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Activists from the ongoing occupation in lower Manhattan called “Occupy Wall Street,” infiltrated an art auction at the famous Sotheby’s auction house and gallery to give voice to the demands of the Occupy Wall Street movement and to stand in solidarity with Sotheby’s workers who have been locked out in an ongoing labor dispute.

Video of the action is below:

Forty-three members of the Teamsters Local 814, the art handlers at Sotheby’s, were locked out on August 1, in the midst of contract negotiations. A press release issued by the Occupy Wall Street activists describes the hardball negotiating tactics of the Sotheby’s management as a bid to destroy their workers’ retirement protections and to replace the skilled handlers with temporary workers without benefits: “[Sotheby’s] wants the art handlers to give up their 401K plan and work a reduced 36-hour week, effectively a 10 percent wage cut. The company also wants to cap workers’ overtime, eliminate certain titles that pay more, and, in initial bargaining, wanted workers to give up their right to sue over charges of discrimination.”

This despite the fact that Sotheby’s just had its most profitable year ever in its 267 years of business and pays the CEO, Bill Ruprecht, approximately $60,000 a day, according to the union.

Occupy Wall Street activist released the following statement about the situation at Sotheby’s:

“Occupy Wall Street supporters are appalled at the persistent attack on workers rights. We support the right of the workers to collectively bargain. Sotheby’s wants all new hires to have no collective bargaining rights, no health benefits and no job security. After locking out their unionized work force, Sotheby’s continues to operate using scabs and a non-union subcontractor. Sotheby’s art auctions epitomize the disconnect of the extremely wealthy from the rest of us.”

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Governor Bill Haslam has signed into law the Professional Educators Collaborative Conferencing Act of 2011 and killed any hope of getting the first professional contract for teachers at Rogersville City School.    

The governor signed the bill Wednesday and it immediately became law.

Although a tentative agreement had finally been reached by negotiating teams representing teachers and the school board, the legislation has a provision that states “Any and all bargaining being conducted pursuant to the Education Professional Negotiations Act on the effective date of this act shall be suspended indefinitely.”  The law also states that “No collaborative conferencing pursuant to this part shall be conducted by a local board of education until the training developed under this part has been implemented within the local education agency.

A training program in the “principles and techniques of interest-based collaborative problem-solving” is to be developed by the Tennessee Organization of School Superintendents in conjunction with representative organizations of school leaders and administrators and professional employees’ organizations by January 1, 2012, at which time a summary report of the training program and related materials, if any, shall be presented to the education committees of the senate and the house of representatives. The proposed law calls for the “training program” to be implemented, as appropriate, within each local education agency no later than July 1, 2012.  

Although it was  suggested the board could ratify the contract at the negotiating session or at special meetings called specifically to address the director’s post, ratification at any of those meetings was not legally permissible.  

via rogersvillereview.com

 

Zambito

 Local bargaining teams are scheduled to negotiate in late June, but as Gov. Bill Haslam is expected to sign into law a new process called collaborative conferencing, which limits negotiable areas, officials are unsure how much longer they’ll be at the table.

 “The TEA (Tennessee Education Association) had a staff meeting on Thursday and were looking at the new law,” said Janis Carroll, president of the Jackson-Madison County Education Association. “After they’ve gone through it, we will have some idea of how we should proceed.” 

The teams have been meeting to renegotiate Jackson-Madison County teachers’ three-year contract, which expires on June 30.

Locally the negotiation process has at times been contentious and resulted in the local association seeking legal remedies, citing the district had failed to enter into good-faith negotiations.

Most recently the teams use a mediator to facilitate the negotiation process, but on areas such as salary and insurance, it still has taken weeks, months and sometimes a full year for both teams to sign off on areas in the teachers’ contract.

If Haslam signs the new law, school boards and employees will enter into binding memoranda of understanding, or contracts, on salaries, grievances, benefits and working conditions.

But no negotiations will take place on differentiated pay or evaluations.

Superintendent Nancy Zambito said the law must be reviewed in order to determine the next steps for the local teams.

“Since the contract expires on June 30, we may have to wait to see if there’s training with this new process,” Zambito said. “We just don’t know.”

What is clear is that if the new law known as “Professional Educators Collaborative Conferencing Act of 2011” — a combination of House Bill No. 130 and Senate Bill No. 113 — is signed, the bargaining process will be changed for Tennessee teachers, who have been sitting at the negotiation table for more than 30 years.

“The current contracts are protected until they expire, so that’s some security for employees,” said Jerry Winters, director of government relations for the Tennessee Education Association. “The training for teachers and boards on how the process works begins next January.”

Winters said the TEA is not in full support of the pending changes to bargaining while proponents of the measure believe it’s a positive move.

“Can I say this is a good law? No. But could it have been worse? Yes,” he said. “We can’t give glowing endorsements for it, and that’s largely because of our lack of involvement (in the process).”

via jacksonsun.com

CC0001.pdf Download this file
HB0130.pdf Download this file
SB0102.pdf Download this file

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Labor-Community Coalition activists march down Wall Street during a protest against budget cuts and bank practices in New York, May 12, 2011.   (Photo Emmanuel Dunand/AFP/Getty Images)

At the end of each week, Working In These Times rounds up labor news we’ve missed during the past week, with a focus on new and ongoing campaigns and protests. For all our other headlines from this week, go here.

—On Thursday, 15,000 protesters from eight separate marches converged on Wall Street to demand that the rich pay their fair share of taxes. Corporate profits are skyrocketing while public budgets are stretched to the breaking point. One of the catalysts for the protest was Mayor Mike Bloomberg’s budget plan, which would lay off over 4000 teachers. The demonstrators urged New York Gov. Andrew Cuomo to reinstate a millionaire’s tax worth $4.6 billion a year.

—Activists in San Francisco kicked off a city-wide campaign against wage theft on Thursday. Wage theft is a $30 billion problem nationwide, and especially pervasive in the hospitality and construction industries. The San Francisco Board of Supervisers is considering legislation to help prevent wage theft in the city.

—For many students, summer jobs are a source of income and work experience. However, the poorest students have the hardest time finding summer jobs and racial disparities are rampant, according to an analysis by the Economic Policy Institute. In 2009, only 20 percent of low-income African Americans aged 16-19 and not enrolled in school were employed, compared to 31 percent of poor Hispanic teens and 36 percent of poor white teens. Among middle-class teens of the same age, employment rates were 55 percent for whites, 56 percent for Hispanics, and 40 percent for African Americans.

—National Nurses United celebrated the 191st anniversary of the birth of Florence Nightingale, the founder of the modern profession of nursing. During the Crimean War, Nightengale led the first recorded nurses strike, refusing to allow her nurses to disembark from a ship until the hospitals were in working order. Nigthingale also made original contributions to epidemiological statistics.

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Contact:  Dan Levitan (646) 200-5315, Eric Koch (646) 200-5309, Peter Kadushin (UFT) (212) 510-6463

OVER 10,000 TO MARCH ON WALL STREET TO MAKE THE BANKS PAY

Unprecedented Labor-Community Coalition Calls on Mayor Bloomberg to Close Loopholes and Renegotiate Bad Deals that Cost City Taxpayers Billions

More than 10,000 people will flood the Wall Street area on Thursday to call on Mayor Bloomberg to close the loopholes and stop the destructive bank practices that destroy our communities and cost taxpayers billions instead of enacting layoffs and budget cuts that hurt working families and low-income New Yorkers. 

The afternoon of events will kick-off at 4:00pm at eight assembly sites, each themed around budget and issues areas at risk from Mayor Bloomberg’s cuts and bad bank practices.  

4:00 PM ASSEMBLY SITES:

(1) Education

City Hall*

260 Broadway

(2) Students

Charging Bull  

26 Broadway

(3) Transportation/Energy

Bowling Green

1Bowling Green

(4) Immigration

Battery Park

Battery Place and State Street

(5) Housing

Staten Island Ferry

1 State Street

(6) Peace

Vietnam Veterans Memorial

55 Water Street

(7) Jobs

Wall Street Fountain

110 Wall St

(8) Human Services / Safety Net

South St. Seaport

20 Fulton St

* Note: Liu, De Blasio, and the Rev. Sharpton will join UFT President Michael Mulgrew at the City Hall Assembly site.

At 4:30pm, demonstrators will begin marches from assembly sites to the intersection of Water Street and Wall Street, where they will participate in over 100 street teach-ins to educate the public on the bad deals, loopholes and sweetheart deals for Wall Street that cost New York City billions.

  • Example:  City officials gave over $100 million in subsidies to JPMorgan Chase, Citigroup and Morgan Stanley to save or create over 17,000 jobs – and they didn’t.  Bloomberg must demand accountability and get back unearned subsidies to prevent budget cuts.

 

Also, at 4:30pm, Comptroller John Liu, Public Advocate Bill de Blasio, and the Rev. Al Sharpton will join UFT President Michael Mulgrew at a City Hall teach-in on education cuts.  At 5:00pm the group will march from City Hall down Broadway through the Wall Street area to join the teach-ins at Water Street and Wall Street. 

At 5:30pm all participants will join at Water Street and Wall Street and march down to Battery Park for an energetic closing session.

 

What:  May 12 Day of Action to Save Our City’s Budget and Make the Banks Pay

Who:  More than 10,000 demonstrators from the May 12 Coalition, joined by Liu, De Blasio, and the Rev. Sharpton

Where and When:   

4:00PM – Mobilization begins at 8 Assembly sites including City Hall

4:30 PM – Demonstrators in Financial District begin March to Water St. and Wall St. Convergence Point

5:00 PM — Liu, De Blasio, and the Rev. Sharpton join UFT President Michael Mulgrew on march from City Hall down Broadway, through the Wall Street area to Water Street and Wall Street

5:00PM – Over 100 of street teach-ins begin at Water St. and Wall St.

5:30PM – All groups join at Water and Wall, March continues to Battery Park


 

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Judge blocks contentious Wisconsin union law

Wis. judge blocks collective bargaining bill

Judge Maryann Sumi listens to arguments at a hearing in Dane County Circuit Court in Madison, Wis., on a request to issue a temporary restraining order to prevent the Secretary of State from publishing the controversial budget repair bill. (Mark Hoffman/Milwaukee Journal Sentinel)

A Wisconsin judge issued a temporary restraining order today blocking the state’s new and contentious collective bargaining law from taking effect, a measure that drew tens of thousands of protesters to the state Capitol and sent some Democrats fleeing to Illinois in an attempt to block a vote on it.

The judge’s order is a major setback for new Republican Gov. Scott Walker and puts the future of the law in question.

Judge Maryann Sumi issued the order, which was requested by Dane County District Attorney Ismael Ozanne, a Democrat.

Ozanne filed a lawsuit contending that a legislative committee that broke a stalemate that had kept the law in limbo for weeks met without the 24-hour notice required by Wisconsin’s open meetings law. The Republican-controlled Legislature passed the measure and Walker signed it last week.

Secretary of State Doug La Follette planned to publish the law on March 25, but the judge’s order will prevent that from happening, at least for now.

Assistant Attorney General Steven Means said the state will appeal the ruling, but he didn’t say when. Walker spokesman Cullen Werwie said in a statement that the governor was confident the bill would become law in the near future.

“This legislation is still working through the legal process,” Werwie said.

A spokesman for Republican Senate Majority Leader Scott Fitzgerald declined to comment, citing the ongoing legal fight.

Democrats were hopeful the ruling would lead to the undoing of the law.

“I would hope the Republicans would take this as an opportunity to sit down with Democrats and negotiate a proposal we could all get behind,” said Democratic Sen. Jon Erpenbach, of the 14 senators who stayed in Illinois for three weeks in an attempt to stop the bill from passing.

The bill was part of Walker’s solution for plugging a $137 million state budget shortfall. A part of the measure would require state workers to increase their health insurance and pension contributions to save the state $30 million by July 1. Other parts of Walker’s original proposal to address the budget shortfall were removed before the bill passed last week. The Legislature planned to take those up later. Lawmakers are not scheduled to be in session again until April 5.

People opposed to the law converged on the state Capitol over the past month with massive demonstrations that went on for more than three weeks.

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Dane County Judge Maryann Sumi today granted a temporary restraining order blocking publication of the collective bargaining bill.

Sumi said she was given no evidence to show why the conference committee could not have given a 24-hour notice for its meeting last week or why a timely notice was not provided.

Sumi said some may ask how a bill can be stopped in its tracks by a “minor” issue like failure to properly notice a meeting.”My response is it’s not minor; it’s not a minor detail,” she said, adding it is of utmost importance that nothing that happens in government occur in secret.

Sumi said similar to the First Amendment protections of controversial speech, “the open meetings law exists to ensure open government in controversial matters.”

via wispolitics.com

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That video above is from last night’s 3-minute conference committee meeting, convened illegally under Wisconsin law, which passed a bill Democratic members of the committee didn’t have an opportunity to read. Rep. Peter Barca, the Assembly Minority Leader, pleads throughout the meeting that it violated Wisconsin’s very precise open meetings law. This stipulates that “Public notice of every meeting of a governmental body shall be given at least 24 hours prior to the commencement of such meeting unless for good cause such notice is impossible or impractical, in which case shorter notice may be given, but in no case may the notice be provided less than 2 hours in advance of the meeting.” The Republicans didn’t even clear the 2-hour bar here; Scott Fitzgerald announced the 6:00pm meeting shortly after 4:00pm. And since there was no good cause to call the meeting on emergency grounds, the 24-hour notice was in effect. Fitzgerald and the Republicans didn’t care. They called the roll while Barca was still screaming about the violation of law. They just walked out on him. Hours later, Fitzgerald obtained a message from the chief clerk claiming that the meeting was properly called. But that should, and will, be challenged in court.

In fact, right after the meeting, Barca started collecting signatures from witnesses in order to prepare for filing an open meetings complaint. Because Barca never saw a bill before the vote, he is also reportedly questioning whether a bill existed prior to voting on it. This would also be a violation.

When you talk to political folks in Wisconsin, you realize that transparency and procedure matter a lot. This violation of law is actually but one of the many dubious marks on yesterday’s action, and actually all the action around the budget repair bill and the assault on workers’ rights. Perhaps the open meetings violation could be rectified merely by waiting another day and starting over. But there are all the questions surrounding the content of the bill itself. The whole reason this ordeal has lasted three weeks is that the collective bargaining piece was tied into the budget repair bill, which had a fiscal impact. That’s what triggered the quorum requirement. But the Republicans supposedly stripped out the fiscal pieces and passed a purely non-fiscal bill last night in the Senate, and later this morning they’ll do the same in the Assembly.

But is the bill non-fiscal? Put aside for a second the fact that Gov. Walker said for three weeks that collective bargaining has a fiscal impact. There were other parts of the bill with a clear fiscal impact as well. For instance, here’s a memo from the Legislative Fiscal Bureau on the bill, and here’s the 138-page bill itself. Here’s what came out of the bill, via WisPolitics:

• changes to the earned income tax credit
• a $79 million reduction in the lapses required from the DOA secretary
• $165 million in debt restructuring
• increasing funding for MA programs to close funding gap through end of fiscal year
• the sale of state power plants
• increasing funding for Corrections to close gap through end of fiscal year
• reallocation of group health and pharmacy benefit reserves
• audit of dependent eligibility under benefit programs

But that does not address the potential fiscal impact in what remained. On page 12 of the LFB memo you see a item that would “reduce funding… in the Joint Committee on Finance’s general program revenue supplemental appropriation.” On page 17, you see the changes to public employee health and pension benefits. On page 33, there’s an inclusion of a particular piece of wetlands in a tax incremental financing district, which appears to be tax relief. It would be hard to imagine that these pieces don’t have a fiscal impact. In fact, the Wisconsin State Journal, one of the more staid publications in the state, basically came this close to accusing the Republicans of outright lying:

After the session, Senate Republicans scattered, leaving no one to explain how they managed to pass components of the bill that seemed to have a fiscal impact, including changes in pensions and benefits, without the 20 senators needed to vote on fiscal matters. In a statement, Senate Majority Leader Scott Fitzgerald said he had consulted with the Legislature’s attorneys and “every item in tonight’s bill follows the letter of the law.”

Fitzgerald’s statement is here. Now, if you look at the language of the quorum law, you can see how Fitzgerald’s John Yoos may have reckoned this one.

Vote on fiscal bills; quorum. SECTION 8. On the passage in either house of the legislature of any law which imposes, continues or renews a tax, or creates a debt or charge, or makes, continues or renews an appropriation of public or trust money, or releases, discharges or commutes a claim or demand of the state, the question shall be taken by yeas and nays, which shall be duly entered on the journal; and three−fifths of all the members elected to such house shall in all such cases be required to constitute a quorum therein.

It’s possible that a friendly judge could take this to mean only items that had a negative fiscal impact, or raise taxes. Items that have a positive fiscal impact may or may not be part of that. The trickiest items to reconcile with that are the changes to pensions and benefits.

The dirty secret here was that there was ALWAYS going to be a court challenge to this bill. If it wasn’t on the open meetings violation – or if it wasn’t on the pension givebacks, supplemental appropration rescissions and tax limitations in the “non-fiscal” bill – it would be on the fact that the pension changes violate “home rule” provisions for localities. Here’s what the Milwaukee city attorney said two weeks ago:

“… in our judgment, the courts would find the statute unconstitutional on three grounds: first, that it unconstitutionally interferes with and intrudes upon the city’s home-rule authority over its pension plan; second, that given certain vested rights or benefits that have accrued to employees currently in the plan, the statute would constitute an unconstitutional impairment of contract rights under the state and federal constitutions; and third, given these same vested rights or benefits, the proposed statute would violate the due process clauses of the state and federal constitutions because it would abrogate the terms and conditions of the Global Pension Settlement …”

Heck, they’re still looking at tape in the Assembly to determine if Republicans reached over and voted using the electronic device of their colleagues who weren’t present in the chamber at 1am when they passed it. Because this new bill represents a reconciled version of that one, that would apply. There are about a dozen different ways this could be unconstitutional under Wisconsin law.

Of course, constitutionality will be determined by the Wisconsin Supreme Court. Which makes the election for a Supreme Court Justice slot on April 5 very interesting. They are basically partisan elections in Wisconsin. Republicans currently have a 4-3 edge on the Court, and one of the incumbent Republicans, David Prosser, a former Speaker of the Wisconsin State Assembly, is the one up for re-election. His opponent is a deputy US Attorney, JoAnn Kloppenburg. So a win for Kloppenburg would shift the balance of power on the court. This goes down in less than 4 weeks. In addition to essentially being a vote of no-confidence in Scott Walker and his party, that vote on April 5 could go a long way to deciding if this bill gets overturned in court.

Sen. Tim Cullen summed things up last night:

“We just don’t know what’s going on,” he said. “We don’t know what is legal. I think we all just need to press ‘pause.’ Democracy does not have to move this fast.”

via firedoglake.com

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Demoncracy Now!

Thousands of demonstrators flooded the Wisconsin State Capitol building last night after Republican senators took a surprise vote to strip most public employee workers of their right to collectively bargain. The bill could be made law if the Assembly votes today. Republicans advanced the measure by stripping it of fiscal measures requiring a 20-member quorum for action. We speak to graduate student organizer Peter Rickman and State Democratic Sen. Chris Larson, who remains in Illinois. Republicans advanced the measure by stripping it of fiscal measures requiring a 20-member quorum for action. We speak to graduate student organizer Peter Rickman and State Democratic Sen. Chris Larson, who remains in Illinois. a bill in Michigan goes even further. In the measure, emergency financial managers would be allowed to break union contracts, dismiss elected officials, and even disincorporate entire municipalities. Michigan Senate Republicans approved the bill yesterday, and protests are expected in the Lansing State Capitol building today. We speak with Frank Emspak of the Workers Independent News in Madison. In Libya, troops loyal to Col. Muammar Gaddafi are locked in intense fighting with opposition forces for control of several cities and towns across the country. While the battles rage in Libya, calls are growing on the international community to impose a no-fly zone to cripple Gaddafi’s airforce. We go to Libya to where Democracy Now! correspondent Anjali Kamat interviews Esaam Gheriani, a field member of the Feb 17th Coalition and we talk to international law professor Richard Falk. Democracy Now!, a daily independent newshour.
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Watch live streaming video from theuptake at livestream.com

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David H. Koch in 1996. He and his brother Charles are lifelong libertarians and have quietly given more than a hundred million dollars to right-wing causes.

David H. Koch in 1996. He and his brother Charles are lifelong libertarians and have quietly given more than a hundred million dollars to right-wing causes.

On May 17th, a black-tie audience at the Metropolitan Opera House applauded as a tall, jovial-looking billionaire took the stage. It was the seventieth annual spring gala of American Ballet Theatre, and David H. Koch was being celebrated for his generosity as a member of the board of trustees; he had recently donated $2.5 million toward the company’s upcoming season, and had given many millions before that. Koch received an award while flanked by two of the gala’s co-chairs, Blaine Trump, in a peach-colored gown, and Caroline Kennedy Schlossberg, in emerald green. Kennedy’s mother, Jacqueline Kennedy Onassis, had been a patron of the ballet and, coincidentally, the previous owner of a Fifth Avenue apartment that Koch had bought, in 1995, and then sold, eleven years later, for thirty-two million dollars, having found it too small.

The gala marked the social ascent of Koch, who, at the age of seventy, has become one of the city’s most prominent philanthropists. In 2008, he donated a hundred million dollars to modernize Lincoln Center’s New York State Theatre building, which now bears his name. He has given twenty million to the American Museum of Natural History, whose dinosaur wing is named for him. This spring, after noticing the decrepit state of the fountains outside the Metropolitan Museum of Art, Koch pledged at least ten million dollars for their renovation. He is a trustee of the museum, perhaps the most coveted social prize in the city, and serves on the board of Memorial Sloan-Kettering Cancer Center, where, after he donated more than forty million dollars, an endowed chair and a research center were named for him.

One dignitary was conspicuously absent from the gala: the event’s third honorary co-chair, Michelle Obama. Her office said that a scheduling conflict had prevented her from attending. Yet had the First Lady shared the stage with Koch it might have created an awkward tableau. In Washington, Koch is best known as part of a family that has repeatedly funded stealth attacks on the federal government, and on the Obama Administration in particular.

With his brother Charles, who is seventy-four, David Koch owns virtually all of Koch Industries, a conglomerate, headquartered in Wichita, Kansas, whose annual revenues are estimated to be a hundred billion dollars. The company has grown spectacularly since their father, Fred, died, in 1967, and the brothers took charge. The Kochs operate oil refineries in Alaska, Texas, and Minnesota, and control some four thousand miles of pipeline. Koch Industries owns Brawny paper towels, Dixie cups, Georgia-Pacific lumber, Stainmaster carpet, and Lycra, among other products. Forbes ranks it as the second-largest private company in the country, after Cargill, and its consistent profitability has made David and Charles Koch—who, years ago, bought out two other brothers—among the richest men in America. Their combined fortune of thirty-five billion dollars is exceeded only by those of Bill Gates and Warren Buffett.

The Kochs are longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation. These views dovetail with the brothers’ corporate interests. In a study released this spring, the University of Massachusetts at Amherst’s Political Economy Research Institute named Koch Industries one of the top ten air polluters in the United States. And Greenpeace issued a report identifying the company as a “kingpin of climate science denial.” The report showed that, from 2005 to 2008, the Kochs vastly outdid ExxonMobil in giving money to organizations fighting legislation related to climate change, underwriting a huge network of foundations, think tanks, and political front groups. Indeed, the brothers have funded opposition campaigns against so many Obama Administration policies—from health-care reform to the economic-stimulus program—that, in political circles, their ideological network is known as the Kochtopus.

In a statement, Koch Industries said that the Greenpeace report “distorts the environmental record of our companies.” And David Koch, in a recent, admiring article about him in New York, protested that the “radical press” had turned his family into “whipping boys,” and had exaggerated its influence on American politics. But Charles Lewis, the founder of the Center for Public Integrity, a nonpartisan watchdog group, said, “The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”

A few weeks after the Lincoln Center gala, the advocacy wing of the Americans for Prosperity Foundation—an organization that David Koch started, in 2004—held a different kind of gathering. Over the July 4th weekend, a summit called Texas Defending the American Dream took place in a chilly hotel ballroom in Austin. Though Koch freely promotes his philanthropic ventures, he did not attend the summit, and his name was not in evidence. And on this occasion the audience was roused not by a dance performance but by a series of speakers denouncing President Barack Obama. Peggy Venable, the organizer of the summit, warned that Administration officials “have a socialist vision for this country.”

Five hundred people attended the summit, which served, in part, as a training session for Tea Party activists in Texas. An advertisement cast the event as a populist uprising against vested corporate power. “Today, the voices of average Americans are being drowned out by lobbyists and special interests,” it said. “But you can do something about it.” The pitch made no mention of its corporate funders. The White House has expressed frustration that such sponsors have largely eluded public notice. David Axelrod, Obama’s senior adviser, said, “What they don’t say is that, in part, this is a grassroots citizens’ movement brought to you by a bunch of oil billionaires.”

In April, 2009, Melissa Cohlmia, a company spokesperson, denied that the Kochs had direct links to the Tea Party, saying that Americans for Prosperity is “an independent organization and Koch companies do not in any way direct their activities.” Later, she issued a statement: “No funding has been provided by Koch companies, the Koch foundations, or Charles Koch or David Koch specifically to support the tea parties.” David Koch told New York, “I’ve never been to a tea-party event. No one representing the tea party has ever even approached me.”

At the lectern in Austin, however, Venable—a longtime political operative who draws a salary from Americans for Prosperity, and who has worked for Koch-funded political groups since 1994—spoke less warily. “We love what the Tea Parties are doing, because that’s how we’re going to take back America!” she declared, as the crowd cheered. In a subsequent interview, she described herself as an early member of the movement, joking, “I was part of the Tea Party before it was cool!” She explained that the role of Americans for Prosperity was to help “educate” Tea Party activists on policy details, and to give them “next-step training” after their rallies, so that their political energy could be channelled “more effectively.” And she noted that Americans for Prosperity had provided Tea Party activists with lists of elected officials to target. She said of the Kochs, “They’re certainly our people. David’s the chairman of our board. I’ve certainly met with them, and I’m very appreciative of what they do.”

Venable honored several Tea Party “citizen leaders” at the summit. The Texas branch of Americans for Prosperity gave its Blogger of the Year Award to a young woman named Sibyl West. On June 14th, West, writing on her site, described Obama as the “cokehead in chief.” In an online thread, West speculated that the President was exhibiting symptoms of “demonic possession (aka schizophrenia, etc.).” The summit featured several paid speakers, including Janine Turner, the actress best known for her role on the television series “Northern Exposure.” She declared, “They don’t want our children to know about their rights. They don’t want our children to know about a God!”

During a catered lunch, Venable introduced Ted Cruz, a former solicitor general of Texas, who told the crowd that Obama was “the most radical President ever to occupy the Oval Office,” and had hidden from voters a secret agenda—“the government taking over our economy and our lives.” Countering Obama, Cruz proclaimed, was “the epic fight of our generation!” As the crowd rose to its feet and cheered, he quoted the defiant words of a Texan at the Alamo: “Victory, or death!”

Americans for Prosperity has worked closely with the Tea Party since the movement’s inception. In the weeks before the first Tax Day protests, in April, 2009, Americans for Prosperity hosted a Web site offering supporters “Tea Party Talking Points.” The Arizona branch urged people to send tea bags to Obama; the Missouri branch urged members to sign up for “Taxpayer Tea Party Registration” and provided directions to nine protests. The group continues to stoke the rebellion. The North Carolina branch recently launched a “Tea Party Finder” Web site, advertised as “a hub for all the Tea Parties in North Carolina.”

The anti-government fervor infusing the 2010 elections represents a political triumph for the Kochs. By giving money to “educate,” fund, and organize Tea Party protesters, they have helped turn their private agenda into a mass movement. Bruce Bartlett, a conservative economist and a historian, who once worked at the National Center for Policy Analysis, a Dallas-based think tank that the Kochs fund, said, “The problem with the whole libertarian movement is that it’s been all chiefs and no Indians. There haven’t been any actual people, like voters, who give a crap about it. So the problem for the Kochs has been trying to create a movement.” With the emergence of the Tea Party, he said, “everyone suddenly sees that for the first time there are Indians out there—people who can provide real ideological power.” The Kochs, he said, are “trying to shape and control and channel the populist uprising into their own policies.”

A Republican campaign consultant who has done research on behalf of Charles and David Koch said of the Tea Party, “The Koch brothers gave the money that founded it. It’s like they put the seeds in the ground. Then the rainstorm comes, and the frogs come out of the mud—and they’re our candidates!”

The Kochs and their political operatives declined requests for interviews. Instead, a prominent New York public-relations executive who is close with the Kochs put forward two friends: George Pataki, the former governor of New York, and Mortimer Zuckerman, the publisher and real-estate magnate. Pataki, a Republican who received campaign donations from David Koch, called him “a patriot who cares deeply about his country.” Zuckerman praised David’s “gentle decency” and the “range of his public interests.”

The Republican campaign consultant said of the family’s political activities, “To call them under the radar is an understatement. They are underground!” Another former Koch adviser said, “They’re smart. This right-wing, redneck stuff works for them. They see this as a way to get things done without getting dirty themselves.” Rob Stein, a Democratic political strategist who has studied the conservative movement’s finances, said that the Kochs are “at the epicenter of the anti-Obama movement. But it’s not just about Obama. They would have done the same to Hillary Clinton. They did the same with Bill Clinton. They are out to destroy progressivism.”

Oddly enough, the fiercely capitalist Koch family owes part of its fortune to Joseph Stalin. Fred Koch was the son of a Dutch printer who settled in Texas and ran a weekly newspaper. Fred attended M.I.T., where he earned a degree in chemical engineering. In 1927, he invented a more efficient process for converting oil into gasoline, but, according to family lore, America’s major oil companies regarded him as a threat and shut him out of the industry. Unable to succeed at home, Koch found work in the Soviet Union. In the nineteen-thirties, his company trained Bolshevik engineers and helped Stalin’s regime set up fifteen modern oil refineries. Over time, however, Stalin brutally purged several of Koch’s Soviet colleagues. Koch was deeply affected by the experience, and regretted his collaboration. He returned to the U.S. In the headquarters of his company, Rock Island Oil & Refining, in Wichita, he kept photographs aimed at proving that some of those Soviet refineries had been destroyed in the Second World War. Gus diZerega, a former friend of Charles Koch, recalled, “As the Soviets became a stronger military power, Fred felt a certain amount of guilt at having helped build them up. I think it bothered him a lot.”

In 1958, Fred Koch became one of the original members of the John Birch Society, the arch-conservative group known, in part, for a highly skeptical view of governance and for spreading fears of a Communist takeover. Members considered President Dwight D. Eisenhower to be a Communist agent. In a self-published broadside, Koch claimed that “the Communists have infiltrated both the Democrat and Republican Parties.” He wrote admiringly of Benito Mussolini’s suppression of Communists in Italy, and disparagingly of the American civil-rights movement. “The colored man looms large in the Communist plan to take over America,” he warned. Welfare was a secret plot to attract rural blacks to cities, where they would foment “a vicious race war.” In a 1963 speech that prefigures the Tea Party’s talk of a secret socialist plot, Koch predicted that Communists would “infiltrate the highest offices of government in the U.S. until the President is a Communist, unknown to the rest of us.”

Koch married Mary Robinson, the daughter of a Missouri physician, and they had four sons: Freddie, Charles, and twins, David and William. John Damgard, the president of the Futures Industry Association, was David’s schoolmate and friend. He recalled that Fred Koch was “a real John Wayne type.” Koch emphasized rugged pursuits, taking his sons big-game hunting in Africa, and requiring them to do farm labor at the family ranch. The Kochs lived in a stone mansion on a large compound across from Wichita’s country club; in the summer, the boys could hear their friends splashing in the pool, but they were not allowed to join them. “By instilling a work ethic in me at an early age, my father did me a big favor, although it didn’t seem like a favor back then,” Charles has written. “By the time I was eight, he made sure work occupied most of my spare time.” David Koch recalled that his father also indoctrinated the boys politically. “He was constantly speaking to us children about what was wrong with government,” he told Brian Doherty, an editor of the libertarian magazine Reason, and the author of “Radicals for Capitalism,” a 2007 history of the libertarian movement. “It’s something I grew up with—a fundamental point of view that big government was bad, and imposition of government controls on our lives and economic fortunes was not good.”

David attended Deerfield Academy, in Massachusetts, and Charles was sent to military school. Charles, David, and William all earned engineering degrees at their father’s alma mater, M.I.T., and later joined the family company. Charles eventually assumed control, with David as his deputy; William’s career at the company was less successful. Freddie went to Harvard and studied playwriting at the Yale School of Drama. His father reportedly disapproved of him, and punished him financially. (Freddie, through a spokesperson, denied this.)

In 1967, after Fred Koch died, of a heart attack, Charles renamed the business Koch Industries, in honor of his father. Fred Koch’s will made his sons extraordinarily wealthy. David Koch joked about his good fortune in a 2003 speech to alumni at Deerfield, where, after pledging twenty-five million dollars, he was made the school’s sole “lifetime trustee.” He said, “You might ask: How does David Koch happen to have the wealth to be so generous? Well, let me tell you a story. It all started when I was a little boy. One day, my father gave me an apple. I soon sold it for five dollars and bought two apples and sold them for ten. Then I bought four apples and sold them for twenty. Well, this went on day after day, week after week, month after month, year after year, until my father died and left me three hundred million dollars!”

David and Charles had absorbed their father’s conservative politics, but they did not share all his views, according to diZerega, who befriended Charles in the mid-sixties, after meeting him while browsing in a John Birch Society bookstore in Wichita. Charles eventually invited him to the Kochs’ mansion, to participate in an informal political-discussion group. “It was pretty clear that Charles thought some of the Birch Society was bullshit,” diZerega recalled.

DiZerega, who has lost touch with Charles, eventually abandoned right-wing views, and became a political-science professor. He credits Charles with opening his mind to political philosophy, which set him on the path to academia; Charles is one of three people to whom he dedicated his first book. But diZerega believes that the Koch brothers have followed a wayward intellectual trajectory, transferring their father’s paranoia about Soviet Communism to a distrust of the U.S. government, and seeing its expansion, beginning with the New Deal, as a tyrannical threat to freedom. In an essay, posted on Beliefnet, diZerega writes, “As state socialism failed … the target for many within these organizations shifted to any kind of regulation at all. ‘Socialism’ kept being defined downwards.”

Members of the John Birch Society developed an interest in a school of Austrian economists who promoted free-market ideals. Charles and David Koch were particularly influenced by the work of Friedrich von Hayek, the author of “The Road to Serfdom” (1944), which argued that centralized government planning led, inexorably, to totalitarianism. Hayek’s belief in unfettered capitalism has proved inspirational to many conservatives, and to anti-Soviet dissidents; lately, Tea Party supporters have championed his work. In June, the talk-radio host Glenn Beck, who has supported the Tea Party rebellion, promoted “The Road to Serfdom” on his show; the paperback soon became a No. 1 best-seller on Amazon. (Beck appears to be a fan of the Kochs; in the midst of a recent on-air parody of Al Gore, Beck said, without explanation, “I want to thank Charles Koch for this information.” Beck declined to elaborate on the relationship.)

Charles and David also became devotees of a more radical thinker, Robert LeFevre, who favored the abolition of the state but didn’t like the label “anarchist”; he called himself an “autarchist.” LeFevre liked to say that “government is a disease masquerading as its own cure.” In 1956, he opened an institution called the Freedom School, in Colorado Springs. Brian Doherty, of Reason, told me that “LeFevre was an anarchist figure who won Charles’s heart,” and that the school was “a tiny world of people who thought the New Deal was a horrible mistake.” According to diZerega, Charles supported the school financially, and even gave him money to take classes there.

Throughout the seventies, Charles and David continued to build Koch Industries. In 1980, William, with assistance from Freddie, attempted to take over the company from Charles, who, they felt, had assumed autocratic control. In retaliation, the company’s board, which answered to Charles, fired William. (“Charles runs it all with an iron hand,” Bruce Bartlett, the economist, told me.) Lawsuits were filed, with William and Freddie on one side and Charles and David on the other. In 1983, Charles and David bought out their brothers’ share in the company for nearly a billion dollars. But the antagonism remained, and litigation continued for seventeen more years, with the brothers hiring rival private investigators; in 1990, they walked past one another with stony expressions at their mother’s funeral. Eventually, Freddie moved to Monaco, which has no income tax. He bought historic estates in France, Austria, and elsewhere, filling them with art, antiques, opera scores, and literary manuscripts. William founded his own energy company, Oxbow, and turned to yachting; he spent an estimated sixty-five million dollars to win the America’s Cup, in 1992.

With Charles as the undisputed chairman and C.E.O., Koch Industries expanded rapidly. Roger Altman, who heads the investment-banking firm Evercore, told me that the company’s performance has been “beyond phenomenal.” Charles remained in Wichita, with his wife and two children, guarding his privacy while supporting community charities. David moved to New York City, where he is an executive vice-president of the company and the C.E.O. of its Chemical Technology Group. A financial expert who knows Koch Industries well told me, “Charles is the company. Charles runs it.” David, described by associates as “affable” and “a bit of a lunk,” enjoyed for years the life of a wealthy bachelor. He rented a yacht in the South of France and bought a waterfront home in Southampton, where he threw parties that the Web site New York Social Diary likened to an “East Coast version of Hugh Hefner’s soirées.” In 1996, he married Julia Flesher, a fashion assistant. They live in a nine-thousand-square-foot duplex at 740 Park Avenue, with their three children. Though David’s manner is more cosmopolitan, and more genial, than that of Charles, Brian Doherty, who has interviewed both brothers, couldn’t think of a single issue on which the brothers disagreed.

As their fortunes grew, Charles and David Koch became the primary underwriters of hard-line libertarian politics in America. Charles’s goal, as Doherty described it, was to tear the government “out at the root.” The brothers’ first major public step came in 1979, when Charles persuaded David, then thirty-nine, to run for public office. They had become supporters of the Libertarian Party, and were backing its Presidential candidate, Ed Clark, who was running against Ronald Reagan from the right. Frustrated by the legal limits on campaign donations, they contrived to place David on the ticket, in the Vice-Presidential slot; upon becoming a candidate, he could lavish as much of his personal fortune as he wished on the campaign. The ticket’s slogan was “The Libertarian Party has only one source of funds: You.” In fact, its primary source of funds was David Koch, who spent more than two million dollars on the effort.

Many of the ideas propounded in the 1980 campaign presaged the Tea Party movement. Ed Clark told The Nation that libertarians were getting ready to stage “a very big tea party,” because people were “sick to death” of taxes. The Libertarian Party platform called for the abolition of the F.B.I. and the C.I.A., as well as of federal regulatory agencies, such as the Securities and Exchange Commission and the Department of Energy. The Party wanted to end Social Security, minimum-wage laws, gun control, and all personal and corporate income taxes; it proposed the legalization of prostitution, recreational drugs, and suicide. Government should be reduced to only one function: the protection of individual rights. William F. Buckley, Jr., a more traditional conservative, called the movement “Anarcho-Totalitarianism.”

That November, the Libertarian ticket received only one per cent of the vote. The brothers realized that their brand of politics didn’t sell at the ballot box. Charles Koch became openly scornful of conventional politics. “It tends to be a nasty, corrupting business,” he told a reporter at the time. “I’m interested in advancing libertarian ideas.” According to Doherty’s book, the Kochs came to regard elected politicians as merely “actors playing out a script.” A longtime confidant of the Kochs told Doherty that the brothers wanted to “supply the themes and words for the scripts.” In order to alter the direction of America, they had to “influence the areas where policy ideas percolate from: academia and think tanks.”

After the 1980 election, Charles and David Koch receded from the public arena. But they poured more than a hundred million dollars into dozens of seemingly independent organizations. Tax records indicate that in 2008 the three main Koch family foundations gave money to thirty-four political and policy organizations, three of which they founded, and several of which they direct. The Kochs and their company have given additional millions to political campaigns, advocacy groups, and lobbyists. The family’s subterranean financial role has fuelled suspicion on the left; Lee Fang, of the liberal blog ThinkProgress, has called the Kochs “the billionaires behind the hate.”

Only the Kochs know precisely how much they have spent on politics. Public tax records show that between 1998 and 2008 the Charles G. Koch Charitable Foundation spent more than forty-eight million dollars. The Claude R. Lambe Charitable Foundation, which is controlled by Charles Koch and his wife, along with two company employees and an accountant, spent more than twenty-eight million. The David H. Koch Charitable Foundation spent more than a hundred and twenty million. Meanwhile, since 1998 Koch Industries has spent more than fifty million dollars on lobbying. Separately, the company’s political-action committee, KochPAC, has donated some eight million dollars to political campaigns, more than eighty per cent of it to Republicans. So far in 2010, Koch Industries leads all other energy companies in political contributions, as it has since 2006. In addition, during the past dozen years the Kochs and other family members have personally spent more than two million dollars on political contributions. In the second quarter of 2010, David Koch was the biggest individual contributor to the Republican Governors Association, with a million-dollar donation. Other gifts by the Kochs may be untraceable; federal tax law permits anonymous personal donations to politically active nonprofit groups.

In recent decades, members of several industrial dynasties have spent parts of their fortunes on a conservative agenda. In the nineteen-eighties, the Olin family, which owns a chemicals-and-manufacturing conglomerate, became known for funding right-leaning thinking in academia, particularly in law schools. And during the nineties Richard Mellon Scaife, a descendant of Andrew Mellon, spent millions attempting to discredit President Bill Clinton. Ari Rabin-Havt, a vice-president at the Democratic-leaning Web site Media Matters, said that the Kochs’ effort is unusual, in its marshalling of corporate and personal funds: “Their role, in terms of financial commitments, is staggering.”

Of course, Democrats give money, too. Their most prominent donor, the financier George Soros, runs a foundation, the Open Society Institute, that has spent as much as a hundred million dollars a year in America. Soros has also made generous private contributions to various Democratic campaigns, including Obama’s. But Michael Vachon, his spokesman, argued that Soros’s giving is transparent, and that “none of his contributions are in the service of his own economic interests.” The Kochs have given millions of dollars to nonprofit groups that criticize environmental regulation and support lower taxes for industry. Gus diZerega, the former friend, suggested that the Kochs’ youthful idealism about libertarianism had largely devolved into a rationale for corporate self-interest. He said of Charles, “Perhaps he has confused making money with freedom.”

Some critics have suggested that the Kochs’ approach has subverted the purpose of tax-exempt giving. By law, charitable foundations must conduct exclusively nonpartisan activities that promote the public welfare. A 2004 report by the National Committee for Responsive Philanthropy, a watchdog group, described the Kochs’ foundations as being self-serving, concluding, “These foundations give money to nonprofit organizations that do research and advocacy on issues that impact the profit margin of Koch Industries.”

The Kochs have gone well beyond their immediate self-interest, however, funding organizations that aim to push the country in a libertarian direction. Among the institutions that they have subsidized are the Institute for Justice, which files lawsuits opposing state and federal regulations; the Institute for Humane Studies, which underwrites libertarian academics; and the Bill of Rights Institute, which promotes a conservative slant on the Constitution. Many of the organizations funded by the Kochs employ specialists who write position papers that are subsequently quoted by politicians and pundits. David Koch has acknowledged that the family exerts tight ideological control. “If we’re going to give a lot of money, we’ll make darn sure they spend it in a way that goes along with our intent,” he told Doherty. “And if they make a wrong turn and start doing things we don’t agree with, we withdraw funding.”

The Kochs’ subsidization of a pro-corporate movement fulfills, in many ways, the vision laid out in a secret 1971 memo that Lewis Powell, then a Virginia attorney, wrote two months before he was nominated to the Supreme Court. The antiwar movement had turned its anger on defense contractors, such as Dow Chemical, and Ralph Nader was leading a public-interest crusade against corporations. Powell, writing a report for the U.S. Chamber of Commerce, urged American companies to fight back. The greatest threat to free enterprise, he warned, was not Communism or the New Left but, rather, “respectable elements of society”—intellectuals, journalists, and scientists. To defeat them, he wrote, business leaders needed to wage a long-term, unified campaign to change public opinion.

Charles Koch seems to have approached both business and politics with the deliberation of an engineer. “To bring about social change,” he told Doherty, requires “a strategy” that is “vertically and horizontally integrated,” spanning “from idea creation to policy development to education to grassroots organizations to lobbying to litigation to political action.” The project, he admitted, was extremely ambitious. “We have a radical philosophy,” he said.

In 1977, the Kochs provided the funds to launch the nation’s first libertarian think tank, the Cato Institute. According to the Center for Public Integrity, between 1986 and 1993 the Koch family gave eleven million dollars to the institute. Today, Cato has more than a hundred full-time employees, and its experts and policy papers are widely quoted and respected by the mainstream media. It describes itself as nonpartisan, and its scholars have at times been critical of both parties. But it has consistently pushed for corporate tax cuts, reductions in social services, and laissez-faire environmental policies.

When President Obama, in a 2008 speech, described the science on global warming as “beyond dispute,” the Cato Institute took out a full-page ad in the Times to contradict him. Cato’s resident scholars have relentlessly criticized political attempts to stop global warming as expensive, ineffective, and unnecessary. Ed Crane, the Cato Institute’s founder and president, told me that “global-warming theories give the government more control of the economy.”

Cato scholars have been particularly energetic in promoting the Climategate scandal. Last year, private e-mails of climate scientists at the University of East Anglia, in England, were mysteriously leaked, and their exchanges appeared to suggest a willingness to falsify data in order to buttress the idea that global warming is real. In the two weeks after the e-mails went public, one Cato scholar gave more than twenty media interviews trumpeting the alleged scandal. But five independent inquiries have since exonerated the researchers, and nothing was found in their e-mails or data to discredit the scientific consensus on global warming.

Nevertheless, the controversy succeeded in spreading skepticism about climate change. Even though the National Oceanic and Atmospheric Administration recently issued a report concluding that the evidence for global warming is unequivocal, more Americans are convinced than at any time since 1997 that scientists have exaggerated the seriousness of global warming. The Kochs promote this statistic on their company’s Web site but do not mention the role that their funding has played in fostering such doubt.

In a 2002 memo, the Republican political consultant Frank Luntz wrote that so long as “voters believe there is no consensus about global warming within the scientific community” the status quo would prevail. The key for opponents of environmental reform, he said, was to question the science—a public-relations strategy that the tobacco industry used effectively for years to forestall regulation. The Kochs have funded many sources of environmental skepticism, such as the Heritage Foundation, which has argued that “scientific facts gathered in the past 10 years do not support the notion of catastrophic human-made warming.” The brothers have given money to more obscure groups, too, such as the Independent Women’s Forum, which opposes the presentation of global warming as a scientific fact in American public schools. Until 2008, the group was run by Nancy Pfotenhauer, a former lobbyist for Koch Industries. Mary Beth Jarvis, a vice-president of a Koch subsidiary, is on the group’s board.

Naomi Oreskes, a professor of history and science studies at the University of California, San Diego, is the co-author of “Merchants of Doubt,” a new book that chronicles various attempts by American industry to manipulate public opinion on science. She noted that the Kochs, as the heads of “a company with refineries and pipelines,” have “a lot at stake.” She added, “If the answer is to phase out fossil fuels, a different group of people are going to be making money, so we shouldn’t be surprised that they’re fighting tooth and nail.”

David Koch told New York that he was unconvinced that global warming has been caused by human activity. Even if it has been, he said, the heating of the planet will be beneficial, resulting in longer growing seasons in the Northern Hemisphere. “The Earth will be able to support enormously more people because far greater land area will be available to produce food,” he said.

In the mid-eighties, the Kochs provided millions of dollars to George Mason University, in Arlington, Virginia, to set up another think tank. Now known as the Mercatus Center, it promotes itself as “the world’s premier university source for market-oriented ideas—bridging the gap between academic ideas and real-world problems.” Financial records show that the Koch family foundations have contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization. “It’s ground zero for deregulation policy in Washington,” Rob Stein, the Democratic strategist, said. It is an unusual arrangement. “George Mason is a public university, and receives public funds,” Stein noted. “Virginia is hosting an institution that the Kochs practically control.”

The founder of the Mercatus Center is Richard Fink, formerly an economist. Fink heads Koch Industries’ lobbying operation in Washington. In addition, he is the president of the Charles G. Koch Charitable Foundation, the president of the Claude R. Lambe Charitable Foundation, a director of the Fred C. and Mary R. Koch Foundation, and a director and co-founder, with David Koch, of the Americans for Prosperity Foundation.

Fink, with his many titles, has become the central nervous system of the Kochtopus. He appears to have supplanted Ed Crane, the head of the Cato Institute, as the brothers’ main political lieutenant. Though David remains on the board at Cato, Charles Koch has fallen out with Crane. Associates suggested to me that Crane had been insufficiently respectful of Charles’s management philosophy, which he distilled into a book called “The Science of Success,” and trademarked under the name Market-Based Management, or M.B.M. In the book, Charles recommends instilling a company’s corporate culture with the competitiveness of the marketplace. Koch describes M.B.M. as a “holistic system” containing “five dimensions: vision, virtue and talents, knowledge processes, decision rights and incentives.” A top Cato Institute official told me that Charles “thinks he’s a genius. He’s the emperor, and he’s convinced he’s wearing clothes.” Fink, by contrast, has been far more embracing of Charles’s ideas. (Fink, like the Kochs, declined to be interviewed.)

At a 1995 conference for philanthropists, Fink adopted the language of economics when speaking about the Mercatus Center’s purpose. He said that grant-makers should use think tanks and political-action groups to convert intellectual raw materials into policy “products.”

The Wall Street Journal has called the Mercatus Center “the most important think tank you’ve never heard of,” and noted that fourteen of the twenty-three regulations that President George W. Bush placed on a “hit list” had been suggested first by Mercatus scholars. Fink told the paper that the Kochs have “other means of fighting [their] battles,” and that the Mercatus Center does not actively promote the company’s private interests. But Thomas McGarity, a law professor at the University of Texas, who specializes in environmental issues, told me that “Koch has been constantly in trouble with the E.P.A., and Mercatus has constantly hammered on the agency.” An environmental lawyer who has clashed with the Mercatus Center called it “a means of laundering economic aims.” The lawyer explained the strategy: “You take corporate money and give it to a neutral-sounding think tank,” which “hires people with pedigrees and academic degrees who put out credible-seeming studies. But they all coincide perfectly with the economic interests of their funders.”

In 1997, for instance, the E.P.A. moved to reduce surface ozone, a form of pollution caused, in part, by emissions from oil refineries. Susan Dudley, an economist who became a top official at the Mercatus Center, criticized the proposed rule. The E.P.A., she argued, had not taken into account that smog-free skies would result in more cases of skin cancer. She projected that if pollution were controlled it would cause up to eleven thousand additional cases of skin cancer each year.

In 1999, the District of Columbia Circuit Court took up Dudley’s smog argument. Evaluating the E.P.A. rule, the court found that the E.P.A. had “explicitly disregarded” the “possible health benefits of ozone.” In another part of the opinion, the court ruled, 2-1, that the E.P.A. had overstepped its authority in calibrating standards for ozone emissions. As the Constitutional Accountability Center, a think tank, revealed, the judges in the majority had previously attended legal junkets, on a Montana ranch, that were arranged by the Foundation for Research on Economics and the Environment—a group funded by Koch family foundations. The judges have claimed that the ruling was unaffected by their attendance.

“Ideas don’t happen on their own,” Matt Kibbe, the president of FreedomWorks, a Tea Party advocacy group, told me. “Throughout history, ideas need patrons.” The Koch brothers, after helping to create Cato and Mercatus, concluded that think tanks alone were not enough to effect change. They needed a mechanism to deliver those ideas to the street, and to attract the public’s support. In 1984, David Koch and Richard Fink created yet another organization, and Kibbe joined them. The group, Citizens for a Sound Economy, seemed like a grassroots movement, but according to the Center for Public Integrity it was sponsored principally by the Kochs, who provided $7.9 million between 1986 and 1993. Its mission, Kibbe said, “was to take these heavy ideas and translate them for mass America… . We read the same literature Obama did about nonviolent revolutions—Saul Alinsky, Gandhi, Martin Luther King. We studied the idea of the Boston Tea Party as an example of nonviolent social change. We learned we needed boots on the ground to sell ideas, not candidates.” Within a few years, the group had mobilized fifty paid field workers, in twenty-six states, to rally voters behind the Kochs’ agenda. David and Charles, according to one participant, were “very controlling, very top down. You can’t build an organization with them. They run it.”

Around this time, the brothers faced a political crisis. In 1989, the Senate Select Committee on Indian Affairs investigated their business and released a scathing report accusing Koch Oil of “a widespread and sophisticated scheme to steal crude oil from Indians and others through fraudulent mismeasuring.” The Kochs admitted that they had improperly taken thirty-one million dollars’ worth of crude oil, but said that it had been accidental. Charles Koch told committee investigators that oil measurement is “a very uncertain art.”

To defend its reputation, Koch Industries hired Robert Strauss, then a premier Washington lobbyist; the company soon opened an office in the city. A grand jury was convened to investigate the allegations, but it eventually disbanded, without issuing criminal charges. According to the Senate report, after the committee hearings Koch operatives delved into the personal lives of committee staffers, even questioning an ex-wife. Senate investigators were upset by the Kochs’ tactics. Kenneth Ballen, the counsel to the Senate committee, said, “These people have amassed such unaccountable power!”

By 1993, when Bill Clinton became President, Citizens for a Sound Economy had become a prototype for the kind of corporate-backed opposition campaigns that have proliferated during the Obama era. The group waged a successful assault on Clinton’s proposed B.T.U. tax on energy, for instance, running advertisements, staging media events, and targeting opponents. And it mobilized anti-tax rallies outside the Capitol—rallies that NPR described as “designed to strike fear into the hearts of wavering Democrats.” Dan Glickman, a former Democratic congressman from Wichita, who supported the B.T.U. tax, recalled, “I’d been in Congress eighteen years. The Kochs actually engaged against me and funded my opponent. They used a lot of resources and effort—their employees, too.” Glickman suffered a surprise defeat. “I can’t prove it, but I think I was probably their victim,” he said.

The Kochs continued to disperse their money, creating slippery organizations with generic-sounding names, and this made it difficult to ascertain the extent of their influence in Washington. In 1990, Citizens for a Sound Economy created a spinoff group, Citizens for the Environment, which called acid rain and other environmental problems “myths.” When the Pittsburgh Post-Gazette investigated the matter, it discovered that the spinoff group had “no citizen membership of its own.”

In 1997, another Senate investigation began looking into what a minority report called “an audacious plan to pour millions of dollars in contributions into Republican campaigns nationwide without disclosing the amount or source,” in order to evade campaign-finance laws. A shell corporation, Triad Management, had paid more than three million dollars for attack ads in twenty-six House races and three Senate races. More than half of the advertising money came from an obscure nonprofit group, the Economic Education Trust. The Senate committee’s minority report suggested that “the trust was financed in whole or in part by Charles and David Koch of Wichita, Kansas.” The brothers were suspected of having secretly paid for the attack ads, most of which aired in states where Koch Industries did business. In Kansas, where Triad Management was especially active, the funds may have played a decisive role in four of six federal races. The Kochs, when asked by reporters if they had given the money, refused to comment. In 1998, however, the Wall Street Journal confirmed that a consultant on the Kochs’ payroll had been involved in the scheme. Charles Lewis, of the Center for Public Integrity, described the scandal as “historic. Triad was the first time a major corporation used a cutout”—a front operation—“in a threatening way. Koch Industries was the poster child of a company run amok.”

During the Clinton Administration, the energy industry faced increased scrutiny and regulation. In the mid-nineties, the Justice Department filed two lawsuits against Koch Industries, claiming that it was responsible for more than three hundred oil spills, which had released an estimated three million gallons of oil into lakes and rivers. The penalty was potentially as high as two hundred and fourteen million dollars. In a settlement, Koch Industries paid a record thirty-million-dollar civil fine, and agreed to spend five million dollars on environmental projects.

In 1999, a jury found Koch Industries guilty of negligence and malice in the deaths of two Texas teen-agers in an explosion that resulted from a leaky underground butane pipeline. (In 2001, the company paid an undisclosed settlement.) And in the final months of the Clinton Presidency the Justice Department levelled a ninety-seven-count indictment against the company, for covering up the discharge of ninety-one tons of benzene, a carcinogen, from its refinery in Corpus Christi, Texas. The company was liable for three hundred and fifty million dollars in fines, and four Koch employees faced up to thirty-five years in prison. The Koch Petroleum Group eventually pleaded guilty to one criminal charge of covering up environmental violations, including the falsification of documents, and paid a twenty-million-dollar fine. David Uhlmann, a career prosecutor who, at the time, headed the environmental-crimes section at the Justice Department, described the suit as “one of the most significant cases ever brought under the Clean Air Act.” He added, “Environmental crimes are almost always motivated by economics and arrogance, and in the Koch case there was a healthy dose of both.”

During the 2000 election campaign, Koch Industries spent some nine hundred thousand dollars to support the candidacies of George W. Bush and other Republicans. During the Bush years, Koch Industries and other fossil-fuel companies enjoyed remarkable prosperity. The 2005 energy bill, which Hillary Clinton dubbed the Dick Cheney Lobbyist Energy Bill, offered enormous subsidies and tax breaks for energy companies. The Kochs have cast themselves as deficit hawks, but, according to a study by Media Matters, their companies have benefitted from nearly a hundred million dollars in government contracts since 2000.

In 2004, Citizens for a Sound Economy was accused of illegitimately throwing its weight behind Bush’s reëlection. The group’s Oregon branch had attempted to get Ralph Nader on the Presidential ballot, in order to dilute Democratic support for John Kerry. Critics argued that it was illegal for a tax-exempt nonprofit organization to donate its services for partisan political purposes. (A complaint was filed with the Federal Election Commission; it was dismissed.)

That year, internal rivalries at Citizens for a Sound Economy caused the organization to split apart. David Koch and Fink started a new group, Americans for Prosperity, and they hired Tim Phillips to run it. Phillips was a political veteran who had worked with Ralph Reed, the evangelical leader and Republican activist, co-founding Century Strategies, a campaign-consulting company that became notorious for its ties to the disgraced lobbyist Jack Abramoff. Phillips’s online biography describes him as an expert in “grasstops” and “grassroots” political organizing. The Kochs’ choice of Phillips signalled an even greater toughness. The conservative operative Grover Norquist, who is known for praising “throat slitters” in politics, called Phillips “a grownup who can make things happen.”

Last year, Phillips told the Financial Times that Americans for Prosperity had only eight thousand registered members. Currently, its Web site claims that the group has “1.2 million activists.” Whatever its size, the Kochs’ political involvement has been intense; a former employee of the Cato Institute told me that Americans for Prosperity “was micromanaged by the Kochs.” And the brothers’ investment may well have paid off: Americans for Prosperity, in concert with the family’s other organizations, has been instrumental in disrupting the Obama Presidency.

In January, 2008, Charles Koch wrote in his company newsletter that America could be on the verge of “the greatest loss of liberty and prosperity since the 1930s.” That October, Americans for Prosperity held a conference of conservative operatives at a Marriott hotel outside Washington. Erick Erickson, the editor-in-chief of the conservative blog RedState.com, took the lectern, thanked David Koch, and vowed to “unite and fight … the armies of the left!” Soon after Obama assumed office, Americans for Prosperity launched “Porkulus” rallies against Obama’s stimulus-spending measures. Then the Mercatus Center released a report claiming that stimulus funds had been directed disproportionately toward Democratic districts; eventually, the author was forced to correct the report, but not before Rush Limbaugh, citing the paper, had labelled Obama’s program “a slush fund,” and Fox News and other conservative outlets had echoed the sentiment. (Phil Kerpen, the vice-president for policy at Americans for Prosperity, is a contributor to the Fox News Web site. Another officer at Americans for Prosperity, Walter Williams, often guest-hosts for Limbaugh.)

Americans for Prosperity also created an offshoot, Patients United Now, which organized what Phillips has estimated to be more than three hundred rallies against health-care reform. At one rally, an effigy of a Democratic congressman was hung; at another, protesters unfurled a banner depicting corpses from Dachau. The group also helped organize the “Kill the Bill” protests outside the Capitol, in March, where Democratic supporters of health-care reform alleged that they were spat on and cursed at. Phillips was a featured speaker.

Americans for Prosperity has held at least eighty events targeting cap-and-trade legislation, which is aimed at making industries pay for the air pollution that they create. Speakers for the group claimed, with exaggeration, that even back-yard barbecues and kitchen stoves would be taxed. The group was also involved in the attacks on Obama’s “green jobs” czar, Van Jones, and waged a crusade against international climate talks. Casting his group as a champion of ordinary workers who would be hurt by environmentalists, Phillips went to Copenhagen last year and staged a protest outside the United Nations conference on climate change, declaring, “We’re a grassroots organization… . I think it’s unfortunate when wealthy children of wealthy families … want to send unemployment rates in the United States up to twenty per cent.”

Grover Norquist, who holds a weekly meeting for conservative leaders in Washington, including representatives from Americans for Prosperity, told me that last summer’s raucous rallies were pivotal in undermining Obama’s agenda. The Republican leadership in Congress, he said, “couldn’t have done it without August, when people went out on the streets. It discouraged deal-makers”—Republicans who might otherwise have worked constructively with Obama. Moreover, the appearance of growing public opposition to Obama affected corporate donors on K Street. “K Street is a three-billion-dollar weathervane,” Norquist said. “When Obama was strong, the Chamber of Commerce said, ‘We can work with the Obama Administration.’ But that changed when thousands of people went into the street and ‘terrorized’ congressmen. August is what changed it. Now that Obama is weak, people are getting tough.”

As the first anniversary of Obama’s election approached, David Koch came to the Washington area to attend a triumphant Americans for Prosperity gathering. Obama’s poll numbers were falling fast. Not a single Republican senator was working with the Administration on health care, or much else. Pundits were writing about Obama’s political ineptitude, and Tea Party groups were accusing the President of initiating “a government takeover.” In a speech, Koch said, “Days like today bring to reality the vision of our board of directors when we started this organization, five years ago.” He went on, “We envisioned a mass movement, a state-based one, but national in scope, of hundreds of thousands of American citizens from all walks of life standing up and fighting for the economic freedoms that made our nation the most prosperous society in history… . Thankfully, the stirrings from California to Virginia, and from Texas to Michigan, show that more and more of our fellow-citizens are beginning to see the same truths as we do.”

While Koch didn’t explicitly embrace the Tea Party movement that day, more recently he has come close to doing so, praising it for demonstrating the “powerful visceral hostility in the body politic against the massive increase in government power, the massive efforts to socialize this country.” Charles Koch, in a newsletter sent to his seventy thousand employees, compared the Obama Administration to the regime of the Venezuelan strongman Hugo Chávez. The Kochs’ sense of imperilment is somewhat puzzling. Income inequality in America is greater than it has been since the nineteen-twenties, and since the seventies the tax rates of the wealthiest have fallen more than those of the middle class. Yet the brothers’ message has evidently resonated with voters: a recent poll found that fifty-five per cent of Americans agreed that Obama is a socialist.

Americans for Prosperity, meanwhile, has announced that it will spend an additional forty-five million dollars before the midterm elections, in November. Although the group is legally prohibited from directly endorsing candidates, it nonetheless plans to target some fifty House races and half a dozen Senate races, staging rallies, organizing door-to-door canvassing, and running ads aimed at “educating voters about where candidates stand.”

Though the Kochs have slowed Obama’s momentum, their larger political battle is far from won. Richard Fink, interviewed by FrumForum.com this spring, said, “If you look at where we’ve gone from the year 2000 to now, with the expansion of government spending and a debt burden that threatens to bankrupt the country, it doesn’t look very good at all.” He went on, “It looks like the infrastructure that was built and nurtured has not carried the day.” He suggested that the Kochs needed “to get more into the practical, day-to-day issues of governing.”

In 1991, David Koch was badly injured in a plane crash in Los Angeles. He was the sole passenger in first class to survive. As he was recovering, a routine physical exam led to the discovery of prostate cancer. Koch received treatment, settled down, started a family, and reconsidered his life. As he told Portfolio, “When you’re the only one who survived in the front of the plane and everyone else died—yeah, you think, ‘My God, the good Lord spared me for some greater purpose.’ My joke is that I’ve been busy ever since, doing all the good work I can think of, so He can have confidence in me.”

Koch began giving spectacularly large donations to the arts and sciences. And he became a patron of cancer research, focussing on prostate cancer. In addition to his gifts to Sloan-Kettering, he gave fifteen million dollars to New York-Presbyterian Hospital, a hundred and twenty-five million to M.I.T. for cancer research, twenty million to Johns Hopkins University, and twenty-five million to the M. D. Anderson Cancer Center, in Houston. In response to his generosity, Sloan-Kettering gave Koch its Excellence in Corporate Leadership Award. In 2004, President Bush named him to the National Cancer Advisory Board, which guides the National Cancer Institute.

Koch’s corporate and political roles, however, may pose conflicts of interest. For example, at the same time that David Koch has been casting himself as a champion in the fight against cancer, Koch Industries has been lobbying to prevent the E.P.A. from classifying formaldehyde, which the company produces in great quantities, as a “known carcinogen” in humans.

Scientists have long known that formaldehyde causes cancer in rats, and several major scientific studies have concluded that formaldehyde causes cancer in human beings—including one published last year by the National Cancer Institute, on whose advisory board Koch sits. The study tracked twenty-five thousand patients for an average of forty years; subjects exposed to higher amounts of formaldehyde had significantly higher rates of leukemia. These results helped lead an expert panel within the National Institutes of Health to conclude that formaldehyde should be categorized as a known carcinogen, and be strictly controlled by the government. Corporations have resisted regulations on formaldehyde for decades, however, and Koch Industries has been a large funder of members of Congress who have stymied the E.P.A., requiring it to defer new regulations until more studies are completed.

Koch Industries became a major producer of the chemical in 2005, after it bought Georgia-Pacific, the paper and wood-products company, for twenty-one billion dollars. Georgia-Pacific manufactures formaldehyde in its chemical division, and uses it to produce various wood products, such as plywood and laminates. Its annual production capacity for formaldehyde is 2.2 billion pounds. Last December, Traylor Champion, Georgia-Pacific’s vice-president of environmental affairs, sent a formal letter of protest to federal health authorities. He wrote that the company “strongly disagrees” with the N.I.H. panel’s conclusion that formaldehyde should be treated as a known human carcinogen. David Koch did not recuse himself from the National Cancer Advisory Board, or divest himself of company stock, while his company was directly lobbying the government to keep formaldehyde on the market. (A board spokesperson said that the issue of formaldehyde had not come up.)

James Huff, an associate director at the National Institute for Environmental Health Sciences, a division of the N.I.H., told me that it was “disgusting” for Koch to be serving on the National Cancer Advisory Board: “It’s just not good for public health. Vested interests should not be on the board.” He went on, “Those boards are very important. They’re very influential as to whether N.C.I. goes into formaldehyde or not. Billions of dollars are involved in formaldehyde.”

Harold Varmus, the director of the National Cancer Institute, knows David Koch from Memorial Sloan-Kettering, which he used to run. He said that, at Sloan-Kettering, “a lot of people who gave to us had large business interests. The one thing we wouldn’t tolerate in our board members is tobacco.” When told of Koch Industries’ stance on formaldehyde, Varmus said that he was “surprised.”

The David H. Koch Hall of Human Origins, at the Smithsonian’s National Museum of Natural History, is a multimedia exploration of the theory that mankind evolved in response to climate change. At the main entrance, viewers are confronted with a giant graph charting the Earth’s temperature over the past ten million years, which notes that it is far cooler now than it was ten thousand years ago. Overhead, the text reads, “HUMANS EVOLVED IN RESPONSE TO A CHANGING WORLD.” The message, as amplified by the exhibit’s Web site, is that “key human adaptations evolved in response to environmental instability.” Only at the end of the exhibit, under the headline “OUR SURVIVAL CHALLENGE,” is it noted that levels of carbon dioxide are higher now than they have ever been, and that they are projected to increase dramatically in the next century. No cause is given for this development; no mention is made of any possible role played by fossil fuels. The exhibit makes it seem part of a natural continuum. The accompanying text says, “During the period in which humans evolved, Earth’s temperature and the amount of carbon dioxide in the atmosphere fluctuated together.” An interactive game in the exhibit suggests that humans will continue to adapt to climate change in the future. People may build “underground cities,” developing “short, compact bodies” or “curved spines,” so that “moving around in tight spaces will be no problem.”

Such ideas uncannily echo the Koch message. The company’s January newsletter to employees, for instance, argues that “fluctuations in the earth’s climate predate humanity,” and concludes, “Since we can’t control Mother Nature, let’s figure out how to get along with her changes.” Joseph Romm, a physicist who runs the Web site ClimateProgress.org, is infuriated by the Smithsonian’s presentation. “The whole exhibit whitewashes the modern climate issue,” he said. “I think the Kochs wanted to be seen as some sort of high-minded company, associated with the greatest natural-history and science museum in the country. But the truth is, the exhibit is underwritten by big-time polluters, who are underground funders of action to stop efforts to deal with this threat to humanity. I think the Smithsonian should have drawn the line.”

Cristián Samper, the museum’s director, said that the exhibit is not about climate change, and described Koch as “one of the best donors we’ve had, in my tenure here, because he’s very interested in the content, but completely hands off.” He noted, “I don’t know all the details of his involvement in other issues.”

The Kochs have long depended on the public’s not knowing all the details about them. They have been content to operate what David Koch has called “the largest company that you’ve never heard of.” But with the growing prominence of the Tea Party, and with increased awareness of the Kochs’ ties to the movement, the brothers may find it harder to deflect scrutiny. Recently, President Obama took aim at the Kochs’ political network. Speaking at a Democratic National Committee fund-raiser, in Austin, he warned supporters that the Supreme Court’s recent ruling in the Citizens United case—which struck down laws prohibiting direct corporate spending on campaigns—had made it even easier for big companies to hide behind “groups with harmless-sounding names like Americans for Prosperity.” Obama said, “They don’t have to say who, exactly, Americans for Prosperity are. You don’t know if it’s a foreign-controlled corporation”—or even, he added, “a big oil company.”


via newyorker.com

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When it comes to improving public understanding of tax policy, nothing has been more troubling than the deeply flawed coverage of the Wisconsin state employees’ fight over collective bargaining.

Economic nonsense is being reported as fact in most of the news reports on the Wisconsin dispute, the product of a breakdown of skepticism among journalists multiplied by their lack of understanding of basic economic principles.

Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans. Accepting Gov. Walker’ s assertions as fact, and failing to check, created the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not.

Out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers. How can that be? Because the “contributions” consist of money that employees chose to take as deferred wages – as pensions when they retire – rather than take immediately in cash. The same is true with the health care plan. If this were not so a serious crime would be taking place, the gift of public funds rather than payment for services.

Thus, state workers are not being asked to simply “contribute more” to Wisconsin’ s retirement system (or as the argument goes, “pay their fair share” of retirement costs as do employees in Wisconsin’ s private sector who still have pensions and health insurance). They are being asked to accept a cut in their salaries so that the state of Wisconsin can use the money to fill the hole left by tax cuts and reduced audits of corporations in Wisconsin. The labor agreements show that the pension plan money is part of the total negotiated compensation. The key phrase, in those agreements I read (emphasis added), is: “The Employer shall contribute on behalf of the employee.” This shows that this is just divvying up the total compensation package, so much for cash wages, so much for paid vacations, so much for retirement, etc.

The collective bargaining agreements for prosecutors, cops and scientists are all on-line. Reporters should sit down, get a cup of coffee and read them. And then they could take what they learn, and what the state website says about fringe benefits, to Gov. Walker and challenge his assumptions.

And they should point out the very first words the state has posted at a web page on careers as a state employee (emphasis added):
  •  
      The fringe benefits offered to State of Wisconsin employees are significant, and are a valuable
    partof an individual’s compensation package.

Coverage of the controversy in Wisconsin over unions collective bargaining, and in particular pension plan contributions, contains repeated references to the phrase “contribute more.”

The key problem is that journalists are assuming that statements by Gov. Scott Walker have basis in fact. Journalists should never accept the premise of a political statement, but often they do, which explains why so much of our public policy is at odds with well-established principles.

The question journalists should be asking is “who contributes” to the state of Wisconsin’ s pension and health care plans. The fact is that all of the money going into these plans belongs to the workers because it is part of the compensation of the state workers. The fact is that the state workers negotiate their total compensation, which they then divvy up between cash wages, paid vacations, health insurance and, yes, pensions. Since the Wisconsin government workers collectively bargained for their compensation, all of the compensation they have bargained for is part of their pay and thus only the workers contribute to the pension plan. This is an indisputable fact.

Not every news report gets it wrong, but the narrative of the journalistic herd has now been set and is slowly hardening into a concrete falsehood that will distort public understanding of the issue for years to come unless journalists en masse correct their mistakes. From the Associated Press and The New York Times to Wisconsin’s biggest newspaper, and every broadcast report I have heard, reporters again and again and again have written as fact what is nonsense. Compared to tax, this economic issue that reporters have been mishandling is simple. But if journalists cannot grasp the economics of this issue, then how can we hope to have an intelligent debate about tax policy?

Dedicated tax journalists like my colleagues Lee Sheppard and Martin Sullivan at Tax Analysts have exposed, and explained in laymen terms, the arcane rules underlying the important tax debates and controversies that affect corporate and individual taxpayers. But the mainstream press is not even getting basic labor economics right, a much simpler matter. Among the reports that failed to scrutinize Gov. Walker’ s assertions about state workers’ contributions and thus got it wrong is one by A.G. Sulzberger, the presumed future publisher of The New York Times, who is now a national correspondent. He wrote that the Governor “would raise the amount government workers pay into their pension to 5.8 percent of their pay, from less than 1 percent now.”

Wrong. The workers currently pay 100 percent from their compensation package, but a portion of it is deducted from their paychecks and a portion of it goes directly to the pension plan. One correct way to describe this is that the governor “wants to further reduce the cash wages that state workers currently take home in their paychecks.” Most state workers already divert 5 percent of their cash wages to the pension plan, an official state website shows.

Gov. Walker says that he wants them to “contribute more” via deductions from their paychecks. But since the workers already contribute 100 percent of the money going to the pension plan the real issue is changing the accounting for this to reduce cash wages. Once the state has settled on the compensation package for its workers then how the cash flows is merely accounting for how the costs are divvied up. If the workers got higher cash pay and diverted all of the pension contributions from their pay it would be the same amount compared to having the state pay directly into the pension funds.

By falsely describing the situation the governor has sought to create the issue as one of the workers getting a favor. The Club for Growth, in broadcast ads, blatantly lies by saying “state workers haven’t had to sacrifice. They pay next to nothing for their pensions.” We expect ideological marketing organizations to shade the truth and even outright lie, as the Club for Growth has done. But journalists are supposed to check the facts, not adopt lies as truths.

Having had the good fortune long ago to train the presumed future publisher of the Los Angeles Times I focused on making sure he understood why careful checking of facts and questioning assumptions was a commercial, as well as journalistic value, for which reporters should be properly compensated because it made the paper reliable and thus more valuable to its owners. (Sadly my trainee later died and the paper was sold.) Having worked at The New York Times I can tell you how editors might try to excuse this error. They call it “shorthand.” But shorthand that is wrong is, in short, still wrong. So, Mr. Sulzberger, take the initiative and correct your error. Doing so, you would set an example that will become newsroom lore long after you retire.

Here are some other examples of inaccurate reporting of the issue, followed by a critique and a simple solution.
  • Todd Richmond of the Associated Press reported on Feb. 20 that the governor wants state workers “to contribute more to health care and pension costs.” Richmond has repeatedly used variations of that phrase.
  • On Feb. 18, Michael Cooper and Katherine Q. Seelye of The New York Times reported that the legislation sponsored by Gov. Walker would “require workers to contribute more to their pension and health care plans.”
  • Jane Ford-Stewart of the Milwaukee Journal-Sentinel’ s on-line community news service reported Feb. 22 on “an effort by Gov. Scott Walker to get state employees to contribute more toward their health insurance and pensions so that the costs are more in line with contributions by workers in the private sector.”
  • Politifact.com has a Wisconsin operation and it was also among those that got it wrong – 100 percent dead wrong — because it assumed the facts as stated by Gov. Walker and failed to question the underlying premise. Further, contrived assumptions make it is easy for the perpetrators of the misrepresentation to point to data that support a false claim, something Politifact missed entirely, on at least two occasions, in proclaiming false statements to be true.

Given how many journalists rely on Politifact to check political assertions, instead of doing their own research, this is, by far, the inaccuracy likely to have the greatest (or most damaging effect) on subsequent reporting. (Examples of Politifact’ s inaccurate assessments can be found here and also here.) Again, the money the state “contributes” is actually part of the compensation that has been negotiated with state workers in advance so it is their money that they choose to take as pension payments in the future rather than cash wages or other benefits today.

Next, journalists should ask how elected officials are treated by the pension system. The pay of elected leaders is set by the legislature without collective bargaining. Here it is also true that any money withheld from paychecks to fund the pension plans comes from the employee (the elected leaders) but this is not the result of a negotiated compensation package so there is a colorable argument that pension benefits that are received by elected leaders beyond the wages deducted from those employees’ compensation package are a gift from taxpayers. The payroll deduction –- again, a mere accounting measure - - was 5 percent last year for “general participants,” official state documents show, a rate that is 56 percent higher than the 3.2 percent rate for “elected leaders.”

The rates were adjusted for 2011 and now the elected leaders pay 3.9 percent, still well below what the “general participants” collectively bargained to divert from their cash wages through this accounting device. The rest of the money going into the plan is also wages the workers diverted, it just does not show up in paychecks as a line item, the same way that half of Social Security and Medicare taxes do not show up on paychecks, but are still part of total compensation to each worker in those plans.

I am being repetitive on purpose – experience supervising others has taught me you usually have to teach something three to seven times before it sinks in. Some management texts also make this point. That is not to say that the state workers make too much or too little. It is to say that journalists as a class are fundamentally getting the facts wrong by not understanding compensation.

Simplistic coverage has also resulted in numerous reports that Wisconsin state workers make more than workers in Wisconsin’ s private business sector. This is true only if you compare walnuts to tuna fish. State governments (indeed almost all governments) tend to hire people with college educations, including advanced degrees. Overall, private employers in all states tend to hire people with less education. More education means more pay because there is more skill required.

America has roughly the same number of food preparers, who can be high school dropouts, as registered nurses, who require a college education. But the nurses make on average $66,500, compared to just $18,100 for the food service workers. The food service workers collectively made less than $50 billion, while the registered nurses made almost $172 billion in 2009, my analysis of the official data shows. Business and government hire both food service workers and registered nurses, but you are much more likely to work for the government as a registered nurse than as a food preparation worker.

When you control for the education required to be a prosecutor or nurse, government workers get total compensation that is less than those in the corporate sector. This may reflect the fact that fewer and fewer private sector workers are in unions, about 7 percent at last count. As economic theory predicts, as fewer workers can bargain collectively the overall wage level falls. Effectively wiping out public employee unions would only add to downward pressure on wages, standard economic theory shows. On the other hand, unionized state workers run a much smaller risk of going through bouts of joblessness, an economic benefit. Numerous studies indicate that public workers, including those in Wisconsin, make about 5 percent less than private sector workers when you control for education. But what is the lifetime cost, and risk, of episodic joblessness among comparable private sector workers? Is that cost equal to 5 percent or so of lifetime earnings, which would even out the differential? I have yet to read an analysis of that issueby an academic economist, much less a journalist, so I do not know the truth of that question.

What Gov. Walker has achieved in selling a false assumption as fact occurs because journalists failed to follow what I call the first and second rules of journalism. This problem is pervasive in coverage of tax and budget issues, where so much nonsense gets reported as fact by the Washington Press corps that I have stopped filing away all but the most egregious errors – and still I copy a story or three every day to use in lectures on getting it right and not writing nonsense. And what are these two rules for journalists?
    Rule One: Check it out. Be so skeptical that if your mother says she loves you, check it out.

    Rule Two: Cross check again and again until you not only know the facts, but can put them in proper context and understand all sides so well that their perspective gets proper weight and lecture, or as I like to say, everyone recognizes their oar in the water.


Deadlines may make Rule Two difficult, and often impossible, in writing the first rough draft of history. We are now in the umpteenth draft and the initial mistake keeps getting repeated, as so often happens when a big story brings a herd, until it becomes accepted as unassailable truth.

The reason that falsehoods are transformed into the public’ s common knowledge via inaccurate reporting is simple. When editors or producers back home get an account that differs from what the news herd says they raise questions and often delete unique and accurate insights. But if a reporter just repeats what everyone else is saying it usually sails unchallenged to print or airtime even when it is untrue.

Then there is this: How the compensation packages of state workers get divided up is not a matter of tax burdens. Only how much the state workers get paid is a matter of tax burdens. There are two other important aspects to this, which go to the heart of tax policy and why our country is in for a long stay in the economic doldrums.

Traditional or defined benefit pension plans, properly administered, increase economic efficiency, while the newer defined contribution plans have high costs whether done one at a time through Individual Retirement Accounts or in group plans like 401(k)s. Efficiency means that more of the money workers contribute to their pensions - - money that could have been taken as cash wages today - - ends up in the pockets of retirees, not securities dealers, trustees and others who administer and invest the money. Compared to defined benefit pension plans, 401(k) plans are vastly more expensive in investing, administration and other costs.

Individually managed accounts like 401(k)s violate a basic tenet of economics – specialization increases economic gains. That is why the average investor makes much less than the market return, studies by Morningstar show. This goes to Adam Smith’s famous insight in 1776 about specialization increasing wealth: when pins were made in full by each worker each could make only a few each day, but when one person draws the wire, another cuts, another fashions the point, etc., the output rises to tens of thousands of pins and their price falls from dear to cheap.

Expecting individuals to be experts at investing their retirement money in defined contribution plans — instead of pooling the money so professional investors can manage the money as is done in defined benefit plans — is not sound economics. The concept, at its most basic, is buying wholesale instead of retail. Wholesale is cheaper for the buyers. That is, it saves taxpayers money.

The Wisconsin State Investment Board manages about $74.5 billion for an all-in cost of $224 million. That is a cost of about 30-cents per $100, which is good but not great. However it is far less than many defined contribution plans, where costs are often $1 or more per $100.

So, I hope that Mr. Sulzberger in particular will take the initiative to correct the inaccurate reporting and show the way to other reporters, for the betterment of both America and his family’ s investment And I hope that all reporters will start questioning the assumption in the governor’ s position instead of assuming his statements are infallible. My larger hope is that reporters, editors and producers will apply this thinking when covering taxes and taxation, the system by which we distribute the burdens of living in and sustaining this, the Second American Republic.

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Wisconsin — The Wisconsin Assembly early Friday passed a bill that would strip most public workers of their collective bargaining rights – the first significant action on the new Republican governor’s plan.

The vote put an end to three straight days of punishing debate, but the political standoff over the bill is far from over. The measure now goes to the Senate, where minority Democrats have been missing for a week, preventing a vote in that chamber.

No one knows when – or if – the Senate Democrats will return from their hideout in Illinois. Republicans who control the chamber sent state troopers out looking for them at their homes on Thursday, but they turned up nothing.

Gov. Scott Walker’s proposal contains a number of provisions he says are designed to fill the state’s $137 million deficit and lay the groundwork for fixing a projected $3.6 billion shortfall in the upcoming 2011-13 budget. The flashpoint is language that would strip almost all public sector workers of their right to collectively bargain benefits and work conditions.

Democrats and unions see the measure as an attack on workers’ rights and an attempt to cripple union support for Democrats. Unions have said they would be willing to accept a provision that would increase workers’ contributions to their pensions and health care, provided they could still bargain collectively. But Walker has refused to compromise.

Tens of thousands of people have jammed the state Capitol since last week to protest, pounding on drums and chanting so loudly that police who are providing security have resorted to ear plugs. Hundreds have taken to sleeping in the building overnight, dragging in air mattresses and blankets.

While Senate Democrats fled to prevent a vote, Assembly Democrats had been filibustering.

After more than 60 hours in which Democrats threw out dozens of amendments and delivered rambling speeches, Republicans halted debate early Friday. In a matter of seconds, they had approved the bill. Only a few Democrats realized what was going on and managed to vote before the roll was closed.

The Democrats rose from their seats and rushed at the Republicans shouting, “Shame!” as the Republicans exited the chamber.

“I’m incensed. I’m shocked,” said Rep. John Richards, D-Milwaukee. “What a terrible, terrible day for Wisconsin.

Republicans refused to speak to reporters, though Majority Leader Scott Suder did issue a written statement.

“The vote we took wasn’t the easy thing to do, but it was the right thing to do,” Suder, R-Abbotsford, said.

The governor has said that if the bill does not pass by Friday, the state will miss a deadline to refinance $165 million of debt and will be forced to start issuing layoff notices next week. However, the deadline may not as strict as he says.

The nonpartisan Legislative Fiscal Bureau said earlier this week that the debt refinancing could be pushed back as late as Tuesday to achieve the savings Walker wants. Based on a similar refinancing in 2004, about two weeks are needed after the bill becomes law to complete the deal. That means if the bill is adopted by the middle of next week, the state can still meet a March 16 deadline, the Fiscal Bureau said.

Democratic Sen. Jon Erpenbach said he and his colleagues wouldn’t return until Walker compromised.

Frustrated by the delay, Senate Republican Majority Leader Scott Fitzgerald, Jeff Fitzgerald’s brother, ordered state troopers to find the missing Democrats, but they came up empty. Wisconsin law doesn’t allow police to arrest the lawmakers, but Fitzgerald said he hoped the show of authority would have pressured them to return.

Erpenbach, who was in the Chicago area, said all 14 senators remained outside of Wisconsin.

“It’s not so much the Democrats holding things up,” Erpenbach said. “It’s really a matter of Gov. Walker holding things up.”

via newsone.com

Shouting “Shame!” on Wisconsin Assembly floor before “union-busting” budget bill vote

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We The People of the USA Need To Thank The Wisconsin 14

IT’S NOT ABOUT THE WISCONSIN BUDGET!

IT ABOUT WAR ON DEMOCRACY!

Jay Bookman
In Wisconsin battle, it’s not about the budget

9:29 am February 21, 2011, by Jay You still can’t find a single Democratic state senator in the entire state of Wisconsin. All 14 of them remain in self-imposed exile in Illinois, and as long as they stay there, they can continue to prevent passage of a highly controversial bill that would sharply reduce benefits for teachers and other government employees and, more importantly, gut public labor unions.

It’s that second aspect of the bill that has drawn national and even international attention. As the Milwaukee Journal-Sentinel reports: The bill would require most public workers to pay half their pension costs – typically 5.8% of pay for state workers – and in many cases at least 12% of their health care costs. Union leaders have said they are willing to accept those concessions, which total nearly $330 million through June 2013.

Under the bill, the unions could not bargain over anything but wages, would have to hold annual elections to keep their organizations intact and would lose the ability to have union dues deducted from state paychecks. Employees would no longer have to automatically pay union dues, but could choose whether they want to do so. In other words, the unions are willing to swallow the economic demands. If givebacks are necessary to help balance the state budget in a time of crisis, the employees say they’re willing to do their part.

However, Gov. Scott Walker has refused to accept that offer and also refuses to negotiate with labor or Democrats. He doesn’t see this merely as a chance to win an important battle against organized labor; he sees it as an opportunity to win the entire war, forever, by stripping state unions of most of their power and influence. And if he succeeds, the implications for the labor movement nationwide would be profound. At the moment, only five states prohibit collective bargaining by teachers and other public employees, as the map below demonstrates. Georgia is one of the five. (Note: The right to bargain collectively does not imply the legal right to strike in many states.)

As I’ve written in my last blog,What we are seeing here today is WAR. Not the blood and guts war that the Republicans would prefer but a war never-the-less on Democracy. And if We-The-People lose this war our America will never be the same.

Since SCOTUS (5/4) ruled blatantly in favor of Corporations (in the Citizen United ruling on corporate campaign spending), by 5 conservative judges who followed their Republican political ideologies in lockstep, against the people and for the corporations, a plutocracy has taken shape. This ruling has emboldened the GOP to openly oppose any democratic rules in which we live under. If they succeed in destroying our Democracy altogether we will find that life ruled by the wealthiest amongst us to be much oppressed and not worth living. Think Slavery, it’s not farfetched it’s REAL!

This is real (although it seems like it should be just a bad dream) We-The-People are about to lose that status and become We-The-Slaves to Corporate/Wealthy Interests. It is so obvious but so many will deliberately refuse to see it just to prove a point. It won’t be the rich and powerful that takes us down it will be the foolish. tb “A fool contributes nothing worth hearing and takes offense at everything.” Aristotle

On Facebook this comment:

What do people do when they know they are wrong? Run and Hide…..

thinkingblue comment back” The Wisconsin 14 DEMS are not running, they are not hiding (not in the sense that the conservatives would like to believe). They are doing what anyone who fights for freedom will do when they are outnumbered … They went underground and are working even harder for the rights of the people! I am so proud to see democrats act like Democrats… right now they are all We-The-People have to fight for us.
A bit of history about fighting for the rights of others:
The Underground Railroad was an informal network of secret routes and safe houses used by 19th-century black slaves in the United States to escape to Free States and Canada with the aid of abolitionists and allies who were sympathetic to their cause. The term is also applied to the abolitionists, black and white, free and enslaved, who aided the slaves that sought freedom…
ABOLITIONIST: a person who favors the abolition of any law or practice deemed harmful to society:
MORE HERE

Thank Wisconsin’s courageous state senators who have joined with protesters to block the Republican attack on public employees. CLICK HERE

Subject: Wisconsin’s courageous state senators deserve our thanks. Dear Friend,

Democratic state senators in Wisconsin have been forced to flee the state in order to stop Governor Walker’s radical attack on worker’s rights. Now, Gov. Walker has ordered state police to hunt them down, and force their return to Madison for a vote on his bill.

The fight in Wisconsin affects all of us. And this is a crucial moment to show solidarity with the state senators as they continue their courageous stand to protect workers. I just signed a petition telling Wisconsin’s Democratic state senators they have my support. You should sign it to. Click below to say thanks.

http://act.credoaction.com/campaign/we_support_wisconsin/?r_by=-2120708-96Ci0nx&rc=paste1

Please sign the petition, CREDO action, has reached 61% of our NEW goal of 50,000 signers! (30,726)

PS: I just came across a video that SAYS IT ALL! (humor but also very real, too real!)

NOW VIEW: Rachel Maddow - BAKE SALES VS. BILLIONAIRES

If the Democrats Don’t Start Being Democrats America Will Become A Plutocracy!

setstats

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Thousands of protesters outside the capital in Madison, WI, Friday night. / AP PHOTO / Wisconsin State Journal

New Jersey labor unions are planning a Statehouse rally on Friday to show their support for the Wisconsin public employees fighting to protect bargaining rights.

But the rally here is not all about the standoff between Wisconsin Gov. Scott Walker and his state’s workers. New Jersey labor leaders say they’re gearing up for when they negotiate new contracts with Gov. Chris Christie.

A message on the Communication Workers of America New Jersey website urges union members to attend the rally, adding the warning: “For those public workers who think this is a completely separate issue and Wisconsin isn’t like New Jersey, Chris Christie said he actually supports Walker, and the similarities between the situations in both states are alarming.”

Christie last week said of Walker: “I support him.”

He also said he’s looking forward to union negotiations here.

“I’m for vigorous collective bargaining. I can’t wait for the process to start,” Christie said.

The union message asked workers to wear red this week.

“Especially on Friday,” the message said.

The rally is scheduled for noon Friday at the Statehouse. It will be attended by National AFL-CIO President Richard Trumka and the union’s state president, Charles Wowkanech.

A spokesman for Wowkanech said, “Hundreds of union members including a couple of Wisconsin union members are expected to attend.”

The Wisconsin protests began more than a week ago. In addition to the proposal to restrict bargaining rights, Walker wants public workers to make larger contributions to their pensions and health benefits — two areas where Christie also advocates making changes in New Jersey worker contracts.

New Jersey union leaders said public workers everywhere are taking the brunt for the economic slump.

“We are all Wisconsin public workers this week,” said Hetty Rosenstein, New Jersey’s CWA state director. “They’re trying to blame middle class workers for the financial mess that Wall Street caused. It’s more politics as usual, and we’re ready to fight back.”

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Sign Our Petition: We Stand with Wisconsin and Ohio

As AFSCME members, we stand in solidarity with Wisconsin and Ohio AFSCME members. Wisconsin is the birthplace of AFSCME, and the attack against public service workers there — or in Ohio, or wherever our sisters and brothers are threatened — is an attack against AFSCME members everywhere.

As public service employees, we understand the need to do more with less. Across the country we have agreed to significant concessions including wage freezes, furloughs, and benefit reductions.

As Americans, we are appalled by the extreme actions being taken by the governors in those states. Their radical proposals would not just gut public services and jobs, they would take away the rights of workers — and effectively eliminate public employee unions.

We are strong. We are united.

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