Excerpt from the book Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets (by Peter Schweizer, the author of a similar book, Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison.) See also It's Even Worse Than It Looks: How the American Constitutional System Collided With the New Politics of Extremism by Thomas E. Mann. Can you read these and still have faith that this system is the beacon for mankind?
You’re only as good as your last envelope. —Silvio Dante, The Sopranos, 1999
THE POTOMAC RIVER THAT SNAKES by Washington, D.C., was given its name by the local native Americans centuries ago. Potomac was the name of a local tribe. According to some accounts, the word means “the place where goods are off-loaded,” or “the place where tribute is paid.” As journalists say, that latter meaning is a fact too good to check.
It is often said that “money is corrupting politics.” And as ever, this is true. Outside interests, from labor unions to large corporations, are influencing and distorting our government in the search for favorable policies. And these interests are well prepared to push money and special favors into Washington, D.C., in order to get them.
But a deeper, more sinister problem that has been overlooked better explains the dismal state our national politics is in: politics is corrupting money. While we have focused on the power that contributors have over officials, we have largely ignored the power that officials have over contributors. We have focused on the buyers of influence (those outside special interests), but paid little heed to the sellers of influence— bureaucrats and politicians.
In short, we have come to believe the problem in Washington is a sort of legalized bribery. If outside interests can only be held at bay, we can and will get better leadership.
But what if we are wrong? What if the problem is not bribery . . . but extortion? What if the Permanent Political Class in Washington, made up of individuals from both political parties, is using its coercive public power to not only stay in office but to threaten others and to extract wealth, and in the bargain pick up private benefits for themselves, their friends, and their families?
What we often think of as the bribery of our national leaders by powerful special interests in Washington may actually make more sense understood as extortion by government officials—elected and unelected. Far from being passive recipients of money and favors, they make it happen. They leverage their positions to shake the money tree for themselves and their political allies. And as we will see, they do so using a variety of methods, many of which you probably have never heard of before.
The assumption is that we need to protect politicians from outside influences. But how about protecting ourselves from the politicians?
Journalists and academics look at politics through a mythical lens that harkens back to Aristotle and Plato: politics is the business of producing correct policies. We may dispute what is correct, but in the traditional view, that is the goal of the process. Media reports on government actions, whether debates, legislation, or regulation, almost always present them in terms of pure policy. New laws are for a specific purpose, perhaps even a noble one.
But what if that isn’t the real point of the exercise? What if politics is really largely about fund-raising and making money? The commercial motives of the Permanent Political Class in acting or not acting are rarely questioned and virtually never fully understood.
Popular culture takes the same naive approach. We all love the image of Jimmy Stewart in Mr. Smith Goes to Washington—the idealistic new senator seduced and targeted by powerful outside interests. “Lost causes are the only ones worth fighting for,” Stewart’s character says as he fights the lobbyists and the political machine. Virtually every new candidate for office runs as an outsider, vowing to take on special interests. If only he can resist those outside forces, everything will be okay. When bad things happen in Washington, we assume the problem is that our national leaders have given in to seductive outside forces, the “special interests.” From time to time we erect laws and rules to protect politicians from these temptations.
But what if we have it backwards? What if the greater culprits are inside the halls of power in Washington rather than on the outside?
Some at the heart of Washington power have hinted at this cold, hard reality. As Edward Kangas, former global chairman of Deloitte Touche, put it: “What has been called legalized bribery looks like extortion to us. . . . I know from personal experience and from other executives that it’s not easy saying no to appeals for cash from powerful members of Congress or their operatives. Congress can have a major impact on business. . . . The threat may be veiled, but the message is clear: failing to donate could hurt your company.”
Former Microsoft chief operating officer Robert Herbold told me, “You’re crazy if you don’t play along. They will go after you.” Ray Plank, the founder and former chairman of Apache Corporation, has seen his company cough up to both parties for fifty years.
He told me that campaign money and lobbying contracts are “protection money. It’s what you expect from the mafia.”
Former politicians who once played the game now admit the same thing. As former senator David Boren puts it, “Donors . . . feel victimized. Now that I’ve left office, I sometimes hear from large donors that they feel ‘shaken down.’”
Former senator Russ Feingold admits, “It’s not like businesses and business leaders call up politicians and beg them, could I please give you some money? It goes the other way, which is that people are called constantly by politicians when you have a system like this, or their representatives, or their allegedly independent agents. And it’s more like extortion than it’s like bribery.”
One survey of corporate executives conducted by the Committee for Economic Development found that half gave to political candidates because they “fear adverse consequences for themselves or their industry if they turn down requests.”
Politics in modern America has become a lucrative business, an industry that has less to do with policy and a lot more to do with accessing money and favors. As we will see, bills and regulations are often introduced, not to effect policy change, but as vehicles for shaking down people for those money and favors. Indeed, the motive on both sides often has nothing to do with creating a “correct” policy, but instead is often about maximizing profits.
Raising campaign money is not just about winning elections and staying in power.
As we will see, the Permanent Political Class has come up with all sorts of creative ways to transfer those funds into other pockets, which can be accessed to enhance their own wealth and lifestyle. And they have carved out convenient loopholes in the law that allow lawmakers to legally convert votes into cash.
The same goes for lobbying. Hiring a lobbyist aligned with a powerful politician is more important than hiring a lobbyist with a certain expertise or experience. Hiring a former staff member or family member is better still. It’s the favor that matters.
Sometimes such favors are requested by politicians. Other times they don’t need to ask out loud. Several powerful politicians have multiple members of their immediate family (spouses and children) who make big money from lobbying.
Over the course of American history there have been repeated attempts to restrict the flow of money going into political parties and campaigns. Contrary to what you might have been told in school or by the media, the advocates of these efforts have not just been good-government, public-spirited citizens. They have also been corporations and individuals tired of being shaken down.
At the turn of the twentieth century, extortion was a widespread problem in Washington. The method was perfected by Mark Hanna, who served as President William McKinley’s chief fund-raiser. (Hanna once famously said, “There are two things that are important in politics. The first is money and I can’t remember what the second one is.”) Issuing a blunt warning to large businesses, Hanna gave them an “assessment,” an “invoice” of sorts, that they were expected to give to the Republican Party. If they failed to pay it, they would face big trouble. Standard Oil was assessed a $250,000 fee. Banks were expected to pay a fee of 1 percent of their capital.
By 1900, when McKinley was up for reelection, the White House was able to shake down the business community for $2.5 million (over $67 million in 2012 dollars). It sounds relatively small by today’s hyperbloated standards, but at the time it was huge. By 1904, the problem had become exponentially worse after the political class systematized the extortion technique: Teddy Roosevelt appointed George Cortelyou, who was the U.S. secretary of commerce and labor, to head up the Republican National Committee. In his cabinet capacity, Cortelyou had oversight of the Bureau of Corporations, which was responsible for investigating any corporations whose business crosses state lines. As the New York Times put it at the time, “the chief of the Department which has become the custodian of corporation secrets [was] put at the head of the partisan committee whose principal function [was] to collect campaign contributions which come chiefly from great corporations.”
In one instance, several Chicago packing companies under investigation by the government’s Bureau of Corporations were hit up for $50,000 in campaign donations. Cortelyou’s demands became so great that companies decided to do something about it, in the form of the Tillman Act of 1907 (named for its champion, Senator Benjamin “Pitchfork Ben” Tillman, now mostly remembered for his racist, segregationist beliefs). The Tillman Act made it illegal for businesses to give campaign contributions to federal candidates. Many corporations were tired of being extorted, and they enthusiastically supported the bill. As one Republican official noted after the law passed, corporate leaders were “entranced with happiness. . . . [T]hey are now in a position to throw us unceremoniously out of the door if we ask them for a penny. . . . They mean to take advantage of the laws forbidding them to give money for political purposes.” (In the 1940s, the act was amended to apply to unions.)
A New York Times editorial entitled “Happy Corporations” at the time quoted a “great financial authority”: “‘[We] welcome . . . this legislation with very much the same emotions with which a serf would his liberation from a tyrannous autocrat.’” The Times went on: “[The act] will lessen a very mean and sordid practice of blackmail. The beneficiaries of [regulation] will still find methods of furnishing the sinews of war to the party that controls their favors, but the great number of corporations that have suffered extortion through weakness and cowardice will have their backbones stiffened, and parties will be put to it to fill their coffers by really voluntary contributions.”
More recently, reforms that ended the practice of “soft money” contributions came as a result of increasingly extortive demands by both parties for large donations from outside companies. (Ray Plank was one of those who fought successfully to shut off the soft money spigot.) For the Republicans, the master of this sort of fund-raising was House Majority Leader Tom DeLay of Texas. DeLay created a corporate enemies list, telling companies that if they failed to make large enough donations, there would be legislative repercussions. For the Democrats, the equally heavy hand was Terry McAuliffe, who organized elaborate fund-raisers for President Bill Clinton, including barbecues where corporations were expected to cough up $500,000 to “honor” the president. Charles Kolb, president of the Committee of Economic Development, expressed the attitude of many corporate leaders pushing for a ban on soft money donations when he said, “We’re tired of being hit up and shaken down.”
Washington, D.C., is beset by gridlock and partisan fighting. Few substantive issues seem to get settled. Popular explanations for the gridlock focus on the increased polarization of congressional districts, and therefore of members of the House, with too few deal-making moderates in the middle. This explanation is accurate—but not the whole story. Reams of legislation are introduced every year that have little to do with the politician’s constituents. Why are our representatives spending so much time on bills that have very little to do with their own voters? In recent years, despite thousands of bills introduced into Congress every year, only a small percentage (approximately 5 percent) become law.
Of course, what matters for laws is quality, not quantity. But why would legislators bother to introduce so many hopeless bills? What if they are not even designed to pass? What if they are instead designed to make money? The cold harsh reality in Washington is this: the very conditions that are so maddening for most Americans— gridlock, problems being ignored, hyperpartisanship—are the very conditions that are most lucrative for the Permanent Political Class. Washington may not be working for citizens, but it’s working quite well for members of the Permanent Political Class who profit handsomely.
While the rest of the country looks on in frustration and anger, gridlock and a handful of massively complex laws are actually evidence that Washington is working, at least for those in power. The system is functioning precisely how they want it to function. Gridlock, complex laws, highly technical bills, and regulations that target specific groups have a commercial purpose for the Permanent Political Class.
Ray Plank, whose company has given to both parties over the decades, believes that gridlock exists because that’s where the money is.
“There’s no money to be made by fixing problems,” Plank told me. “So why are they going to fix them?”
In many cases “gridlock” really means “lobbyist-lock” or “donor-lock,” which pits several sides against each other. It’s an arms race between two or more sides, and the Permanent Political Class is the ultimate winner.
What goes on in Washington’s halls of power has less to do with lawmaking than with moneymaking. Far from being about policy, much of what happens in Washington is about extorting money. This isn’t to say there are not people in leadership positions with deeply held convictions. But from a commercial standpoint, there is money to be made by passing, or threatening to pass, certain laws. And the two political parties, far from being mortal enemies, as often depicted, desperately need each other for these same commercial reasons. Indeed, party and ideological differences matter less than you think.
Politics in Washington is a lot like professional wrestling. What seems like vicious combat to the uninitiated is actually choreographed acting. Professional wrestlers face off in the ring, shouting and pointing fingers and appearing to hate each other. But in fact, they are partners in a commercial enterprise to entertain and extract money from an audience. No matter who wins the match, everyone gets paid.
John Hofmeister, who served as the president of Shell Oil Company, recounted for me how it works. In his appearance before a congressional committee in 2008, politicians from both parties grilled him about the oil industry and high oil prices. Congresswoman Maxine Waters even threatened to nationalize the oil industry.
Ignore for a minute the question of who is responsible for high oil prices and consider what happened after those lively hearings according to Hofmeister. “After the hearings, a lot of those who had been attacking Shell asked me to donate to their campaigns or help to organize a fund-raiser for them.”
From a commercial standpoint, conflict, division, and calamity are good for business in Washington too. To be sure, both sides have their true believers, but the Permanent Political Class is also filled with entrepreneurs looking to maximize the opportunity to make money and increase their power base. It’s not uncommon for the same lobbying firm to be advising both sides in a political race or both sides on an important bill.
Microsoft’s Bob Herbold put it simply: “They are only interested in themselves.” Herbold has done considerable business in Asia, which has a reputation for payoffs and bribes. “There is corruption everywhere,” he told me. “But we are masters over those countries at legalizing corruption.”
Consider, for example, one particular highly confrontational bill. Democrats have threatened to impose a tax on Internet sales in the form of a bill that would allow states to tax online purchases, whether or not the retailer has a physical presence in the state. Each time it comes up, there are financial opportunities for both Democrats and Republicans. Democratic lobbyists could be hired by large firms that want to “talk down” the bill’s sponsors from proceeding. Those Democrats who sponsor the bill can solicit campaign donations from Internet retailers who hope their donation might convince the sponsors to kill the bill. Republicans, on the other side, might denounce the bill as a terrible idea that is destructive to the economy, but the threat of its passage is a moneymaking opportunity for them too. Stopping the tax comes with a price: campaign donations and lobbying arrangements for their friends. After all, they are the only thing standing between the retailers and financial Armageddon. John Hofmeister calls this practice “legalized corruption where the corrupters (elected members) have assumed the legal authority to set in motion the policies and practices that manipulate the corruptees (vulnerable donors).”
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.
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.
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.”
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.”
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.”
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.
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.”
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.
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.
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.
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.”
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.”
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.
Because of the way our laws are written, this political extortion is extralegal rather than illegal.
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.
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.
At least in one respect, dealing with the Mafia is easier. With the Mafia, businesses can feel confident that if they pay the fee, no harm will come. Mobsters don’t like other mobsters extorting on their turf. But in Washington paying for protection only buys that peace for a little while, and only from certain politicians. A competing politician can always step up and demand more.
And like the Mafia, political extortion can often involve a web of family members, who extract from the target on several levels: campaign contributions and favors for the politicians, jobs for the politicians’ children, and lobbying contracts for their spouses.
The rampant extortion in Washington explains why government continues to grow, regardless of who is in power. And it also explains why governme nt is getting meaner. It’s more lucrative for the Permanent Political Class that way. Just as the Mafia likes to expand its turf to seek more targets for extortion, an expanding government increases the number of targets for a shakedown. And the meaner government gets the more often threats of extortion are successful. No wonder that now a large portion of the American people distrust the federal government, regardless of who is in power. According to Pew Research, only 30 percent of the American people trust the federal government. This also explains why Transparency International, an international organization that tracks “perceptions of corruption” in countries around the world, has the United States well below Singapore and Barbados on its “corruption perception index.” Meanwhile, Washington, D.C., and the Permanent Political Class prosper.
The numbers are startling. The World Bank scores what it calls “worldwide governance indicators” and measures each country’s “control of corruption.” In recent years, the United States has continued to slip in the rankings.
Since 2009, the United States has dropped to the very bottom of developed countries in that category.
The World Economic Forum has created a similar scale as part of its Global Competitiveness Report. Here, too, the United States scores below most other developed countries when it comes to dealing with corruption.
What happens in Washington doesn’t stay in Washington. It undermines the entire country.
Is it any wonder that the Italian Mafia was initially developed in Sicily—by politicians?
Below are the original footnotes. The links in the text were lost in conversion.
Congressional Record, vol. 145, pt. 19, October 26–November 3, 1999, p. 26957.
Maplight, “U.S. Congress—Find Contributions: Contributor, Apache Corporation; Election Cycle, 2002, 2004, 2006, 2008, 2010, 2012,” http://maplight.org/us-congress/contributions (accessed April 12, 2013).
Ray Plank, interview with the author.
Robert H. Sitkoff, “Politics and the Business Corporation,” Regulation (2003–2004): 1136.
HBR IdeaCast, “How Campaign Finance Reform Could Help Business,” Harvard Business Review (September 6, 2012), http://blogs.hbr.org/ideacast/2012/09/how-campaign-finance-reform-co.html.
Robert Dreyfuss, “Reforming Reform,” The American Prospect (December 18, 2000).
CREW (Citizens for Responsibility and Ethics in Washington), “Family Affair Report Details Nepotism in Congress,” http://www.citizensforethics.org/pages/family-affair-report-reveals-nepotism-abuse-in-congress.
Sitkoff, “Politics and the Business Corporation,” p. 1132.
Ibid., 1135.
“Cash from the Packers: Story of a Republican Demand While the Beef Inquiry Was On,” New York Times, September 17, 1905.
Sitkoff, “Politics and the Business Corporation,” p. 1135.
Ibid.
Fred Wertheimer, “Soft Money and Political Extortion,” Baltimore Sun, June 5, 2000.
U.S. Senate, “Résumé of Congressional Activity,” http://www.senate.gov/pagelayout/reference/two_column_table/Resumes.htm.
Maplight, “U.S. Congress—Find Contributions: Contributor, Apache Corporation; Election Cycle, 2002, 2004, 2006, 2008, 2010, 2012” (see ch. 1, n. 2; accessed April 15, 2013).
Ray Plank, nterview with the author.
“Basically Taking Over,” Las Vegas Review-Journal, June 11, 2008.
John Hofmeister, interview with the author.
Bob Herbold, interview with the author.
John Hofmeister, interview with the author.
Former FBI agent Bill Roemer, quoted in Kirsten Lindberg, Joseph Petrenko, Jerry Gladden, and Wayne A. Johnson, “Traditional Organized Crime in Chicago,” International Review of Law, Computers, and Technology (March 1998): 47–73.
John Bresnahan, “Tim Bishop’s Bar Mitzvah Episode Could Spell Trouble,” Politico, August 15, 2012.
Brittany H. Bramlett, James G. Gimpel, and Frances E. Lee, “The Political Ecology of Opinion in Big-Donor Neighborhoods,” Political Behavior 33 (2011): 565–600.
Gary J. Miller, “Confiscation, Credible Commitment, and Progressive Reform in the United States,” Journal of Institutional and Theoretical Economics 145, no. 4 (December 1989): 686–92.
John Hofmeister, interview with the author.