Main News; National Desk
Trade Groups Join Bush on Social Security; Though individual firms are wary, nearly
100 associations answer a White House battle cry.
Tom Hamburger
Times Staff Writer
1842 words
11 April 2005
Los Angeles Times
Home Edition
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Copyright 2005 The Los Angeles Times
WASHINGTON
Snow swirled outside the White House as presidential advisor Karl Rove strode into Room 450 of
the Old Executive Office Building, just across from his West Wing office.
Four weeks had elapsed since his boss, President Bush, embarked on a national campaign to
overhaul Social Security -- and the reception was as chilly as the Washington winter. Polls
showed the public wary, Republicans were balking on Capitol Hill, and businesses that had
agreed to lend support were dropping out under pressure from labor unions.
The White House had summoned dozens of the nation's most influential business lobbyists so
Rove could personally deliver the message that Social Security was the president's No. 1
domestic priority -- and introduce the committee charged with building support for it.
Even in a business community still divided on the issue, the private talking-to penetrated deeply.
Since that Feb. 24 meeting, nearly 100 state and national trade associations -- representing
bankers and bakers, restaurateurs and road builders -- have joined Compass, the Coalition for
the Modernization and Protection of America's Social Security.
It was clear "from folks who looked you right in the face that this president is serious ... and that
anything business can do to help on this journey will be important. And it will be noted," recalled
Dirk Van Dongen, president of the National Assn. of Wholesaler-Distributors and one of those
charged with recruiting members for the committee.
But while the business associations convey support to the White House -- and funnel money to
the Social Security campaign -- individual companies that make up the trade groups are for the
most part declining to take a public position.
A Los Angeles Times telephone survey this month of the 20 largest U.S. companies found only
two willing to publicly support the president's proposal on Social Security.
The companies are caught between the clearly expressed desires of the White House and the
fierce opposition of labor, which is pressing business to renounce the Bush plan. That struggle is
occurring against the backdrop of the proposal's poor showing in most public opinion polls,
especially among older Americans.
American businesses have traditionally stayed out of partisan policy debates except on issues
that directly affect them. Business trade groups typically lobby for legislation involving tax,
regulatory and healthcare questions that go directly to the bottom line, while avoiding hotbutton social issues.
The solvency of Social Security is a business concern, but the element of Bush's plan that would
let workers divert part of their payroll taxes to private investment accounts would not
necessarily address that. Many business executives say privately they are more interested in
other things: strengthening the dollar, and reducing healthcare costs, taxes and the trade
deficit.
Nonetheless, the Bush White House wants to harness business on the Social Security issue to
communicate with workers, fund ad campaigns and counter labor's muscle.
Among the half dozen or so leading groups supporting the Bush plan are two coalitions made up
almost entirely of trade associations: the Alliance for Worker Retirement Security, based in
Washington, and Compass, the coalition that saw its ranks swell after Rove gave it a push at the
Feb. 24 meeting.
And their attention to grass-roots activities coincides with a tighter focus from the Republican
National Committee.
Under its new chairman, former Rove aide Ken Mehlman, the RNC is becoming more of a fulltime campaign operation dedicated to building support for the Bush agenda, said RNC
spokeswoman Tracey Schmitt.
Each Friday, the RNC hosts representatives from the Business Roundtable -- made up of chief
executives from 160 of the country's best-known corporations -- Compass and aligned
organizations, along with staff from Rove's office.
At these meetings, RNC staff tally their efforts to build support for the president's plan in key
congressional districts. Compass offers similar campaign-style reports. The group's executive
director, Derrick Max, said in an interview that his organization had generated 300,000
telephone calls to voters in key states on Social Security, organized 150 town hall meetings on
the topic and is active in 70 congressional districts. It plans to spend $18 million backing the
president's initiative.
At the Business Roundtable, communications director Tita Freeman says her organization
supports Bush's initiative not to side with the GOP but because "it is the right thing to do for
future generations. We are joining with any and every group that believes that this needs to be
addressed now," she said.
Nonetheless, the Republican tilt has caught the wary eye of Democratic Party leaders. Senate
Minority Leader Harry Reid of Nevada and his staff have met with a few of the leading trade
groups and questioned their close association with the White House campaign.
The trade group executives say they do not have a partisan bias and that their members are
simply united behind a desire to fix Social Security. For example, today the National Assn. of
Manufacturers plans to announce that "98% of board members surveyed said they favored
personal accounts" as part of Social Security reform.
But there are splits in the unified business front that the associations like to present.
Last week, one of the huge investment firms that makes up the Securities Industry Assn. asked
that the trade group "cease all funding" of groups such as Compass because they are viewed by
some as "politically motivated and polarizing" and do "not represent the collective views of the
SIA constituents."
In a letter written to the association's directors, the chief executive of Sanford C. Bernstein &
Co. asked that the trade association board "formally issue a statement of complete neutrality"
on Social Security reform, including private accounts, when it meets this week.
"Given the divergence of views among the member firms and the complete lack of unanimity
that we have, it seems inadvisable to maintain our recent posture," wrote the CEO, Lisa Shalett,
who represents the company's parent firm, Alliance Capital Management, on the association
board.
Her letter, provided to The Times by another leading financial services firm, says that Alliance
Capital believes "we serve our clients by devoting our energies to reacting to and interpreting
public policy, and not by aggressively attempting to shape the course of public debate."
Despite conventional wisdom that Wall Street embraces the plan for personal accounts because
it would enrich its firms, many are uninterested. That is partly because it would directly benefit
only a handful of brokerages that specialize in small investors -- and because the issue is so
laden with controversy and any financial crisis in the system is still years away.
When Treasury Secretary John W. Snow visited a prominent New York investment house
recently to talk up Social Security, a top executive asked why the White House was putting
Social Security, which does not face a crisis for years, ahead of more immediate worries such as
the weak dollar and the swollen federal deficit.
Snow's only response, according to one person who was in the room, was to acknowledge the
import of those issues but reiterate that Social Security was the president's priority.
Despite such stories of ambivalence, the president of the Business Roundtable, John J.
Castellani, says that a Social Security overhaul, including private investment accounts, has been
a longtime priority for his organization.
Although only a few of his member companies speak openly in favor of the idea, Castellani says
the position was arrived at by consensus years ago. The Roundtable supports and helps run
Compass, which he thinks has made progress in educating the public on the subject.
Critics contend, however, that organizations such as Compass are virtually an arm of the
Republican Party and that contributions to it are, in effect, campaign contributions.
"This is the new soft money," says Bruce Freed of the Center for Political Accountability, which
encourages corporate transparency and board oversight of political giving. "Donations made by
corporations through trade associations are becoming a very serious problem.
"This spending can have a profound effect on political outcomes -- and sometimes on a
company's bottom line and reputation. Yet trade associations and their corporate members don't
have to disclose where the money comes from or how it is spent."
With the Social Security discussion launching such an array of difficult questions, many
companies are seeking a low profile on the issue.
In The Times' survey of leading corporations, one of the two companies that that said it backed
the Bush initiative was pharmaceutical giant Pfizer Inc. Its chairman and CEO, Henry A.
McKinnell Jr., is chairman of the Business Roundtable.
Before Rove stepped up the pressure, Pfizer had issued statements to unions and a news
organization saying it had no position on Bush's proposed restructuring of Social Security. Last
week, the company said its previous statements were wrong and that it had supported the
Business Roundtable approach all along.
Pfizer's annual meeting in San Diego later this month will take up a resolution from Teamsters
Union shareholders calling for disclosure of the company's spending on some political causes.
"If a company contributes to organizations that do political work, like the Alliance or Compass,
the union would like to see that information disclosed," said Louis Malizia, assistant director of
the Teamsters' office of corporate affairs.
Pfizer executives recommend that shareholders reject the resolution. The company says it
discloses contributions to election campaigns but doesn't think those standards apply to
legislative issues.
Officials at many unions, including AFSCME and the AFL-CIO, say they are fighting Bush's
proposal and corporate backing of it because they see it as part of an ongoing erosion of
traditional retirement benefits. The unions and several allied groups, including AARP, plan to
spend millions to convince the public and employers that private accounts are not the way to
reform Social Security.
The threat of union action has made many Wall Street firms wary. Some union pension fund
trustees, who manage portfolios in the billions of dollars, have said they would consider an
investment company's position on Social Security, among other factors, when they review funds
managers.
Max, the executive director of Compass as well as the Alliance for Worker Retirement Security,
said that he "underestimated the impact that individual companies would feel for lending their
name" to the personal accounts cause.
Given the controversy the issue engenders, he is considering inviting only trade associations to
join his organizations because they give individual companies a buffer.
"If you are a CEO, you don't want your product bought and sold based on a political issue," he
said.
*
Times staff writers Sara K. Clarke and Elise Castelli contributed to this report.
Main News; National Desk
THE DELAY INDICTMENT; DeLay Helped Cement GOP Ties to Lobbyists; His pressure
helped turn business groups into a key part of the party's political machine.
Tom Hamburger and Peter Wallsten
Times Staff Writers
1392 words
30 September 2005
Los Angeles Times
Home Edition
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Copyright 2005 The Los Angeles Times
WASHINGTON
Whether or not Rep. Tom DeLay (R-Texas) returns to power, few industry lobbyists in the nation's
capital are likely to forget the lesson he once taught the electronic manufacturers: Support the
Republican Party -- or else.
That industry felt DeLay's wrath in the fall of 1998, when one of its leading trade associations hired
a Democrat as its top lobbyist. DeLay and his staff temporarily blocked one of the industry's
favorite measures from coming to a vote.
His slap at the Electronic Industries Alliance led to a private reprimand from the House Ethics
Committee, and even some Republicans called his approach heavy-handed. But DeLay was not
deterred.
And the beleaguered former House majority leader has left a lasting mark on the capital: turning
the Washington lobbying establishment into a critical cog of the Republican political machine.
Seven years after the dust-up with the electronics group, many on K Street -- home to
Washington's network of business associations and lobbying shops -- believe they can no longer
divide political contributions evenly between the parties. Instead, they see their success in Congress
riding more on how hard they work to provide money and political muscle to the Republican Party
and its quest for a long-lasting conservative majority.
Although DeLay's indictment this week on a Texas campaign finance charge renews questions
about the ethics of mixing corporate interests and electoral politics, his well-cemented relationship
with business is likely to benefit the GOP into the future.
"DeLay deserves credit for bringing about a significant change" in the way Washington works, said
Richard Hohlt, a veteran lobbyist for banking and other interests. "It takes a whip and a chair to
control K Street, and DeLay had both and used them," said Hohlt.
"He was the tip of the spear," said Stuart Roy, a former DeLay aide who now works as a consultant.
"Before we were in the majority, the Republican leadership was reticent" to go too far in telling
trade groups what to do, he said. "Now it is the mind-set of the leadership: If you are supposed to
be pro-business, that should be reflected in your political giving and your political activity."
Indeed, although DeLay's indictment Wednesday forced him to step down, at least temporarily, as
House majority leader, the same view of K Street has been adopted by the person replacing him in
that role, Rep. Roy Blunt (R-Mo.). Blunt was assigned by DeLay several years ago to take over the
monitoring of K Street, and some lobbyists say he has surpassed DeLay in getting businesses to
mobilize on behalf of the conservative agenda.
The revolution in corporate behavior began with the Republican takeover of Congress in 1994, when
DeLay was among the most outspoken of several GOP leaders demanding that business groups
support the party -- not only by contributing to Republican campaigns but by helping GOP leaders
round up voters and selecting party faithful to run trade associations.
When the National Assn. of Securities Dealers hired a former Clinton administration official, John
Hilley, as a vice president in 1998, DeLay told the industry publication Traders Magazine that the
hiring was a "very big mistake."
"For an organization to hire a highly partisan Democrat gives me great concern, because I won't
deal with such organizations," he said. (Hilley stayed and was later promoted.)
Now, prominent Republicans head some of the city's most influential trade groups: Former Michigan
Gov. John Engler leads the National Assn. of Manufacturers, and former Commerce Secretary Don
Evans, a friend of President Bush, runs the Financial Services Forum. Marc Racicot, a former
Montana governor who was once chairman of the Republican National Committee, leads the
American Insurance Assn.
Lobbyists who have their offices in the glass-and-steel buildings that line K Street say that DeLay's
effort has had real impact.
Many of the Republicans who have taken lobbying and trade association jobs recently owe their
positions to GOP benefactors in Congress. About two dozen former DeLay staffers work as
lobbyists. In these jobs, they often have access to funds they can use as donations to campaigns
and conservative causes. The corporate world also supplies contacts in congressional districts that
can help Republican candidates with grass-roots campaigns.
The Bush administration has sought to take advantage of these ties in building unified support for
judicial nominees, the president's Social Security proposal and, more recently, immigration overhaul
-- issues that in the past did not draw much trade association activity. DeLay and other GOP
leaders used business contacts to push for passage in 2003 of the new Medicare prescription drug
benefit, which was a priority of the pharmaceutical industry.
Before Republicans won control of the executive and legislative branches in 2000, Washington
lobbying had been studiously bipartisan. Contributions from many industry groups were close to
evenly divided between Republicans and Democrats.
But DeLay and his allies had been working several years to change that. To keep pressure on
businesses to shift toward the GOP, DeLay and his allies in 1995 compiled a list of the 300 or so
largest business-affiliated political action committees, along with a breakdown of their campaign
donations by party. Lobbyists were told their ranking, and DeLay pressed those low on the list to
give more to Republicans. Over time, contribution patterns changed.
The accounting profession, for example, gave more than half of its campaign donations to
Democrats in 1994. So far this year, 71% has gone to Republicans, according to the Center for
Responsive Politics, a nonpartisan research organization. The insurance industry increased the share
of donations to Republicans from 55% to 68% in the past decade. Energy interests increased the
share going to Republicans from 64% in 1994 to 75% a decade later.
To monitor business hiring in Washington, DeLay and conservative activist Grover Norquist
launched the "K Street Project," which tracks K Street jobs and who fills them.
Norquist assigns a full-time staffer to keep up with hiring changes, which are then posted on a
website. This week, for example, the site says that a liquor manufacturer has tapped a new
corporate affairs chief who has made contributions to Democrats, including Senate Minority Leader
Harry Reid (D-Nev.). A separate item reports that a Washington lobbying firm has promoted an
executive who had donated to the Bush-Cheney 2004 campaign fund.
Norquist said House and Senate GOP leaders consulted the database to review hiring decisions by K
Street firms.
There are cases when firms hire Democrats for top jobs. But they often pay a price.
Last year, conservatives fumed when the Motion Picture Assn. of America hired Bill Clinton's former
Agriculture secretary, Dan Glickman, to run its Washington office. Afterward, Republicans removed
tax-relief provisions for the film industry from a pending tax bill. Later, Glickman hired prominent
Republicans, including a senior aide to House Speaker J. Dennis Hastert.
The electronics alliance in 1998 learned there was a cost to hiring a former Democratic lawmaker,
but it was not fatal to the alliance's interests. Its legislation eventually passed, and it kept the
Democrat as its top lobbyist.
A campaign finance activist, Fred Wertheimer, president of Democracy 21, agreed that DeLay's
approach had penetrated deeply.
"It is a reality in the psyche of Washington lobbyists," he said.
But Wertheimer said he believed the indictment of DeLay and a separate investigation of a DeLay
friend, lobbyist Jack Abramoff, could lead to an abrupt change in that way of thinking.
DeLay's efforts, he said, "have institutionalized a process of public officials demanding private
companies hire lobbyists of their choice, and lobbyists must be required to pay in return. But that
system under DeLay's leadership has become so blatant and brazen that I do not expect it to last in
its current form."