Campaigning for Money
The Cost of Money

excerpted from the book

Selling Out

How big corporate money buys elections, rams through legislation,
and betrays our democracy

by Mark Green

Regan Books (HarperCollins) , 2002


Former Senator Bill Bradley, 2000
"Today's political campaigns function as collection agencies for broadcasters. You simply transfer money from contributors to television stations. "

Like the designation "cc" (for "carbon copy") on an e-mail screen, "running for office" is an outdated term. Thanks to today's high-cost races, candidates spend very little time running in the traditional sense of the word-mobilizing voters, communicating ideas, debating opponents, attending public meetings. Instead, candidates fund-raise for office. Their time is dominated by the incessant chore of pleading, cajoling, schmoozing for campaign cash.

Because television is by far the most effective means of reaching potential voters, the candidate who wins the battle of the airwaves usually wins the war at the polls. The only way to assure airwave victory is to outspend-and therefore outraise-your opponent.

... 94 percent of congressional races end in victory for the candidate who outspends his or her opponent.

To get an idea of the scope of this political arms race, consider that in 1972, the year the Federal Election Campaign Act became law, total campaign expenditures by House and Senate candidates was $77 million. Twenty-eight years later, in the 2000 elections, total hard money spending by congressional candidates reported to the Federal Election Commission reached $999 million, an increase of nearly 1200 percent.

... television advertising ... is, without question, the single largest expense item on the typical campaign balance sheet.

A recent Bear Stearns study revealed that "in even-numbered election years, political advertising is now the third biggest category of ads sold on local broadcast television-behind automotive and retail stores, but ahead of movies and fast foods."

According to an analysis of the top seventy-five media markets during the 2000 election by the Alliance for Better Campaigns, political ad sales accounted for $771 million; when the nation's remaining smaller markets are included, that figure would likely cross the $1 billion mark. These figures represent the sales revenues of broadcast television only, not cable, and include hard-money expenditures by candidates as well as soft money expenditures by parties and interest groups.

Candidates are under increasing pressure to buy "paid media" because of the gradual decline I of "free media." Television news programs are covering political campaigns less, as they themselves compete with cable news by airing more "sexy" stories that appeal to hard-to-please viewers. After if-it-bleeds-it-leads coverage of crime, terrorism, and war, plus local features and weather, there's rarely time left for local campaigns*-not to mention that television stations have a market incentive to create a demand for candidate ads by undercovering elections.

Compounding this problem is the fact that most of the debates from the 2000 election were not even televised. A report by the Committee for the Study of the American Electorate found that only 37 percent of debates in ten states were actually aired, with a paltry 18 percent broadcast on a major network affiliate. "For the vast majority of citizens in these states and districts, it was as if these debates never happened," said Curtis Gans, director of the group. "These debates are the only means to cut through the demagogic advertising that dominates campaigns, the dearth of coverage, and the interpretations of journalists."

... the Telecommunications Act of 1996, along with the deregulation fervor of the Federal Communications Commission, has encouraged a concentration of powerful conglomerates in broadcast and newspaper markets, including Disney, AOL Time Warner, News Corporation, General Electric, and the New York Times Company. From the early 1980s to 2000, the number of owners of major media outlets in the United States dropped from about fifty to just six. Less competition produces higher ad rates.

"People don't like them, but they work," believes media consultant McMahon of negative ads. "Repetition is what it takes to make the message stick, and positive ads need a lot more repetition than negative ones. If you show ten advertisements to a focus group-nine positive, one negative-then ask them their impressions, almost without fail they will prefer the positive ads. But in a blind callback two or three days later, they will invariably be able to recite the negative ad and have forgotten the positive ones."

In the past three congressional election cycles, only 88 winners out of 1399 races were outspent, or barely 6 percent. With those odds, an underfunded candidate has as good a shot at lasting a couple rounds in the boxing ring with Lennox Lewis as he does at winning an election. No matter your record, skills, or integrity, odds are you lose if you can't reach the voters.

Consequently, raising money is the number one activity by far of American politics.

Because it's unlawful for members of Congress to use government offices to make fund-raising calls, "you go to the Democratic National Committee headquarters into what they call a clean room," Georgia Senator Zell Miller, an outspoken critic of the process, recalled last year. "You have an aide who's getting somebody on the line and handing you a card or sheet of paper that tells you who this person is, what their main interests are, what their spouse's name is, and what you might be able to extract from them. Then you call them up and act like you're their best buddy and ask, 'How's Mary and the kids?' and 'By the way, how about donating $1000 to my campaign?' I always left that room feeling like a cheap prostitute who'd had a busy day."

So, in midafternoon of an election year, one can see streams of members leaving their government work for the political work of dialing for dollars. West Coast members have it worse: since their constituents are three hours behind Washington, D.C., they feel pressured into using the evenings for phoning.

As special-interest dollars in elections go up by the millions, voter participation goes down. While Israel reliably achieves over 80 percent turnout in its elections for prime minister, and France and the United Kingdom typically turn out about three quarters of their voting-age populations, the United States has not broken 60 percent since 1968. The turnout for American elections is no higher today than it was in the 1930s-with roughly half of eligible voters staying home in presidential elections, and nearly two thirds in congressional elections.

Robert Putnam's much discussed Bowling Alone: The Collapse and Revival of American Community:

* Just 11 percent of eighteen- and nineteen-year-olds eligible to vote for the first time in 1998 actually did so.

* Beyond a 25 percent decline in voting, there has been a 50 percent dip in political involvement (measured by campaign activities) over the last forty years. In 1973, a majority of Americans wrote an article, signed a petition, made a speech, or sent a letter to an elected official; twenty-one years later, most Americans did none of these.

* In 1973, two-thirds of Americans attended at least one organization or club meeting a year; in 1994, the reverse was true. Over the same time span, membership in social and civic organizations fell 16 percent, while active participation in these same groups dropped by 50 percent.

Curtis Gans, Committee for the Study of the American Electorate

... citizens watching six hours a day of TV are left with little time to do much else but work, eat, and sleep; their civic information base is unvaried and limited because it's filtered nearly exclusively through the TV screen.

... since Buckley v. Valeo permits the wealthy to contribute as much to their own campaigns as they like-because the Court reasoned a person can't corrupt himself, never considering how such spending could corrupt the process-the strategy is legal, and often a winning one.

If something doesn't change soon, there will be only three types of people running for and holding office in the future: super-fund-raisers, celebrities, and multimillionaires.

The Energy Industry

The energy industry had few friends more loyal during the 1980s than Senator Bennett Johnston (D-LA), chair of the Senate Energy and Natural Resources Committee. Johnston carefully passed a bill through his committee in March 1989 opening the coastal plain of the Arctic National Wildlife Refuge in Alaska to oil and gas drilling. After years of trying, he finally squeezed the bill out of committee by an 11-8 vote. Then, nine days later, a ship called the Exxon Valdez dumped 10 million gallons of crude oil into the Prince William Sound. This case of colossal bad timing led Johnston to withdraw the proposal, because, he said, it would be "politically foolish" to push it at the time.

That setback notwithstanding, Johnston has had his fair share of success stories on behalf of the industry. In 1986, he succeeded in enacting legislation that favored privately owned utilities over public utilities in federal licensing of hydroelectric power. In 1988, he fought back legislation making contractors at nuclear facilities owned by the Department of Energy (DOE) liable for accidents caused by their own gross negligence.

Looking at a 1954 law that required the DOE to price its enrichment services so that it recovers program costs, the General Accounting Office reported in 1987 that the DOE had not recovered $8.8 billion in the prior year. Two years later, at the behest of the commercial nuclear power industry, Senator Johnston helped propose an initiative to restructure the uranium industry by setting the amount of unrecovered costs at roughly $364 million, a figure approved by the utilities and a break of over $8.4 billion.

Johnston's friendship with energy was not one-sided. While up for reelection in 1984, he received more than $121,000 from energy PACs and at least $84,000 from individuals who worked in the business. In 1988 he earned $8000 in honoraria from General Electric, Chevron, and electric utilities. The year before, he set up his own Pelican PAC, and had it managed by former aides who had become big-energy lobbyists. Funds for the PAC came in large part from individuals working for energy companies. Those helping him raise money for Pelican included Robert Szabo, a electric utilities lobbyist, and Charles McBride, a nuclear utilities lobbyist. Questioned about the propriety of such an arrangement, Johnson answered, "I'm very much playing by the rules.

Johnston was right: for the energy industry, money was and is the heart of the matter. From 1990 through early 2002, the industry invested $140 million in the political system, including $40.6 million in PAC money and $49.1 million in soft money. One instance in which the industry's benevolence paid off was the $5.5 billion Shoreham Nuclear Power Station built by the Long Island Lighting Company (LILCO). Viewed as a safe and economical way to provide 500,000 homes with electricity, the Shoreham plant was originally expected to cost $75 million, but accidents, increased costs, community opposition, and licensing issues ran the total cost to more than 70 times the expected figure. When Shoreham was unable to recoup the billions in added costs, state regulators allowed LILCO to raise its electric rates, and Long Island residents became the highest-paying electricity consumers in the United States-through no fault of their own.

"The industry in large part has been spared by its customers," wrote Deborah Lutterbeck of Common Cause magazine. "Just as LILCO's ratepayers continue to pay for the Shoreham plant, ratepayers across the country are paying for their electric companies' bad investments." Alan Noia, president of New York's Allegheny Power System, estimated in 1995 that consumers had paid $38 billion in excess costs. While the ratepayers paid the price, the electric companies had copped a bargain, giving approximately $ 1 million or so to congressional candidates in the 1993-1994 election cycle and $1.5 million in soft money from 1988 to 1995.

The return on its investment that the energy industry was seeking in the mid-1990s was deregulation, through which the industry hoped to be freed from government requirements that had been forcing them to buy alternative forms of energy or cap the prices they charged. The proponents of deregulation promised smaller bills to consumers, strong stock returns, and stability and reliability. But, as California would later show, consumers don't often benefit from energy laissez-faire. Industry giants do.

When California decided to deregulate its electric utilities in 1996, proponents of the move promised that market competition would drive consumer electric bills down by at least 20 percent. But they have been proven wrong. Because just a few corporations controlled the power plants sold by the California utilities, in the deregulation deal these companies suddenly had an opening to grossly increase electricity rates without fearing the competition-and they did. By charging three times more in 2000 than the year before, the top ten sellers boosted their profits by 54 percent.

In early 2001, eight western governors (half of them Republicans) asked the federal government to put a temporary cap on the region's wholesale electricity prices, citing ballooning costs and low supplies. They were joined by two of the Congress's most conservative Republicans, who sponsored a bill urging the installment of caps. Yet President Bush ignored their calls, despite a manufactured crisis that was exploiting taxpayers and consumers. Why?

One explanation is that ten of Bush's largest contributors in 2000, whose gifts totaled $4.1 million, were energy suppliers who were poised to benefit from such a hands-off policy. Three of the corporations making large profits in California were Texas-based companies that gave $1.5 million to the President's campaign. Another was Reliant, whose board includes James A. Baker III, the former secretary of state who oversaw Team Bush's recount struggle in Florida. Baker's law firm, Baker Botts LLP, which contributed $113,621 to BushCheney in 2000, received $14.5 million for services provided to Reliant in 1999. Electric utilities, which donated $825,000 to the President's inaugural committee, and Reliant, whose CEO, Steve Ledbetter, gave $47,000 to Bush's gubernatorial campaigns in 1994 and 1998, gained enormously by this hands-off policy.

Energy companies did not restrict their influential donations only to federal officials. The 2000 election cycle saw the industry spend over $17 million in contributions and lobbying to state and local energy policy makers in California. Nearly $1 million alone was given to the three state elected officials with the greatest influence over policy: Governor Gray Davis got over $600,000 (though he wasn't even on the ballot that year), while State Senate President Pro Tempore John Burton received over $250,000, and Assembly Speaker Robert Hertzberg $220,000. To cover their bases, investor-owned utilities (IOUs) contributed to every single state legislator but one. "Nobody in the legislature is standing up for what's right because they don't want to give up campaign contributions," complained Harry Snyder, spokesperson for Consumers Union.

While the IOUs had pushed the failed deregulation policies of 1996, they nevertheless were able to influence new policy because of their $4 million in contributions to those in power. In the words of Laura Tyson, dean of the Haas School of Business at UC-Berkeley, "The solution to the policy problem is moving agonizingly slowly because there are several powerful political groups that can block any piece of legislation."

Beyond Enron, the power of corporate contributors to influence energy policy has begun to garner national attention. Vice President Cheney's refusal to release the list of participants on his energy task force and Energy Secretary Spencer Abraham's private meetings with energy executives have already been noted. The Center for Responsive Politics estimates that six of the individuals and groups Abraham met with accounted for nearly $3.3 million in political contributions to Republicans over the prior three years-almost triple what the same group gave Democrats.

One group that was consulted in crafting the energy plan was Exelon, the nation's largest nuclear energy company, whose wish was granted when the administration endorsed its new nuclear reactor. In supporting the so-called pebble-bed reactors, which environmentalists have questioned as vulnerable to terrorist attack, Vice President Cheney explained, "The industry has an interest in this." According to the New York Times, only Exelon, which provided hundreds of thousands of dollars to Republican (and Democratic) campaigns in recent years, has an interest in the reactor. As is typical with these kinds of money-for-favors transfers, Exelon's name is not mentioned in the energy report (the corporation itself conceded its identity to the Times), and the task force's endorsement of the reactor takes up just one small paragraph in the report. But that doesn't make the endorsement less important-just harder for journalists and the public to discover. In 2001, the year preceding the task force's recommendation, Exelon had upped its contributions to the Republican Party to $347,514.

As these revelations were appearing in newspapers across the country, the nuclear energy industry won another massive victory in February 2002. Over the protests of environmental groups, scientists, and the state of Nevada, President Bush approved Secretary Abraham's recommendation to store 77,000 tons of nuclear waste permanently in the Yucca Mountains. The Nuclear Energy Institute-self-described on its Web site as "the policy organization of the nuclear energy and technologies industry"-had donated over $ 18 million to Republicans soft money from 1991 to 2001.

Drugs and Health Care

In an effort to widen their wallets, the health care industry has often resisted measures that would make medicine and health care cheaper and safer for patients. To do so, it has spent millions on campaign contributions, lobbyists, front groups, soft money, and issue ads. One result: the lack of a prescription drug plan for elderly Americans and a health care economy in which our seniors pay more than double what others pay abroad.

Drug companies profit from their patents. If a company has a monopoly patent on a drug, other companies cannot market it. So cheaper competitors or generic alternatives are not available. For example, many drug companies are capable of manufacturing the antibiotic known as Cipro, which became well known during the anthrax scare in the fall of 2001. But by law only Bayer can sell it, because the giant firm holds the monopoly patent on the drug.

But after September 11, Bayer pushed for legislation (S. 838) that would reauthorize a 1997 law that extended by six months the patents of many of the most expensive drugs on the market, including Cipro. All drug companies would have to do to get their monopoly patents lengthened was to test the drugs for safety (and effectiveness) in children. But pediatric testing is something that many groups, such as Public Citizen and the Elizabeth Glaser Pediatric AIDS Foundation, feel should be required as a condition of FDA drug approval anyway.

The pediatric patent extension has long been a sticking point in drug industry legislative negotiations. Companies have often refused to test their products for safety and efficacy in children, because the children's market for prescription drugs is smaller and therefore less lucrative than the adult market. "Because of the small market for pediatric formulations, a pharmaceutical manufacturer has no incentive to invest resources in such trials," admitted the drug industry's trade association, the Pharmaceutical Research and Manufacturers of America. This would explain why some children's advocacy and health groups agreed to what was essentially a bribe-they needed to give the drug companies the incentive to perform the pediatric tests. "This is an incentive that has become such a windfall for blockbuster drugs," said Paul Glaser, chairman of the Elizabeth Glaser Pediatric AIDS Foundation. "However, as I see it, that is all part and parcel of buying into our system that stresses money and power and where there is very little room for mandating a moral imperative. There is no choice."

Why is pediatric testing so important? Children react differently to medicines than adults do, and without information on how children will respond to a given medication, pediatricians have to guess when prescribing drugs how a child might react.

According to a study by the Tufts Center for the Study of Drug Development, pediatric tests cost an average of $3.87 million per drug. Since the FDA has requested tests on 188 drugs, the total cost to the industry would be about $700 million. By contrast, the FDA estimates that patent extensions on the drugs are worth at least forty times that number, or $29.6 billion, in added sales for the companies holding the patents. Beyond $592 million in additional profits each year for drug companies, the added costs to consumers will be over twenty times that, or $14 billion, because consumers will lack access to cheaper generic alternatives.

Presumably, convincing members of Congress to support a plan that drives drug prices up would be a tough sell. Consequently, drug companies are very prolific donors to assure that their access to policy makers can make them more susceptible to industry arguments.

In all, the drug industry spent $262 million on lobbying, campaign contributions, and issue ads in 1999-2000, more than any other industry. The Democratic sponsor of the Cipro bill, Representative Anna Eshoo (D-CA), received $131,544 in drug industry campaign contributions from the time she was elected in 1992 until she sponsored the bill. All this generosity worked to yield the desired result: subcommittee members who supported the patent extension received 250 percent more in campaign contributions from the industry ($64,691 on average since 1990) than did those voting to reduce it ($25,492). After initially standing by Bayer-even though it would take the company twenty months to meet the government's demand for the drug, while generics could jointly reach the goal in three-Health and Human Services Secretary Tommy Thompson eventually succumbed to public criticism and forced the company to reduce its price for Cipro.

Claritin is another example of what Public Citizen's Frank Clemente calls the industry's "uncontrolled drive for monopoly patent extensions and sky-high profits." Drug manufacturer Schering-Plough's legislative vehicles, S. 1172 and H.R. 1598, would allow three-year patent extensions for this. multibillion-dollar allergy drug and six other "pipeline" drugs (so named because they were in the FDA review process as the 1984 Hatch-Waxman Act, which made it easier for generic manufacturers to market copies of brand-name drugs, became law). This extension would cost Claritin consumers an extra $7.3 billion, and extensions for all seven drugs would cost a cumulative $ 11 billion. After Schering-Plough began its drive in 1996 to persuade Congress to extend the company's patent on Claritin, it significantly increased its soft money contributions and lobbying expenditures, giving nearly $1 million in soft money to Democratic and Republican party committees. The company gave 4.5 times more in 1999 than it did during the previous two election cycles.

New Jersey Senator Robert Torricelli, who received the greatest amount of contributions from the corporation's PAC and executives ($31,050), became a major supporter of the Claritin patent extension bill. Orrin Hatch (R-UT), then the Senate Judiciary Committee chairman and its second-highest recipient of Schering-Plough PAC and executive contributions ($16,000), was treated to the company's corporate jet on multiple occasions in July and August of 1999, within days of speaking in support of the legislation at a committee hearing.

One legislative director for a midwestern congressman explained how drug industry lobbyists try to capture legislators. "What happens on a day-to-day scale is [that] lobbyist organizations hold fund-raisers, get the ear of the Congress member, and the member is beholden to them. And then, when there's legislation that affects the lobbying group, they call and make their opinions known." She acknowledges that "a good member is open to hearing but not accepting verbatim. But members not in leadership positions-and thus not guaranteed to continue getting industry money-have ethically difficult decisions to make."

One "ethically difficult decision" was keeping Medicare from providing coverage for prescription drugs, leaving 13 million Americans under Medicare to pay top retail prices for their prescriptions. Studies show that consumers without prescription drug coverage are charged retail prices double the amount manufacturers charge their most favored customers. To maintain this lucrative status quo, the industry spent approximately $230 million in the 2000 election cycle on lobbying, campaign contributions, and issue ads to block Democratic-backed legislation that would provide such coverage.

The industry's spending included $170 million for lobbying, almost $15 million in direct campaign contributions, at least $35 million in campaign ads (produced by a front group benignly called Citizens for Better Medicare, which is really run by the industry), and $ 10 million funneled to the U.S. Chamber of Commerce for pro-drug industry issue ads. Such spending was required, industry lobbyists believed, because polls showed expensive prescription drugs to be an issue paramount to voters.

So far the investment has paid a healthy dividend, for the industry but not seniors: the industry's push has kept Congress from providing prescription drug coverage through Medicare. And it keeps coming: the constituency that gave the most $250,000 donations to President Bush's record-setting $30 million fund-raiser in June 2002 was the drug industry.

Selling Out

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