In October, Barbara Boxer and Harry Reid employed something called the nuclear option: putting the bill to a vote in the committee over the objections of Republicans. The bill passed without a single Republican vote. The bill was tainted now, stained as being partisan. Each passing week made it easier for other senators to stand aside and let the bill sink.
When the cap-and-trade bill moved to the Senate floor, it set off a frantic race among senators who sought to shape it, support it, or kill it. During this period, Koch Industries sought to raise the temperature even higher on any senator who considered supporting the bill. To do this, Koch employed a tactic known as the “echo chamber,” of which it had become a master. The echo chamber allowed Koch to amplify its message while hiding its hand.
The strategy originated from the network of think tanks and academic programs that Charles Koch had been building for almost forty years. In 1974, when Charles Koch laid out his strategy for launching a libertarian revolution in the United States, he listed education as the first of four pillars in his strategy.III He had pursued this strategy with great success, building the Cato Institute think tank and academic centers like the Mercatus Center at George Mason University. These efforts had a philosophical, almost noble, feel to them. The stated goal was to fund scholars and big ideas that would slowly move society toward an understanding of Charles Koch’s political vision. By 2009, the educational enterprise had become a network of shell enterprises and hidden funding streams that gave immediate tactical support to Koch Industries’ lobbying goals.
Ideas are the raw material of all legislation. In Washington, DC, there is a surprisingly small congregation of think tanks, policy shops, media outlets, and academic institutions that shape the daily political conversation. Over the decades, Koch Industries became adept at seeding this territory with its own ideas, and its own thinkers, in a way that hid its influence.
The echo chamber tactic began when Koch’s lobbyists would commission and pay for an academic study, without claiming credit for it. That study, seemingly independent of Koch, was then fed into a series of think tanks and foundations that Koch controlled. Finally, the work of those think tanks was weaponized into the raw ammunition of political campaigns. Taken together, it had the effect of making the message from Koch Industries’ lobbying shop seem far louder, and far more popular, than it really was. This, in turn, had a surprisingly strong effect on senators and other lawmakers, who paid close attention to public sentiment.
In 2007, for example, Koch Industries quietly funded the work of a Democratic-leaning think tank called Third Way. The think tank promoted “New Democrat” policies such as those embraced by Bill Clinton: neoliberal policies that sought to combine New Deal goals with free-market methods. Lobbyists at Koch’s office knew that Third Way’s economic study program supported free-trade policies such as NAFTA. Such trade policies were under attack in 2007 because they did not deliver the economic benefits that they had promised to huge swaths of the American population. The textile industry of South Carolina, for example, was decimated by trade agreements, such as NAFTA. This was stoking opposition to such trade agreements among both Democratic and Republican politicians.
Koch Industries supported free-trade agreements and wanted to ensure the passage of future trade deals, while blocking any reversal of existing deals. The possibility of any trade war was dangerous for Koch Industries not just because the company had extensive business holdings around the world. To take one specific but very high-stakes example: Koch’s Pine Bend refinery, still a major profit center for the company, was deeply dependent on oil imports from Canada. Any trade disputes ignited by renegotiating NAFTA could dramatically hurt Koch’s profitability. Koch’s lobbyists knew that they wouldn’t get much of a hearing from Democratic politicians. Very few liberals saw an upside in 2007 in carrying water for Koch. That’s why Koch used Third Way to make its point: liberals listened to Third Way.
The Koch lobbying office directed money to support a Third Way report that was published in November of 2007, entitled “Why Lou Dobbs Is Winning.” Dobbs was a cable television personality who carved out a niche railing against free trade deals that he said harmed the middle class. The Third Way report cast Dobbs as part of a dangerous “neopopulist” movement that threatened to harm America’s future by making the country turn inward. The report did not cite the support from Koch Industries, nor does it appear that Third Way acknowledged Koch’s support anywhere in its publicity materials. The report’s acknowledgments did give thanks to Rob Hall, a lobbyist for Koch’s Invista division, thanking him for “his support in helping us conceive of and design Third Way’s trade project,” without disclosing Koch or Invista’s funding. Third Way was not obligated to disclose its support from Koch Industries in its tax filings, and did not. Koch successfully pushed its view on trade while barely leaving a fingerprint.
In 2009, Koch’s use of the echo chamber was more targeted and better amplified. The operation began at Koch’s lobbying office, where a senior manager directed lobbyists to pay for a third-party economic report that would undermine support for the Senate’s cap-and-trade bill, according to a person familiar with Koch’s political operations.
To produce the report, Koch’s lobbyists selected a reliably conservative economic think tank called the American Council for Capital Formation. The ACCF didn’t hide its free-market leanings, and tax filings showed that it was funded by ExxonMobil and other corporate interests. But Koch Industries took pains to hide its involvements in the report it commissioned in 2009. Koch enticed another lobbying group, called the National Association of Manufacturers, to “sponsor” the report, with the understanding that Koch Industries would pay for it.
The Koch network had funded the ACCF for years, although it disguised its contributions by using the Claude R. Lambe Charitable Foundation, which the Koch family controlled. In 2006, the Lambe Foundation gave ACCF $40,000. It gave $50,000 in 2007. Koch hired the ACCF to produce a study looking at the economic damage that a cap-and-trade bill would cause the US economy. A person familiar with the arrangement said that a study of this kind would cost roughly $100,000. In both 2008 and 2009, the Claude R. Lambe Charitable Foundation gave $100,000 to the ACCF. Then its contribution dropped back to $50,000 in 2010.
The report was released in August of 2009. It carried the kind of dry academic title that conveyed a sense of credibility and seriousness in Washington, DC: Analysis of the Waxman-Markey Bill “The American Clean Energy and Security Act of 2009.” The report’s lead author was a long-time ACCF economist named Margo Thorning.
The study was announced with a press release from the National Association of Manufacturers. The announcement made no mention of Koch Industries’ involvement. Instead, the study appeared to have the backing of a trade group with the interests of a wide range of manufacturing companies at heart.
The study was brutal in its assessment of Waxman-Markey. “Unfortunately, this study confirms that the Waxman-Markey Bill is an ‘anti-jobs, anti-growth’ piece of legislation,” NAM’s executive vice president, Jay Timmons, said in the press release.
The study’s predictions were dire, in part because the ACCF used a set of economic assumptions underlying its analysis that most other studies did not use. The group, for example, predicted that renewable sources of energy would be slower to come online than many analysts predicted, which would leave the United States in an energy crunch. The ACCF estimated that the Waxman-Markey bill would destroy 2.4 million jobs between 2012 and 2030 if it was passed. It estimated that electricity prices would jump 50 percent by 2030, while $3.1 trillion in economic activity would be lost.