K Street’s Favorite Democrat

K Street’s Favorite Democrat

When Max Baucus, chair of the Senate Finance Committee, is every lobbyist’s best friend, is economic reform possible?


In October 2005 Republican lobbyist Leo Giacometto hosted a NASCAR Fundraiser in Georgia. For $2,500 a pop donors received breakfast at the Ritz-Carlton and a day at Atlanta’s famed Motor Speedway. Giacometto, a former chief of staff to Montana GOP Senator Conrad Burns–disgraced lobbyist Jack Abramoff’s favorite senator–has been involved in a number of tawdry political scandals, raising questions about why any elected official would want to be associated with him. But the most interesting thing about his NASCAR party was the identity of the guest of honor: not a fellow Republican but the Democratic senator from his home state, Max Baucus. To Giacometto, Baucus, the ranking Democrat on the powerful Senate Finance Committee, was not a partisan adversary but a useful and valuable ally. “I believe that he’s good for what I believe in,” the lobbyist told the Billings Gazette.

Today, in the aftermath of the Democratic sweep of Congress, Baucus is still one of corporate America’s favorite Democrats. As chair of the Finance Committee, he counts among his friends and political supporters a Who’s Who of bankers, oilmen, ranchers, pharmaceutical lobbyists and Wall Street executives. He’s particularly close to Montana’s sole billionaire, industrialist Dennis Washington, a major donor to the Republican Party whose business interests Baucus has promoted over the years. The business community, in turn, expresses admiration for Baucus in its usual style–by writing big checks.

The Finance Committee has always had an incestuous relationship with corporate lobbyists, and with Baucus at the helm, the tradition continues. In their book about the tax reform act of 1986, authors Jeffrey Birnbaum and Alan Murray coined a term for the lobbyist-packed hallway outside the Finance Committee hearing room: Gucci Gulch. With jurisdiction over taxes, Social Security, Medicare, healthcare and international trade, the committee is the place that raises all the government’s money and spends half of it. “It really is the committee, more than any other, that decides what kind of government you have,” says Lawrence O’Donnell, former chief of staff of the Finance Committee, whose chair was Daniel Patrick Moynihan.

The rap on Baucus is that he has always valued his own re-election above all else. He’s up again in 2008. The question is: What is he sacrificing to get there? When Democrats were in the minority, Baucus brokered the passage of two of George W. Bush’s signature first-term achievements: his massive 2001 tax cuts and his 2003 Medicare prescription drug plan. He’s spent the better part of the Bush presidency cutting deals with Republicans and infuriating members of his own party, voting for the war in Iraq, the energy bill, the bankruptcy bill and to confirm Supreme Court Justice John Roberts. On core economic issues, the very ones that come before his committee, only one Democrat, Nebraska’s Ben Nelson, has a more conservative voting history, according to National Journal.

To be sure, not everything Baucus does is heresy to fellow Democrats. He’s always been solidly progressive on issues like choice and the environment. After some initial pressure, he led the effort by Senate Democrats to block the privatization of Social Security. He recently came out for ending the conflict in Iraq (his nephew Philip, a Marine corporal, died in Anbar last July) and for providing all Americans with healthcare. Back home, he’s one of the most popular politicians in Montana. In recent years the state has moved leftward, but there’s mixed evidence on whether Baucus is currently following or resisting that trend. Unlike a deeply polarizing figure like Joe Lieberman, Baucus is not a rigid ideologue; he’s a dealmaker. That’s one of the reasons corporate America likes him so much.

As big business shifts to playing defense in Congress, Baucus will be one of its go-to guys. As chairman, Baucus says, he wants to operate by consensus and work across the aisle. “With the Democratic majority, it’s an opportunity to be practical, to be pragmatic, to get results,” he told me during an interview in his Capitol office, between votes on the minimum-wage bill. In the past, those results have often benefited big corporations and the Republican Party. Will they be any different now that Baucus is chairman? The Bush Administration is probably too weak for Baucus to again shepherd through a major pact. But he can still temper, dilute or block initiatives by his Democratic colleagues, deciding at any given moment whether an important piece of progressive legislation lives or dies.

Baucus seems like an accidental senator: not especially well spoken, engaging or smooth, though he looks the part with a tall athletic frame, mop of shiny gray hair and strong cleft chin. He speaks in a staccato monotone, smiles awkwardly by exposing his top teeth and rarely displays the backslapping manner customary in Washington. At Finance Committee hearings, the most remarkable thing about Baucus–other than his deference to the ranking Republican, Charles Grassley–is how unremarkable he is. He’s managed to rise in the Senate simply by sticking around. Elected to the Senate in 1978, the son of a wealthy ranching family, Baucus was little known before he became the ranking Democrat on the Finance Committee in 2000.

That soon changed. After helping to craft the largest tax cut in a generation, Baucus raised more than $1 million in campaign contributions from the financial sector for his 2002 re-election campaign. Opening doors in both directions were former Baucus staffers. During the debate over whether to add a $400 billion privately run prescription-drug plan to Medicare, his former chief of staff, David Castagnetti, and legislative aide, Scott Olsen, were part of the Pharmaceutical Research and Manufacturers of America’s $8 million lobbying effort. Shortly after the legislation–written largely by the pharmaceutical industry–passed, Baucus’s top staffer on the Finance Committee, Jeff Forbes, left to open his own lobbying shop, with clients including PhRMA, the drug maker Amgen and the American Health Care Association. These companies have in turn donated generously to Baucus; almost $700,000 between 2001 and 2006 from the healthcare industry and pharmaceutical lobby.

A study last year by Public Citizen found that between 1999 and 2005 Baucus, along with former Senate majority leader Bill Frist, took in the most special-interest money of any senator. He tops the list of recipients from business PACs. And only three senators have more former staffers working as lobbyists on K Street (at least two dozen in Baucus’s case). Now that he’s chairman, “former aides of Baucus, in particular, have been in demand on K Street by companies that hope to limit damage to their business interests,” reports Congressional Quarterly.

“We see the world in the same way he does,” says Greg Mastel, a former chief of staff to Baucus who now works as a lobbyist for Miller & Chevalier, representing clients like Home Depot and Eastman Chemical. “To me, a moderate Democrat as chairman of the Finance Committee is a good thing.”

In recent years Baucus has not been shy about reaching out to K Street for campaign contributions. In February 2005 he asked fifty lobbyists to raise $100,000 each for his 2008 re-election campaign. Two lobbyists who attended told CNN that they “have never gotten such an aggressive pitch from a senator.” In 2006, as the Abramoff scandal heated up, Baucus removed lobbyist William Oldaker as treasurer of his PAC. But his longtime fundraiser, Shannon Finley, recently left to join other former Finance Committee staffers at a new firm, Capitol Counsel, which principal John Raffaelli said will give corporations “the best opportunity to present their case.”

Since becoming chairman, Baucus has sent out three invitations to upcoming big-ticket ($2,000 per person, $5,000 per PAC) fundraisers for his Glacier PAC, including “skiing and snowmobiling in Big Sky” and fly fishing and horseback riding at “Camp Baucus” in August. Baucus says that raising money from lobbyists at such gatherings “has no effect, none whatsoever, on my thinking.”

Pat Williams, a liberal Congressman from Montana from 1979 to 1997, says his former colleague “is hardworking and puts Montana first.” But, adds Williams, Baucus doesn’t take the clear stands on difficult issues that would keep lobbyists away. “He is simply bombarded by interests trying to persuade him,” says Williams. “He’s like a tin plate on the ocean being pulled this way and that.”

Baucus is off to an inauspicious start as chairman, beginning with his handling of minimum-wage legislation. On the day the House of Representatives passed a federal wage increase by a vote of 315 to 116, Baucus held a hearing on Tax Incentives for Businesses in Response to a Minimum Wage Increase. Of the five testifying witnesses, only one expert, Jared Bernstein, senior economist at the Economic Policy Institute, advocated a “clean” bill without the tax breaks. “I’ve been on minimum wage panels for years,” says Bernstein, “and this was no better than the ones during the Republican era.” The Finance Committee subsequently attached $8.3 billion in tax breaks for small business to the legislation. “People like to vote for tax cuts,” Baucus told me afterward.

Baucus’s Democratic colleagues were furious that he didn’t even try to advance a clean bill. “Maybe he doesn’t have a strong feel for the depth of support that this bill has,” House Ways and Means chair Charles Rangel, Baucus’s House counterpart, told the Wall Street Journal. In a private caucus meeting, Ted Kennedy, the leading advocate for a clean bill, personally assailed Baucus. “He got railed in there,” one observer said later. A provision in the bill, reportedly slipped in by Grassley, that encourages employers to contract with staff leasing companies, making it harder to unionize temporary human resources employees, particularly angered the coalition of labor groups that supported the House version. “The Finance Committee operates like there’s been no election,” says one labor leader. (The House passed a much smaller package of tax cuts on February 16 and is currently reconciling its version with the Senate’s.)

But lobbyists for the tax breaks were overjoyed. “We wholeheartedly supported the way they approached that,” says Chris Walters, a tax lobbyist for the National Federation of Independent Business, one of Washington’s most potent business groups. Added Walters colleague Amanda Austin, “He’ll be a good advocate for us going forward.”

Baucus has rarely seen a tax cut he didn’t like. Unlike many Democrats, he wants to extend Bush’s 2001 tax cuts. And he’s still seeking a compromise on the estate tax, whose repeal he supported last summer. Would he still like to find a way to reform the tax? “Oh, yeah,” he says. “Senator Baucus has been interested in it before and could be in the future,” says Dorothy Coleman, vice president of tax and economic policy at the National Association of Manufacturers, another powerful DC business group lobbying for “death tax” repeal.

Taxes are not the only issue on which Baucus parts from the majority of his colleagues. In early January he wrote an editorial in the Wall Street Journal calling on Democrats to renew Bush’s fast-track authority for international trade deals. Given that most Democrats elected in 2006 campaigned against agreements like NAFTA and CAFTA, the editorial was a provocative move. Byron Dorgan, chair of the Senate Democratic Policy Committee, took the unusual step of rebuking Baucus in a letter to the Journal. “There is, indeed, a growing Democratic consensus on trade–but in the opposite direction,” Dorgan wrote. The chairman of the taxation committee in the Montana Senate went further, passing almost unanimously a resolution urging Baucus to oppose fast-track authority. Under growing pressure from his colleagues, Baucus has since called for attaching tough, enforceable environmental and labor standards to any fast-track accord and restoring a measure of Congressional oversight. But he remains a committed proponent of economic neoliberalism. “We can’t be protectionist, or other countries are going to pass us by,” Baucus says.

On Medicare, too, Baucus has failed to address the deep flaws in policy he helped write. The House Democrats’ “100-hour plan” included a provision instructing the government to negotiate lower drug prices under Medicare. Baucus had voted against such amendments in the past and after the election refused to show his hand. Eventually, he agreed to support the repeal of the “noninterference clause” in the law but declined to require the Secretary of Health and Human Services to negotiate, thereby taking any teeth out of the bill. And he couched his statement in supply-side rhetoric. “I see nothing that warrants heavy-handed intervention in this market,” he said in a statement. “We should proceed cautiously with any legislation.” PhRMA has blanketed newspapers and television screens with ads praising the Medicare law and opposes plans circulated by many Democrats to create a government-run drug benefit–the only step, experts contend, that will significantly lower prices. Baucus is close to the organization. His new health counsel, Michelle Easton, came to his office after a stint at PhRMA.

“I’m a very proud Democrat,” Baucus likes to say, “but I’m a Montanan and an American first.” Over his career, Baucus has used his red state roots as an excuse to vote for egregious pieces of Republican-written legislation. Yet though Montanans are strongly libertarian on issues like gun control and personal freedom, the state is no longer the GOP stronghold it once was. It recently elected two “prairie populist” Democrats, Governor Brian Schweitzer in 2004 and Senator Jon Tester in 2006. In both stylistic and substantive ways, Schweitzer and Tester differ from Baucus. Schweitzer is a colorful-talking, snappy Western dresser who bemoans trade deals (“I was a critic of NAFTA, I was a critic of CAFTA and I’ll be a critic of Shafta”), refuses to take PAC money and has made energy independence a near crusade. Tester is a burly organic farmer with a flat-top haircut who lost three fingers in a meat grinder and campaigned against the Iraq War and the Patriot Act.

Schweitzer and Tester both praise Baucus, at least publicly, in part because of his success in steering federal funds to Big Sky country. “I work very closely with Max, and I think it’s important that Max is at where he’s at,” says Schweitzer. “If he swings the bat away from the core of the Democratic Party at times, get used to it.” But Schweitzer admits that on economic issues, he and Tester see the world differently from Baucus. “I would define him as less of a populist than Tester and myself,” Schweitzer says. Montana is the forty-ninth-poorest state per capita in the country, with a history of robber barons that people still remember. Montanans, according to Tester, think corporate America “bears watching.” And they don’t much care for lobbyists, either, he says. “The election was an indication they didn’t like the undue influence lobbyists had.”

Baucus is more at home with Montana’s elites. His relationship with billionaire Washington is of particular significance. “Max is the only Democrat that Dennis Washington has consistently supported, financially and politically, with a great deal of enthusiasm,” says Milton Dotsopolous, a trial lawyer from Missoula who advises Washington politically. “He appreciates the fact that Max doesn’t always purely toe the party line.” In 2002 the Washington Group donated $60,000 to a 527 campaign organization operated by Baucus. And in 2005, Washington held a fundraiser for the Democratic Senatorial Campaign Committee at his ranch.

It is a mutually beneficial friendship. In 2003 the Environmental Protection Agency drew up a plan to clean up a Superfund site at Milltown dam in Missoula and place the waste just downstream. But Baucus, citing environmental concerns, urged that the sediments be moved upstream, by rail, to an existing repository more than 100 miles away. Such a step, Baucus conceded, would be “significantly more expensive,” the Missoulian reported. It just so happened that Dennis Washington owned both the company that would remove the waste, Envirocon Inc., and the railroad, Montana Rail Link, that would transport it. Baucus eventually got his wish. The contract, which has never been disclosed, is said to be worth roughly $100 million. “I met with Max and talked with him about it,” says Dotsopolous. “But he was more driven by the public policy interests.”

Despite such handouts to the wealthy, Baucus has managed to stay in touch with the rest of the state. With a Montana approval rating of 68 percent, he’s one of the most popular senators in the country.

That may be changing, however. Montana Democrats, who feel invigorated after recent victories, are talking of running a primary opponent against him in 2008. Others think a progressive challenge to Baucus, or political trends in the West, could turn him a darker shade of blue. “The environment is changing in this part of the country, and it will be less suicidal for Democrats to be more progressive in the future,” predicts Jim Farrell, executive director of the Montana Democratic Party.

Political pressure in Montana is starting to have an effect on how Baucus operates back in Washington. He plans to hold “lots of hearings” on how to invest seriously in renewable energy and wean the United States off foreign oil. He’s urged the Treasury Department to crack down on tax shelters and loopholes and wants to cap the amount of pay corporate executives can defer tax free. He opposed the Administration’s pick for Deputy Commissioner of the Social Security Administration because of the nominee’s past support for privatization. His top priority, he says, is extending children’s healthcare. His rhetoric in calling for universal coverage is particularly striking, given his past timidity on the issue. “For healthcare, the season of incremental change is coming to an end,” he recently said.

Yet even as he makes overtures to Main Street, Baucus remains supportive of Bush policies, a schizophrenic figure who denounces the Administration one minute and compromises with Republicans the next. While House Ways and Means chair Rangel has held hearings on the “economic and societal costs of poverty,” it’s difficult to imagine Baucus taking similar steps.

The minimum-wage fight between the House and Senate could become the first of many disputes over economics and ideology. Who prevails will be an important indicator of how far the Democratic majority plans to push the mandate voters gave them November 7. And the role Baucus plays in that battle will make clear whether his mild nods to the left are the start of a meaningful shift or whether his real friends are still on K Street and in the White House.

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