The bill might go away; the executioner might take away the guillotine for a time. But it will return. The bill will reemerge, and the money will be extorted again by both sides. Sometimes bills only finally pass after the donors have been wrung dry.
Solving problems and settling issues is good lawmaking, but it’s not lucrative. It is gridlock, confusion, and rehashing fights that create streams of income—like an annuity—for the Permanent Political Class.
This sort of extortion is illegal if we practice it in our private lives. Threatening to harm someone if he or she refuses to fork over cash is classic extortion. Twenty years ago, several American cities were plagued by stoplight windshield washers called “squeegee men.” Their approach was simple: They would approach your car at a stoplight with a washcloth or a squeegee in one hand, then begin wiping the windshield, expecting payment from you. And if you refused? The threat went unstated: Would the squeegee man run a key along your exterior to ruin your paint job? Smash your window? Needless to say, the squeegee men usually got paid.
This sort of street-level extortion was not tolerated. New York City and other municipalities cracked down. Squeegee men were arrested for jaywalking or other crimes. New York mayor Rudy Giuliani argued that this sort of behavior created a hostile environment. (Studies at the time showed that women drivers felt particularly threatened.) Even in Canada, the city of Toronto outlawed the practice under a “safe streets law.”
But as we will see, for government officials, this sort of extortive behavior is okay. Instead of standing on a street corner with a squeegee and a scowl, these extorters wear nice suits, speak eloquently, and know how to present themselves in front of a television camera. They dismiss their extortion as “just politics,” similar to how some defenders of the squeegee men argued that they were just trying to make a living. But in Washington the extortionists do considerably more damage and make far more from their extortion racket than the squeegee men ever could.
The Permanent Political Class operates far less like Jimmy Stewart in Mr. Smith Goes to Washington than like the organized crime lords in The Sopranos or The Godfather. I’m not arguing that politicians are criminals (however tempting that argument might be for some people). Indeed, I’m going to argue that they practice an effective and lucrative form of “legal extortion.” But don’t try this at home. Because of the ways in which American laws are written, politicians and bureaucrats are able to employ extortion techniques that would send the rest of us to prison. Likewise, lawmakers have written the laws in such a way that they can sell their votes—and can do so legally.
In the classic mob film The Godfather, Michael Corleone, the Godfather’s son who becomes the Boss, recalls a disputed agreement. “Luca Brasi held a gun to his head—and my father assured him that either his brains or his signature would be on the contract.” Members of the Permanent Political Class, of course, don’t threaten physical violence. But they do extract their money by threatening a sort of “financial violence” to those they extort.
The Chicago Mob (often called “the Outfit”) believed that the best way to extort people was to “throw fear” at them.21 In Washington, politicians can throw fear at individuals in a lot of different ways.
If you are a politician, the key is linking what you do in your official duties to a sophisticated fund-raising apparatus. Washington politicians have direct, detailed, and regular communication between their congressional staffers—who write, analyze, and assess bills, as well as perform constituent services—and their congressional fund-raising teams. This allows politicians and their fund-raisers to target those who might be vulnerable to political extortion. Sometimes you have to wonder: who is more important, the chief of staff or the chief fund-raiser?
Even a minor request can become an opportunity to extort. In August 2012, for example, Congressman Tim Bishop of New York squeezed a donation out of a constituent who needed help getting a permit. Eric Semler wanted to celebrate his son’s bar mitzvah with a fireworks display near his house, but he ran into local resistance. Semler contacted Bishop’s office. But before anyone did anything to help him, Semler received a request from the congressman’s campaign staff seeking $10,000 in campaign contributions. The congressman’s daughter wrote to Semler, “Our Finance Chair, Bob Sillerman suggested to my dad that you were interested in contributing to his campaign and that I should be in touch directly with you.” The request came three days before the party.22 Semler ended up donating $5,000 and said the congressman’s staff solicited him. Bishop said Semler “volunteered the money as a show of thanks.” This is just a minor and inartful form of extortion. But as we will see, far more significant opportunities can be pursued, whether artfully or not. Studies demonstrate that beyond those who have an interest in politics, “many donors are reluctant to give contributions and only do so when asked.”23
There’s a lexicon for modern political extortion. Politicians from some parts of the country refer to “milker bills,” which are intended to “milk” companies and individuals to pass or stop legislation that will benefit or hurt them. Others call them “juicer bills” because they are introduced largely for the purpose of squeezing money out of the target. Some call them “fetcher bills” because they are drafted and introduced to “fetch” lavish and lucrative attention from lobbyists and powerful interests. Whatever you call them, these bills are designed not to make good law, but rather to raise money. The politicians are not necessarily interested in having the bill pass. Often these bills are very narrow in focus and would do little to benefit their constituents.
Indeed, politicians often don’t want these bills to pass because if they do, the opportunity for future extortion is removed. A good milker bill can be introduced repeatedly, milking donors year after year. Laws that do pass, particularly narrowly focused ones, are purposely designed to expire every few years so politicians can then revisit the issue and “juice” the same people. The best kind of all is the “double-milker,” or “double-juicer,” which is designed to play two deep-pocketed industries against one another, setting off a lucrative arms race. Members of Congress can milk each bill multiple times. In addition to their regular campaign committees, they also have leadership political action committees (PACs) and joint fund-raising committees—all of which can grab a teat and squeeze. This money can be funneled to other politicians to buy votes or converted into accounts that enhance a politician’s lifestyle.
Milker bills have a long history in some of our most corrupt cities. The muckraker journalist Lincoln Steffens first wrote about them in his 1904 classic The Shame of the Cities. He described a state of corruption whereby politicians introduced “strike bills” that would affect certain businesses. The bill would be so detrimental to a group of businesses that they would be driven to pay large sums of money to “put the strike bill to sleep.”24 That was politics on a local level, where corruption could more easily remain hidden. Today it happens on an even larger, national scale in Washington, D.C.
The practice is the same, but the payments have become much bigger. The extortion process with a milker bill occurs in steps. A congressman or a senator announces that he is gathering data on a certain subject and doing “prep work” on a particular piece of threatening legislation. He and his cosponsors consult with the Office of Legislative Counsel in the Capitol Building on how the bill should be drafted and reach out to fellow legislators to gather support. So far, so good. They also reach out to lobbyists, most especially former staffers who are now lobbyists, and let them know what is planned. Next, a call is placed to their fund-raisers so they can zero in on lucrative targets.
Then the politicians hold committee hearings and hand out draft versions of the legislation. Along the way, their personal staffs communicate with fund-raising aides, who begin soliciting the targeted companies who stand to win or lose with the bill’s passage. If they play it right, they can extract money and favors from both sides. (Presidents do this too, but instead of using legislation,
they announce that the federal bureaucracy is looking at a new regulation.) The point of the exercise is not necessarily to pass the bill or regulation, but to exert threats of impending legislation to extort benefits.
No explicit verbal threats, or quid pro quo, need be made. The “squeegee men” in New York City would not utter a word about extortion when they began “cleaning” windshields. They didn’t have to. It’s the same in Washington. Politicians and their fund-raisers usually don’t call a donor and state outright that the donor has to give money or do a favor. Politicians and their fund-raisers have plenty of ways to signal their intentions loud and clear. The Permanent Political Class is well aware of the power it possesses. Its members don’t need to shout. As John Hofmeister told me, “These engagements themselves take place with carefully orchestrated behaviors, such that a distant observer would never know what is actually taking place.”25
So what you find is that corporations and wealthy individuals often have to “walk both sides of the street” by giving to both candidates in a congressional race. Or they feel they must give generously to a powerful congressman who faces no challenger. As we will see, members of Congress often have very successful campaign fund-raisers immediately after an election. Conversely, giving to the wrong candidate in a tight race can make a donor a target. One lobbyist recounts how his firm gave money to the loser of an election (a Democrat). After the election, the winner (a Republican) called the lobbyist and asked for a donation that was much larger than the check the lobbyist had cut to the Democrat. Why the difference in amount? “The late train is a hell of a lot more expensive than the early train,” he was told.26
Companies know how the game gets played. When a small defense firm was invited to a congressional wine-tasting fund-raising event for Congressman Jim Moran a couple of years ago, senior executives tried to figure out who had the time to attend. The one executive who could make it was a nondrinker. When he protested, the company’s chief technology officer emailed him: “You don’t have to drink. You just have to give.”27
Timing is everything in comedy—and in extortion.
Americans write checks to politicians for a host of reasons. Sometimes it is out of admiration. Sometimes it is out of fear. To extract the maximum amount of revenues in the shortest period of time, politicians from both sides have discovered the importance of asking for money at just the right time. Along with milker bills, another popular method of extraction used by a congressman in a position of leadership or the chair of a powerful committee is the “tollbooth.” The Speaker of the House or a powerful chairman will erect one on the eve of an important vote. Donations are solicited days before a vote is scheduled to take place. If the tribute offered by those who want the bill to pass is not large enough, the vote will be delayed. Tom DeLay made an art of this practice. As we will see, Speaker of the House John Boehner has perfected it.
Presidents operate in a similar manner. The vast machinery of the executive branch affects every sector of the economy and can be leveraged for donations. President Richard Nixon was a master at this. He regularly mixed the regulatory powers under his control with his fund-raising needs. Dairy farmers who made up the Associated Milk Producers accused the Nixon White House of extorting money from them by threatening antitrust action by the Department of Justice unless they coughed up hundreds of thousands of dollars. Likewise, American Airlines was reportedly shaken down for campaign donations to avoid retaliation by the Civil Aeronautics Board.28
As we will see, the Obama administration is using a similar approach when it comes to extorting and threatening large companies, using legal ambiguities and threats of criminal action to extort campaign contributions or to attempt to intimidate those who are donating to their opponents. It’s an exercise in power that also enriches the political and business allies of senior administration officials at the Department of Justice.
Even bureaucrats can get in this game, though they don’t need campaign funds. Indeed, extortion is a regular part of bureaucratic behavior. Many of the complex rules and regulations that we have to comply with are written by unelected bureaucrats deep in the bowels of government. There are about 170 federal entities that issue regulations. There are about 60 federal departments, agencies, and commissions, with about 240,000 full-time employees who make and enforce them. Americans are awash in regulations that are increasingly complex and difficult for the average person to understand.29
Simple rules are easy to follow. Complex rules require an interpreter. The Depression-era Glass-Steagall Act, which reformed the entire U.S. banking system, was thirty-five pages long. The recent Dodd-Frank financial reform bill is twenty-three times longer—and many of the new rules have not even been written yet. Even savvy Wall Street attorneys say they are befuddled in their efforts to understand what major portions of the law actually mean.
Famed criminal defense attorney and civil libertarian Harvey Silverglate and Harvard law professor Alan Dershowitz believe that many professionals in America—particularly lawyers, accountants, bankers, and doctors—commit on average three felonies a day without knowing it.30
Why is this happening? Because of liberals running rampant? Bureaucrats with bad grammar? Lobbyists in control? The deeper answer can be found by the traditional route: follow the money. The commercial possibilities for bureaucrats explain what’s really happening. There is money to be made in creating complex rules and laws that nobody can understand. Those who write these laws and regulations can leave their posts and charge companies large fees to decipher the very regulations they wrote. This has become a common practice, a form of indirect extortion. You might be breaking a law and not know it, the pitch goes. Pay me money and I will tell you if you are or not. We will see this in the case of Dodd-Frank. And elsewhere: the author of complex Medicare reforms in the Bush White House was able to cash out and charge health care companies $1,000 an hour to interpret the convoluted regulations he wrote.
The United States has relied on English common law to guide our thinking on extortion. Blackstone’s Law Dictionary defines extortion as “an abuse of public justice, which consists in any officer’s unlawfully taking, by colour of his office, from any man, any money or thing of value, that is not due to him, or more than is due, or before it is due.”31 What we often see as bribery is often actually a form of extortion. The two, of course, overlap. If you give money to a politician, it can both (a) get you unfairly favorable treatment and (b) protect you from unfairly negative treatment. Donating to campaigns and hiring lobbyists are essentially forms of paying insurance money. In the annals of case law, courts have conceded that “the line is a fine one” between “an altogether ‘voluntary’ payment” and those who are giving money or favors “in fear of retaliation.”32
Or, as one professor puts it, “the difference between legalized extortion and illegal corruption is largely definitional, the incentives are virtually the same except that the cost of corruption might be punishment or jail.” The simple fact is that bribery and extortion are “not distinctly different.” The same transaction might be both. In fact, corrupt officials who take bribes are often prosecuted under statutes forbidding extortion. As federal judge Richard Posner has put it, the difference between extortion and bribery is difficult to determine because in either case the politician or bureaucrat is active. They are not the passive recipients of money or favors. Cows don’t milk themselves. And oranges don’t juice themselves.33
Because of the way our laws are written, this political extortion is extralegal rather than illegal.34 So long as politicians and bureaucrats don’t explicitly demand a quid pro quo, their actions are not illegal. As long as they don’t spell out precisely what they are selling and demanding what they will get in return, they are fine.
But it’s different for the rest of us. By Congress’s standard, the squeegee men in New York City weren’t committing extortion either. And the Mafia street thug who offers a business “protection” from violent criminals on the street
would also not be guilty of extortion by this definition—so long as there is no explicit quid pro quo. If a threat is only implied, and the mafiosi are subject to Congress’s rules, they can extort to their heart’s content. In the real underworld, there was reportedly a mobster named William “Butch” Petrocelli who was so intimidating that he simply stared at the target. He didn’t need to utter a word. The target knew what he meant—and gave him the extortion money. Perhaps he missed a lucrative calling in politics, where such a skill would not have landed him in jail.35
The great thing for the Permanent Political Class is that they get paid either way. They can get paid for doing something, or they can get paid for not doing something. As they propose legislation that will harm or help certain companies and industries, they are simultaneously calling those affected and soliciting donations, on both sides of the issue. This is a wealth strategy that is unavailable to anyone in America today outside of politics.
Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets Page 2
