THE K STREET STRATEGY

July 23, 2011

The power of special interest money funneled through K Street lobbying firms--and the revolving door between these firms and federal officials--affect the lives of every American. Three student readings (followed by questions & suggested activities) show the process at work.

The new prescription drug bill may not be at the top of your students' concerns. But the issue demonstrates clearly how the power of special interest money funneled through K Street lobbying firms—and the revolving door between these firms and federal officials—affect the lives of every American. They also cast a flood light on the real-life legislative process, far beyond the usual text account of how a bill becomes a law. The three student readings below show this process at work.

For further materials on the power of money, lobbyists and the revolving door, see "Follow the Money," especially reading 4 on the military-industrial-congressional complex, on this website.

 


Student Reading 1:

The K Street Strategy

How does a bill become a law? In most social studies books the steps include:

1. A representative or senator introduces a bill and it is assigned a number.

2. The bill is referred to the appropriate committee for study and action.

3. The committee studies and discusses the bill, after which it is reported out to the full House and Senate where, after debate, the legislators vote.

4. House and Senate conference committees meet to iron out differences in the bills approved by the two houses and send a single version to each chamber for a final vote.

5. The president signs the bill into law.

But these steps omit K Street. K Street?

In the alphabet soup of Washington D.C. streets, K Street is just a few blocks north of the White House. If you walk along K, you don't see any famous buildings or statues—just ordinary office buildings. But these buildings house offices for major industry trade associations and lobbying firms. Their business is influencing the United States government in ways not even hinted at in the official legislative process described above.

A "lobby," says Webster's New Collegiate Dictionary, is "a corridor or hall connected with a larger room or series of rooms and used as a passageway or waiting room." In corridors and halls of the Capitol and of federal office buildings in Washington, D.C., lobbyists buttonhole the thousands of officials and other workers who conduct the business of our country.

Of course, lobbyists also meet legislators and other officials in their offices. And at times they do more than talk with them to influence their actions and votes. They sometimes play a major role in writing the very bills representatives and senators introduce in Congress.

In 2005, 34,785 registered lobbyists were hard at work in Washington, D.C. This is more than twice the number registered only a few years ago.

According to the Washington Post: "To the great growth industries of America such as health care and home building add one more: influence peddling. The lobbying boom has been caused by three factors, experts say: rapid growth in government, Republican control of both the White House and Congress, and wide acceptance among corporations that they need to hire professional lobbyists to secure their share of federal benefits." ("The Road to Riches Is Called K Street," Washington Post, 6/22/05)

In 2004, spending on federal lobbying of Congress as well as 220 other federal agencies rose 30% to $2.1 billion. (Congressional Budget Office and Political MoneyLine, a non-partisan service).

Lobbying firms and corporations employ lobbyists who ingratiate themselves with government officials by providing them with sky-box tickets to major sporting events, hosting expensive restaurant dinners for them, flying them to Scotland for golfing junkets, presenting them with handsome gifts. But the biggest and most handsome gifts of the lobbying industry are often large contributions to both political parties for congressional and presidential election campaigns.

Flat-out bribery is not unknown. In 2005 Congressman Randy "Duke" Cunningham (R, CA) pleaded guilty to taking $2 million in bribes from three defense contractors.

What has become known as the K Street strategy has been especially profitable for the Republican Party in recent years. (Although K Street lobbyists do plenty of business with Democrats, the corporate interests the lobbyists represent have a richer relationship with Republicans.)

A key moment came in April 1994 when a corporate lobbyist entered the office of Congressman Tom DeLay (R, TX), the "majority whip," the legislator responsible for discipline on party line votes.

The Washington Post reported: "The Texas congressman was standing at his desk that afternoon, examining a document that listed the amounts and percentages of money that the 400 largest political action committees had contributed to Republicans and Democrats over the last two years. Those who gave heavily to the GOP were labeled 'Friendly,' the others 'Unfriendly.'

"'See, you're in the book,' DeLay said to his visitor, leafing through the list. At first the lobbyist was not sure where his group stood, but DeLay helped clear up his confusion. By the time the lobbyist left the congressman's office, he knew that to be a friend of the Republican leadership his group would have to give the party a lot more money... [DeLay's] motto is an unabashedly blunt interpretation of the dictums of [former House] Speaker Newt Gingrich: 'If you want to play in our revolution, you have to live by our rules.'" ("Speaker and His Directors Make the Cash Flow Right," Washington Post, 11/27/95)

DeLay became the Republican majority leader in the House in 2003. Republicans succeeded in capturing a majority in the House and in the Senate as well as the presidency. As the Republicans solidified their power so did they solidify the rules for lobbying firms if they wanted to influence legislation affecting their clients: (1) Don't hire Democrats, only Republicans; (2) Fill the Republican campaign chest.

For discussion

1. What questions do students have about this reading? How might they be answered?

2. What is a lobbyist? Who employs lobbyists? Why?

3. Why are political campaign contributions essential for successful lobbying? Corporations and lobbying firms frequently contribute to the political campaigns of both the Republicans and the Democrats. Why?

 


Student Reading 2:

Prescription Drugs and the K Street Payoff

"Uniquely in the industrialized world, our government does not regulate the pharmaceutical industry—rather the pharmaceutical industry regulates the government, which is why Americans pay by far the highest prices in the world for the medicines they need."
— Representative Bernie Sanders (Independent, VT)

On December 8, 2003, President Bush signed into law the Medicare Modernization Act of 2003, which is better known to most Americans as the prescription drug law. The bill creates a new drug benefit as part of Medicare, the federal health insurance program that covers all seniors. Under the new law, seniors sign up for drug coverage, choosing from among a panoply of private and public plans.

A White House "fact sheet" declared that the law "...will help create a modern Medicare system, allow for the biggest improvements in senior health care in nearly 40 years, and provide seniors with prescription drug benefits and more choices in health care... But health plans will compete for seniors' business by providing better coverage at affordable prices—helping to control the costs of Medicare by using market-place competition, not government price-setting." (www.whitehouse.gov)

But critics of the prescription drug law ask:

  • why does it subsidize private companies to run the program?
  • why does it forbid the federal government from using its huge purchasing power to negotiate much lower prices with drug companies? This, critics argue, would save money for American taxpayers who subsidize the program and for the seniors who buy the drugs.
  • why does it forbid importing cheaper prescription drugs from Canada?

The answer to all these questions is that the law as it now stands means big profits for the companies running the program and selling the drugs.

For years K Street drug and health insurance lobbyists have been at work in the Capitol. During 2003 alone, the year the Medicare Modernization Act was passed by Congress and signed by the president, drug and health insurance companies and their trade associations spent $141 million for 952 lobbyists (almost two lobbyists for each representative and senator). Between 1998 and 2004 they spent $675 million to lobby 1,600 bills before Congress.

Drug industry political action committees, employees and family members contributed close to $100 million to both Republican and Democratic candidates for the House of Representatives, the Senate and the presidency. Of this money, 69% went to Republicans, 31% to Democrats.

President Bush received $1.5 million. Twenty-one executives and lobbyists from drug and health insurance companies were major fundraisers for the president, becoming "Pioneers" and "Rangers" for collecting $100,000 or $200,000 for his presidential campaigns.

According to a Boston University study, these companies stand to make 61% of the money spent on prescription drugs in the next eight years, to the tune of $139 billion in increased profits.

"We've got a problem here," said Allan Cigler, a political scientist at the University of Kansas. "The growth of lobbying makes even worse than it is already the balance between those with resources and those without resources." ( Washington Post, 6/22/05)

Would legislators who voted for the prescription drug bill and the president who signed it into law have done so even if lobbying firms had not been so generous with their money? President Bush's states his support above for "marketplace competition," a key element in the bill, and his opposition to "government price-setting," which the bill prohibited. The drug and health lobbies strongly favor these views, which are dominant in the Republican Party. Some Democrats hold them, too.

But lobbyists know that gifts and campaign money develop and solidify political support. Why else did the drug and health industries have spent so much money on lobbying in 2003, the year the drug prescription bill was developed, passed, and signed?

Pharmaceutical and health industry lobbyists have been very successful and not just in getting what they wanted in the prescription drug law. Some examples:

  • In 2002 the lobbyists won congressional passage of the Best Pharmaceuticals for Children Act. It provides an extra six months of patent protection during which cheaper generic drugs cannot be sold. The Congressional Budget Office estimates that in the long run the result will be higher drug prices.
  • In 2004 they successfully lobbied Congress to pass the American Jobs Creation Act, which eliminates a tax on foreign income. It is worth billions to pharmaceutical companies, including $17 billion to Pfizer alone.
  • They have fended off measures harmful to profits, like allowing the importation of drugs from countries that cap prices. If such imports were allowed, they would lower prescription drug costs in the U.S.
  • The pharmaceutical industry has also won more U.S. government money for drug development in the form of tax breaks and subsidies than have drug companies in any other country.

"If the bond of trust between public officials and their constituents is frayed, if our citizens believe that decisions are tainted by improper influence, then our country will be unable to tackle the big issues."
— Susan Collins (R, ME), Chairwoman of the Homeland Security and Governmental Affairs Committee

(All of the above facts and statistics are from the Center for Public Integrity, www.publicintegrity.org)
 

For discussion

1. What questions do students have about the reading? How might they be answered?

2. Why do you think that more than two-thirds of drug industry political contributions have gone to Republicans?

3. Suppose the drug prescription law required the government to use its purchasing power to negotiate lower drug prices and encouraged the importation of cheaper drugs from Canada. Who would stand to save money? Why? What would have been the political implications for the Republican Party, do you think?

4. Consider other examples of successful pharmaceutical and health industry lobbying. Why is this legislation so important to these industrial interests?

5. Allan Cigler warns about "the balance between those with resources and those without resources." How do you explain this comment?

6. Why might Senator Collins think that if citizens believe decisions are "tainted by improper influence, then our country will be unable to tackle the big issues"? Do you agree with her? Why or why not? Do you agree with Congressman Sanders? Why or why not?

 


Student Reading 3:

Prescription Drugs, K Street and the Revolving Door

When the drug prescription bill was ready for a vote, the Bush administration estimated that the cost to taxpayers of this new benefit would be $395 billion over 10 years. But after Richard Foster, an auditor for the U.S. Health and Human Services Administration, studied the bill, he concluded that its cost would actually be $156.5 billion higher. This sharply higher amount, if known to cost-conscious legislators, would have jeopardized passage of the bill.

Thomas Scully, the chief administrator for the Centers for Medicare and Medicaid Services and Foster's superior, learned of his estimate. Scully threatened Richard Foster with dismissal if he released the results of his study. They did not become available until after the bill had become law. It was only then that the Bush administration changed its estimate of the drug bill's cost to $534 billion. Many legislators in both parties expressed anger.

The Congressional Research Service advised that Scully's successful effort to prevent "the communication of accurate information to Congress... would appear to violate a specific and express prohibition of federal law." But by then Scully was gone, having accepted two new high-paying positions, one with a law firm that represents drug manufacturers, Alston and Bird, and another with an investment firm specializing in health care, Welsh, Carson, Anderson and Stowe. (Information from "Democracy on Drugs: The Medicare Prescription Drug Bill: A Study in How Government Shouldn't Work," Common Cause, www.commoncause.org)

Scully had exited via the revolving door that sends government officials into well-paid positions in the businesses and industries they had previously been charged with overseeing and regulating. Sometimes the revolving door turns the other way, sending business and industry executives into the government agencies that have been regulating them.

  • Representative Billy Tauzin (R, LA), Chairman of the House Energy and Commerce Committee, played a key role in crafting the prescription drug bill. Soon after that bill became law, Tauzin became the chief of the Pharmaceutical Researchers and Manufacturers of America (PhRMA), a top industry trade group that includes such well-known drug companies as Pfizer, Johnson & Johnson, and Bristol-Meyers Squibb.
  • PhRMA lobbyists include former members of the House of Representatives Vic Fazio (D, CA), Vic Weber (R,MN), and Bill Paxon (R, NY).
  • The chief of the Biotechnology Industry Organization, a major industry trade group, is another former member of the House of Representatives, Jim Greenwood (R, PA), who had been on congressional committees regulating drug companies.
  • 43% of the lawmakers who left office since 1998 have become lobbyists; of these 52% were Republicans and 33% Democrats. (Public Citizen, www.citizen.org)

After the prescription drug program became law, PhRMA and other health industry organizations hosted a celebration, a "Rooftop Rendezvous," for all the Congressional staffers who had worked on the bill behind the scenes.

The First Amendment guarantees the American people the right "to petition the government," so lobbyists are as old as our republic. Their work for special interests in trying to influence legislators is normally legal and part of the political process. But today that process is being reexamined for three major reasons:

1. the powerful influence of huge sums of money directed toward passing legislation wanted by special interests, perhaps at the expense of the public

2. the tremendous cost of political campaigns, much of it financed by those same special interests

3. the revolving door between special interests and U.S. officials and its potentially corrupting influence

"People used to run for Congress to serve the greater good and help the public. Now Congress has become a way station to wealth. Members use it for job training and networking so they can leave office and cash in on the connections they forged as elected officials. No wonder the public is cynical about whose interests lawmakers are protecting in Washington. Lobbying has become the top career choice for departing members of Congress."
Jean Claybrook, president, Public Citizen, www.citizen.org, 7/27/05

For discussion

1. What questions do students have about the reading? How might they be answered?

2. What is the revolving door and how does it work?

3. What does the term "a conflict of interest" mean? What evidence is there that elected officials are involved in such conflicts?

4. Is Jean Claybrook's criticism of Congress too harsh? Why or why not?

 


For student inquiry

1. "The scandal here is not that the rules were broken. Lobbying is part of our system, but there is a set of ethical standards and rules that ought to be followed." —Representative Martin Meehan (D, MA)

What ethical standards and rules are there for lobbying? What reform efforts are underway in Washington? One ambiguous area is lobbyist-sponsored travel. Why would a lobbying firm invite an elected official on to an all-expenses-paid trip? Are such trips social and recreational (like the golfing trip to Scotland?. Or educational (as the president of National Association of Manufacturers recently testified before senators about recent NAM-sponsored trips to Arizona and Georgia to tour local manufacturing plants)? What are the possible pros and cons of such trips?

Lobbying is a huge business in the state capitals as well as in Washington, D.C. According to the Center for Public Integrity, lobbyists and their associated interests spent nearly $1 billion in 2004 in the 42 states that required detailed reporting. What efforts are taking place in your state to reform lobbying?
2. Where does the money come from for the political campaigns of your U.S.
senators and your U.S. representative? How have they voted on issues in which major contributors had a special interest? Do you find any other evidence of special interest influence on your legislators? Good sources for such information can be found at the sites of the Center for Responsive Politics (www.opensecrets.org), the Center for Public Integrity (www.publicintegrity.org), Public Citizen (www.citizen.org) and Common Cause (www.commoncause.org).

3. Efforts to reform lobbying were sparked by the indictment of the prominent Republican lobbyist Jack Abramoff on charges of fraud, tax evasion, and conspiracy to bribe public officials, and his subsequent guilty plea as part of a settlement with federal prosecutors. Exactly what did Abramoff plead guilty to and why?

4. The most prominent public official involved in the lobbying scandals is former Republican majority leader Tom DeLay, who was forced to resign that position after he was indicted over a Texas redistricting scandal. What questionable practices has DeLay been involved in? Why may he be indicted for his connection with a lobbying firm?

5. Lobbyists often persuade federal legislators to include "earmarks," or special projects, in larger bills. Investigate this practice. What are some of these special projects? Why did legislators include them in larger bills? How much do they cost? What judgments do you make about how worthwhile each one is? Why?

For citizenship

Public Citizen is scathing about the Medicare prescription drug program: "Influence peddling and blatant 'revolving door' conflicts of interest are the reasons that you got a lousy Medicare prescription drug law and why drug companies are getting rich at your expense. This shows you why fighting corruption matters and why ending or reforming practices such as these are critical to your interests as an American citizen." (www.citizen.org)

President Bush, of course, would not agree with this criticism, as the White House statement at the beginning of the first reading indicates.

In between these two positions might be an organization like AARP, the seniors' group that supported the prescription drug law, but criticized some of its provisions.

What has been the role of lobbying in the American system of government? Is it a necessary element in that system? Why or why not? If it is necessary, should it reformed? If so, how?

These questions might be the subject of a school assembly on how their government works and how it might be improved. Lawmakers, like the local House representative, might be invited to participate along with students who have studied the issues. These students might play a major role in organizing such an event.

These same questions might be the basis of a class-prepared newspaper or magazine, or a radio or TV production for the school.

 

This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: lmcclure@morningsidecenter.org