous economists found that the crash had been caused by recklessness of the financial industry and abject failures of policymakers and regulators.(21)
15. Many secondary issues that distract voters from their primary political and economic interest: These include guns, abortion, access to birth control, the war on Christmas, gender issues, and racial resentments, usually expressed by implicit coded terms rather than explicitly. (21)

• Making many targeted attacks in specific situations, such as the following:

1. Removal of campaign financial restrictions to increase the influence of the super rich: This was accomplished by a carefully staged ten year legal campaign funded by the right wing super rich using their “social welfare” corporations Citizens United and Speech Now to create test cases. The 2010 victories of the superrich in these cases greatly increased their influence by removing campaign finance limits for both individuals and nonprofit corporations that hide the identities of donors. After these rulings, outside political spending from social welfare groups that hid donors increased from 2% to 40% from 2007 to 2010, while known contributions from the top 0.01% of donors continued to increase from 15% to 40% from 1980 to 2012. By the 2012 presidential race, these changes allowed contributions by the top 0.04% of donors to be about the same as those of the bottom 68%. In their ruling in favor of Citizens United, the conservative Supreme Court majority claimed campaign finance restrictions were unnecessary because of transparency that would allow voters to know who was supporting political issues and candidates. Obviously, this claim is false, particularly when the effect of dark money is considered. (19) 
2. Climate change denial: $558 million was donated from 2003 to 2010 by 140 conservative foundations as 5,299 grants to 91 nonprofit organizations. Three-fourths of these funds were untraceable due to use of conduits, such as Donor’s Trust. In addition to the usual lobbying, efforts were made to discredit, defund, and fire leading climate scientists (James Hansen, Michael Mann), to present less qualified scientists paid by donors without disclosure as competing experts (Fred Seitz, Fred Singer, Wei-Hock Soon), and to create or fund groups that suggested grass roots support. (19)
3. Opposition to Obamacare: Americans for Prosperity and Freedom Works (successors of the Koch’s Citizens for a Sound Economy), as well as other foundations were involved, and the Center for Protection of Patient’s Rights was formed. Internal right wing polling showed there was no groundswell of public opposition to Obama’s health-care plan…; in fact, there was a ground swell of public support. Hence, funding was provided to create the appearance of opposition, such as the staged disruptions of Democratic congressional leader’s town hall meetings that appeared to be spontaneous, but were organized by Freedom Works, and such as the outbursts of politicians vulnerable to challenges from the right like Senator Charles Grassley, who shamelessly shouted “death panels,” to the press.  (19)
4. Complete right wing takeover of targeted state governments, such as in Wisconsin: Since 2007, the Koch organization had been fighting Wisconsin’s public employee unions, and in 2009 the Bradley foundation made large grants to two right wing think tanks developing plans to break the power of these unions. Meanwhile, the Koch’s Americans for Prosperity provided Scott Walker with a field operation and speaking platform at its Tea Party rallies. In 2010, Walker was elected governor with support from Koch Industries (second largest campaign contributor), unsavory Koch network Wisconsin billionaires John Maynard and Diane Hendricks, and the Republican Governor’s Association (also supported by the Kochs) that was employed to work around state contribution limits. The Bradley Foundation’s president served as Walker’s campaign manager. The out-of-state Kochs also contributed to sixteen legislative candidates who all won, helping conservatives control both houses of the legislature. In addition, the state Supreme Court majority was captured by funneling $10 million (which exceeded campaign contributions for all candidates combined) through the Wisconsin Club for Growth and Wisconsin Manufacturers & Commerce primarily for ads to elect three conservative justices in 2007, 2008, and 2011 and to replace the liberal chief justice with a conservative. This provided the final step to victory when the right-wing program passed by Walker and the legislature withstood a challenge to the right wing packed state Supreme Court by a partisan 4 to 3 vote. A 2012 attempt to recall Walker failed when the Koch’s Americans for Prosperity and the Wisconsin Club for Growth, headed by Koch ally Eric O’Keefe, served as a conduit for out-of-state money from hidden donors. Subsequently, the Walker campaign was shown to have engaged in prohibited coordination with the supposedly independent Wisconsin Club for Growth, but the investigation was stopped by the packed state Supreme Court, whose conservative members had received funds from the same source. (3,19)
5. Direct lobbying for excessive CEO privileges and benefits: The Business Round Table (BRT) consists of CEOs of top U.S. corporations who personally lobby government officials. Initially intended to provide relatively nonpartisan discussions, BRT soon narrowed its focus to backing measures that boost short-term profits and to killing measures that limit the power and pay of top CEOs. The group successfully lobbied and brought legal challenges to block the proxy access provision of Dodd-Frank that would have limited their ability to manipulate boards to protect their salaries. (14).

• Creation of the false appearance of spontaneous grass roots support, usually by dark money, for positions that benefit the superrich, often at the expense of everyone else—such as by organization of disrupters of Democrat town hall meetings by Freedom Works during the Obamacare debate and by organization and funding of the Tea Party (including start-up activity by Americans for Progress, Sam Adams Alliance, and other right wing foundations, paying Glenn Beck up to $1 million annually for Tea Party promotion, and daily conference calls by Dick Armey of Freedom Works to fifty key Tea Party organizers). (19)
• Forcing changes to the right for Republican candidate’s positions to further favor interests of the super rich. At the presidential level, to obtain campaign funding, Mitt Romney infamously reversed himself on acceptance of climate change and on his own successful Massachusetts health insurance plan. At the congressional and state levels, the success of gerrymandering for secure general election seats enables right wing funded primary challenges to intimidate or replace Republicans deemed insufficiently conservative. (19)
• Auditioning of Republican presidential candidates at the Koch Donor summits. Paul Ryan, the favored candidate for 2012 because of his proposals to cut taxes and the safety net, declined a long run for the presidency in favor of a less strenuous short run for the vice presidency. But, no doubt, he’ll be back. (19)
• Employment of private investigators, media attacks, and legal attacks to intimidate and discredit those who oppose them—such as those against Jane Mayer for writing about the Koch network, leading climate scientists Michael Mann of Penn State and James Hansen of NASA, Bill Clinton’s history of infidelity prior to impeachment (funded by Richard Mellon Scaife), and, interestingly, even a twenty year battle between Charles and Bill Koch. (19)

Donors

Who provides dark money and other contributions to the right wing political network?

Super rich families and individuals–-by 2014, Koch biannual donor summit meetings attracted 300 or so secretive donors that included 18 billionaires with combined assets of $222 billion, as well as many multi hundred-millionaires:

1. Charles Koch: $42.9 billion, Koch Industries.
2. David Koch: $42.9 billion, Koch Industries.
3. Sheldon Adelson: $31.4 billion, Las Vegas Sands Corporation.
4. Harold Hamm: $12 billion, Continental Resources (North Dakota shale oil).
5. Stephen Schwarzman: $12 billion, Blackstone Group private equity company.
6. Philip Anschutz: $11.8 billion, Qwest Communications, oil.
7. Steven Cohen (rep. by M. Sullivan): $10.3 billion, SAC Capital Advisors hedge fund.
8. John Menard Jr.: $9 billion, chain of home improvement stores.
9. Elaine Tettemer Marshall: $8.3 billion, widow of Koch Industries. participant.
10. Ken Griffin: $6.5 billion, Citadel (hedge fund).
11. Charles Schwab: $6.4 billion, Charles Schwab Corporation (brokerage and banking).
12. Richard DeVos: $5.7 billion, Amway.
13. Diane Hendricks: $ 3.6 billion, ABC Supply (roofing, windows, and siding).
14. Stephen Bechtel Jr.: $2.8 billion, Bechtel Corporation (engineering firm).
15. Richard Farmer: $2 billion, Cintas Corporations (business supplies and services).
16. Stan Hubbard: $2 billion, Hubbard Broadcasting (radio and television).
17. Joe Craft: $1.4 billion, Alliance Resource Partners (coal producer).
18. {My apologies to other billionaire donors not included on this particular list, such as Ken Langone ($2.7 billion, Home Depot) and Paul Singer ($2.2 billion, Elliot Management vulture fund)}. (19)

Super rich family foundations that are tax-exempt, and supposedly philanthropic nonprofit corporations—selected, particularly prominent examples:

1. Koch Family Foundations (assets $469 million, fortune from Koch Industries).
2. Scaife Foundations (assets $1.15 billion after Richard’s death, fortune from Mellon banking, Gulf Oil, Alcoa, etc.).
3. Lynde and Harry Bradley Foundation (assets $612 million, fortune from Allen-Bradley company).
4. John M. Olin Foundation (assets $370 million spent by 2005 closure, fortune from family businesses).
5. Adolf Coors Foundation (assets $140 million, fortune from Coors Brewing).
6. DeVos Foundation (Assets $62 million, fortune from Amway). (19)

Commercial corporations and other special interests—such as the few selected:

1. Exon Mobile and Koch Oil against environmental regulations.
2. Big banks and hedge fund managers against financial regulations.
3. Health care corporations against Obamacare.
4. Pharmaceutical corporations for the industry-favorable Medicare drug benefit. (5,14,19)

Distribution of Resources

What organizations are used for the distribution and employment of these contributions?

A complex network of additional non-family foundations and other organizations that may serve as conduits to further conceal donor’s identities, including this highly selected list:

1. Citizens for a Sound Economy—funded by the Kochs in 1984 as a false populist movement that hid the identities of the actual corporate sponsors when fighting Clinton’s energy tax and tax on high earners.
2. Citizens for the Environment—Kochs’ spin-off from #1 that called acid rain and other environmental problems myths.
3. Americans for Prosperity—2003 continuation by the Kochs of Citizens for a Sound Economy after it split from rivalries, with activities in many areas, including political campaigns, attacking environmental regulation, and developing grass roots movements, like the Tea Party.
4. Freedom Works—also a continuation of the Koch’s Citizens for a Sound Economy after a split from rivalries—funded by Richard Mellon Scaife and others, run by Dick Armey, with activities in many areas, including organizing the Tea Party.
5. Donor’s Trust—developed in 1999 by a former Koch lieutenant to be a conduit for donations from other right wing foundations while further hiding donor’s identities (accounted for $750 million from fewer than 200 exceptionally wealthy donors from 1999 to 2015).
   6. Crossroads GPS—A nonprofit spinoff of Karl Rove’s American Crossroads super PAC aimed at a Republican takeover of the Senate was the top spender in political advertising in 2010 Senate races (6 seats gained in 2010, Senate control gained by 2014).
  7. Center to Protect Patient Rights—founded in 2009 and funded by the Kochs and others eventually aimed at Republican takeover of the House of Representatives according to a plan that distributed money from many right wing organizations targeting the 105 most vulnerable Democratic congressmen.
8. Republican State Leadership Committee—taken over for REDMAP (Redistricting Majority Project) aimed at Republican takeover of governorships and state legislatures to ensure Republican advantage for 2011 redistricting after census—Republicans gained control of 675 legislative seats and control of both the governor’s office and legislature in 21 states (compared to 11 for Democrats) resulting in four times as many districts to gerrymander for the Republicans.
9. American Legislative Exchange Council–a conservative corporate bill mill that drafted about 1000 bills a year for states, of which about 200 became laws, to be introduced by state legislators as their own (essentially a lobbying organization but calling itself a tax-exempt educational organization).

10. Judicial Watch–founded in 1994 with funding by Richard Mellon Scaife and others to pursue the Clintons by numerous law suits, including by creating the recent narrative that Hillary Clinton is untrustworthy. (19, Jonathan Mahler.  October 12, 2016.  New York Times)

Business associations that conceal donor’s identities while directing their contributions to targets of their choosing:

1. Freedom Partners—created by the Kochs as a “business league” so donor’s contributions could be hidden as membership fees and deductible as business expenses.
2. Chamber of commerce—Thomas Donohue’s rise to leadership in 1997 led to a change from advocating general business interests and avoiding partisan politics to embracing right wing politics and the Republican Party (with reported lobbying activity of $1.1 billion from 1998 to 2014). This provided a path for dark money whereby donors could make generic contributions to the Chamber which were then directed anonymously to their targeted issues.
3. Special purpose arms of larger right wing organizations, such as the Chamber of Commerce’s Institute of Legal Reform that targets elections of state Supreme Courts and attorneys general (15/ 16 victories) and National Chamber Litigation Center that  pursues favorable court decisions, especially from the Supreme Court. (14,19)

Political Action Committees (PACs) that allow unlimited donations while concealing donor’s identities: Super PACS like Karl Rove’s American Crossroads were made possible after the 2010 Citizens United and Speech Now decisions. (19)

Numerous partisan university institutes—selected examples follow:

 1. A network of 5,000 scholars established in 400 colleges and universities.
 2. Pro-corporate programs in 283 colleges and universities funded by the Koch foundations alone.
 3. 24 privately funded right wing academic centers, such as George Mason University’s Koch-funded Mercatus Center and Koch-funded Institute for Humane Studies, which was chaired by Charles Koch and whose founder wrote that taxes are theft, welfare is immoral, labor unions are slavery, and court-ordered remedies to racial segregation are wrong.
 4. Harvard Law School’s John M. Olin Center for Law, Economics, and Business, which employed the stealth tactic of selecting a neutral name for a right wing institute to gain acceptance into an elite university and which led to nearly 80 law schools teaching the same subject by 1990, indoctrination of numerous students, and eventually all-expenses-paid Law and Economics seminars attended by 660 judges, including some federal judges and future Supreme Court Justices.
 5. The Federalist Society for conservative law students started with funds from the Olin Foundation  and then foundations tied to Scaife, the Kochs, and others, which eventually grew to a network of 42,000 right-leaning lawyers, 150 law school campus chapters, and membership of attorneys general Edwin Meese and John Ashcroft, as well as all conservative Supreme Court Justices.
 6. The Collegiate Network, backed by the Olin Foundation, which privately financed a string of right-wing newspapers on college campuses, including The Dartmouth Review, which published an infamous editorial about Ebonics and produced Dinesh D’Souza and Laura Ingraham. (19)

Numerous partisan ideological think tanks—selected examples follow:

 1. Hoover Institution (at Stanford)—founded in 1919 by Herbert Hoover with more recent donors including the Scaife Foundation, Bradley Foundation, Walton Foundation, and William Simon Foundation.
 2. American Enterprise Institute—founded in 1938 with Richard Mellon Scaife as a large early donor; a major source of personnel for the George W. Bush administration’s public and foreign policies.
 3. Heritage Foundation—founded in 1973 with Richard Mellon Scaife as the largest donor; a major source of policy and personnel for the Reagan administration.
 4. Cato Institute—founded and funded in 1974 by Charles Koch as a libertarian think tank; a champion for small government, privatization of government functions, abolition of the welfare state, and ending business regulation.
 5. Manhattan Institute for Policy Research—founded in 1978 with grants from the Olin Foundation, Kochs, and others; supported Charles Murray in writing the books Losing Ground that attacked liberal welfare policies and The Bell Curve that contained highly controversial conclusions regarding race and IQ scores.
 6. State Policy Network—founded in 1992 as a national coalition to coordinate 64 separate conservative state-based think tanks. (19)

• Right wing media—including crteating media outlets like The Daily Caller, The Washington Free Beacon, and The Franklin center, sponsoring talk radio hosts like Rush Limbaugh, Sean Hannity, and Laura Ingraham ($22 million from Heritage and Freedom Works 2008-2012), and paying up to $1 million annually to TV host Glenn Beck to promote the Tea Party and paying radio host Mark Levin to promote AFP attacks on climate scientist Michael Mann. (19)

Consequences

What are the consequences of the rise of the right wing super rich political network and dark money?

Dysfunctional government:  Remember, the people at the top of the right wing political network are extremist libertarians.  They don’t want government to work.  They don’t want it to tax them.  They don’t want it to regulate their industries against pollution and financial excess.  They don’t want it to support programs that benefit the general public, like social security, access to medical care, public education, and a safety net to help those left behind by globalization and automation. Moreover, they want you the public to think government doesn’t work so you will support them in their efforts to undermine it.  And what better way to show that government doesn’t work than by sabotaging it by obstructionist actions like shutdowns, refusing to raise the debt limit, intimidating moderate Republicans to vote as a block against responsible legislation, and the Hastert Rule to block voting on programs favored by the majority of all representatives but not by the majority of Republicans.

Greatly increased inequality:  From 1979 to 2006, wages have grown 324% for the top 0.1%, 144% for the top 1%, and just 15% for the bottom 90%. Since the 2007
crisis, the top 1% has taken 95% of income growth. The shares of wealth from 1978 to 2011 have
grown from 23 to 40% for the top 1% and from 7 to 22% for the top 0.1%, while in 2012 the bottom half owned just 2%. Consequently, the top 0.1% now possess essentially as much wealth as the entire bottom 90%–22% and 23% in 2011 (See figs. 8 & 9.). (32)

The causes of this inequality are controversial, numerous, and complex, but some changes have obviously been enhanced by policies and conditions that favor the super rich and that are moving the U.S. toward being a suboptimal extractive economy. (1,6,10,22,27,32):
 1. Tax cuts for the rich: The average tax rate was cut by 20% for the top 1% from 1979 to 2007 (37% to 29.5%)  and by 37% for the top 400 families from 1992 to 2007 (26.4% to 16.6%–1979 figures not available). (32)
 2. Globalization that enriches elites but fails to benefit the middle class or provide help for those left behind: Relative gains in real per capita income from 1988 to 2008 are about 70% for emerging nation’s middle classes, about 0 to 5% for developed nation’s middle classes, and about 65% for the global top 1% (See fig. 10.).  (21)
 3. Automation that enriches elites but fails to provide broad sharing of benefits or help for those left behind:  Despite job loss to China and elsewhere, U.S. manufacturing output doubled from 1984 to 2015  but with 1/3 fewer workers. (Market Watch, March 28, 2016)  Oxford researchers predicted in 2013 that an additional 47% of U.S. jobs will be lost to automation in two decades (see fig. 11.). (21, 29)
 4. Greater return on capital than on labor, not corrected by taxation or other mechanisms: According to the seminal book Capital by Thomas Piketty, this leads to inexorable growth of fortunes with incomes from investments relative to labor incomes. (23)
 5. Increasingly rapid growth of large fortunes on their own accord as they get larger, regardless of the merits of the possessors: According to Piketty, this is related to the types of investment management and opportunity that become available. This is shown by returns on U.S. university endowment according to size, which are about 10% from $15-30 billion (3), about 9% from $1-15 billion (60), about 8% from$500 million to $1 billion (66), about 7% from $100-500 million (226), and about 6% below $100 million (498). From 1990 to 2010, the fortune of Bill Gates, the Microsoft genius, grew from $4 billion to $50 billion, while that of Liliane Bettencourt, a cosmetics heiress who never worked a day in her life, grew at a similar rate from $2 billion to $25 billion. (23)
 6. Changing corporate culture: In the mid-twentieth century, corporate concerns included responsibilities to workers, consumers, and communities and reinvesting for long-term growth, as well as increasing stock prices. Long-term GE CEO Owen young summarized at the time, “Stockholders are confined to a maximum return equivalent to a risk premium. The remaining profit stays in the enterprise, is paid out in higher wages, or is passed on to the customer.” In recent decades, CEOs have shed these values and instead use their insider authority to markedly increase their own salaries and to pursue strategies for short-term stock price increases, such as stock buy-backs, to further enrich themselves and large, extractive shareholders at the expense of workers, customers, communities, and long term growth of their companies. As a result, corporate payouts to the top five executives increased from less than 5% to more than 10% in eight years ending in 2003, and CEO’s salaries relative to worker’s salaries increased from 20:1 to 300:1 since 1965. Although gains in productivity have come from scientists, technology professionals, engineers, and mathematicians, rewards from those gains have gone almost entirely to the top 1% and half of those to the top 0.1%, of which 60-70% are top financial and corporate managers. (7,9,14,23,29)
 7. Increasing political power of the super rich as campaign finance restrictions have been removed:  With this change, financial support by the superrich is increasingly essential for political success in the U.S. (21)

Emerging Oligarchy:  According to Jeffrey Winters, a scholar who studies oligarchy, earlier oligarchs, such as in the Italian city states, needed to employ private armies to take and protect their wealth, but modern oligarchs, whose wealth is protected by the rule of law, need only employ private armies of lawyers, accountants, lobbyists, and propagandists, as well as large campaign contributions, to protect and expand their wealth. (33)

International economists Thomas Piketty (author of Capital) and Branko Milanovic (author of Global Inequality) see the U.S. as firmly on this path to oligarchy and plutocracy (rule by the few and by the rich) with little hope for change in the near future due to the entrenchment of the super rich at the top of the political process. (21,23)

Fred Wertheimer, a Washington public interest lawyer has said, “We have two unelected multibillionaires who want to control the U.S. government and exercise the power to decide what is best for more than 300 million American people, without the voices of these people being heard.” (19)

Morality

Why do some, but not all, of the super rich, who already have more than they can possibly spend, pursue these policies to get even more at the expense of the needy, the sick, and the environment (my view)?

According to economic and social psychologists, much of human behavior is determined by primitive emotional and instinctual impulses, while reasoning exerts only a much smaller after the fact influence to provide a rationale for what has already happened. According to this model, the libertarian extremism of the those super rich who promote it can be seen as merely an after the fact rationalization to justify their deep-seated, primitive, grasping, territorial behavior. (15,18)

This was expressed philosophically by Xenophon, a brilliant Greek economist about 400 years B.C., who identified the insatiability of abstract monetary desires (expressed as silver), “Neither is silver like furniture, of which a man never buys more once he has got enough for his house. No one ever yet possessed so much silver as to want no more; if a man finds himself with a huge amount of it, he takes as much pleasure in burying the surplus as in using it.” (28)

A similar sentiment was expressed more poignantly by Doreen Carlson after a settlement by Koch Industries for the death of her husband, “I don’t think you could write what I think of Koch. You’re just collateral damage. It’s just money for them, and they never have enough.” (By 2015, the combined net worth of Charles and David Koch was $84 billion.) (19)

This position was acknowledged rather bluntly by Richard Fink, the Koch’s main lieutenant, when he assumed he was among friends speaking at a Koch Donor Summit, “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.” (19)

This sounds like addictive behavior, similar to that of those who can’t stop the compulsive pursuit of alcohol, heroin, pornography, or whatever. Perhaps we should regard these people as merely sick rather than as evil.

Conclusions

The right wing super rich have created a donor network and dark money to establish their ascendancy in the political process to protect and increase their wealth by pursuing an agenda that essentially has only two main items—elimination of taxes on their fortunes and elimination of regulation of their industries.

 They have succeeded in doing this by mostly capturing the Republican Party so that its leading senators and congressmen, like Mitch McConnell and Paul Ryan, now act like employees of their wealth protection organizations, along with numerous lawyers, accountants, etc., to pursue lower taxes and regulations for their fortunes and industries.

   In addition, they have succeeded in persuading much of the general public to vote against its own best interest by creating right wing academic programs, think tanks, and media outlets to  develop a “false consciousness” about the role of government, taxation, and even science by demonizing government, progressives, welfare recipients, etc., and by the use of distracting issues like opposition to gun control, birth control, and separation of church and state.
References
1. Acemoglu, Daron and Robinson, James. 2012. Why Nations Fail.
2. Blinder, Alan. 2013. After the Music Stopped.
3. Caplan, Lincoln. 2011. “Justice for Sale.” Thearmericanscholar.org.
4. Diamond, Peter and Saez, Emmanuel. Fall 2011. “The Case for a Progressive Tax: From Basic Research to Policy Recommendations.” Journal of Economic Perspectives.
5. Drutman, Lee. 2015. The Business of America Is Lobbying.
6. El-Erian, Mohamed. 2016. The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.
7. Foroohar, Rana. 2016. Makers and Takers.
8. Frank, Robert. 2013. Success and Luck: Good Fortune and the Myth of Meritocracy.
9. Freeland, Chrystia. 2012. Plutocrats.
10. Gilson, Dave and Perot, Carolyn. 2011. “It’s the Inequality, Stupid.” Mother Jones.
11. Gilens, Martin. 2005. “Inequality and Democratic Responsiveness.” Public Opinion Quarterly, vol. 69.
12. Gilens, Martin. 2014. “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.” Perspectives on Politics, vol. 12.
13. Gravelle, Jane and Marples, Donald. January 2, 2014. “Tax Rates and Economic Growth.” Congressional Research Services Report for Congress.
14. Hacker, Jacob and Pierson, Paul. 2016. American Amnesia.
15. Haidt, Jonathan. 2013. Righteous Minds: Why Good People Are Divided by Politics and Religion.
16. Jackson, Brooks. 2011. “Fiscal Fact Check: Does Washington have a spending problem or an income problem? We offer some key facts.” www.factcheck.org.
17. Johnson, Dave. 2012. “So Do Tax Cuts Create Jobs?” www.huffingtonpost.com.
18. Kahneman, Daniel. 2013. Thinking Fast and Slow.
19. Mayer, Jane. 2016. Dark Money.
20. Mazzucato, Mariana. 2013. The Entrepreneurial State.
21. Milanovic, Branko. 2016. Global Inequality.
22. Mitchell, Bill. 2014. “Back to 1917—the wealth distribution in the US.” http://bilbo.economicoutlook.net/blog/?p=29465.
23. Piketty, Thomas. 2014. Capital.
24. Reuss, Alejandro. 2011. “Do Lower Tax Rates Really Increase Government Revenue?” www.dollarsandsense.org.
25. Ruttan, Vernon. 2006. Is War Necessary for Economic Growth?
26. Ruttan, Vernon. 2001. Technology, Growth, and Development.
27. Saez, Emmanuel and Zucman, Gabriel. 2014. “Working Paper 20625.” www.nber.org./papers/w20625.
28. Sedlacek, Thomas. 2011. Economics of Good and Evil.
29. Sharma, Ruchir. 2016. The Rise and Fall of Nations.
30. Short, Doug. 2010. “Reminder: The Connection Between Tax Rates And The Deficit Is Non-Existent.” www.businessinsider.com.
31. Spitzer, Eliot. “Tax Fraud: Debunking the claim that higher income-tax rates reduce GDP.” www.slate.com.
32. Stiglitz, Joseph. 2012. The Price of Inequality.
33. Winters, Jeffrey. 2011. Oligarchy.

Figures

Figures embedded in text shown full size below:

Figure 1. Probability of policy adoption (dark line) according to policy preferences (gray columns) for average citizens, economic elites, and special interests.  This study of 1779 policy outcomes shows no influence of average citizens and considerable influence of economic elites and special interests. (12)

 

Figure 2. Top marginal income tax rates and GDP growth from 1930 to 2009. The graphs show very little change of the rate of GDP growth throughout the period of tax cuts from after World War II to the present. (31)

 

Figure 3. Top marginal income tax rates, GDP growth (scale expanded), and an arrow showing the trend of GDP growth from 1950 to 2008. The arrow shows a long term trend of slightly decreasing rather than increasing GDP growth throughout the period of tax cuts from after World War II to the present time. (17)

 

 

 

 

 

 

 

 

 

 

 

Figure 4. The Laffer curve—anticipated tax revenue plotted according to tax rates from 0 to 100%. According to this construct, tax revenue may be increased by lowering taxes. Note that this occurs only for tax rates beyond the peak of the curve (revenue maximizing tax rate). For tax rates before the peak, lowering them will, of course, result in decreased tax revenue. The key question of what the tax rate is at the peak is not answered by this theoretical graph. Recent studies estimate that the peak occurs at a combined U.S., state, and local income tax of about 73%. (24)

 

 

 

Figure 5. Size of U.S. federal government by spending compared to GDP. These graphs show a relatively stable size since the 1950s of about 21% for spending until the transient increase caused by the 2007-8 financial crisis. (U.S. Office of Management and Budget)

 

 

Figure 6. U.S. national debt compared to GDP. This graph actually shows a steady decrease of the national debt from over 120% to about 30% from the end of World War II to 1980, then an increase to about 65% with the Reagan tax cuts, and another increase to over 100% with the Bush tax cuts and 2007-8 financial crisis. (30)

 

Figure 7. Sources of government funding for development of the many technical features of the Apple iPod and iPhone. (20)

 

 

Figure 8. Changes in productivity, average overall wages, and average income of the top 1% from 1979 to 2009. Clearly gains in income from increased productivity that came mostly from scientists, technologists, engineers, and mathematicians were taken almost entirely by the executives and investors of the top 1%. (10)

 

Figure 9. Share of U.S. household wealth by the top 0.1% and the bottom 90% since 1917. These graphs show that the level of inequality between these groups was quite high in the 1920s and 1930s, decreased considerably in the 1940s through the 1970s, then returned to the previously high levels from the 1980s through the 2010s. (22)

 

Figure 10. Relative gain in real per capita income by global income level, 1988-2008. During twenty years of globalization, the emerging world middle class and the global top 1% saw substantial gains in relative income of up to 70% and up to 65%, while the middle class of the U.S. and other developed countries saw very little gain of 0-5%. (21)

 

Figure 11. U.S. manufacturing output compared to employment 1947-2014. In recent decades, U.S. manufacturing has continued to show strong growth in output but has shown a sharp decrease in employment.  These jobs have been lost to automation, not outsourcing to China. (Perry, Mark. October 1, 2015. www.aei.org)