Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

  “I came back and said to everyone, hey, we’ve all had a pretty traumatic August here,” he says now. “But I told them, ‘I did fourteen town halls, with eight thousand people, and there was one thing, one thing, that the people from the teabag rebellion to the single-payer people agreed on, and that was ending the antitrust exemption for the insurance industry.’ ”

  That speech drew applause at the House caucus meeting, and from there, with the support of other members like Louise Slaughter, who was writing the manager’s amendment, a real, almost full-blown repeal of McCarran-Ferguson was attached to the bill, and it passed. In other words, an actual repeal of the antitrust exemption went before the full Congress and was approved by democratically elected representatives of the people.

  In the Senate, Leahy pushed for his much weaker amendment throughout the autumn, with the support of Majority Leader Harry Reid, who incidentally had been a cosponsor of an earlier Leahy bill that was much more aggressive in its attempt to repeal the exemption. And after much prodding Reid finally allowed Leahy on December 1 to file the amendment and tack it on to an early version of the Senate health bill that had been voted on over the Thanksgiving holiday. And then …

  “Well, that’s sort of the end of the story,” says Chabot.

  It was the end because somewhere between Reid giving Leahy the okay to file his amendment on December 1 and the Christmas holiday, when the Senate actually voted on the final version of the health care bill, the Leahy amendment was stripped from the whole effort. And since it was known all along that the Senate version of health care was the one that actually mattered, that really meant the antitrust exemption had survived, again.

  What happened? At least three members of Congress I spoke to said that a deal had been cut—that the White House bought the vote of Nebraska senator Ben Nelson, a former CEO of the Central National Insurance Group, by agreeing to drop even a modest cutback of the antitrust exemption. And Nelson is one of the all-time leaders in insurance company largesse—no other industry has given him more money in his career, a total that currently stands at over $1,259,000.

  “Nelson goes way back with the insurance industry,” said one House member. “He was the insurance commissioner for Nebraska, remember. So this was part of his price.”

  Remember also, this wasn’t the only bribe that Nelson extracted for his vote. The Democratic leadership also gave Nelson $100 million and allowed Nebraska to have its Medicaid payments subsidized almost entirely by other states.

  But more importantly, this was a White House deal, a Democratic Party deal all the way. The whole style of Obama’s health care “initiative” was to try to smooth the bill’s passage by neutralizing the opposition of the relevant industries by giving way on key issues. With the health insurance industry, the White House was clearly willing to give way on the antitrust exemption at the outset, in exchange for the health insurance industry not beating up on Obama with an ad blitz, the way they beat up Clinton all those years ago.

  “This was a deal,” says Kucinich. “They promised PhRMA”—the Pharmaceutical Research and Manufacturers of America—“they wouldn’t back reimportation and bulk negotiating for Medicare purchases of drugs. And this is what they gave the health insurance industry. They backed off the antitrust exemption.”

  “The weird thing is, it’s not like they were buying the support of these industries by doing this stuff,” says an aide to one Democratic House member. “They thought they were neutralizing them. They weren’t neutralizing them. They were just surrendering completely as an opening strategy in the long war. It was like that Monty Python movie about the crack suicide squad, that was their way of doing things.”

  DeFazio says he spoke with Obama personally at a Democratic Caucus meeting in early 2010, around the time of Brown’s victory in Massachusetts, and asked him about his position on the antitrust exemption.

  “What he told me,” DeFazio says, “is that he always thought it was ‘weird’ that the insurance industry had this exemption. But what he also said is, he needed his sixty votes.”

  The reason the Democrats pursued the strategy they did was based almost entirely on their perception of the political playing field. This was a party leadership that was not really interested in actually fixing the health care problem; what they were much more concerned with was passing something they could call “health care reform” while at the same time doing it in a way that kept campaign contributions from the insurance and pharmaceutical industries away from the Republicans.

  This was Rahm Emanuel’s political unified field theory: score a monster political win with the electorate and a massive takeaway of campaign funds at the same time, a great interconnected loop of deals that would keep them in office for two terms at the least. And to achieve this, all they had to do was sell out just enough to buy the acquiescence of the relevant businesses.

  That would be a straight business deal, a backroom calculation of the sort the modern Democrats are quite good at. But the other half of the deal, managing the internal dynamics of their own party, that was less predictable, and from the outset it was clearly the problem that troubled the party leadership the most.

  The setup for all of this started when George W. Bush pissed away the stratospheric approval ratings and virtually unlimited political capital of the post-9/11 period in just seven short years of radical incompetence. Bush’s record of reckless spending, bumbling foreign policy disasters, and monstrous tax giveaways to the rich set the stage for the Democrats to seize full control of the state, reducing the Republican Party to a sideshow role in the health care fiasco. Once the Democrats rode Bush’s unpopularity to within striking distance of those filibuster-proof sixty Senate votes, the real obstacle to Obamacare was suddenly not where it was before.

  With impenetrable majorities in both houses, the Democrats now mainly needed to worry not about conquering anti-entitlement sentiment on the right, but about keeping their own troops in line. And in practice the only real ideological opposition along the whole spectrum of Democrats would come from the progressive side, which not only had high hopes for real health care reform but would likely renounce any bill perceived as a giveaway to private industry.

  Thus with Republicans effectively sidelined by their own incompetence and the Clintonian mainstream Democrats likely to be the authors of the bill and hence not opposed to it, the real problem in getting health care passed was always about finding a way to keep the Democratic Party’s left/progressive flank on board with the program. And Barack Obama achieved this in a number of ways, with the first and most important being an old political standby: he lied.

  Toward the end of Obama’s first year in office, when certain pundits and journalists (myself included) began going after him for breaking an alarming number of campaign promises, a small public relations campaign gurgled up in the nation’s editorial pages in response. It was suggested that it’s unreasonable to criticize a politician for breaking campaign promises, apparently because expecting a candidate to avoid lying during an election campaign is unrealistic.

  A White House spokesman even expressed that idea in graphic terms to a New York Times reporter, in response to a question about activists harping on Obama’s broken promises. These critics, he said, “need to take off their pajamas, get dressed, and realize that governing a closely divided country is complicated.”

  But in the case of Barack Obama, complaints about broken promises—particularly with regard to those he made on health care—were, for two key reasons, not just a matter of weepy pajama-wearing teenage idealists failing to grasp how the hard, hard adult world works.

  For one thing, Obama won a furious primary campaign over Hillary Clinton by the slimmest conceivable margin thanks in large part to his successful conquest of the party’s liberal/progressive flank. It’s very safe to say that Barack Obama would not have been enjoying that difficult challenge of governing such a closely divided country if he hadn’t managed two winters ago to convince larg
e numbers of Democratic primary voters in traditionally liberal states like Oregon, Minnesota, and Washington that he was more real than Hillary on domestic policy issues in general, and health care in particular.

  As a reporter who covered Obama on the campaign trail I can report that Barack Obama was at his oratorical best when he was talking about nothing at all, but his second-best subject at the campaign lectern was health care. Candidate Obama was remarkably frank and eloquent about the problems of the current system, and some of his best applause lines came when he went after politicians who talked the talk on health care only to change their minds after election.

  “We are tired of watching as year after year, candidates offer up detailed health care plans with great fanfare and promise, only to see them crushed under the weight of Washington politics, and drug and insurance lobbying, once the campaign is over,” Obama told a campaign audience in Newport News, Virginia, in 2008.

  Lines like that bring out the second important point about Obama’s broken promises: these weren’t just occasional minor fibs. Obama’s campaign deceptions on health care were both incredibly specific and grossly serial in nature, and are suggestive not of an idealistic politician who was forced to change course once reality set in but of one who spearheaded a comprehensive, intentional campaign strategy to buy votes with empty promises.

  In the age of insta-polling and focus groups it is hard to imagine that the Obama campaign did not know exactly what it was doing when it promised on the one hand to support drug reimportation, televise all negotiations on C-SPAN, and push for bulk pharmaceutical purchases for Medicare, and on the other swore it would never tax health care benefits, push for an individual mandate, or support any health care bill that did not have a public option in it. He would completely reverse himself on all those positions and more.

  Obama made a lot of these policy promises sound like they weren’t particularly tough decisions for him, either. My personal favorite was his take on the individual mandate, offered in February 2008 in an interview on CNN. Obama is laughing when he’s asked about mandates. “If a mandate was the solution,” he chuckles, “we could try that to solve homelessness by mandating everybody buy a house.” Roughly a year later, Obama would be ramming a sweeping mandate to buy insurance down the throats of the entire U.S. population.

  Candidate Obama similarly laughed at the notion that reimporting cheap drugs from Canada was unsafe, but when he became president his administration ultimately rejected reimportation over safety issues. His campaign take on taxing “Cadillac” health plans (a major McCain campaign idea) was just as eloquent; candidate Obama was one of the few politicians to grasp that a lot of these so-called Cadillac plans were union benefits that had been negotiated up in exchange for concessions on salary in collective bargaining.

  “John McCain calls these plans ‘Cadillac plans,’ ” Obama said in October 2008. “Now in some cases, it may be that a corporate CEO is getting too good a deal. But what if you’re a line worker making a good American car like the Cadillac? What if you’re one of the steelworkers … and you’ve given up wage increases in exchange for better health care?”

  It wasn’t just the promise, it was the candidate’s nuanced understanding of issues like this, added to a seemingly rare willingness to educate the public about these matters, that impressed voters like me before the election. Obama clearly understood that taxing Cadillac plans would disproportionately punish union members, but then as president he turned around and pushed for exactly that tax as health care moved toward the finish line, eschewing a genuinely progressive millionaire’s tax as an alternative.

  Probably the most cynical reversal of all was Obama’s extremely sudden change of heart when it came to Billy Tauzin, the former Louisiana congressman who was the principal author of the Bush-era prescription drug benefit bill of 2003—a massive giveaway to the pharmaceutical industry that barred the government from negotiating bulk rates for Medicare purchases of drugs. Here is the text of an Obama campaign ad called “Billy” that showed Obama talking to a small group of seniors:

  The pharmaceutical industry wrote into the prescription drug plan that Medicare could not negotiate with drug companies. And you know what, the chairman of the committee who pushed the law through went to work for the pharmaceutical industry making two million dollars a year. Imagine that. That’s an example of the same old game playing in Washington. I don’t want to learn how to play the game better. I want to put an end to the game playing.

  Well, guess what? Billy Tauzin turned out to be one of the very first people Obama invited to the White House, and he became one of his most frequent visitors. Between February 4 and July 22, 2009, Tauzin visited the White House eleven times, an average of once every fifteen days or so, in the process making his notorious deal to pay for a few pro-Obama commercials in exchange for billions in subsidies.

  Rahm Emanuel’s decision to crawl up the ass of Tauzin’s pharmaceutical lobby in the political back room is almost exactly reminiscent of Dick Cheney’s subpoena-proofed relationship with the energy industry.

  In a similar aping of Bush-era corruption, the Obama administration served up an almost exact answer to the Armstrong Williams scandal (in which a conservative pundit was paid $240,000 via a Department of Education grant in exchange for his public promotion of George Bush’s No Child Left Behind Act) by repeatedly citing the work of an MIT economist named Jonathan Gruber in its propagandizing of health care reform. The administration failed to disclose that Gruber, who was extremely enthusiastic about Obamacare all year, had received some $780,000 in taxpayer money via a consulting contract with the Department of Health and Human Services.

  “If this had been George Bush, liberals would have been screaming bloody murder,” says author and activist David Sirota. “But they were silent.”

  Why were they silent? Well, among other things, because the White House carefully disciplined virtually the entire universe of liberal activist groups through regular contact, instruction, and intimidation. One of the chief forums here was the little-publicized meetings of a group called Common Purpose, run by former Dick-Gephardt-aide-turned-lobbyist Erik Smith and held once a week at the Capitol Hilton.

  At these weekly meetings, liberal activist groups like Change to Win, Rock the Vote, and MoveOn would show up and receive guidance—some would say marching orders—from a White House representative, typically former Max Baucus aide and legendary Washington hardass Jim Messina.

  It says a lot that the White House would choose as its liaison to the liberal activist community a former aide to ultraconservative Max Baucus. Messina, incidentally, once authored a gay-baiting attack ad against a Montana state senator who happened to be a former hairdresser (the ad showed the candidate working in a hairdressing salon, massaging a man’s temples, with the voice-over: “Mike Taylor: not the way we do business here in Montana”).

  “[Messina] was a strange choice,” says Mike Lux, who served as the White House’s liaison to progressives during Obama’s transition.

  The operating dynamic here is important to understand. At these meetings the White House representative would sometimes be flanked by important donors, and in any case the White House influence over major funding sources like the Democracy Alliance network was implicitly understood by all.

  “There’s a group of donors in the Democracy Alliance who collectively come together to make investments, and those folks certainly talk regularly with the White House about who the good [activist] groups are,” says one former Obama aide. “That’s one of the reasons why some people are afraid to cross the White House.”

  Again, the White House would often stand literally side by side with the donor. This was even spelled out explicitly in one e-mail circulated to Common Purpose attendees, in which the incipient arrival of Larry Summers deputy Diana Farrell and Assistant Treasury Secretary Michael Barr was paraded alongside news of a “potentially significant” donor:

  All:

  A reminder o
f the Common Purpose meeting on Tuesday afternoon at 3:30, and encouragement to attend.

  We expect that a potentially significant funder … will be at the meeting this week, and that Michael Barr and or Diana Farrell will be there, and available for updates on the full range of issues.

  But the threat here wasn’t always merely implicit. Sometimes it was literally screamed at the attendees—the most famous instance being when Rahm Emanuel himself showed up and roared at group members who were planning to run ads targeting conservative Blue Dog Democrats. He screamed at the members, calling them “fucking retards” and telling them they weren’t going to derail a legislative winning streak Rahm apparently was proud of. “We’re thirteen and zero going into health care,” he yelled. “We’re not going to be thirteen and one!”

  The bizarre tirade exploded by word of mouth within the gossipy Beltway (“I heard about it within five minutes,” says the former Obama aide), yet it somehow managed to avoid appearing in most of the media. One of the few stories was a sanitized Politico version in which Rahm’s actual words were excised in favor of a more general report: “White House chief of staff Rahm Emanuel warned liberal groups this week to stop running ads against Democratic members of Congress.”

  That the direction was coming from Emanuel was hardly surprising, since the health care business seemed to confirm what a lot of DC observers had begun to suspect, which is that the Obama presidency was basically run out of the chief of staff’s office. Emanuel in a short period of time had amassed tremendous power, thanks in large part to certain quirks of Barack Obama’s personality. One former Obama aide compared him to another Democratic president he worked for, Bill Clinton.

  “Clinton and his lifestyle … well, he knew a lot of people, and he actually listened to a lot of people,” he says. “Obama is different. He basically takes his marching orders from Rahm. He doesn’t talk to all sorts of people at four a.m. that Rahm doesn’t know about.”