Evil Geniuses: The Unmaking of America: A Recent History (10 page)

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But beyond the particular galvanizing effects of the Powell Memo, it and the earlier, virtually unknown Powell speech clearly show the state of mind of the rich right and a lot of the capitalist Establishment at the time—frightened, angry, and motivated to resist before it was too late. Ignored for decades, the memo is now an uncanny and invaluable forensic artifact of the early 1970s for making sense of the remaking of our system that began at that moment.

Conspiracy theories, because they tend to emulate fiction, often imagine Dan Brownian plots with great secrets at their centers. But from 1972 on, Justice Powell’s playbook wasn’t secret at all. For instance, in a 1974 speech Charles Koch gave to business executives in Dallas, he quoted its final line—“
As
the Powell Memorandum points out
,
” he said, without further explanation, “ ‘business and the enterprise system are in trouble, and the hour is late.’ ” He assumed that everyone in his audience was familiar with it.

Almost nobody else was paying much attention to the new movement and generational project for which Powell’s memo was a piece of founding scripture. Center-left hegemony and (thus) complacency were real. According to that annual national Yankelovich survey asking people if “business tries to strike a fair balance between profits and the interests of the public,” Americans were continuing to fall out of love with even the nicer, fairer U.S. capitalism of the time—from 33 percent who’d agreed in 1970 about that “fair balance” down to just 19 percent in 1974 and 15 percent in 1976. A campaign by business and the far right to push conventional wisdom and our political economy itself back to the 1920s, or further? A very long shot, faintly ridiculous, arguably impossible.

But big business and the extremely rich got the memo. They’d been trolled and attacked during the late 1960s, felt besieged, and started imagining or pretending to imagine that some kind of socialist revolution might actually happen. They were becoming, pardon the expression,
class conscious
and began organizing and mobilizing for a long-term struggle.

*1
Likewise, conservatives in a conservative era twenty years later would give Bill Clinton no credit for his moderately conservative policies—balancing the federal budget, continued deregulation of business, tightening welfare eligibility, signing tough anticrime legislation, and so on. Clinton gets credit and blame for inventing political “triangulation” in the 1990s, but Nixon did it first.

*2
Nixon also supported the constitutional amendment guaranteeing equal rights for women and signed the Title IX law that required full-fledged school athletic programs for girls. In addition, his administration was the first to enable Native American tribal autonomy, and it increased the National Endowment for the Arts’ budget by 500 percent. A 1971 bill passed by both houses of Congress, getting the votes of most Senate Republicans, would have created federally funded childcare centers nationwide, available to every family and free for poor and lower-middle-class ones—but the president finally vetoed it at the urging of his young right-wing aide Pat Buchanan.

The newly militant capitalists, superrich industrial heirs, and leaders of the largest corporations promptly began executing a version of Powell’s plan—a version, in fact, much more ambitious than he’d urged on the Chamber of Commerce. The mission was twofold: turn elite discourse and general public sentiment more in their favor, and wheedle and finagle the federal government—the discredited federal government—to change laws and rules in their favor. The goal was to create a powerful counter-Establishment. What they accomplished in a decade was astonishing. It astonished even them.

Changing the skeptical consensus in academia would be a gradual project, but the rich right realized it could instantly create a few faux mini-universities to crank out business-friendly public policy research and arguments. Until then, think tanks, as they’d come to be called in the 1960s, conceived of themselves as nonpartisan and objective, not really in the business of aligning with particular politicians or pushing particular programs. In 1970 the conservative think tank in Washington, the American Enterprise Institute (AEI), had a tenth the funding of the big established liberal one, the Brookings Institution, a staff of ten, and only two resident scholars. By the end of the decade AEI’s budget was equal to Brookings’s, and its staff had grown to 125.

The Hoover Institution at Stanford had been around for years, as a foreign policy library founded by Archie Bunker’s man Herbert Hoover before he became president. In the 1960s, shortly before Hoover died, he gave the place an aggressive new mission, “to demonstrate the evils of the doctrines of Karl Marx—whether Communism, Socialism…or atheism.” He installed a new director, a right-wing economist who’d worked for the U.S. Chamber of Commerce and run AEI. The strictly international focus remained—until 1972, when the Hoover Institution announced that it would now be “devoting the same amount of attention to ‘the social and political changes taking place in this country.’ ” By the end of the 1970s, the annual budget had quintupled and the endowment increased from $20 million to $300 million, and former governor Reagan and Milton Friedman were Hoover Institution fellows.

Instead of merely
leaning
right on economics, as in the past, these new and reborn think tanks would be explicitly, unapologetically political and right-wing. The most important 1970s benefactors of the think tanks and the rest of the new counter-Establishment were, in addition to Scaife and Charles and his brother David Koch, the beer heir Joseph Coors and the industrial heir John Olin. All five have curiously similar backgrounds. They grew up in the middle of the country, between the Alleghenies and the Rockies, and all five were heirs to industrial fortunes that their fathers or grandfathers started amassing in the old days, before the New Deal. All but Scaife ran their eponymous family companies, and all but Olin were young, members of the so-called Silent Generation.
*1

In the early 1970s they all felt besieged by the federal government and demonized by the business-skeptical spirit of the age. As an operator of oil refineries, Koch Industries was now under permanent scrutiny by the new EPA. Coors faced suits and boycotts for racial discrimination and a sudden gigantic federal estate tax liability. The Olin Corporation was one of the largest manufacturers of the pesticide DDT—which the EPA had just banned. “My greatest ambition now,” John Olin said in the 1970s, “is to see free enterprise re-established in this country. Business and the public must be awakened to the creeping stranglehold that socialism has gained here since World War II.”

Scaife’s boast to Jane Mayer, decades later, that he’d funded “133 of the conservative movement’s 300 most important institutions,” suggests the ambition and ultimate scale of the network of start-ups they began building in the 1970s—those three hundred are just the
“most important”
think tanks and foundations and programs and law firms and advocacy and lobbying groups. David Koch was explicit about this long-game strategy of donating large sums over many years to a large number of new right-wing nonprofits. His goal was

to minimize the role of government and to maximize the role of the private economy….By supporting all of these different organizations, I am trying to support different approaches to achieve those objectives. It’s almost like an investor investing in a whole variety of companies. He achieves diversity in balance. And he hedges his bets.

In fact, not just almost
like
what an investor does: the absolutely direct effect of the Kochs’ political donations was to maximize their income and wealth, and to minimize the taxes they paid.

The most important of the think tanks, as it turned out, was an entirely new one dreamed up by a pair of young right-wingers born a year apart, both German-American Catholic midwesterners who worked for middle-of-America right-wing members of Congress. In 1973 Coors gave the two the equivalent of $1.5 million to start the Heritage Foundation. Soon Olin was contributing as well, and Scaife donated millions a year for decades.
*2
Heritage started publishing papers and making arguments to the right of the conservative mainstream—turning Social Security into an optional system, for instance, and denying food stamps to striking workers. “We are different from previous generations of conservatives,” one of the cofounders, Paul Weyrich, explained later. “We are radicals, working to overturn the present power structure of the country.” What’s more, within Washington’s ideological ecology, the existence of Heritage had the effect of making AEI seem comparatively reasonable and centrist.

Because it meant to maximize its political influence and impact, Heritage’s ultra-conservatism encompassed the two big strange-bedfellow constituencies within the Republican right, the libertarians and the uncomfortable-with-liberty fundamentalist Christians. The second most influential right-wing think tank born in the 1970s, Charles Koch’s creation, was the strictly libertarian Cato Institute. He poured in the equivalent of $10 million to $20 million to get it going and tens of millions more afterward.

Libertarianism was definitely outside the mainstream. In the early 1970s, at a conference in Washington of what its organizer Milton Friedman called “free enterprise radicals,” he said that it was “important for people of our political persuasion to come together and realize that they’re not such kooks as they are sometimes made to appear in their communities.” Among his fellow kooks at that meeting was the not-yet-widely-known economic consultant and Ayn Rand associate Alan Greenspan. The new Libertarian Party’s 1972 presidential candidate, an entirely unknown philosophy professor then and now, won a total of 3,674 votes nationally.

For a few years during the 1970s, Charles Koch published a stylish-looking San Francisco–based magazine called
Libertarian Review
. In it he wrote an essay that reiterated the gists of the Friedman Doctrine and the Powell Memo but went further, arguing that their “movement…for radical social change” must seek to take over American conservatism, radicalize it. Businesspeople and mainstream conservatives ought to support the extreme libertarian demands of “ ‘the (radical) agitator,’ ” Koch wrote, because “ ‘the more extreme demand of the agitator makes the politician’s demand seem acceptable and perhaps desirable.’ ” But who read the
Libertarian Review
? And who’d ever heard of this Charles Koch guy?

Slowly but surely, the little movement made progress against progress. In 1974, for instance, a few weeks after Nixon resigned, President Ford named Greenspan chairman of his Council of Economic Advisers. His surrogate spouse at the swearing-in was sixty-nine-year-old Ayn Rand herself.


The right-wing mediascape was still tiny, a few small magazines with circulations in the tens of thousands, the most important of them William F. Buckley’s
National Review,
and hardly any radio; cable news and the Internet didn’t exist. The only influential right-wing venue of any scale was the daily opinion pages of
The
Wall Street Journal,
whose circulation had recently passed 1 million on its way to more than 2 million. In 1972 the young editor Robert Bartley took over the section and enforced a more rigorously hard-edged screw-the-liberals libertarian economic line in the new post-1960s spirit, more unapologetically antitax, antigovernment, pro-wealthy. He hired Irving Kristol, a prominent former leftist who had been so undone by the countercultural 1960s that he’d turned into the original neoconservative—a teacher and intellectual who began savaging in America’s capitalist-class daily paper, “the New Class,” “our scholars, our teachers, our intellectuals, our publicists,” liberals now “engaged in a class struggle with the business community for status and power.”

Starting in the 1970s, too, plain old-fashioned Republican tax hatred acquired a new set of academic rationales, thanks to a new generation of economists—and Bartley’s
Wall Street Journal
editorial page was their absolutely indispensable corner of the public square. “Our page was the forum,” Bartley said a decade later. “These people had to find each other. And they had to have publicity to get other economists thinking about it. It wouldn’t have happened without someone playing the role of broker.”

Bartley hired a right-hand man at the
Journal,
Jude Wanniski, a former columnist at the
Las Vegas Review-Journal.
One of his duties was cultivating and handling a young economist at the University of Chicago business school—ambitious, eccentric, second-tier—named Arthur Laffer. Laffer’s particular brand of old wine in a new bottle was the idea that by dramatically slashing tax
rates
on big business and the rich, you’d make people work and earn and invest more, producing such fountains of prosperity that tax
revenues
would grow enough to prevent excessive federal deficits or draconian budget cuts. Do the math! A 35 percent tax on $2 million in income generates the same amount as a 70 percent tax on $1 million. Everybody wins! Theoretically. Because only the rich would definitely and immediately win. Wanniski made up a legitimate-sounding name—supply-side economics. For anyone else to benefit, what Democrats since the Depression had called trickle-down economics also had to operate—that is, the supply-side tax cuts (and deregulation) would have to make businesses boom and rich people profit so gloriously that some of that money trickled down to produce jobs and better paychecks for the little people.

During the 1970s Bartley, Wanniski, and Laffer had regular dinners, often weekly, sometimes with Kristol, near the
Journal
’s offices in Manhattan’s financial district. In 1974 Kristol commissioned Wanniski to write a ten-thousand-word article about Laffer and his notions for the policy journal he ran,
The Public Interest,
thus introducing them to the intellectual world. The premise of the essay was that the last few years of high inflation and slow economic growth proved that conventional economists had no clue, and that the young genius renegade Laffer could bring about a “ ‘Copernican revolution’ in economic policy.”

At the same time, according to Wanniski, he went to Washington to drum up interest there in the radical-tax-cut revolution. He met with the new White House chief of staff, Donald Rumsfeld, who in turn ordered his deputy to meet with Wanniski and Laffer. And so over drinks at a restaurant three blocks from the White House, Laffer explained himself to the deputy White House chief of staff, Dick Cheney, by sketching on a cocktail napkin what later became known as the Laffer Curve, as if it were some well-established principle of economics.

In 1976 Wanniski introduced supply-side talking points to the
Journal
’s readers. By then Laffer was teaching at the USC business school in Los Angeles, which made it easy for him to throw a dinner party for Governor Reagan—and teach him the supply-side catechism—just before he announced he’d be running for president in 1980. “Supply side economics,” the political journalist Sidney Blumenthal wrote in his remarkably good 1986 book
The Rise of the Counter-Establishment: The Conservative Ascent to Political Power,
“was a theology spawned almost overnight” but “presented as radically innovative” as well as “ancient wisdom.” It was “so old”—from the arguments fifty and eighty years earlier against income taxes and the New Deal—“that it seemed incredibly new.” Theologically dogmatic, both old
and
new—and as Wanniski wrote in his Copernican revolution article, a magical cure for our problems that “would not involve a period of suffering” or “politically impossible prescriptions.” It was a work of evil genius.


As the 1970s proceeded, the gates of all sorts of mainstream bastions opened up to intellectuals and ideas from the economic right, giving conservatism and libertarianism shiny new imprimaturs, and thereby made the liberal gatekeepers feel more exquisitely, magnanimously liberal. The Ford Foundation awarded a grant worth the equivalent of $1.8 million to AEI, the conservative think tank.
*3
The
New York Times
hired William Safire, a speechwriter for Nixon (and his nasty criminal vice president, Spiro Agnew), as one of its main political columnists—and the Pulitzer authorities soon gave Safire a prize, as they did a year later to the
Journal
’s Bartley. Nobel Prizes for economics went both to Friedman and to his Austrian émigré mentor, Friedrich Hayek, in the 1970s. Harvard had two young superstars of the libertarian right on its faculty, the philosopher Robert Nozick and the economist Martin Feldstein.
*4
Nozick’s 1974 book
Anarchy, State, and Utopia
argued that anything beyond minimal governmental activity, such as redistributing any money from rich people to poor people, is immoral—and won the National Book Award. Feldstein was skeptical of Social Security and government unemployment benefits and even generous health insurance provided by employers. A decade after the
Times Magazine
delivered the Friedman Doctrine and eight months before Reagan was elected president, it published a long, gushing profile of Feldstein for its 3 million Sunday readers, headlined
SUPERSTAR OF THE NEW ECONOMISTS
. The opening scene depicted him as an exciting celebrity at a conference of Wall Street executives—and seemed to love “the fact that so titillates his audience—he is a conservative,” “the most influential among a cluster of young conservative economists” who say the economy had been “overregulated and overtaxed into deep trouble.”

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