“Although nobody agrees with me, I am of the opinion that the only sound countries in the world are Germany, Italy, and Japan, simply because they are all working and working hard,” he wrote in a letter to a friend. Koch added, “The laboring people in those countries are proportionately much better off than they are any place else in the world. When you contrast the state of mind of Germany today with what it was in 1925 you begin to think that perhaps this course of idleness, feeding at the public trough, dependence on government, etc., with which we are afflicted is not permanent and can be overcome.”
Needless to say he had a profound influence on his sons, going so far as to hire an authoritarian German nanny to raise them—which may have a lot to do with who they have become. Like most of today’s Koch donors, Fred Koch absolutely hated paying taxes and in order to avoid inheritance taxes on his estate took full advantage of estate planning schemes, including the establishment of “charitable lead trusts” that required his heirs to donate all income from the inherited capital to charity for 20 years. Many wealthy men did the same, encouraging their heirs to find charitable uses for the income that allowed them to avoid inheritance taxes. Many created private foundations that then donated the money to other non-profit charities.
By the early 1970s the John Birch Society and the conservative movement itself had become sidelined, considered too extreme for American politics. It was an era that saw the anti-war movement grow in popularity and acceptance and it began to attack the corporations behind the Vietnam War, particularly Dow Chemical, the manufacturer of napalm.
In 1971, future Supreme Court Justice Lewis Powell wrote a 5,000 word memo for the U.S. Chamber of Commerce that was a “counterrevolutionary call to arms for corporate America.”
He urged America’s capitalists to wage “guerilla warfare” against those seeking to “insidiously” undermine them. Conservatives must capture public opinion, he argued, by exerting influence over the institutions that shape it, which he identified as academia, the media, the churches, and the courts. He argued that conservatives should control the political debate at its source by demanding “balance” in textbooks, television shows, and news coverage. Donors, he argued, should demand a say in university hiring and curriculum and “press vigorously in all political arenas.” The key to victory, he predicted, was “careful long-range planning and implementation,” backed by a “scale of financing available only through joint effort.”
In the following years Richard Scaife’s foundation, which had been the largest donor to the American Enterprise Institute, donated funds to the new, overtly political Heritage Foundation. Joseph Coors was the first donor to the Heritage Foundation, when it was still called the Analysis and Research Association. Charles Koch started the Cato Institute. The Olin Foundation was a top donor to the American Enterprise Institute. And the beauty of all of these nonprofit think tanks was that the gifts to them could remain private—and tax deductible.
The think tanks changed the public’s perception, and starting in 1973 trust in government began sinking. By the time that Ronald Reagan said, “Government is not the solution to our problem; government is the problem,” most Americans were ready to believe him, so effective had been the work of the conservative movement in response to Powell’s memo.
Using private foundations with their privacy and tax-deductible status, the conservatives moved into education, with the Olin Foundation establishing what became known as a beachhead in America’s law schools. They donated funding to schools for an entirely new approach to jurisprudence that required laws and regulations to be analyzed not just for their fairness, but for their economic impact. Known as Law and Economics, it was even accepted by Harvard, and by 1990 “nearly eighty law schools taught the subject.” In 1982, the Olin Foundation provided start-up funds for the Federalist society.
The Kochs went after their own academic beachhead at George Mason University in Virginia through the Mercatus Center, a “staunchly anti-regulatory center,” according to the Washington Post. They donated $30 million to the school, most of which went to the Center.
After Barack Obama was elected the wealthy conservatives created fake populist movements that appeared to be grassroots but were actually financed by corporate sponsors, adding the term “Astroturf” to politics. FreedomWorks, Americans for Prosperity, and others began to battle the new administration’s efforts to stimulate the economy and bring us back from the edge. Using tax-deductible donations, they were able to market test slogans that they then used to encourage movement members to demand tax cuts for the rich and a roll back of federal regulations on business. The Heritage Foundation paid Premier Networks, which syndicated Rush Limbaugh’s show, $2 million to peddle its ideology.
By the time the Koch donors met in Beaver Creek, Colorado, for their semi-annual conference in 2011, the Roberts Supreme Court had decided the Citizens United case in their favor. Apparently that wasn’t enough:
The Kochs had recently come up with a new and even cleverer way of masking the money. Rather than simply directing the funds through the maze of secretive nonprofit charities and social welfare groups that they had used during the 2010 campaign, they now established a more efficient method. They pooled much of the cash first in a form of nonprofit corporation that the tax code defined as a 501( c)( 6), or a “business league.” The advantage of this umbrella organization, which they named the Association for American Innovation (AAI), was that donations to it could be classified as “membership dues” and to some extent get deducted as business expenses. As with contributions to a 501( c)( 4), the law protected the donors’ anonymity. But as a business league, it fell outside the charitable trust purview of state attorneys general, further safeguarding the secrecy.
They collected $70 million in pledges at that meeting, and after a name change from AAI to Freedom Partners, they raised a$250 million by the end of the tax year.
For more than four decades Charles and David Koch and their assorted allies and fellow travelers have been fighting against taxes and government regulations on business. It is not surprising to learn that many of them have problems with the Internal Revenue Service or the Environmental Protection Agency.
In 2012, according to the EPA’s Toxic Release Inventory database, which documents the toxic and carcinogenic output of eight thousand American companies, Koch Industries was the number one producer of toxic waste in the United States. It generated 950 million pounds of hazardous materials that year. Of this total output, it released 56.8 million pounds into the air, water, and soil, making it the country’s fifth-largest polluter. The company was also among the largest emitters of greenhouse gases in America, spewing over twenty-four million tons of carbon dioxide a year into the atmosphere by 2011, according to the EPA, as much as is typically emitted by five million cars.
Nor is it any surprise that their fossil fuel interests have resulted in a Congress unwilling to even discuss climate change. Or that even though an overwhelming majority of Americans want to expand our social safety net the politicians are still looking at budget cuts instead, all while making sure that tax loopholes for the wealthy remain unclosed.
The Freedom Partners want to cut taxes and regulations only to increase their profits. The Koch network admits as much privately, according to Mayer, but they also know that the public doesn’t really support positions that appear to be “motivated by greed,” so they are looking for a kinder, gentler manner of presenting their goals. They have started talking about “well-being” as a way to re-frame their objectives.
After their huge electoral gains in 2010, the re-election of Barack Obama to a second term in 2012 was a shocker. But the Koch donors, now known as Freedom Partners, learned from their mistakes and pushed forward to big wins in 2014. They have learned a lot about the American electorate over the years and appear poised to apply that knowledge (as well as their $889 million) this year because they still have not won their most desired prize: The White House.
Regardless of whether you support Hillary Clinton or Bernie Sanders, Dark Money is a must read for every Democratic activist. Fortunately, it is a page turner, as Mayer combines the hard cold numbers with the stories of the people involved—and not just the Kochs and their ilk, but the people they have killed with leukemia and with exploding butane gas. There are also the prosecutors they have spied on and the journalists they have attempted to intimidate with false accusations of plagiarism. It seems as though they have no boundaries in what they consider allowable in their pursuit of profit. The purchase of the American government is only another step in that pursuit. They do not want to govern America: They just want to own it.
And we can’t let that happen.