Star-Spangled Lobbyists

Rushing to enlist in the war on terrorism, corporate lobbyists are doing their patriotic duty by seeking federal handouts for everything from bison meat to chauffeured limousines.

On Sept. 19, eight days after the terrorist attacks on New York and Washington, Senator Frank Murkowski took to the Senate floor to deny reports that he was trying to affix an amendment containing one of his pet proposals to a fast-moving defense bill. Murkowski, a Republican from Alaska, said he resented any suggestion that he was exploiting a national military emergency to slip through a measure that would open the Arctic National Wildlife Refuge (ANWR) to energy exploration and development. "That is certainly not the case," a plainly agitated Murkowski told his colleagues. "It would be inappropriate and in poor taste."

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Just hours later, however, one of Murkowski's key allies in the Senate did exactly what Murkowski said he would not do. Republican James Inhofe of Oklahoma introduced an amendment-drawn verbatim from an energy bill that Murkowski had written six months earlier-to permit drilling for oil and natural gas in ANWR's environmentally sensitive coastal plain. And two days later, Murkowski's reticence to link ANWR to the events of Sept. 11 had apparently evaporated. "I think we've got an issue here whose time has come," he told reporters. Soon he was couching his pronouncements in the twin themes of antiterrorism and national security. "Mideast oil funds terrorism," he declared. "If there was a terrorist attack on our oil supply, such as an attack on tankers in the Strait of Hormuz, there would be a significant blow to our national security." The ANWR amendment was ultimately removed from the defense appropriations bill, but Murkowski vowed to attach what he now called the "Homeland Energy Security Act" to other legislation.

Murkowski was not the only elected official trying to slip industry-backed items into unrelated emergency measures. In the wake of Sept. 11, scores of Capitol Hill lawmakers, Washington lobbyists, trade associations, and interest groups rushed to repackage their old proposals in national security wrapping. Bald opportunism and the political exploitation of tragedy is nothing new in the nation's capital, but what's happened in the months since the terrorist attacks may well show Washington at its worst. "I think that this was more shameless than anything else I've ever seen in Washington," says Ronald Utt, a senior research fellow at the Heritage Foundation, a conservative Washington think tank.

Television producer Bill Moyers, in a speech to a group of environmental funders, put a more venal cast on the latest lobbying tactics. "It didn't take long for the wartime opportunists-the mercenaries of Washington, the lobbyists, lawyers, and political fundraisers-to crawl out of their offices on K Street to grab what they can for their clients," he said. "In the wake of this awful tragedy wrought by terrorism, they are cashing in."

Consider, for example, the lobbying strategy of the nation's beleaguered steel industry. The smoke had not yet cleared from the wreckage of the World Trade Center when the nation's big steelmakers and their allies in Washington began invoking the terrorist attacks to bolster their arguments for direct subsidies, as well as further restrictions on imports of less-costly foreign steel. "Without steel, we cannot guarantee our national security," said Senator Jay Rockefeller, a Democrat from West Virginia. "Without steel, we cannot build from our tragedy." (Without steel, Rockefeller might have added, the two political parties and their congressional candidates would have been about $2.7 million poorer in the 2000 elections.)

"Absolute baloney," Robert Crandall, a senior fellow at the Brookings Institution, says of the argument that propping up the domestic steel industry is vital to the national security. One or two steel mills, he maintains, could produce all the steel plate needed for shipbuilding and other critical defense industries.

National security arguments were even used to advance a farm-subsidy bill worth $167 billion. Before Sept. 11, the bill was titled the Agriculture Act of 2001. After the terrorist attacks, it was renamed the Farm Security Act of 2001. On Sept. 24, the growers of more than 20 federally subsidized agriculture commodities sent a letter to Capitol Hill lawmakers in which they said that the attacks had "bolstered the argument that food production is vital to the national interest." No doubt their message got through: The producers of these and other commodities had poured more than $58 million into the 2000 elections. On October 5, the measure passed the House by a vote of 291 to 120.

Similar arguments were advanced by the manufacturers of traffic signs, barricades, and other equipment, who gamely recast their perennial plea for more federal highway-safety spending in a national security framework. A spokesman for the 1,800-member American Traffic Safety Services Association said that increased federal spending on highway signs and other traffic-routing devices would help motorists flee cities faster and more safely during a terrorist attack. Rob Dingess, the association's director of government relations, pointed out that the evacuation of many federal facilities following the attack on the Pentagon left the nation's capital in gridlock. "If a second plane had come into that city," Dingess said, "you would almost have had to helicopter people to fight fire or evacuate people."

Then there was the American Bus Association, which represents nearly a thousand private companies that provide intercity bus and motorcoach service. The trade group has been lobbying for legislation that would provide $400 million "to improve bus security and safety." The legislation is important, the association insists, because it would help bus companies retain drivers who, in the wake of Sept. 11, have come to fear potential terrorist attacks.

But the most labored stretch may have come from the National Taxpayers Union, a conservative advocacy group that touted a cut in capital-gains taxes as a national security initiative. Eric Schlecht, the organization's director of congressional relations, maintains that lowering taxes for the rich would flood the coffers of the irs with more money. "By reducing the rate at which capital gains are taxed," he says, "President Bush and Congress could help revitalize the sagging economy and bring new revenues to Washington-decidedly aiding our war against terrorism."

Washington has always been a city of wretched excesses, but never have so many lobbyists for so many different special interests so blatantly wrapped their requests for subsidies, tax breaks, and other forms of federal largesse in patriotic packaging. "No self-respecting lobbyist in Washington has resisted the temptation to reframe the exact arguments they were making before Septem- ber 11 into a post-Sept. 11 response to terror," observes Rep. Edward Markey (D-Mass.). "There is no issue-none-where they aren't doing it."

The feeding frenzy was kicked off by the airline industry's drive for a fast-track bailout in the days immediately after the terrorist attacks. By Sept. 22, the airlines had sealed an especially sweet deal: $5 billion in cash, plus another $10 billion in loan guarantees based on their pre-Sept. 11 market share rather than their post-Sept. 11 losses. The airlines also won protection from any lawsuits arising from the attacks, a provision of the bailout that may ultimately cost taxpayers many additional billions.

The success of the airlines inspired the insurance industry to follow suit. On Sept. 21, during a private meeting at the White House arranged by the American Insurance Association, 16 insurance executives informed President George Bush and Commerce Secretary Donald Evans that the industry would be able to pay all the claims-estimated at $40 billion to $75 billion-arising from what's expected to be the costliest disaster in the nation's history. During a brief "photo op," the executives assured Bush that the insurance industry, with its $3 trillion in assets in the United States alone, wouldn't need federal help.

When the cameras were gone, however, the executives-led by CEOs Maurice Greenberg of American International Group and Robert O'Connell of Massachusetts Mutual Life Insurance-got down to the real business at hand. They bluntly pressed Bush and Evans for legislation that would shift the lion's share of liability for future terrorist attacks to the federal government. Furthermore, Greenberg reportedly asked the White House for its help in keeping claim disputes related to the World Trade Center disaster confined to a federal court in Manhattan-and thereby out of state courts, where insurers could potentially be liable for additional millions, if not billions, in punitive damages. If the White House failed to act, the insurers warned, the industry would refuse to cover damage from future terrorist attacks, potentially triggering a full-scale financial crisis.

The executives in the industry's delegation were anything but strangers to their White House hosts. In particular, Greenberg and O'Connell had been among the elite group of fundraisers known as "Pioneers" who raised at least $100,000 for Bush's presidential campaign under the direction of his finance chairman, Donald Evans. In all, the insurance industry had invested nearly $1.6 million to elect Bush, and Greenberg's company and two industry trade associations had chipped in $100,000 apiece to underwrite his inaugural celebration. The industry had also pumped more than $20 million into Republican and Democratic soft-money accounts since 1999- corporate checks bearing such names as Chubb, CNA, Hartford, Kemper, Travelers, and Zurich, all of whom had representatives at the White House meeting.

The White House was quick to respond to the industry's request. On October 15, it unveiled a plan to cap the industry's liability in 2002 by agreeing to use public funds to pay all but $12 billion of the first $100 billion in future terrorism-related claims. The plan would also limit the industry's liability to $23 billion in 2003 and $35 billion in 2004.

In November, the House voted along party lines to approve the plan, which had been introduced as the "Terrorism Risk Protection Act" by Rep. Michael Oxley, a Republican from Ohio. Oxley was clearly the right lawmaker for the job: Even with Election Day more than a year away, he'd already collected more than $34,000 in contributions from insurance-industry interests.

The plan to shift the cost of any future terrorist attacks to taxpayers later stalled in the Senate, but the early successes of the airline and insurance industries emboldened other businesses to think big. "If you start saying, ÔWell, the airlines have been hurt because nobody wants to fly on airplanes any longer,' there are literally hundreds of industries that could make that exact same claim," says Stephen Moore, a senior fellow at the Cato Institute, a free-market-oriented think tank. "It starts with the airlines, and then it's insurance businesses, and then it's the entertainment industry, and tourism, and then, of course, the Las Vegas casinos. It just becomes a parade of special-interest groups down Pennsylvania Avenue that have their hands out. This is the quintessence of corporate welfare."

Indeed, the list of post-Sept. 11 petitioners-all asking for a handout, a bailout, or something in between-seems downright endless. Flight schools, operators of skydiving companies, manufacturers of small aircraft, and owners of small airports were among the first in line. They've been seeking a $7.5 billion package of grants and loan guarantees called the General Aviation Reparations Act to compensate them for business lost since the attacks. "Congress acted swiftly to provide the major airlines with needed relief to keep that industry going," explained Rep. John Mica (R-Fla.), who introduced the measure. "Now it should do the same for general aviation."

Similarly, the National Limousine Association tried to arrange an exemption from the gas-guzzler tax for fleets operated by its members. Early on, some of its members persuaded Rep. Robert Andrews (D-N.J.) to introduce legislation that would have provided financial assistance to "chauffeured ground-transportation companies that incurred losses as a result of the terrorist attacks." The measure, which was supposed to be tacked onto the airline bailout, didn't make it to the floor. "Oh boy, that one never got off the ground," concedes Bruce Cottew, the association's executive director. More recently, the association's biggest member, Carey International, retained the heavyweight Washington lobbying firm of Arent, Fox, Kintner, Plotkin & Kahn to seek federal loan guarantees on its behalf.

The nation's farmers, evidently not content with the goodies in the Farm Security Act, also rushed to get in on the giveaways. In the Senate Finance Committee's summary of its proposed economic-stimulus package, a fine-print footnote proposed $220 million in price subsidies for a list of 34 agricultural commodities arranged alphabetically from "apples" to "watermelons." In between "bell peppers" and "black beans" was federal support for "bison meat." A subsidy of $10 million, it turned out, was being proposed by Democrat Kent Conrad of North Dakota, the chairman of the Senate Budget Committee, whose state is home to the North America Bison Cooperative. Officials of the cooperative, whose 350 members (including billionaire Ted Turner) produce about half of the world's bison steaks, burgers, and roasts, maintain that the fear of additional terrorist attacks has driven patrons out of the high-priced restaurants that serve their products, plunging the industry into an economic tailspin.

Other industries also saw their opening. Ethanol producers, already heavily subsidized by the federal government, argued that requiring ethanol to be blended in gasoline would make the United States less reliant on oil from the Middle East. And the American Society of Travel Agents sought $4 billion in grants and no-interest loans. "Without travel agencies," the society warned, "the nation's travel industry cannot function."

Indeed, as both the Senate and House crafted huge economic-stimulus bills in November, lobbyists from nearly every industry scurried to get a piece of the action. "As soon as there was an announcement of an aid package, people started coming out of the woodwork," acknowledged James Albertine, president of the American League of Lobbyists. "There are a lot of industries that will be looking at the pot of gold. The federal government is spending more and, obviously, there will be some winners. There's lots of opportunities and it cuts across all industries. It's pretty much open season."

Barely a month after the terrorist attacks, Rep. Jim Moran, a Democrat whose Virginia congressional district includes Reagan National Airport, bluntly summed up the attitude of both lawmakers and lobbyists. "It's an open grab bag," he said, "so let's grab."

In a few cases, the lobbying free-for-all proved too brazen even by Washington standards. In November, lobbyist Howard Marlowe scored a modest but impressive victory for the nation's seaside resorts, persuading Congress that it was vital for national security to spend a record $135 million to shore up public beaches with sand-nearly $50 million more for beach "nourishment" than the Bush administration had requested. Emboldened by their success, Marlowe's clients immediately made a pitch for additional subsidies. "America needs to make a major commitment to its energy and water infrastructure, both for security and economic reasons," the American Shore and Beach Preservation Association urged lawmakers. "Protecting the nation's coastline is also vitally important to ensure the recovery of the American economy."

This time around, though, the appeal went nowhere. "We haven't gotten anything yet, and I don't think we will," says Marlowe, who concedes that the lobbying frenzy has gotten out of hand. "It gets to the point where you don't want to be associated with it," he says. "So many people saw opportunity in the wake of tragedy that it's definitely gotten unseemly."

Perhaps the most unseemly proposal of all was the juicy platter of corporate tax breaks that formed the centerpiece of the economic-stimulus plan put forward by House Republicans. The GOP plan called for almost doubling the amount that companies can write off for capital expenses they haven't yet incurred, allowing corporations that rely on loopholes to pay no taxes at all, and providing immediate rebates for any alternative-minimum taxes they have paid since 1986. The congressional Joint Committee on Taxation estimated that the bill would trigger nearly $13 billion in rebates, with nearly a third going to just 16 Fortune 500 firms. The legislation also proposed making permanent a provision that allows multinational corporations to shelter their U.S. profits from taxation by shifting them, on paper, to offshore tax havens. The provision was included even after an administration official conceded that the measure-which would cost taxpayers $21 billion over 10 years-would have "zero stimulative effect."

Much of the lobbying for the tax breaks was orchestrated by Kenneth Kies, a partner at the accounting and lobbying firm of PricewaterhouseCoopers who previously worked on Capitol Hill as staff director of the Joint Committee on Taxation. Like other lobbyists, Kies suggested to reporters that he was only trying to do his patriotic duty by bolstering the bottom lines of some of the nation's wealthiest corporations. "I wouldn't be doing the job-not necessarily for my clients-but for my country," he told the New York Times, "if I wasn't being helpful in terms of offering ideas that can be helpful in stimulating the economy."

But many didn't find the ideas very helpful-especially when Republicans balked at extending direct assistance to workers struggling to pay for health insurance. "The House bill was a public-relations disaster, because it really read like it was written by K Street corporate lobbyists," says Stephen Moore of the Cato Institute, the free-market think tank. "And unfortunately, the truth is that it was largely written by K Street corporate lobbyists." With Senate Democrats refusing to sign on to the tax breaks, the stimulus package failed to win approval before Congress adjourned at the end of the year.

But despite the political setback, many seasoned observers say the lobbying landscape in Washington has shifted dramatically since Sept. 11. The corporate tax breaks are back on the table, they say, as industry lobbyists intent on raiding the federal treasury continue to sell their proposals by waving the flag or stirring public fears of future attacks. "Lobbyists are in the business of asking for things," says the Heritage Foundation's Ronald Utt. "And they adjust their message to whatever they think will sell. Right now that's national security, economic stimulus, and disaster relief, and so they link what they want to one of those-better yet, to all three."

Even the Bush administration is now playing the name game: Early this year White House spokesmen started referring to the president's economic-stimulus package as an "economic security" plan.

"You know, this stuff never goes away," says Robert McIntyre, director of Citizens for Tax Justice, a Washington-based watchdog organization. "They never close down K Street."