Ramblings
Allan C. Brownfeld
Allan C. Brownfeld is the author of five books, the latest of which is The Revolution Lobby (Council for Inter-American Security). He has been a staff aide to a U.S. vice president, members of Congress, and the U.S. Senate Internal Security Subcommittee. He is associate editor of The Lincoln Review, and a contributing editor to Human Events, The St. Croix Review, and The Washington Report on Middle East Affairs.
Eric Cantor: New Poster-Boy for the Transition from Congressman to Well-Paid Lobbyist
Rep. Eric Cantor (R-VA), the House Majority Leader, and long-time defender of Wall Street, including bailouts of failed firms with taxpayer money, was defeated by the voters of Virginia's Seventh Congressional District. Rather that continue to fill out his congressional term until January, Cantor abruptly resigned and joined the Manhattan-based global investment bank Moelis & Company as vice chairman and managing director and will serve as a "strategic counsel." He will receive a reported $3.5 million in cash and stock.
"The news that Eric Cantor has taken a job on Wall Street comes as little surprise," says Kevin Broughton, national communications director for the Tea Party Patriots Citizens Fund.
After Dave Brat's upset victory in June, many analysts accused Cantor of paying more attention to Wall Street than to the people of Virginia's Seventh District. He certainly didn't waste any time validating that theory.
Former Rep. Tom Davis (R-VA) was not surprised. He said:
He's got a lot of private-sector friends he has done favors for. So I think it would be easy for him to become Eric Cantor Inc. and make a few million dollars a year.
Cantor's attractiveness to Wall Street has nothing to do with any experience managing large amounts of money. Before his first election as a state legislator in 1991, he practiced law in his family's real-estate development firm in Richmond. As The New York Times pointed out:
What he brings to that world are the connections he built in what is still known, innocently enough, as public service. From his first assignment on the Financial Services Committee, Mr. Cantor courted the favor and donations of Wall Street. He . . . personally eliminated a requirement that hedge funds disclose how they gather market-sensitive intelligence. . . . He has been well-rewarded, raising more than $3 million since 1999 from the securities and investment sector. In the last few years he has been the top congressional recipient of its generosity.
Representing Wall Street and big business, Cantor was perhaps the most persuasive advocate in Congress for the Export-Import Bank, which subsidizes certain large corporations. The Bank will exhaust its charter on Oct. 1. The new House Majority whip, Rep. Steve Scalise (R-LA) opposes renewing the Export Import Bank charter, as does the new majority leader, Rep. Kevin McCarthy (R-CA). The U.S. Chamber of Commerce and the National Association of Manufacturers have mounted an all-out campaign to save the Bank, but without Cantor's influence, they may not succeed.
In Congress, Eric Cantor and others in the leadership showed contempt for any members who challenged the traditional influence of Wall Street, the subsidization of big business, and the bail-out of failed enterprises. Consider their treatment of Rep. Justin Amash (R-MI). Last December, after Amash repeatedly opposed Republican budgets, congressional leaders removed him from the House Budget Committee. At a town-hall meeting in Middleville, Michigan he told those assembled: "I was kicked off the budget committee for wanting to balance the budget."
After law school at the University of Michigan, Amash began to receive daily e-mails from the Mackinac Center, a free market think-tank. "They were always pointing out how Democrats and Republicans in Lansing voted the same way on economic matters," he says.
It seemed like everyone was for industrial policy - targeted tax breaks and subsidies rather than lowering tax rates and letting markets work. I wanted to know if any economic philosophers shared my views. So I entered a few search items into Google and found myself on Hayek's Wikipedia page.
From there he went on to read The Road to Serfdom and other classics.
Sadly, Eric Cantor is far more typical of Congress than Justin Amash. Ideas and the public interest seem to take a back seat to personal advancement and enrichment. And Eric Cantor is hardly alone.
In 2009, then-House Speaker Nancy Pelosi and her husband, Paul, made the first of three purchases of Visa stock. Visa was holding an initial public offering, among the most lucrative ever. The Pelosis were granted early access to the IPO as "special customers" who received their shares at the opening price, $44. They turned a 50 percent profit in two days. Peter Schweitzer, a scholar at the Hoover Institution, points out that the Pelosis got their stocks just two weeks after legislation was introduced in the House that would have allowed merchants to negotiate lower interchange fees with credit card companies. Visa didn't like the bill, and Pelosi kept it bottled up for two years. During that time, the value of her Visa stock jumped 200 percent while the stock market as a whole dropped 15 percent. "Isn't crony capitalism beautiful?" Asks Schweitzer.
Soon after he retired from Congress in 2011, one of the leading liberals in Congress, Rep. William D. Delahunt (D-MA) started his own lobbying firm with an office on the 16th floor of a Boston skyscraper. One of his first clients was a small coastal town that agreed to pay him $15,000 a month for help in developing a wind energy project. While in Congress, Delahunt personally earmarked $1.7 million for the same energy project. According to The New York Times:
Today . . . his firm . . . stands to collect $90,000 or more for six months of work from the town of Hull . . . with 80 percent of it coming from the pot of money he created through a pair of Energy Department grants in his final term in office.
Members of Congress, with safe seats, now seem willing to give them up to become lobbyists and make millions. This is what Senators John Breaux (D-LA) and Trent Lott (R-MS) did. Others, such as Senator Tom Daschle (D-SD) and Rep. Richard Gephardt (D-MO) wait to be defeated before selling their services to various special interests to influence their former colleagues.
In July, former Rep. Howard Berman (D-CA) was hired as a lobbyist by the Motion Picture Association of America (MPAA) whose interests he had long promoted in Congress. The MPAA is led by former Senator Christopher Dodd (D-CT).
Former Republican presidential candidate Newt Gingrich often criticizes big government, but has been happy to be a highly paid lobbyist in support of enlarging government dramatically when out of office - or not seeking it. Conservative columnist Timothy Carney notes that:
When Newt Gingrich says he never lobbied, he's not telling the truth. When he was a paid consultant for the drug industry's lobby group, Gingrich worked hard to persuade Republican congressmen to vote for the Medicare drug subsidy that the industry favored. . . . Newt Gingrich spent the past decade being paid by big businesses to convince conservatives to support the big government policies that would profit his clients.
Congress, for many of its members, seems something quite different from an opportunity to serve the public interest and work for the good of the community. They seem to view it as a farm team for the riches to be earned in the future by persuading their former colleagues to serve the interests of their new masters. Of course, as members of the farm team, players like Eric Cantor were doing their best to impress their future employers with bailouts, subsidies, tax breaks, whatever it took to get in their good graces and qualify for future lucrative employment. It is the rest of us, citizens and taxpayers, who pay for this corruption of our system.
Until Americans understand how this bipartisan political game works, we are unlikely to change it. Republicans and Democrats are co-conspirators in this enterprise. Thus far, we have let them get away with it. And some, like Eric Cantor, are making it pay very nicely.
One Thing Congress Has Managed to Achieve: Legalizing What Always Used to Be Viewed as Corruption
Congress for good reason is held in disrepute by most Americans. The latest Gallup Poll tells us that only 8 percent of Americans think Congress is doing a good job. It is difficult to imagine who these 8 percent might be, other than relatives or employees of those holding office.
But if Congress has no inclination to fulfill its constitutional responsibility when it comes to going to war, or to balance the budget, protect our borders, or do the many other essential tasks which are left undone, it has been successful in one area. Both Republicans and Democrats, in bipartisan cooperation, have done their best to legalize their own conduct that, in many cases, used to be viewed as corruption.
In an important new book, Corruption in America: From Benjamin Franklin's Snuff Box to Citizens United, Professor Zephyr Teachout of Fordham Law School argues that corruption is the most pressing problem our democracy faces. In her view, corruption, broadly understood as placing private interests over the public good in public office, is at the root of what ails American government.
The Framers themselves predicted that corruption would be a constant threat. George Mason warned "if we do not provide against corruption, our government will soon be at an end." In James Madison's notebook from the summer of 1787, the word "corruption" appears fifty-four times. Teachout writes that, "Corruption, influence, and bribery were discussed more often in the convention than factions, violence, or instability."
By corruption the Founders of the country did not mean simply the exchange of cash for a vote, what the Supreme Court in Citizens United came to call "quid pro quo corruption." Teachout reports that the word "corruption" came up hundreds of times in the Constitutional Convention and the ratification debates, yet "only a handful of uses referred to what we might now think of as quid pro quo bribes," constituting "less than one-half of one percent of the times corruption was raised."
The Framers believed that corruption involved using public office for private ends, which was the opposite of public virtue. A republican form of government required that men act as citizens concerned for the public good, not as private, self-interested individuals. The philosopher Baron de Montesquieu, who had great influence on the Founding Fathers, maintained that:
The misfortune of a republic . . . happens when the people are gained by bribery and corruption: in this case they grow indifferent to public affairs, and avarice becomes their predominant passion.
James Madison believed that without civic virtue,
. . . no theoretical checks, no form of government, can render us secure. To suppose that any form of government will secure liberty or happiness without any virtue in the people is a chimerical idea.
Professor David Cole of the Georgetown Law School notes that:
The concern with corruption, broadly conceived, has remained a dominant theme of American law and politics. Indeed, because of these concerns, lobbying itself was treated as illegal for much of the nation's history. This seems inconceivable in today's political culture, in which "K Street" lobbying dominates Washington's political and financial economies alike. But until the 20th century, lobbying was considered contrary to public policy. Some states such as Georgia made it a crime. And even where lobbying was not a crime, courts refused to enforce contracts for lobbying on the ground that such conduct was contrary to public policy.
Consider the 1874 case of Trist v. Child in which the Supreme Court declined to enforce a contract for lobbying. N. P. Trist, an elderly man too frail to travel to Washington, hired a lawyer, Linus Child, to try to persuade Congress to authorize payment of an 18-year-old debt owed to Trist. Trist told Child he would get one quarter of the recovery as his fee. When Child succeeded, however, Trist's son refused payment, and Child sued to recover the fee.
The Supreme Court declined to enforce the contract. Lobbying was contrary to public policy because the lobbyist was paid to advocate not for the public good, but for someone's private interest. It risked corrupting the political process. The Court reasoned that if individuals were allowed to hire lobbyists, soon corporations would be doing so, a practice "every right-minded man would instinctively denounce."
The Court declared:
If any of the great corporations of the country were to hire adventurers who make market of themselves in this way, to procure the passage of a general law with a view to the promotion of their private interests, the moral sense of every right-minded man would instinctively denounce the employer and employed as steeped in corruption, and the employment as infamous.
Now, in 2014, we see a much different picture, in which Republicans and Democrats, self-proclaimed "liberals" and "conservatives," work closely together not to advance the public interest, but to promote their own - and they have made it all legal.
In 1974 only three percent of retiring or defeated members of Congress became lobbyists. Today, that number is 42 percent for members of the House and 50 percent for Senators. In 2010 Senator Evan Bayh (D-IN), after writing in The New York Times about the "corrosive system of campaign financing," joined with Andrew Card, the former Bush chief of staff, in the U.S. Chamber of Commerce to lobby against corporate regulatory reform. After BP's oil spill in the Gulf BP recruited a former top spokesman for Dick Cheney and the Democratic fund-raiser Tony Podesta as lobbyists.
Two of the top three political action committee donors to Democratic Senate Majority Leader Harry Reid and Republican Senate Minority Leader Mitch McConnell are the same: Comcast and AT&T. The former Republican Senate leader Trent Lott and former Democratic House Leader Dick Gephardt are united in lobbying for GE. And members of Congress often go to work, for million dollar salaries for the very industries they were responsible for regulating while in Congress. Former House Majority Leader Eric Cantors regulated banking in Congress, and is now at work on Wall Street. And this clear conflict of interest is legal, because members of Congress, in bipartisan agreement, have made it so.
Trust in our democracy is eroding. In 1964, 29 percent of voters believed that government was "run by a few big interests looking out for themselves." By 2013, that view had grown, with 79 percent feeling that way. In 2006, 59 percent of Americans were convinced that corruption in government was widespread; by 2013, that number had jumped to 79 percent.
Since Congress writes the laws, we have seen members of both parties simply make legal what would ordinarily be viewed as simple corruption. Consider Leadership PACs, which permit politicians to solicit and spend money without the same restrictions they face when using their campaign committees. According to Peter Schweitzer, a fellow at the Hoover Institution of Stanford University, these groups have become slush funds that enable lavish lifestyles while they exist, in theory, to help members of Congress finance their own campaigns and help political allies. He cites such examples as these: Senator Saxby Chambliss (R-GA) presided over a leadership PAC that spent $10,000 on golf at Pebble Beach, nearly $27,000 at Ruth's Chris Steakhouse, and $107,752 at the Breakers resort in Palm Beach, Florida. Senator Roy Blount (R-MO) spent $65,000 at a resort at Kiawah Island, South Carolina. Rep. Charles Rangel (D-NY) used his leadership PAC to spend $64,500 on a painting of himself. Rep. Rosa DeLauro (D-CT) used hers to pay for catered parties at her home several times a month.
Beyond the abuse of money, members of Congress regularly pass laws for the rest of us from which they exempt themselves. In the recent controversy over the Affordable Care Act, Americans learned that congressional staff members were to receive subsidies not available to other Americans, many with lower incomes. Traditionally, Congress has exempted itself from laws and regulations it imposes upon other Americans - from Social Security, to affirmative action, to occupational health and safety rules. Recently, Senator Rand Paul (R-KY) introduced a constitutional amendment stating: "Congress shall make no law applicable to a citizen of the United States that is not equally applicable to Congress."
Much time is spent lamenting the "gridlock" in Congress. But there is bipartisan cooperation between Republicans and Democrats, liberals and conservatives, when it comes to making legal what has historically been viewed as corruption, and which most Americans properly understand to be corruption today. This is something the Founding Fathers feared. Their fears have become our current reality, to the detriment of all, except the favored few who have enriched themselves at the public trough, and cleverly avoid any penalty for doing so by making their self-serving acts perfectly legal. *
