<http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=IN963107NBB5>
Bush Relies on Corporate Lobbyists to Help Him Push U.S. Agenda
By Kristin Jensen, Jonathan D. Salant and Michael Forsythe
Sept. 23 (Bloomberg) -- On Labor Day, as emergency workers and politicians rushed to Louisiana and Mississippi because Hurricane Katrina had killed hundreds and left thousands of people homeless, Senate Majority Leader Bill Frist talked with his staff and sought counsel from trusted allies about delaying a vote on legislation to repeal the estate tax. Frist's outside advisers: lobbyists.
Dirk Van Dongen, 62-year-old head of the Washington-based National Association of Wholesaler-Distributors, says he was at his weekend home in Manhattan that morning when he received a BlackBerry message from Kyle Simmons, chief of staff for Senate Majority Whip Mitch McConnell.
Van Dongen says he guessed what was in the works. He knew the estate tax repeal vote -- which would financially benefit the wealthiest U.S. citizens -- was scheduled for that week. He also realized the tragedy and politics of the hurricane were changing the agenda in Washington.
``It was increasingly obvious that this was a massive event with cataclysmic impact,'' Van Dongen says. ``It was absolutely obvious to me, irrespective of what was on the Senate's calendar, if it was not related to the disaster, it should be set aside.''
Van Dongen and his group's own head lobbyist, Jade West, spent much of Labor Day contacting other trade association officials, all of whom came to the same conclusion even though they supported repeal of the estate tax: Put off the vote. Van Dongen says he and West passed on that opinion to Frist, 53, a Tennessee Republican, and McConnell, 63, a Republican from Kentucky. That afternoon, Frist announced the vote would be postponed.
The President
Since George W. Bush became president in January 2001, it hasn't been unusual for top-ranking U.S. lawmakers and 59-year-old Bush himself to turn to trade group lobbyists for advice in making legislative decisions. The industry associations have staged successful battles ranging from new laws cutting individual income taxes to reducing tariffs in international trade agreements.
Van Dongen, whose group represents 40,000 member companies from beer distributors to furniture suppliers, is the dean of a bloc of a half dozen U.S. trade groups. He calls it ``the Gang of Six.''
The groups represent companies that employ more than 22 million people and generate at least $5.2 trillion in goods and services, or almost half of U.S. gross domestic product. If the Gang of Six were a country, it would constitute the world's second- biggest economy, eclipsing Japan's $4.7 trillion GDP.
`Very Important'
The Gang of Six has been gaining in power amid an explosion in Washington lobbying. Companies, industry leaders and other interest groups spent a record $2.14 billion to influence legislation and federal policy in 2004, $670 million more than five years earlier, according to PoliticalMoneyLine, a Washington- based company that tracks lobbying spending.
``That coalition was very important,'' says Nick Calio, Bush's former chief liaison to Congress. The group played a critical role in getting Bush's $1.35 trillion individual-tax-cut legislation passed in 2001, he says.
Before Van Dongen's team started working with the White House on the tax-change proposal, passage was uncertain, says Calio, 52, now New York-based Citigroup Inc.'s top lobbyist. ``There were a lot of recalcitrant Democrats and some Republicans.''
In the past, some of these groups have had different goals. A tax break for manufacturers, for example, is of no value to the owner of one restaurant. Now the associations have mapped out a winning strategy by concentrating on issues that benefit all of their members, says Michael Graetz, a Yale University law professor who co-wrote, with Ian Shapiro, the book ``Death by a Thousand Cuts'' (Princeton University Press, 2005) about the groups' lobbying for Bush's 2001 tax-cut plan.
`Stick Together'
``They've learned, particularly during this administration, that they can do better when they stick together and find common cause,'' he says.
The group's influence is even stronger because union membership has fallen in the past decade, says Graetz, 60, a former assistant Treasury secretary under President George H.W. Bush, the current president's father.
The percentage of American workers belonging to labor unions declined to 12.5 percent in 2004 from 20.1 percent in 1983, U.S. Labor Department statistics show.
In July, the International Brotherhood of Teamsters and the Service Employees International Union broke away from the AFL-CIO, the nation's largest labor federation. ``The disintegration of organized labor as a major force in the legislative process often means that there is no counterbalance to their views,'' Graetz says. ``You have an 800-pound gorilla battling no one.''
`Very Conservative'
The Washington-based U.S. Business and Industry Council, which classifies itself as ``very conservative,'' says the White House and the Gang of Six have formed an alliance that is straying from conservative principles such as balancing the U.S. budget and protecting domestic manufacturers.
``We emphatically reject the idea that the only way we can restore our competitiveness is to reduce our level of taxation to Third-World levels,'' says Alan Tonelson, 52, a research fellow at the council, which represents about a thousand manufacturers.
The coziness between the Bush administration and trade groups has opponents such as Steny Hoyer, the No. 2 House Democrat, crying foul. The 66-year-old representative from Maryland says the groups are carrying water for Bush in return for support on pet issues such as limits to class-action lawsuits, and aren't fighting enough for what should be natural issues for companies.
In the past, the Washington-based Business Roundtable, a group of 160 chief executive officers and one of the associations in the Gang of Six, was outspoken about the need to balance the U.S. budget; it's now largely silent, Hoyer says. In 2004, the deficit reached a record $412 billion.
`Outraged'
``If a Democratic administration had pursued the fiscal policies and put the nation in the fiscal posture it's now in, the business community would be outraged and on the ramparts,'' Hoyer says. ``They're getting benefits, but they're also very concerned that if they are perceived to be opposed to the administration's policies, there will be a cost to pay in terms of direct adverse impact on their corporate interests.''
Bill Allison, editor-at-large at the Center for Public Integrity, a Washington group that tracks lobbying, says lobbying by the Gang of Six calls into question whether ordinary U.S. citizens have a role in decisions made in Washington.
``When you have a coalition working together, agreeing on common areas of interest and trying to make policy, the question is, Who is making policy in this country?'' Allison, 40, asks. ``Is it these six trade groups, or is it the elected representatives of the people?''
Money and Reach
In addition to the Business Roundtable and the National Association of Wholesaler-Distributors, the Gang of Six consists of the National Association of Manufacturers, the National Federation of Independent Business, the National Restaurant Association and the U.S. Chamber of Commerce. The independent business federation is based in Nashville, Tennessee; the rest are based in Washington.
The money and reach of the trade groups dwarf what's available to unions and consumer and environmental organizations. That's evident in legislation passed this year, including a law that brings class-action lawsuits to federal courts rather than state courts and a law making it harder to erase debts through bankruptcy, says Frank Clemente, director of Washington-based Public Citizen's Congress Watch, a government watchdog group founded by consumer activist Ralph Nader.
`Against Consumer Interests'
``It's daunting what consumer and public interest groups face,'' Clemente says. ``The big bills that have passed have all been against consumer interests.''
The direction of the Bush administration and the Gang of Six may change because of Hurricane Katrina. Senate Majority Leader Frist was under pressure from the Senate's Democratic leader, Nevada's Harry Reid, who warned that a vote on repealing the federal estate tax -- paid by 178 families in Louisiana in 2003, according to the Internal Revenue Service -- would offend too many Americans.
``It would be a travesty on top of a tragedy,'' Reid said at a Sept. 5 news conference, after thousands of poor families had been left homeless.
Graetz agrees. ``I couldn't imagine Frist going ahead when we've seen a real death tax on the poorest citizens of New Orleans,'' Graetz says. ``I think that Katrina could -- indeed, should -- slow if not stymie the tax-cutting agenda.''
The trade associations played a critical role in July in winning congressional passage of the Central American Free Trade Agreement. Cafta ends most tariffs on more than $33 billion of goods traded between the U.S. and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.
Last-Minute Lobbying
John Engler, 56, president of the National Association of Manufacturers, did last-minute lobbying himself. With the U.S. House of Representatives preparing to vote July 27 on legislation removing trade barriers to Central America, Engler didn't have time to go home after his West Coast flight landed in Washington at 9 p.m.
Engler, a former Michigan governor, had his driver take him straight to the Capitol, says Christopher Wenk, the association's director of trade policy.
Engler immediately began making phone calls and visiting offices of representatives who hadn't decided whether they would support Cafta, Wenk, 29, says. Engler promised Republicans like Robin Hayes of North Carolina and Robert Aderholt of Alabama that he and his group, the nation's largest industrial organization, would help win back angry constituents if they voted in favor of Cafta. They both voted yes, and the legislation passed, 217 to 215.
Election Role
The Gang of Six is also increasingly becoming involved in elections, getting employees of member companies out to vote and campaigning for lawmakers such as South Dakota Senator John Thune, who defeated former Democratic leader Tom Daschle in 2004. In addition, Engler's group supports Bush's first nominee to fill one of two Supreme Court openings.
Engler's group honors lawmakers who support its positions consistently by having local company leaders set up testimonials in their home states. The Chamber of Commerce, which represents 3 million U.S. companies, assigns ratings to legislators based on their voting records and uses them to determine endorsements for elections.
The chamber last year gave Senator Frist a 100 percent rating, while Massachusetts Democratic Senator Ted Kennedy got a rating of 31 percent.
Lobbying for Cafta
At the 2004 Republican National Convention in New York, Chamber of Commerce President Tom Donohue, 67, held a reception on a boat docked on the Hudson River for favored candidates and potential contributors. While lobbying for Cafta, Donohue pledged to give double weight to the vote when calculating the next round of ratings that will help determine election support from his group.
In the case of Cafta, each group played a different role. The Business Roundtable, whose chairman is New York-based Pfizer Inc. CEO Hank McKinnell, 62, was in charge of counting votes and giving updates to other members of the coalition. McKinnell and about 65 other CEOs also met with lawmakers such as Frist and Reid and told them that passage of the agreement was crucial to convincing the rest of the world that the U.S. supports a dismantling of international trade barriers, says John Castellani, president of the roundtable.
Castellani, 54, says his organization brings CEOs to Washington to talk to members of Congress and administration officials. ``We do that regularly, meet with the secretaries of Treasury and Commerce and with the White House economic advisers and staff, because they want to know what's going on in the economy,'' he says.
`Whip List'
For Cafta, coalition members met weekly at the offices of Trade Representative Rob Portman and House Majority Whip Roy Blunt, a Missouri Republican. They reviewed lists of undecided lawmakers and assigned letter-writing and phone campaigns within the districts, says Wenk, who works with Mike Baroody, a top lobbyist at the group.
``There was a whip list of members who were on the fence,'' Wenk says. ``We have manufacturing plants in every congressional district. The point was to get as many people to touch base with members of Congress as possible.''
Van Dongen used a similar model for his Tax Relief Coalition, which helped pass cuts in 2001 and 2003. He kicked it off with a meeting attended by Bush on Feb. 23, 2001, in the Indian Treaty Room of the executive office building adjacent to the White House, Van Dongen says.
Bush and Van Dongen
The president and Van Dongen faced each other on opposite sides of an inlaid-tile nautical compass at the center of the floor, anchoring the meeting for dozens of industry representatives and administration officials such as then Treasury Secretary Paul O'Neill and presidential adviser Karl Rove.
Bush said the tax cuts were needed to give Americans more money to spend, and the company leaders gave their support, signing on to the premise that the tax cuts would go to individuals and not to specific industries, Van Dongen says. Bush gave Van Dongen, who agreed to lead the coalition, the nickname ``Dirkus.''
In May 2003, Bush praised the work of ``my friend Dirk Van Dongen'' in a speech pushing for the tax cuts and singled him out again for thanks a few weeks later when signing the new law. During the fight for the 2001 tax cuts, Van Dongen says he planned lobbying efforts in Room 450 of the Victorian-era Old Executive Office Building.
``Dirk sets up management committees, steering committees,'' says Lee Culpepper, 42, until recently the top lobbyist at the restaurant association, headed by Steven Anderson, and a frequent recipient of Van Dongen's BlackBerry messages. ``He is the preeminent organizer.''
Espresso
One July day this year, Van Dongen discussed that coalition at his favorite eatery, a Connecticut Avenue restaurant called Equinox, which, appropriately, sits on a direct line to the White House two blocks away. Van Dongen is such a regular at the restaurant that the chef appears at his table to offer items other patrons won't see on menus. Van Dongen is partial to frog legs.
Van Dongen sets down his espresso to free his hands for an animated description of the business group's ad hoc committees, giving them Leninist-style names, such as executive secretariats. He's friendly, though without the smiles of colleagues such as Dan Danner, chief lobbyist at the National Federation of Independent Business, and Castellani.
One picture in the wholesalers' 2003 annual report features Van Dongen in a serious talk with Bush; another shows him standing with his fellow association officers, the only person lacking an ear-to-ear grin.
`Similar Objectives'
``Coalitions emerge as a logical organizing mechanism for people who have highly similar or identical objectives,'' Van Dongen explains in language that better befits a business school professor than a lobbyist for beer distributors.
Van Dongen's ties to the president go back decades. He first met Bush when his father was vice president in the 1980s and says he has met with the younger Bush 20 to 25 times since, always in groups.
Van Dongen and other members push for the president's policy goals. In a Dec. 9, 2004, letter to Bush, the Business Roundtable's first point in a list of policy proposals for the president's second term was to reduce the federal deficit.
Yet the group is more active on the president's priorities such as Social Security. Roundtable President Castellani, a former businessman who delights in talking about the small-town politics of his native central New York, argues that the administration and industry groups are united because their concerns largely dovetail, such as cutting taxes and removing barriers to free trade.
Private Accounts
The Gang of Six is now supporting Bush's plan to add private accounts to Social Security. The member groups haven't made much headway against opposition by the Washington-based AARP, the largest lobbying group for the elderly.
Castellani, who is heading the effort, says Social Security wasn't the first entitlement program he would have tried to overhaul. ``We probably would have started with Medicare or Medicaid,'' he says. ``But the president picked Social Security reform. And off we go on Social Security reform.''
Van Dongen says Gang of Six members are prepared to spend years pushing for changes in Social Security. Even so, the groups say there are limits on how far they'll follow Bush. Van Dongen makes clear they'll support Social Security legislation only as long as private accounts remain part of the proposed new law. Before the hurricane, the Gang of Six consistently pushed for passage of the estate tax repeal.
Open Letter
On July 20, Van Dongen gathered the Tax Relief Coalition at the distributors' K Street offices to pen a letter to Frist. ``We are writing to reiterate the coalition's continued strong support for full repeal of the death tax,'' they wrote.
The next day, Frist agreed to schedule a vote on repeal, despite the fact that Senators Jon Kyl, an Arizona Republican, and Max Baucus, a Montana Democrat, were negotiating a compromise that would haven fallen short of full repeal.
The estate tax has wealthy supporters such as Bill Gates Sr., father of Microsoft Corp. founder Bill Gates, the world's richest man. And it affects less than 2 percent of Americans. In 2003, when 2,453,984 people died in the U.S., according to Census Bureau estimates, just 30,627 estate tax returns were deemed taxable by the IRS.
Full repeal would cost the U.S. Treasury $290 billion from 2006 to 2015, according to the Congressional Budget Office. Members of the Gang of Six say they oppose the tax because it hurts small businesses and because they believe it's wrong in principle, serving as a form of double taxation.
Chamber of Commerce
The U.S. Chamber of Commerce made its first entry into presidential politics in 2004, contributing $3 million to an independent pro-Bush political committee, the November Fund, which ran ads saying that trial lawyers hurt the economy by pursuing frivolous lawsuits. The Democratic vice presidential nominee, John Edwards, was a former plaintiffs' attorney.
To help Bush and congressional Republicans, Jack Faris of the National Federation of Independent Business traveled the length of Interstate 75 in western Ohio in the weeks before the November election, telling businessmen to vote early, get three friends to do the same and call another 10 to urge them to vote.
The efforts helped defuse one of the traditional strengths of the unions: getting members out to support Democrats. ``We can't match the resources the other side puts into these campaigns,'' AFL-CIO President John Sweeney says.
Prominent Republican
The National Association of Manufacturers got its own prominent Republican last year when it hired Engler, who in 1990 defeated a Democratic incumbent governor in Michigan partly by railing against rising property taxes.
Engler has moved the manufacturers into new political fights such as judicial confirmations. In August, the group for the first time in its 110-year history endorsed a president's nominee to the U.S. Supreme Court, U.S. Court of Appeals Judge John Roberts, 50, whom Bush picked to serve as chief justice. Engler says his organization's analysis suggests that Roberts won't legislate from the bench, creating new plaintiffs' rights that would hurt companies.
``The vast majority of cases before the federal courts relate to business issues such as contract law, employment law, regulatory issues and property rights,'' Engler says. ``We have an interest in this confirmation, and we intend to participate in the debate.''
Socializing
The Gang of Six members socialize as friends while working together on issues. They attended a February event at Equinox when Chef Todd Gray threw a party for Van Dongen to mark his 500th meal at the restaurant. Danner of the small business group and Baroody of the manufacturers' association have houses within a few blocks of each other in Delaware's Bethany Beach.
Danner is now working on a new coalition to push for the Lawsuit Abuse Reduction Act, which he says is designed to cut down on frivolous lawsuits. He's working with his usual allies, such as Van Dongen and the Chamber of Commerce.
``You do go back to a short list of the same people you know,'' says Danner, settling back in his chair in a conference room off his F Street office. ``You work with them for years, you know them, you like them, you trust them. That's what makes coalitions work.''
For now, the lobbyists' list leaves most Democrats, unions and consumer groups out. Hurricane Katrina has done what Gang of Six political opponents couldn't: delay the groups' agenda.