Extortion (2 page)

More recently, reforms that ended the practice of “soft money” contributions came as a result of increasingly extortive demands by both parties for large donations from outside companies. (Ray Plank was one of those who fought successfully to shut off the soft money spigot.) For the Republicans, the master of this sort of fund-raising was House Majority Leader Tom DeLay of Texas. DeLay created a corporate enemies list, telling companies that if they failed to make large enough donations, there would be legislative repercussions. For the Democrats, the equally heavy hand was Terry McAuliffe, who organized elaborate fund-raisers for President Bill Clinton, including barbecues where corporations were expected to cough up $500,000 to “honor” the president. Charles Kolb, president of the Committee of Economic Development, expressed the attitude of many corporate leaders pushing for a ban on soft money donations when he said, “We’re tired of being hit up and shaken down.”
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Washington, D.C., is beset by gridlock and partisan fighting. Few substantive issues seem to get settled. Popular explanations for the gridlock focus on the increased polarization of congressional districts, and therefore of members of the House, with too few deal-making moderates in the middle. This explanation is accurate—but not the whole story.

Reams of legislation are introduced every year that have little to do with the politician’s constituents. Why are our representatives spending so much time on bills that have very little to do with their own voters?

In recent years, despite thousands of bills introduced into Congress every year, only a small percentage (approximately 5 percent) become law.
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Of course, what matters for laws is quality, not quantity. But why would legislators bother to introduce so many hopeless bills? What if they are not even designed to pass? What if they are instead designed to make money? The cold harsh reality in Washington is this: the very conditions that are so maddening for most Americans—gridlock, problems being ignored, hyperpartisanship—are the very conditions that are most lucrative for the Permanent Political Class.

Washington may not be working for citizens, but it’s working quite well for members of the Permanent Political Class who profit handsomely.

While the rest of the country looks on in frustration and anger, gridlock and a handful of massively complex laws are actually evidence that Washington
is
working, at least for those in power. The system is functioning precisely how they want it to function. Gridlock, complex laws, highly technical bills, and regulations that target specific groups have
a
commercial
purpose for the Permanent Political Class.

Ray Plank, whose company has given to both parties over the decades, believes that gridlock exists because that’s where the money is.
¹⁵
“There’s no money to be made by fixing problems,” Plank told me. “So why are they going to fix them?”
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In many cases “gridlock” really means “lobbyist-lock” or “donor-lock,” which pits several sides against each other. It’s an arms race between two or more sides, and the Permanent Political Class is the ultimate winner.

What goes on in Washington’s halls of power has less to do with lawmaking than with moneymaking
. Far from being about policy, much of what happens in Washington is about extorting money. This isn’t to say there are not people in leadership positions with deeply held convictions. But from a commercial standpoint, there is money to be made by passing, or threatening to pass, certain laws. And the two political parties, far from being mortal enemies, as often depicted, desperately need each other for these same commercial reasons. Indeed, party and ideological differences matter less than you think.

Politics in Washington is a lot like professional wrestling. What seems like vicious combat to the uninitiated is actually choreographed acting. Professional wrestlers face off in the ring, shouting and pointing fingers and appearing to hate each other. But in fact, they are partners in a commercial enterprise to entertain and extract money from an audience. No matter who wins the match, everyone gets paid.

John Hofmeister, who served as the president of Shell Oil Company, recounted for me how it works. In his appearance before a congressional committee in 2008, politicians from both parties grilled him about the oil industry and high oil prices. Congresswoman Maxine Waters even threatened to nationalize the oil industry.
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Ignore for a minute the question of who is responsible for high oil prices and consider what happened after those lively hearings according to Hofmeister. “After the hearings, a lot of those who had been attacking Shell asked me to donate to their campaigns or help to organize a fund-raiser for them.”
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From a commercial standpoint, conflict, division, and calamity are good for business in Washington too. To be sure, both sides have their true believers, but the Permanent Political Class is also filled with entrepreneurs looking to maximize the opportunity to make money and increase their power base. It’s not uncommon for the same lobbying firm to be advising both sides in a political race or both sides on an important bill.

Microsoft’s Bob Herbold put it simply: “They are only interested in themselves.” Herbold has done considerable business in Asia, which has a reputation for payoffs and bribes. “There is corruption everywhere,” he told me. “But we are masters over those countries at legalizing corruption.”
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Consider, for example, one particular highly confrontational bill. Democrats have threatened to impose a tax on Internet sales in the form of a bill that would allow states to tax online purchases, whether or not the retailer has a physical presence in the state. Each time it comes up, there are financial opportunities for both Democrats and Republicans. Democratic lobbyists could be hired by large firms that want to “talk down” the bill’s sponsors from proceeding. Those Democrats who sponsor the bill can solicit campaign donations from Internet retailers who hope their donation might convince the sponsors to kill the bill. Republicans, on the other side, might denounce the bill as a terrible idea that is destructive to the economy, but the threat of its passage is a moneymaking opportunity for them too. Stopping the tax comes with a price: campaign donations and lobbying arrangements for their friends. After all, they are the only thing standing between the retailers and financial Armageddon. John Hofmeister calls this practice “legalized corruption where the corrupters (elected members) have assumed the legal authority to set in motion the policies and practices that manipulate the corruptees (vulnerable donors).”
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The bill might go away; the executioner might take away the guillotine for a time. But it will return. The bill will reemerge, and the money will be extorted again by both sides. Sometimes bills only finally pass after the donors have been wrung dry.

Solving problems and settling issues is good lawmaking, but it’s not lucrative. It is gridlock, confusion, and rehashing fights that create streams of income—like an annuity—for the Permanent Political Class.

This sort of extortion is illegal if we practice it in our private lives. Threatening to harm someone if he or she refuses to fork over cash is classic extortion. Twenty years ago, several American cities were plagued by stoplight windshield washers called “squeegee men.” Their approach was simple: They would approach your car at a stoplight with a washcloth or a squeegee in one hand, then begin wiping the windshield, expecting payment from you. And if you refused? The threat went unstated: Would the squeegee man run a key along your exterior to ruin your paint job? Smash your window? Needless to say, the squeegee men usually got paid.

This sort of street-level extortion was not tolerated. New York City and other municipalities cracked down. Squeegee men were arrested for jaywalking or other crimes. New York mayor Rudy Giuliani argued that this sort of behavior created a hostile environment. (Studies at the time showed that women drivers felt particularly threatened.) Even in Canada, the city of Toronto outlawed the practice under a “safe streets law.”

But as we will see, for government officials, this sort of extortive behavior is okay. Instead of standing on a street corner with a squeegee and a scowl, these extorters wear nice suits, speak eloquently, and know how to present themselves in front of a television camera. They dismiss their extortion as “just politics,” similar to how some defenders of the squeegee men argued that they were just trying to make a living. But in Washington the extortionists do considerably more damage and make far more from their extortion racket than the squeegee men ever could.

The Permanent Political Class operates far less like Jimmy Stewart in
Mr. Smith Goes to Washington
than like the organized crime lords in
The Sopranos
or
The Godfather
. I’m not arguing that politicians are criminals (however tempting that argument might be for some people). Indeed, I’m going to argue that they practice an effective and lucrative form of “legal extortion.” But don’t try this at home. Because of the ways in which American laws are written, politicians and bureaucrats are able to employ extortion techniques that would send the rest of us to prison. Likewise, lawmakers have written the laws in such a way that they can sell their votes—and can do so legally.

In the classic mob film
The Godfather
, Michael Corleone, the Godfather’s son who becomes the Boss, recalls a disputed agreement. “Luca Brasi held a gun to his head—and my father assured him that either his brains or his signature would be on the contract.” Members of the Permanent Political Class, of course, don’t threaten physical violence. But they do extract their money by threatening a sort of “financial violence” to those they extort.

The Chicago Mob (often called “the Outfit”) believed that the best way to extort people was to “throw fear” at them.
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In Washington, politicians can throw fear at individuals in a lot of different ways.

If you are a politician, the key is linking what you do in your official duties to a sophisticated fund-raising apparatus. Washington politicians have direct, detailed, and regular communication between their congressional staffers—who write, analyze, and assess bills, as well as perform constituent services—and their congressional fund-raising teams. This allows politicians and their fund-raisers to target those who might be vulnerable to political extortion. Sometimes you have to wonder: who is more important, the chief of staff or the chief fund-raiser?

Even a minor request can become an opportunity to extort. In August 2012, for example, Congressman Tim Bishop of New York squeezed a donation out of a constituent who needed help getting a permit. Eric Semler wanted to celebrate his son’s bar mitzvah with a fireworks display near his house, but he ran into local resistance. Semler contacted Bishop’s office. But before anyone did anything to help him, Semler received a request from the congressman’s campaign staff seeking $10,000 in campaign contributions. The congressman’s daughter wrote to Semler, “Our Finance Chair, Bob Sillerman suggested to my dad that you were interested in contributing to his campaign and that I should be in touch directly with you.” The request came three days before the party.
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Semler ended up donating $5,000 and said the congressman’s staff solicited him. Bishop said Semler “volunteered the money as a show of thanks.” This is just a minor and inartful form of extortion. But as we will see, far more significant opportunities can be pursued, whether artfully or not. Studies demonstrate that beyond those who have an interest in politics, “many donors are reluctant to give contributions and only do so when asked.”
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There’s a lexicon for modern political extortion. Politicians from some parts of the country refer to “milker bills,” which are intended to “milk” companies and individuals to pass or stop legislation that will benefit or hurt them. Others call them “juicer bills” because they are introduced largely for the purpose of squeezing money out of the target. Some call them “fetcher bills” because they are drafted and introduced to “fetch” lavish and lucrative attention from lobbyists and powerful interests. Whatever you call them, these bills are designed not to make good law, but rather to raise money. The politicians are not necessarily interested in having the bill pass. Often these bills are very narrow in focus and would do little to benefit their constituents.

Indeed, politicians often don’t want these bills to pass because if they do, the opportunity for future extortion is removed. A good milker bill can be introduced repeatedly, milking donors year after year. Laws that do pass, particularly narrowly focused ones, are purposely designed to expire every few years so politicians can then revisit the issue and “juice” the same people. The best kind of all is the “double-milker,” or “double-juicer,” which is designed to play two deep-pocketed industries against one another, setting off a lucrative arms race. Members of Congress can milk each bill multiple times. In addition to their regular campaign committees, they also have leadership political action committees (PACs) and joint fund-raising committees—all of which can grab a teat and squeeze. This money can be funneled to other politicians to buy votes or converted into accounts that enhance a politician’s lifestyle.

Milker bills have a long history in some of our most corrupt cities. The muckraker journalist Lincoln Steffens first wrote about them in his 1904 classic
The Shame of the Cities
. He described a state of corruption whereby politicians introduced “strike bills” that would affect certain businesses. The bill would be so detrimental to a group of businesses that they would be driven to pay large sums of money to “put the strike bill to sleep.”
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That was politics on a local level, where corruption could more easily remain hidden. Today it happens on an even larger, national scale in Washington, D.C.