Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets

by Peter Schweizer

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.

But what if that isn’t the real point of the exercise? What if politics is really largely about fund-raising and making money?

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?

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.2 He told me that campaign money and lobbying contracts are “protection money. It’s what you expect from the mafia.”3

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.”6

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.

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

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.”)

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.10

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.

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 th...

Ray Plank, whose company has given to both parties over the decades, believes that gridlock exists because that’s where the money is.15 “There’s no money to be made by fixing problems,” Plank told me. “So why are they going to fix ...

What goes on in Washington’s halls of power has less to do with lawmaking than with moneymaking.

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.

“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.”18

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.

But as we will see, for government officials, this sort of extortive behavior is okay.

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.

“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,

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

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—...

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.

According to Pew Research, only 30 percent of the American people trust the federal government.

Politics is the art of putting people under obligation to you. —JACOB ARVEY, ILLINOIS PARTY BOSS (1990)

The methodology in Washington is similar: if someone wants a bill passed, charge them money to allow the bill to move down the legislative highway.

Imagine the nightmare of having to add different state and local taxes to every individual phone bill, depending on the jurisdiction. And imagine what higher cell-phone taxes might do to the type of phones and cellular plans people chose. Local taxes could deeply affect their bottom line.

AT&T, like most large corporations, tends to give more money to the party in power, which has ultimate control of their regulatory and financial life. So AT&T employees sent him twelve donations on a single day, November 2, 2010—election day.5

But with his unique leverage, John Boehner was the toll collector. Finally, he declared a vote for the bill on November 1, 2011, and on the day before the vote, Boehner’s campaign collected the toll: thirty-three checks from wireless industry executives, totaling almost $40,000. Twenty-eight of those checks came, again, from executives with AT&T.10

Corporations try to influence legislation they don’t like by hiring lobbyists and making contributions. But the relationship works both ways. Politicians want corporations involved in the process on their terms: it allows for maximum extraction.

During the 112th Congress, a senator needed to raise an average of $10,476,451 and a representative $1,689,580 to clinch the coming election.35

Those who wonder why the American tax code is so complex, convoluted, and constantly changing fail to appreciate what a wonderful tool it is for extortion. When you start seeing it as a source of enrichment for the Permanent Political Class, you will realize why we have the tax system we have.

More recently, the Justice Department went after Apple and five book publishers over ebook pricing decisions. Fighting these cases costs tens and even hundreds of millions of dollars.

Yet the Obama administration has not filed any criminal charges against any major Wall Street investment banks or their officers. Could there be a simple reason?

President Obama raised record sums from Wall Street in 2008 and then declared on 60 Minutes, “I did not run for office to be helping out a bunch of fat cat bankers on Wall Street.”6 On the other hand, Obama privately positioned himself as the one politician who could protect the “fat cats” from the mob.

was amid that public clamor that President Obama, in April 2009, gathered twenty-five finance executives to the White House for a frank discussion. As ABC News reported, the president told them: “My administration is the only thing between you and the pitchforks.”9 One individual who attended the meeting told Politico, “The signal from Obama’s body language and demeanor was ‘I’m the president, and you’re not.’”10

According to the president, the protests and the civil disobedience reflected a “broad-based frustration about how our financial system works.”11 Democratic House leader Nancy Pelosi explained, “I support the message to the establishment, whether it’s Wall Street or the political establishment and the rest, that change has to happen.”12 Congresswoman Debbie Wasserman Schultz, head of the Democratic National Committee, added, “We understand their [Occupy Wall Street’s] frustration, we applaud their activism.”13

Former Clinton secretary of labor Robert Reich declared that this was evidence that Wall Street was “bribing elected officials with their donations.”14 I would argue that Reich had the power equation wrong. It was the Permanent Political Class that threatened to cause severe damage to the financiers—not the other way around. As the late economics professor Peter H. Aranson puts it, “The real market for contributions is one of ‘extortion’ by those who hold a monopoly on the use of coercion—the officeholders.”15

By July 2011, just as Goldman executives were making their donations, cash from Wall Street made up fully one-third of President Obama’s campaign money raised by bundlers.23 As CNBC put it at the time, “Obama is relying more on Wall Street to fund his re-election this year than he did in 2008.”

“If he’s busy attacking people with wealth, why does he want to go to fancy restaurants and fancy homes to have these events? If he wants to go where the people go, I’m happy to go where the people go.” Levy suggested a fund-raiser at McDonald’s.25

But the government should regulate or prosecute wrongdoing—not turn it into an opportunity to make

America’s tax code had always been straightforward about one thing: income should be taxed differently than interest and capital gains made off of investments. But that distinction was now under fire as “unfair” because investors were paying a lower percentage on their capital gains than middle-class Americans were on income from their jobs. The New York Times called it the “Most Unconscionable Tax Loophole” in America.

Boehner was generally opposed to large tax increases. But in the spring of 2011, he indicated that he might be open to considering a change in the capital gains rate. Boehner then went to Wall Street looking for money. Over a two-day period, June 8–9, he deposited 144 checks worth $274,800 in contributions from hedge-fund and finance executives.42 Thirty-five of those checks, totaling over $56,000, came from employees of a single hedge-fund group, Paulson & Company.43 Paulson execs had never given to Boehner before. Cantor Fitzgerald executives were also quite generous—and also had no prior history of supporting Boehner. But now they needed his “protection.” Would they have done so without this threat?

We’ve come to accept this as routine: companies facing legal action from the federal government being solicited at the same time for campaign donations. On the street, this would be considered de facto extortion.

“You start your fundraising network by thinking of people . . . who can’t say no.”

Nine out of ten times in the House of Representatives, and eight out of ten times in the Senate, the candidate who spends the most money wins.

why give money? If you are a CEO and you are spending millions of dollars on lobbying, without any statistically significant result, you are letting down your shareholders. Why do it? Because you think you have no choice.

Politicians who get on a powerful committee but refuse to pay their dues will get yanked from the committee no matter how knowledgeable they might be on the relevant issues.