Even as the remarkable wealth of the 400 richest Americans continues its astonishing annual increase – 13 per cent this year – those funding the Presidential campaigns still want more in return for their support.
‘Tis the season of influence, as candidates race toward election day, 6 November 2012, seeking the mother’s milk of politics to get them through the home stretch. It’s a time to reflect on what the big money is seeking for the astounding bets being placed on this year’s campaigns in the wake of the Citizens United case, where the Supreme Court endorsed the disappearance of practical limits on contributions.
One might assume there is no easy, short answer to this question; the high rollers do indeed have a range of interests. No, there is one very short answer. They want more. They’re getting used to it. Those on the new Forbes magazine list of the 400 richest Americans saw their combined net worth increase by 13 per cent since last year. Not bad for tough times.
Consider multinational companies and one lever of influence some contributors covet. It’s a safe bet more than a few would like to damp down the zeal of government investigations, including those of the US Senate.
In a 20 September 2012 hearing, The US Senate Permanent Subcommittee on Investigations focused on tax loopholes allowing US-based multinationals to dodge billions of dollars in taxes by shifting profits to low-tax jurisdictions overseas. According to the subcommittee’s chairman, Senator Carl Levin (D-Michigan), they also use legal loopholes such as transfer pricing to avoid taxes on repatriated income that should be subject to taxation. Billions in US taxes were lost in relation to two major US companies. While not determined to be illegal, Levin considers such manoeuvres as contrary to the intent of US tax policy, and rough on a country in need of revenue.
The Congressional Research Service puts the share of corporate income taxes for federal tax revenue in 2009 at 8.9 per cent, a drop from 32.1 per cent in 1952.
Conversely, payroll taxes as a share of federal tax revenue rose from 9.7 per cent to 40 per cent. These types of loopholes riddle the tax code, and the cumulative impact on US deficits and on the huge sums the US must pay in interest on the national debt are undeniable.
The favours sought by major campaign contributors are often subtle, flying under the radar of most of the citizenry and usually of most media. For example, during this lively election season most eyes are on the races. Little attention has been paid to a recently proposed Senate bill, S 3468, championed by Senators Rob Portman, (R-Ohio); Mark Warner, (D-Virginia); and Susan Collins, (R-Maine). According to the Consumer Federation of America, the arcane bill imposes duplicative and time-consuming requirements on independent agencies to conduct cost-benefit analyses of proposed protections. The targets of such regulations include predatory financial schemes, dangerous consumer products, polluters and anti-competitive practices.
Cost-benefit analysis is already used by these agencies under various laws tailored to them. The proposed bill, the Independent Agency Regulatory Analysis Act of 2012, is heavily backed by the Business Roundtable. It would authorise the President to issue executive orders requiring independent agencies to conduct 13 additional cost-benefit analyses. This is wonderful fodder for legal challenges seeking to delay and derail the activities of agencies including the Consumer Financial Protection Bureau, the Consumer Product Safety Commission the Securities and Exchange Commission, the National Labor Review Board, the Federal Trade Commission, the Environmental Protection Agency, the Federal Reserve Board and many others. Additional political pressures would be brought by requiring the Office of Information and Regulatory Affairs of the Office of Management and Budget to conduct detailed review not just of rules but of significant policies. In other words, it would take the independence out of independent agencies.
Hill insiders note that this bill has the potential to cripple the regulatory reforms from an already fractured and weakened Dodd-Frank finance reform bill, which has so far only managed to implement about 100 hard-fought rules. Anyone doubting the desire to derail agencies pushing oversight of the finance industry has only to consider that Consumer Financial Protection Board chief Richard Cordray was just hauled before a Congressional committee, the 27th Congressional appearance by a member of his young agency. Cordray had to be placed in office via a recess appointment because Republicans refused to confirm an agency head. While he was on the pillory, Republicans called him ‘not a legitimate appointee,’ leaving ‘a big gray legal cloud hanging over [his] agency.’ Funded not by Congressional appropriations but by Federal Reserve fees, Cordray’s budget was called ‘a slush fund of half a billion dollars.’ The desire of Republicans to vaporise the CFPB is not well concealed.
In the oddly coincidental world of Washington, a key Senate staffer shepherding S 3468 hails from one of the law firms at the vanguard of court challenges to financial regulations. So it goes with the revolving door.
Not far down the road from the effort to hamstring independent agencies is the desire to avoid prosecution for misdeeds, as opposed to civil penalty settlements that sound significant but aren’t to the world’s biggest banks. But prosecution remains a recurring concern in the finance sector. Jaws dropped all over town when the Justice Department announced it wasn’t going to pursue Goldman Sachs. There is widespread belief that regulatory capture by the big financial institutions, who are among the major contributors to campaigns, will remain pervasive regardless of which political party is in charge.
Among those expressing disappointment in the lack of robust pursuit of the financial sector’s misdeeds by the Obama Administration is Jeff Connaughton. A former investment banker, political operative and successful lobbyist, Connaughton joined Senator Ted Kaufman as his chief of staff when Kaufman was appointed to fill out the two years remaining in Joe Biden’s Senate term after Biden ascended into the vice-presidency. Kaufman approached his job like one of Eliot Ness’s untouchables, determining not to run for reelection and to let the chips fall where they may. Connaughton, who recently authored the book The Payoff: Why Wall Street Always Wins, warmed to Kaufman’s agenda, including holding Wall Street execs accountable for securities fraud, breaking up too-big-to-fail megabanks and other measures to curb destabilising risk-taking by Wall Street.
‘The Congressional Research Service puts the share of corporate income taxes for federal tax revenue in 2009 at 8.9 per cent, a drop from 32.1 per cent in 1952. Conversely, payroll taxes as a share of federal tax revenue rose from 9.7 per cent to 40 per cent’
In September 2009, over eight months into the Obama Administration, Connaughton joined Kaufman in a meeting with senior Justice Department officials. He walked away feeling that instead of being ‘aggressive, systematic and creative,’ the department’s response to Wall Street’s misdeeds was ‘passive, desultory and decentralized.’ Connaughton believes the multiple task forces that have been announced remain under-staffed and non-threatening. He believes the opportunity to draw bright lines, such as tighter leverage limits sought by Kaufman, were lost, in part due to an opposing alliance of the Obama Treasury Department and Wall Street banks. Among Connaughton’s examples of how the levers of influence work is the difficulty of implementing Paul Volcker’s rule that would ban proprietary trading by banks. Wall Street’s legions sought multiple loopholes and exceptions, and now argue the whole approach should be scrapped because of the complexity they built into it.
Wall Street, which gave President Obama great support during the 2008 campaign, broke overwhelmingly in support of Mitt Romney in 2012, with many bankers expressing displeasure over Obama’s earlier criticism of their crowd. Whether there will be gamblers’ remorse if Obama continues to pull ahead in the swing states, with the cash spigots starting to redirect, remains to be seen. In any case, Connaughton wonders how either party can attack the other as too pro-Wall Street with credibility. If Obama gets rehired in November, many will watch to see if he’ll come out swinging, perhaps with a bit of payback, with tough regulators. Or, will politicians seeking support in 2016 hear the Wall Street sirens’ call, and manage to keep regulators and prosecutors a soft parade.
Connaughton says the Left, including the Occupy movement, and the Right, including the Tea Party, need to understand this is a practical issue they should come together to address. Long periods of financial stability can only be brought by structural reforms, says Connaughton, but the power of the finance sector’s money is keeping that from happening. Connaughton bets that, without more significant reforms, another financial crisis is ensured. The political opportunity for real reforms may have to wait until that calamity.
While most of the big money behind Super PACs came out in early support of Romney and the Republicans, one of the best illustrations of how campaign money works its magic is Jeffrey Katzenberg, CEO of DreamWorks Animation. Katzenberg was a major donor and bundler for President Obama’s 2008 campaign, and a prolific contributor to Democratic candidates. In 2012, his support includes a couple million dollars to Priorities USA, a Super PAC eventually embraced by President Obama. According to Bill Allison of the Sunlight Foundation, two weeks after a February big-ticket fundraiser for President Obama at his home, Katzenberg was a guest at a 14 February luncheon hosted for Xi Jinjing, China’s vice-president, by Vice-President Joe Biden and Secretary of State Hillary Clinton. Depending on how intrigues in China are resolved, Xi is presumed by many to be China’s heir-apparent.
Katzenberg, as he told the Financial Times, sought Xi’s personal approval for a joint venture with three state-owned media firms, toward creating a Chinese studio. There were film-related trade dispute issues before the WTO that Biden was negotiating, consulting with Katzenberg and Robert Iger, CEO for Walt Disney. Long story short: a trade deal emerged that Hollywood could happily live with, and Katzenberg also announced his joint venture, Oriental Dreamworks. Producing films in China, the company isn’t subject to the same quotas US studios face. Katzenberg is well positioned to take advantage of a film market predicted to become the world’s largest box office.
Win-win for Katzenberg, but how many citizens, or competing businesses, could dream of such helpful access outside the sphere of big-money politics?
It’s too early to know all the thinly veiled quid pro quos until some time after the election, says Dale Eisman of Common Cause. But past patterns with contributors can be discerned, and they are often predictive. The big exception, says Melanie Sloan, Executive Director of Citizens for Responsibility and Ethics in Washington, is that so much of the money in this post-Citizens United election is secret and much of it will remain so. She holds out hope that whistleblowers will start surfacing to reveal contributions that can be tied back to legislative action.
Allison notes that special interests tend to favour incumbents, many of whom companies have business with before now. This gives incumbents a huge fundraising advantage. If the incumbents lose, contributors can always give to the winners’ fundraisers later. The rest of government – the agencies and departments –are more cloaked, as the favours asked, and the askers often don’t surface.
One discernible Super Pac impact is boosting broadcasters and other media. Overall, $6bn is predicted to be spent on presidential and congressional campaigns this election. Super Pac ads pay full freight instead of a candidate discount. Is there a conflict of interest when reporting on campaign finance and reform efforts? The National Association of Broadcasters has fought efforts to reveal ad expenditures.
Anything can happen once the big money starts soaking television sets with advertising that amounts to repetitive brainwashing. Ironic, then, that the presidential election may turn on Mitt Romney’s pitch to donors in Boca Raton in which he referred to those dependent on government who think themselves victims, refusing to take responsibility for their lives. In so doing, he appeared to be writing off nearly half of Americans as voting, come hell or highwater for President Obama, – and all captured on video taken on the sly.
Skip Kaltenheuser is a freelance journalist and writer. He can be contacted at email@example.com