Big Money

Preface

It was a dreary Pacific Northwest evening in February 2012, and President Barack Obama’s mood matched the weather. Despite being among supporters who had gathered in a stunning modernist mansion in Seattle’s eastern suburbs, he seemed irritated. Pacing in front of towering twenty-five-foot-high windows that offered a sweeping view of a rain-spattered Lake Washington, he rattled through a short pro forma speech about how his administration was working to help struggling Americans through “the toughest three years economically since the Great Depression.”

Tickets for the speech—a fund-raiser for Obama’s reelection campaign—cost $17,900 apiece, so it was unlikely anyone in the small crowd was going to end up in a breadline anytime soon. In the Medina, Washington, living room of the hosts, Costco cofounder Jeff Brotman and his wife, Susan, Microsoft founder Bill Gates—the richest man in the country—leaned against a black grand piano, while others, including fellow Microsoft billionaire Steve Ballmer, were scattered about, some standing with their backs to muted off-white walls decorated with colorful bursts of abstract expressionist art. They listened attentively to Obama’s speech, which lasted all of sixteen minutes. But they really perked up when he finished and the traveling press pool was escorted from the room, which allowed them to talk candidly with the president.

In their private question-and-answer session, Obama let his guard down and eventually shared some thoughts that revealed more about his view of American politics than perhaps anything he said publicly during the entire campaign. Election Day was still more than eight months away. But Obama, in a previously unreported riff, signaled surrender on one of the fights that had drawn him to politics in the first place: the effort to limit the flow of big money. It was a remarkable concession, one that would have stunned the campaign volunteers who believed so deeply in his promise to change the way politics works. It wasn’t just that he was admitting that his own election prospects would be disproportionately influenced by super-rich donors like those he was addressing. He had already done that eleven days earlier, when he blessed a so-called super PAC collecting million-dollar checks to boost his reelection. What really distinguished his remarks to Gates and company from his carefully calibrated official position was the admission that the grassroots, people-powered politics he had long glorified might never again trump the swelling political buying power of the very richest donors in presidential campaigns in 2016 and beyond.

“You now have the potential of 200 people deciding who ends up being elected president every single time,” Obama told the group in response to a question about the 2010 Supreme Court ruling in a case called Citizens United vs. Federal Election Commission that gutted campaign finance restrictions and marked the beginning of a new big-money era in American politics.^*

Unless things changed dramatically, Obama predicted, “I may be the last presidential candidate who could win the way I won, which was coming out without a lot of special-interest support, without a handful of big corporate supporters, who was able to mobilize and had the time and the space to mobilize a grassroots effort, and then eventually got a lot of big donors, but started off small and was able to build. I think the capacity for somebody to do that is going to be much harder.” He continued, “In this election, I will be able to, hopefully, match whatever check the Koch brothers want to write,” referring to the billionaire industrialists Charles and David Koch. “But I’m an incumbent president who already had this huge network of support all across the country and millions of donors. I’m not sure that the next candidate after me is going to be able to compete in that same way.” Obama turned to face Gates, who stood awkwardly, his hands stuffed in his suit pants pockets. “And at that point, you genuinely have a situation where ten people—hey, you know, Bill could write a check.” And, Obama pointed out, it wasn’t just Gates, whose fortune, then estimated at $61 billion, Democrats had been hoping to tap in a big way. “Actually, there are probably five or six people in this room,” Obama said, gesturing to Ballmer and others, as nervous laughter spread through the crowd. Obama plowed ahead insistently, eyebrows raised, his voice rising with agitation as he stepped toward the donors. “I mean, there are five or six people in this room tonight that could simply make a decision this will be the next president and probably at least get a nomination, if ultimately the person didn’t win. And that’s not the way things are supposed to work.”

It was jarring to hear such a blunt assessment from a politician who had built so much of his identity around the idea that average people could band together to change the world, partly by taking politics back from moneyed special interests. When he had formally announced his unlikely presidential bid almost exactly five years before the Medina fund-raiser, Obama had boldly declared that it was time to take government back from “the cynics, and the lobbyists, and the special interests who’ve turned our government into a game only they can afford to play.”¹ Now, as the leader of the free world, Obama was admitting that was no longer achievable in the current system—that American politics had fundamentally changed in a way that made it, at the highest levels, a game for the ultra-rich.

Of course, the richest Americans have always used their fortunes to try to tilt the nation’s political landscape to their liking. The robber barons spent unknown millions financing William McKinley’s 1896 presidential election. Insurance magnate W. Clement Stone invested $4.8 million helping Richard Nixon win the White House—twice.² And billionaire currency trader George Soros spent $27 million trying to elect John Kerry in 2004.

Having tracked the flow of money into politics as a reporter for more than a dozen years, I’d heard plenty of hyperbolic predictions from self-styled reformers like Obama. From their perspective, the latest developments in campaign finance law always seemed to be threatening the very fabric of American democracy by empowering rich donors or special interests. Mostly, though, the system self-corrected, and American democracy continued more or less unaltered. If moneyed interests pumped too much cash through a particular loophole and it resulted in a scandal, Congress, regulators, or judges would close it down, only to see the cycle begin anew with a fresh avenue for spending.

But the cresting wave of big money sparked by the Citizens United decision was truly altering the very character of American politics. Sure, there were still potential marginal changes that could come from lawsuits, court rulings, bills, and regulatory processes that were pending even as this book was going to press. But Obama’s judgment was sound: a new political reality was here to stay.

It’s not just that the total sums pouring into our politics are greater than they’ve been at any other time in our nation’s history—though that is undeniably true. Rather, it’s that the spending is fundamentally changing how campaigns are run, which issues are debated, and which candidates represent their parties. In past elections, most major donors boosted candidates or causes closely aligned with the Democratic or Republican establishments. Now it’s just as likely that the biggest checks will be spent bucking the system. At a time when wealth is increasingly coalescing in the bank accounts of the richest 1 percent of American citizens, members of this mega-donor community—and the consultants who spur them on—are wresting control from the political parties and their proxies, which once combined to dominate politics. A tightly choreographed hierarchy controlled by party insiders is being replaced by a chaotic one where even those with no political experience can buy in. In a perverse kind of way, the new system is more democratic, but only for those with the cash to buy in. Anyone with enough net worth can become a player in the new big-money politics, and the country’s ultra-rich have lined up to get in the game. They are—in a very real and entirely legal way—hijacking American democracy.

The 2012 election was a tipping point in this evolution—the first in the modern campaign finance era³ in which independent groups like those powered by the mega-donors spent more money, $2.5 billion, than the political parties themselves (which spent $1.6 billion).⁴ Some of the implications of this trend will likely take years to become apparent, but it has already profoundly reshaped the political landscape. The parties are losing the ability to pick their candidates and set their agendas, as fewer and fewer politicians are reliant on the financial support of their party to win. In fact, it can be preferable to have the backing of a sugar daddy donor or a group with deeper pockets willing to spend unlimited cash to fight the party.

To date, this dynamic has played itself out more fully on the right. Rich Republicans leapt to take advantage of the new Wild West–like landscape. Their huge checks helped harness the energy of the anti-establishment tea party movement and lift the GOP to control of the House of Representatives in 2010. But that widened sectarian rifts between the party and factions of its base that regarded party leaders as insufficiently conservative on fiscal or social issues. The new tea party wing of the House majority quickly became an albatross, calling public attention to noisy internecine disagreements that resulted in disputes over national fiscal policy, expensive and damaging primaries in 2010 and 2012, and a disastrous government shutdown in 2013 that left party elders dreading another big-money demolition derby in the 2014 primaries.

Rich Democrats mostly sat on their wallets early in the big-money era. They were sidelined by apathy toward Obama and other party leaders, and by queasiness about the impact of big money on democracy. The famous ”shellacking” they took at the ballot box in the 2010 midterms helped them get over their qualms. Once they joined the game, they managed to play it more skillfully than Republicans, taking advantage of their relative ideological unity to adhere to the same playbook, and attracting plenty of million-dollar checks to help reelect Obama and protect his Democratic allies in Congress. But with Obama’s presidency coming to an end and disagreements percolating over the direction and leadership of the party, it seemed only a matter of time before wealthy Democrats found themselves at odds and battling one another with their checkbooks, just like the Republicans before them. Already a coalition of rich partisans was trying to avoid this plight by aligning behind a prospective Hillary Clinton 2016 presidential campaign. But a sect of more liberal donors was quietly searching for a more progressive alternative to support with their own super PAC mega-checks.

As Obama said in Medina, it no longer requires an army of supporters to make a serious presidential candidate—just a handful with enough zeros in their net worth. Heck, it only took one sugar daddy apiece to allow Rick Santorum and Newt Gingrich to make a messy and prolonged race out of the 2012 Republican presidential primary. Neither White House hopeful had assembled the basic trappings of a credible presidential campaign, but that doesn’t matter as much in the big-money era. It used to be that a viable presidential campaign meant spending years building lists of small donors, traveling to county fairs, endorsing state legislative candidates, and schmoozing local party chairmen in their Iowa, New Hampshire, and South Carolina living rooms and rec centers. That still has its place, of course. Now, though, you can be competitive with minimal commitment to that kind of retail politicking, as long as you have one billionaire who’s able to stroke seven- or eight-figure checks. And while a single mega-donor can now subsidize a politician through any given election or even for an entire career, no class of people benefits from the new big-money political economy as much as the consultants who keep it all going. They solicit and spend the money, earning fat commissions on the cash as it comes in and then again when it gets spent, regardless of their results in any given election. As long as they keep the mega-donors happy, the money keeps flowing.

So just what is it that drives these donors to keep giving? Among the motivations of these guys—and they are mostly men, mostly older, and largely white—are passion, ego, and in some cases financial self-interest, though the new big-money politics is no way to boost profits. In fact, most of the mega-donors whose areas of business are closely regulated by government also spend heavily—and more efficiently—on lobbying. One uniting factor in this gilded club is a political junkie’s love of the game. They may be true believers in a cause or a candidate, but politics is also their hobby, just like the Washington cabbie whose radio is glued to NPR or the uncle at Thanksgiving dinner who can’t stop quoting Bill O’Reilly.

At first blush, they may seem like conniving robber baron archetypes trying to buy government favor, but they remind me more of the wealthy class of sports junkies who plunk down hundreds of millions of dollars to buy a professional team. In fact, there’s a good bit of overlap between team owners and political donors. Los Angeles Kings investor Phil Anschutz and Arizona Diamondbacks owner Ken Kendrick regularly attend secretive mega-donor conferences organized by the Koch brothers, while New York Jets owner Woody Johnson is a leading GOP donor, as is Joe Ricketts, whose family bought the Chicago Cubs in 2009. Big Democratic donors include Peter Angelos, who owns the Baltimore Orioles, and George Soros, who owns a stake in Manchester United and tried to buy the Washington Nationals.

Like their fellow 1-percenters playing the political field, it’s usually not enough for sports patrons to merely cut the checks. Many seem almost pathologically compelled to try their hand at managing aspects of the team better left to professionals. It’s as if the newly minted owners are impatient to show that the same acumen they demonstrated in business can be applied to sports. Often it can’t. History is rife with examples of sports owners whose meddling has kept their teams mired in chaos near the bottom of the standings. The mega-donors playing the political field have in many ways wrought chaos on American politics, but that seems only to have emboldened them to dig deeper to try to get their way in the next election. While some politicians and consultants privately grumble about the impact on the process, many more are queuing up to try to tap into the cash flow. The big-money game is only just getting started. This is the story of that game—how it came to be, the donors who underwrite it, the consultants and politicians who play it—and how it’s changing American politics.

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*Obama’s remarks were detailed to me by a source familiar with the event.

CHAPTER 1

The Billionaires’ Club

It was 105 degrees on a late April afternoon in the California desert town of Indian Wells. A blazing sun was beating down on the manicured grounds of the Renaissance Esmeralda Resort. A contingent of several dozen guests trickled into the hotel from the broiling outdoors wearing slacks and long sleeves, the women in silk blouses, the men sweating under sport coats. They were older and almost entirely white, and they had that well-kempt look that only privilege can bring. It was clear they were all together, both because they wore small black tags engraved only with their names and because they stuck out conspicuously from another set of guests who were about a third their age and were toned, tanned, tattooed, and quite fond of the poolside bar.

The boozier crowd was in town for the spring 2013 Stagecoach country music festival. The more groomed group had been invited by the billionaire industrialists Charles and David Koch to attend the latest in a running series of secretive political gatherings of the big-money conservative elite. Since 2003, twice a year the Koch brothers have brought together some of the top Republican politicians in the country, leading political operatives, and a hundred or more of the party’s most generous donors for closed-door “seminars” on how, as an invitation to Indian Wells put it, “to advance a plan to defend our free-enterprise system.” I had decided to travel to the California desert to try to get as close as I could to some of the most important—but least known—donors and operatives in politics. My aim was to get a sense of whether the Kochs and their donors were discouraged by the 2012 election six months earlier. After all, their political network had spent an estimated $400 million—an astounding and historic sum—in the run-up to Election Day, mostly beating up on President Barack Obama and his Democratic allies in Congress. Yet Obama had won handily and the Democrats gained seats in Congress.

But the election seemed not to be weighing on the Koch guests congregating in the hotel’s eight-story atrium lobby before the seminar’s opening dinner. One after another they made their way down a grand, curved double staircase built of tropical African hardwood, as if arriving for their coronation into politics’ most elite ranks. A few hours later, with the Stagecoach posse mostly off-site, the Koch invitees had the run of the place. Some rimmed the lobby bar, while others gathered in a private lounge. Hotel and Koch security roamed the lobby anxiously and stood sentry by the double glass doors to the lounge, talking through earpieces and watching over their prized guests. State troopers buzzed about—a sure sign that governors were present. I tried my best to blend in, pulling up a seat at the bar next to a middle-aged fellow with the creased tan skin and shaggy blond hair of an aging beach bum. He was not, in my best estimation, a likely Koch seminar participant. Turns out he was a marketing executive for Toyota, the main sponsor of Stagecoach, and he wasn’t particularly talkative. We watched the end of an NBA playoff game between the Oklahoma City Thunder and Houston Rockets, and I tried to make small talk during breaks in the action while keeping my eyes peeled for any circling big-name Republicans. I feigned disinterest in a conversation that Sen. Ron Johnson of Wisconsin was having with a group of donors as they walked by. Ken Ellegard, an Arizona car dealer and Republican donor, sidled up to the bar next to the Toyota marketing guy and me and ordered a vodka soda with a splash of cranberry. The conservative pundit Erick Erickson pulled up a seat at the far end of the bar and ordered food. Behind us, South Carolina governor Nikki Haley joined a small group at a high-top table near the bar. Nursing a glass of red wine, she held court for an hour about politics and stock car racing.

“That’s the governor of South Carolina,” I informed the Toyota guy in hushed tones, perhaps out of a subconscious desire to enlist an ally in my reconnaissance. I told him he was surrounded by masters of the universe, whose wealth the Koch brothers hoped to tap to reshape American politics, and that I was a reporter hoping to learn about their exclusive world. “The only Koch I know is Coca-Cola,” the Toyota guy said, shaking his head and chuckling (the brothers’ last name is pronounced “Coke.” Turning back to his cabernet, he conceded it was a relief to find out why everyone else was so much better dressed than he.

Not all the Koch summit attendees had followed the business casual dress code for daytime sessions. Billionaire tech entrepreneur Rob Ryan ambled through the Renaissance lobby in a rumpled white polo shirt, wrinkled khakis, and scuffed white sneakers. Rick Sharp, the former chairman of Crocs, Inc. and a regular at Koch seminars, regularly sported the ultra-casual, ultra-comfortable, and ultra-dorky foam clogs manufactured by the company at seminars. The point of the dress code is to suggest the aesthetic of an investors’ conference. And that’s pretty much what the Koch seminars are—political investors’ conferences. Prospective donors sit through jargon-laden presentations and get up close with politicians and operatives in whom they might invest money. The summits are designed to help donors “effectively achieve what we believe to be your policy, political and philanthropic goals,” as an email sent to attendees two months prior by senior Koch aide Kevin Gentry put it.¹ Gentry promised an exclusive opportunity to engage with “several hundred of America’s top business owners and CEOs” to discuss “short-term policy threats in 2013 while building toward free-market gains in 2014 and beyond.”

The seminars are a brilliant way to raise political cash. For politicians and operatives, invitations are coveted. You got the closest thing to an endorsement from Koch World, plus a chance to go fishing in a stocked pond full of some the biggest donors in the land. It is the Kochs’ ability to pool donations from wealthy attendees—rather than just Charles’s and David’s personal fortunes (estimated at $36 billion each in 2013)²—that has put them among the leading forces in the increasingly competitive world of big-money politics. The more cash the Koch political network could raise in Indian Wells, the more influence it would have in setting the course for the then-rudderless Republican Party. Among the attendees at Indian Wells were Sens. Ted Cruz of Texas and Rand Paul of Kentucky and Govs. Bobby Jindal of Louisiana and John Kasich of Ohio, all prospective contenders for the party’s 2016 presidential nomination.

Just like an investor conference, the Indian Wells gathering included presentations from experts on a range of subjects: How to use elaborate databases to mobilize voters. How to craft messages that appeal to young, female, and Hispanic voters (though in Indian Wells those demographics appeared to be represented primarily by the hotel staff). How to recruit and train candidates who adhere to the Kochs’ small-government, anti-regulation philosophy.

Before the Kochs could shape the future of American politics, though, they needed to convince donors that they had learned from the bust that was 2012. That was perhaps the major task at Indian Wells. And it was the one facing all the well-funded operations on the right, from the Republican National Committee (RNC) to the groups powering the anti-establishment tea party to Koch World’s most direct rival for big-money supremacy—the American Crossroads operation, steered by veteran GOP operative Karl Rove.

The Democrats had their own issues. They had nowhere near the big-money network that the conservative side did. Rich liberals like George Soros and Peter Lewis had spent more than $200 million a decade earlier trying to elect John Kerry president, and after that failure, many remained leery about tossing their millions into electoral politics. Democrats were trying to rally the major donors they did have into a cohesive group that could keep the party united post-Obama, or at least avoid the toxic factionalism being fueled by deep-pocketed conservative groups. It wasn’t going to be easy. Lone-wolf liberal billionaires such as Michael Bloomberg and Tom Steyer were signaling a willingness to challenge the Democratic Party and its candidates on tricky issues like gun control and energy production. Some of the left’s most influential leaders were trying to head off deeper divisions by uniting the deepest Democratic pockets behind Hillary Clinton, but several major donors were bristling at the idea that Hillary represented the future of the party. They were signaling willingness to invest serious cash to boost a more progressive alternative to carry the party’s banner in 2016—and were actively looking for such a candidate.

The big-money jockeying on both sides would go a long way toward determining the shape of American politics for years to come. It was a striking departure from recent political history. A few dozen rich donors were now helping set the course of the two major political parties, challenging the power of elected and appointed party leaders who for decades had ruled politics with an iron grip. It used to be that if the party thought a particular politician would be a good soldier for them in Washington, they could use their recruiting, fund-raising, and networking infrastructure to propel that person to victory, if not in every case, then in many. Now, all it took to throw that into disarray was one affluent activist with a favorite candidate different from the party’s. Things could really get messy if multiple wealthy partisans had different ideas about the best candidate.

The historic conservative big-money spending spree in the 2012 election and its aftermath provided the first real glimpse of the chaos that this new reality could bring. Yet none of the participants wanted to take the blame, since it would play into the hands of their rivals. If donors decided the Koch operation had squandered their cash in 2012, it could mean more money in 2014 for Rove’s operation—or vice versa. Rove, who made his name as former president George W. Bush’s political guru, had emerged in the new world as sort of the shadow boss of the business-backed GOP establishment. That put him at odds with an increasingly influential cluster of fiscal hard-liner groups eager to raid his donor base, as well as with some parts of the Koch operation, which had come to represent the strain of uncompromising fiscal conservatism that spurred the anti-establishment tea party movement to major wins in the 2010 midterm election. The Kochs’ political team had entered into a tenuous collaboration with Rove’s Crossroads network in 2010 and again in 2012. But Rove had not attended any recent Koch summits, and the distrust between the two camps ran deep.³ Some in Koch World viewed Rove as representative of a philosophically compromised brand of pocket-padding big-government conservatism, while Rove’s allies regarded the Kochs as uncooperative ideologues willing to sacrifice the good in futile pursuit of the perfect. The tentative alliance was showing signs of fraying after 2012, when Rove’s operation suggested that tea party groups and candidates were hurting the GOP. With so much money at stake and so many fingers pointing following the 2012 disaster, the rivalry had never been fiercer.