When you are 21, you will receive what now seems like a large sum of money. It will be yours to do what you will. It may be a blessing or a curse. You can use it as a valuable tool for accomplishment or you can squander it foolishly. If you choose to let this money destroy your initiative and independence, then it will be a curse to you and my action in giving it to you will have been a mistake. I should regret very much to have you miss the glorious feeling of accomplishment and I know you are not going to let me down. Remember that often adversity is a blessing in disguise and certainly the greatest character builder. Be kind and generous to one another and to your mother.
In his telling, he was almost feverishly bent on finding some overarching system of political theory to bridge his father’s emotional anti-Communism with his own more analytical approach to the world. He also wanted to merge his thinking about business and his interests in engineering and mathematics. “I spent the next two years almost like a hermit, surrounded by books.” Visitors to his apartment recall him littering almost every surface with abstruse economic and political texts. He later explained that having learned that “there are certain laws that govern the natural world,” he was trying to discover “if the same isn’t true for the societal world.”
With Charles as the undisputed chairman and CEO, Koch Industries expanded rapidly. Roger Altman, who heads the investment-banking firm Evercore, described the company’s performance as “beyond phenomenal.” He added, “I’d love to know how they do it.” Much of the credit went to Charles, who won a reputation as brilliant, detail-oriented, metrics-driven manager. He was such a tough negotiator, one associate joked, that “in a fifty-fifty deal, he takes the hyphen.”
In Coppin’s view, it was already clear by this point, at the end of the 1970s, that Charles “was not going to be satisfied with being the Engels or even the Marx of the libertarian revolution. He wanted to be the Lenin.”
According to Doherty’s history, the Kochs came to regard elected politicians as merely “actors playing out a script.” Instead of wasting more time, a confidant of the Kochs’ told Doherty, the brothers now wanted to “supply the themes and the words for the scripts.” In order to alter the direction of America, they realized they would have to “influence the areas where policy ideas percolate from: academia and think tanks.”
Soon after his father died, his mother set up two charitable trusts of $50M each. The beneficiaries were Scaife and his sister. Like the Koch family, the Scaifes designed the trusts so that all net income had to be donated to nonprofit charities for the next twenty years. After that, the $50M principal could pass to each of the Scaife offspring fee from inheritance taxes. In other words, two decades fo philanthropy was the price for a tax-free inheritance. As Scaife wrote of the setup, “Isn’t it grand how tax law get written?”
One attractive solution for enormously wealthy families like the Scaifes and the Kochs was to donate to their own private philanthropic foundations. By doing so, they could get the tax deductions and still keep control of how charitable funds were spent.
The new, hyper-partisan think tanks had impact far beyond Washington. They introduced doubt into areas of settled academic and scientific scholarship, undermined genuinely unbiased experts, and gave politicians a menu of conflicting statistics and arguments from which to choose. The benefit was a far more pluralistic intellectual climate, beyond liberal orthodoxy. The hazard, however, was that partisan shills would create “balance” based on fraudulent research and deceive the public about pressing issues in which their sponsors had financial interests.
The Ivy League was no more hospitable to Scaife and his ilk than it had been the day he was expelled. Scaife claimed he was thankful to have been spared the liberal indoctrination. “I was lucky. Higher education did not push me left, and I’ve never regretted it,” he wrote in his memoir. “I’d say the main reason that rich people feel guilty is that the schools teach them they should.”
His foundation aimed at the country’s most elite schools, the Ivy League and its peers, cognizant that these schools were the incubators of those who would hold future power. If these young cadres could be trained to think more like him, then he and other donors could help secure the country’s political future. It was an attempted takeover, but instead of waging it with bandoliers and rifles, he chose money as his weapon.
He wanted to be the bribe at every wedding, and the corpse at every funeral.
By the late 1980s, Fink had supplanted Cato’s Ed Crane as Charles Koch’s main political lieutenant. Unlike Crane, who was interested in libertarian ideas but regarded it as “creepy when you have to deal with politicians,” Fink was fascinated by the nuts and bolts of power. After studying the Kochs’ political problems for six months, he drew up a practical blueprint, ostensibly inspired by Hayek’s model of production, that impressed Charles by going beyond where his own 1976 paper on the subject had left off. Called “The Structure of Social Change,” it approached the manufacture of political change like any other product. As Fink later described it in a talk, it laid out a three-phase takeover of American politics. The first phase required an “investment” in intellectuals whose ideas would serve as the “raw products.” The second required an investment in think tanks that would turn the ideas into marketable policies. And the third phase required the subsidization of “citizens” groups that would, along with “special interests,” pressure elected officials to implement the policies. It was in essence a libertarian production line, waiting only to be bought, assembled, and switched on.
Fink’s plan was tailor-made for Charles Koch, who deeply admired Hayek and approached both business and politics with the systematic mind-set of an engineer. While some might find it disturbing to regard the democratic process as a factory, Charles soon adopted the approach as his own. As he told Brian Doherty, the libertarian writer, “To bring about social change requires a strategy that is vertically and horizontally integrated.” It must span, he said, from “idea creation to policy development to education to grassroots organizations to lobbying to political action.”
“Perhaps he has confused making money with freedom,” he said of Charles. One conservative who worked closely with the Kochs but declined to be identified in order not to inflame the relationship went so far as to call their tax-exempt giving “a shell game.” He contended they merely saw philanthropy as preferable to paying taxes. “People say, ‘Wow — they’re so generous!’” he marveled. “It’s just the best available option for them. If they didn’t give it to their causes, they would have to give it to the government. At least this way they control how it’s spent.” He noted that by blending their corporate and charitable work, “they draw some pretty fine lines. It’s really another form of lobbying.” But he conceded, “They’ve built a pretty amazing machine.”
In essence, Charles believed that businesses’ corporate culture should replicate the competitiveness of the free market. Employees at almost every level of his company were compensated on the basis of the value they created, competing with each other for bonuses, which constituted large portions of their annual pay.
Cap and trade was a market-based solution requiring permits for carbon emissions. By choosing a tested, moderate, bipartisan approach, the Obama administration and many environmentalists assumed a deal would be winnable.
“What we didn’t take into account,” Mann later noted, “was the ferociousness of the moneyed interests and the politicians doing their bidding. We are talking about a direct challenge to the most powerful industry that has ever existed on the face of the earth. There’s no depth to which they’re unwilling to sink to challenge anything threatening their interests even if it’s science and the scientists involved in it.”
“Spending edge is the only thing that gives a Republican a chance to compete.” He had once opened a college class by writing on the blackboard the three ingredients that he felt were necessary to build a political party: “Money, money, money.” In a Senate debate on proposed campaign-finance restrictions, McConnell reportedly told colleagues, “If we stop this thing, we can control the institution for the next 20 years.”
As tensions built in the increasingly calamitous debt ceiling stalemate, two sources say, Boehner traveled to New York to personally beseech David Koch’s help. One former adviser to the Koch family says that “Boehner begged David to ‘call off the dogs!’ He pointed out that if the country defaulted, David’s own investments would tank.” A spokeswoman for Boehner confirmed the visit but insisted, “Anyone who knows Speaker Boehner knows he doesn’t beg.” But the spectacle of the Speaker of the House, who was among the most powerful elected officials in the country, third in line in the order of the presidential succession, traveling to the Manhattan office of a billionaire businessman to ask for his help in an internecine congressional fight captures just how far the Republican Party’s fulcrum of power had shifted toward the outside donors by 2011.
Obama denounced the “breathtaking greed” that had led to the housing market’s collapse, as well as the Republican Party’s “you’re-on-your-own economics.” He also had some stinging words for big money’s influence on politics. “Inequality distorts our democracy,” he warned. “It gives an outsized voice to the few who can afford high-priced lobbyist and unlimited campaign contributions, and it runs the risk of selling our democracy to the highest bidder.”
The words were ringing. The audience cheered. The problem, though, was that no matter how keenly Obama wanted to address economic inequality, he was going to have to turn to his own party’s own billionaires and multimillionaires for help. Soon, in fact, Obama would set a record for the number of fund-raisers attended by an incumbent president.
“In previous eras,” Lizza noted, “ideologically extreme minorities could be controlled by party leadership. What’s new about the current House of Representatives is that party discipline has broken down on the Republican side.” Party bosses no longer ruled. Big outside money had failed to buy the 2012 presidential election, but it had nonetheless succeeded in paralyzing the US government.
But the Kochs had reached an important conclusion during their post-2012 autopsy. They decided that the Republican Party’s infrastructure wasn’t worth a damn, and if they wanted it to be done better, they’d have to do it themselves.
It might seem a radical and troubling step for a couple of billionaire businessmen who had never been elected to any office, and had no formal allegiance to anything other than their massive, private multinational company, to decide to supplant one of the country’s two political parties. But in his interview with the Wichita Business Journal, Charles shrugged it off nonchalantly. Asked why he was so involved in politics, he likened himself to the golfer Lee Trevino, who explained his reason for winning tournament by saying, “Well, somebody has got to win them, and it might as well be me.” Charles added, “There doesn’t seem to be any other large company trying to do this, so it might as well be us. Somebody has got to work to save the country.”