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The mood at the beginning of the meeting matched the weather: gray and dreary. The warm-up speaker told a joke about how local Republicans could merit placement on the endangered species list, which met with polite laughter. Talk of the most recent presidential election elicited audible groans.

Days after Barack Obama took the oath of office for his second term, about 400 GOP donors gathered in a downtown San Francisco hotel to hear Jim DeMint—who had just resigned from the Senate to take a $1-million-a-year job as head of the Heritage Foundation—explain the way forward.

“This is a battle we can win, and we are winning in many places around the country,” DeMint told the assembled donors confidently. He implored them to look beyond Washington, DC, and see that conservatives were scoring victories in state after state, citing the December move by Michigan Republicans to ram through anti-union legislation, as well as similar laws passed in Wisconsin and Indiana. Some of these victories would influence the Beltway as well. After all, the GOP’s control of state governments guaranteed that congressional districts were drawn in such a way that, in the 2012 elections, Republicans retained a thirty-three-seat majority in the House despite Democrats earning 1.3 million more votes for their candidates.

“You may not have heard about it,” DeMint continued. “We’ve been cultivating bright ideas, building coalitions and working with others like the State Policy Network to make these things happen.” SPN is a nonprofit that nurtures conservative think tanks in all fifty states; its president, Tracie Sharp, was sitting near the front at the event and was warmly acknowledged by the speakers several times.

By the end of DeMint’s presentation, which was punctuated by roaring applause, the audience—whose members included food processing tycoon Jerry Hume and wealthy Bay Area investor Nersi Nazari—seemed decidedly more cheerful. But DeMint’s pitch about promoting state-based political organs in networking groups like SPN wasn’t just bluster or salesmanship: Sharp is among the leading strategists who have made the right’s under-the-radar resurgence possible.

Other conservative leaders have spoken even more glowingly of the way that state-level political investments can shape the future of conservatism. “We have, us fellow warriors for liberty, a rendezvous with destiny,” said Henry Olsen, an American Enterprise Institute vice president, at a meeting of conservative think tank leaders last November at the Ritz-Carlton resort on Amelia Island, Florida. “Reagan’s generation did too, and their task was to plant the tree of liberty in the garden of Roosevelt. Our task is to protect that tree against the gales and gusts of Hurricane Barack, and to help nurture that tree so that it grows into a grove and forest.”

At the same event, Grover Norquist proclaimed that with SPN’s support, Republican governors might “turn their states into Texas or Hong Kong”—laboratories of the free market. “It’s a wonderful opportunity,” he added.

Though Democrats largely outperformed electoral expectations at the federal level last year, Republicans made significant gains in several states. The GOP is using this shift to redistribute wealth by cutting taxes on the rich while raising them on working-class citizens, largely through sales tax increases. What makes this year different from past Republican realignments, however, is the massive increase in funds available to conservative think tanks operating on the state level, as well as how these groups have made the goal of consolidating power through attacking unions and similar tactics central to their agenda.

These media-savvy organizations—which frequently employ former journalists to churn out position papers, news articles, investigations and social media content with a hard-right slant—bolster the pro-corporate lobbying efforts of the American Legislative Exchange Council. Like ALEC, State Policy Network groups provide an ideological veil for big businesses seeking to advance radical deregulatory policy goals. Interviewed at the San Francisco event this past January, SPN’s Sharp maintained that her organization is loosely connected and has no coordinated agenda. But if the last four years are any guide, conservative think tanks are on the march, working from a similar script to tear down organized labor and promote extreme right-wing policies in state capitols from Alaska to Florida.

Financial support for SPN-affiliated think tanks has increased by tens of millions of dollars over the last four years, disclosures show. In areas with the most concentrated investments, particularly the Midwestern states referred to in DeMint’s speech, budgets for state-level political groups have doubled, outpacing their counterparts on the left. Without control of the White House, corporations anxious to push back against taxes and regulations, along with a cadre of wealthy right-wing donors, have invested in these state-level think tanks, partisan media outlets, training institutes and online advocacy efforts. Some existing organizations have been expanded, and others founded to fill what conservative planners viewed as a tactical void.

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Americans for Prosperity, known largely for its affiliation with the billionaire Koch brothers and for organizing Tea Party rallies, is part of this state-focused spending spree. The group has opened new local chapters or more than tripled the funding for existing chapters in key states. This increased spending has helped Americans for Prosperity recruit conservative activists and deploy them during contentious policy debates. Audit reports collected by the New York State Attorney General’s office show that Americans for Prosperity went from spending about $4.9 million on state chapter activities in 2009 to $10.6 million in 2011, the last available disclosure. Those figures do not necessarily account for the television, radio and Internet advertising purchased by the group when lobbying on state policy issues (which has reportedly reached over $4 million in places like Wisconsin), or the ubiquitous bus tours it has sponsored around the country.

A key area of growth among state-level conservative think tanks involves efforts to develop nonprofit media. Founded in 2009, the Franklin Center for Government and Public Integrity has partnered with SPN and Americans for Prosperity to hire and train conservative reporters in nearly every state capital. In fact, many Americans for Prosperity officials now lead the center.

As Joe Strupp of Media Matters has reported, the Franklin Center’s stated mission is to take advantage of cutbacks at local papers: “Cash-strapped and under-staffed, local and regional newspapers often can’t provide the real information that voters need to make good decisions.” Strupp, who interviewed several local editors who reluctantly run the center’s syndicated content, noted that some stories covered by the group—including one claiming that a union traded free barbecue for votes in Wisconsin—turned out to be false.

The head of the Franklin Center, a former executive director of the North Dakota Republican Party, boasted that by 2011, the group had hired more than 100 journalists in forty-four states—virtually all of them placed at SPN-affiliated think tanks. In Tennessee, it hired an award-winning journalist, Clint Brewer, for over a year, while in Hawaii and other states, its affiliates ran multiple stories questioning Obama’s birth certificate.

Consultants associated with State Policy Network have also set up supposedly nonpartisan “government transparency” websites. These sites, which neglect the topic of highly paid government contractors while at times exaggerating the pay of public sector employees like teachers—have recently cropped up in almost every state. In Ohio, the Buckeye Institute, an SPN-affiliated think tank, provided the underlying data for a database on public employee pay, which came under criticism after the Associated Press reported that it was “riddled with errors and omissions.”

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This latest project in conservative infrastructure building comes at a time when power is drifting away from political parties and other long-established organizations. The Supreme Court’s Citizens United decision has accelerated this trend, with new Super PACs and attack-ad nonprofits springing up almost as fast as donors can write checks. The upgraded state echo chambers, led by SPN think tanks, seem particularly well-suited for this environment: they are fast-paced, Internet-savvy and dedicated to eliminating their perceived opposition.

Months before Scott Walker took the oath of office as Wisconsin’s forty-fifth governor, the groundwork for his controversial “budget repair bill,” which severely curtailed public sector collective bargaining rights, had already been laid. The John K. MacIver Institute for Public Policy, founded in 2009 as the second SPN think tank in the state, had—along with the Wisconsin Policy Research Institute, an older state affiliate—published several studies calling for government leaders to tackle public sector employee bargaining. Specifically, they targeted teacher pay and benefits as the driver of the state’s budget ills. Unlike the Wisconsin Policy Research Institute, the MacIver Institute waged its advocacy through YouTube videos and social media, including its own blog.

Brett Healy, president of the MacIver Institute, explained later that it was “critically important” that the state think tanks used “digital media” advocacy and “not the traditional research and analysis…that we’re normally accustomed to doing.”

In January 2011, as Walker began his term, conservatives opened two new reporting outfits in the state. The Franklin Center helped sponsor one called Wisconsin Reporter, while American Majority, a group that helps train conservative activists, started another called MediaTrackers.org. The MacIver Institute bloggers, joined by these new reporting organizations, moved quickly to frame the debate, interviewing protesters who had gathered in Madison to try to stop the bill. The interviewers highlighted the radicals among the group, harshly criticized child participants and sought to rebut union arguments against the budget.

Meanwhile, the Wisconsin chapter of Americans for Prosperity began a “Stand With Walker” campaign in partnership with the MacIver Institute. The group aired over $342,000 worth of advertising to support the governor’s budget and also began a bus tour crisscrossing the state to drum up support. A turning point came when the MacIver Institute’s bloggers reported that a group of teachers on sick leave were being given fake doctors’ notes by volunteer physicians among the protesters. The story took off, garnering coverage by the local and national media; there was so much Internet traffic to the MacIver Institute’s website that the server crashed. “Tracie [Sharp] probably remembers the panicked phone call that she received from me trying to figure out a patch to fix the situation,” Healy recalled.

The Wisconsin groups went on to help re-elect a pro-Walker State Supreme Court judge and successfully fend off the attempt to unseat Walker himself in a recall election.

The strategy in Wisconsin—with several think tanks and nimble media outlets all coordinating to enact laws to weaken labor unions—also played out in Indiana, where Republicans enacted a right-to-work law, and in Ohio, where a bill to limit collective bargaining was passed (Ohio’s law was subsequently repealed by referendum in 2011). Then, in December 2012, Republicans in Michigan reversed a previous promise and enacted a right-to-work law during the post-election lame- duck session. Happening as it did in the cradle of private-sector union activism, this was perhaps the crowning achievement of the state-based conservative movement. (The Taft-Hartley Act allows states to enact right-to-work laws, which quickly erode unions by allowing workers to benefit from union contracts and negotiations without having to pay dues.)

While many legislators were caught off guard by Michigan Governor Rick Snyder’s announcement, space in the front of the capitol had been reserved weeks in advance by Americans for Prosperity’s state chapter to set up a booth in support of the effort. Likewise, the Mackinac Center for Public Policy—the SPN affiliate in Michigan, with two recently opened media outlets, Michigan Capitol Confidential and Watchdog Wire Michigan—produced an array of content, from a Pinterest page to short videos on why the state should change its law governing labor unions.

Labor unions, on the other hand, spend the majority of their limited resources on member services like bargaining; their political money is mostly spent on candidate donations rather than the kind of rapid-response permanent campaign now embraced by their opposition. The only labor-backed political group that could be compared to the SPN-affiliated Mackinac Center and its allies—an organization called Progress Michigan, which does political research and media outreach—has far fewer resources than its counterparts on the right. In 2010, according to the latest available disclosure for the three groups, the Mackinac Center and Americans for Prosperity’s state chapter outspent Progress Michigan by $4.6 million to a little over $700,000.

MediaTrackers.org sites and news outlets mirroring Wisconsin Reporter now exist in states across the country, augmenting the advocacy of the expanded Americans for Prosperity and SPN chapters. “There’s no counterweight,” says Lisa Graves, head of the Center for Media and Democracy, a watchdog group in Madison. Graves notes that Wisconsin Reporter, among the other Franklin Center news sites set up in more than two dozen states, has acted as a syndication service, providing right-leaning news coverage to local media. “There’s no progressive wire service,” she adds.

Though many of the conservative groups involved in this strategy have claimed that their interest in promoting right-to-work laws or ending collective bargaining is about creating jobs or cutting spending, there is evidence to suggest that they are really seeking to eliminate unions across the board.

“Freedom is the issue at the core of this debate, and we want to ensure the citizens of Michigan understand this,” said Scott Hagerstrom, Americans for Prosperity’s state leader, in a press release following the passage of the right-to-work law. In a meeting for activists, however, Hagerstrom described his goals differently. “We fight these battles on taxes and regulation,” he said, “but really, what we would like to see is to take the unions out at the knees so they don’t have the resources to fight these battles.”

Speaking at a panel discussion in Dallas a year before the right-to-work law’s passage in Michigan, Mackinac Center president Joseph Lehman conceded that his group’s campaign to promote government transparency through hundreds of Freedom of Information Act requests was really an effort to hurt the unions. “The strategic idea we had in mind was defunding unions,” he said. And while it’s too early to predict the result of the Michigan law, new figures released by the Bureau of Labor Statistics show that Wisconsin and Indiana recorded the sharpest decline in union membership in recent history. Last year, Wisconsin’s union membership rolls dropped by 13 percent. The only state with a higher decrease was Indiana, which reportedly declined by 18 percent.

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In their aggressive effort take out the opposition, SPN and its allies have at times used unscrupulous tactics. A MediaTrackers.org story late in the campaign last November claimed that the husband of Mark Pocan, a Democratic candidate for Congress, “threatened and harassed” a Republican volunteer named Kyle Wood over text messages. Wood, who also claimed he was beaten in his apartment for not supporting Pocan, later recanted his entire story as a hoax. But the MediaTrackers.org reporter never viewed the alleged text messages before spreading the claim.

MediaTrackers.org’s founder, Drew Ryun, the son of former Republican Congressman Jim Ryun, calls his group an “attack bloc component.” As he explained at an event with Sharp: “For so long, we as a conservative movement have thought good ideas will win the day. Nothing could be further from the truth.” Ryun added that public opinion could be shaped with technology like “search engine optimization” as well as with ”a little bit of pushing back and punching back.”

Before Ryun started working at MediaTrackers.org, his group American Majority had been training Tea Party activists to manipulate the rating systems on sites like Rotten Tomatoes and Amazon and create lower ratings for left-leaning movies and books. “Literally 80 percent of the books I put a star on, I don’t read,” said a staff member at an American Majority training session. “That’s how you control the online dialogue.”

And before State Policy Network focused its attention in 2011 on eliminating unions, the group helped propel the campaign against the low-income advocacy group ACORN. In 2008, one of its affiliates filed a racketeering suit against ACORN, alleging it was a criminal gang designed to commit voter fraud in Ohio—though no evidence existed of any illicit voting.

After James O’Keefe’s edited tapes of ACORN brought the organization to its knees the following year, the conservative videographer was invited to speak at multiple events held by these state-level think tanks. And when O’Keefe was caught tampering with wires in Senator Mary Landrieu’s office some months later, it was revealed that he’d plotted the idea at the Pelican Institute for Public Policy, SPN’s Louisiana think tank, where he was scheduled to give a talk on “Exposing Truth: Undercover Video, New Media and Creativity.” Indeed, the Pelican Institute’s Robert Flanagan was one of his accomplices, dressing up as a telephone repairman in order to enter Landrieu’s office.

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Consider these organizations as the spokes on a wheel. When a group of for-profit education companies sought legislation allowing online charter schools greater access to taxpayer dollars, it hired dozens of state lobbyists from coast to coast. In addition, however, the virtual-school companies tapped SPN to provide academic studies, talking heads for the local media, flip-cam-equipped journalists to quiz critics, and busloads of activists at state capitols.

Lobbyists with the school companies—including K12 Inc. and Connections Academy—drafted the legislation through ALEC. The State Policy Network groups acted, in essence, as ALEC’s public relations team to promote the laws. And it worked: by the end of 2011, sixteen states had passed laws expanding virtual education. The flow of campaign dollars and closed-door influence peddling still happened, as in any traditional corporate campaign to pass major legislation. The difference in this case, however, was a well-oiled operation that could deliver the appearance of a groundswell in demand for proprietary online charter schools, when little public support existed. Worse, the lobbying by SPN-affiliated think tanks overshadowed serious questions about these charter-school businesses, which despite their soaring profit margins have been roundly criticized for abysmal test scores and high dropout rates. Together, these new state-level groups have remade the political map, providing ideological cover for extreme conservative policies once thought of as politically toxic.

State Policy Network’s organizations have also operated as fronts for corporations seeking to cloak their business interests under an ideological veneer. The Commonwealth Foundation for Public Policy, a Pennsylvania-based affiliate of SPN that is pushing to pass right-to-work legislation, is financed in part by the Pennsylvania Manufacturers’ Association, a lobbying group that represents US Steel, Hershey Foods, Sun Oil and many smaller firms. The lobbying group even provides office space for the Commonwealth Foundation and its media outlet, Pennsylvania Independent. The foundation has surged in size, with its budget climbing from $890,000 in 2008 to $1.95 million in 2011, the last available figure. The head of the Pennsylvania Manufacturers’ Association, Frederick Anton, has pushed right-to-work legislation for years. But this time, he’s being aided by grassroots organizers from Americans for Prosperity, as well as the media work of Pennsylvania Independent.

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The pattern seen in the online education debate has been duplicated to pass corporate tax cuts, reductions to health and education programs, a rollback in state environmental laws, and other corporate and conservative priorities. In places like Minnesota and Louisiana, the playbook has been deployed to provide telecom companies with a greater monopoly by pushing to outlaw municipal fiber-optic broadband networks, a faster, cheaper alternative for consumers. (Notably, Comcast and Time Warner Cable helped sponsor the last State Policy Network retreat.)

When the Free State Foundation, a Maryland affiliate of SPN, testified in Congress in opposition to so-called net neutrality rules, which prevent Internet providers from setting discriminatory download and upload speeds based on content, the National Cable and Telecom Association quietly provided the small think tank with a grant of $85,000.

In 2010, when the Texas Public Policy Foundation filed similar comments to the FCC in opposition to net neutrality, the think tank received $76,500 from AT&T and $34,950 from Verizon, according to a leaked donor list.

Meanwhile, several family foundations financed by Koch Industries—a firm that produces chemicals and transportation infrastructure for hydraulic fracturing (better known as fracking) and horizontal drilling for oil and natural gas—have helped with State Policy Network’s expansion. In turn, SPN think tanks from New York to California have attacked bills intended to create state-level regulations over fracking.

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State Policy Network was founded on March 24, 1992, in South Carolina by Thomas Roe, a wealthy businessman, Reagan adviser and leader of the South Carolina Policy Council, a state think tank modeled after the Heritage Foundation. Now headquartered in Arlington, Virginia, SPN began as an effort to mobilize more than twenty state think tanks. Political Research Associates, a left-leaning investigative team, reported that the group quickly became a “government-in-waiting” for the wave of Republican governors elected in 1994. As SPN affiliates proposed broad tax cuts and privatization schemes, the Republican governors frequently hired policy professionals from the think tanks to help enact those ideas.

Though backed by some of the largest Republican donors in the country, including the Coors family and Richard Mellon Scaife, SPN also thrived in the 1990s by assisting the tobacco industry in packaging its resistance to tobacco taxes and health regulations as part of a “freedom agenda” for conservatives.

Sharp herself gained experience working at this nexus of influence. Records stored with the University of California, San Francisco, reveal that Philip Morris not only gave generous financial donations to SPN affiliates, but was heavily involved in drafting and disseminating content for the think tanks. Before assuming her current position, Sharp served as executive director of the Cascade Institute, a State Policy Network affiliate in Oregon. The UCSF archive shows that during her tenure, the Cascade Institute corresponded with Philip Morris’s state lobbyist in Salem on promoting opposition to tobacco taxes, including one instance where Cascade published an opinion piece by a doctor. The doctor’s column, which was faxed to the Philip Morris representative, warned that high cigarette taxes could lead to “drive-by shootings and mob-style assassinations—turf wars—over the control of black market cigarette sales.”

At a 2001 meeting for SPN, Sharp invited Joshua Slavitt, Philip Morris’s director of external affairs, to give a talk. “I know that many of you have worked with Philip Morris,” Slavitt said, according to a prepared text, adding: “It won’t surprise you that we believe it is in our enlightened self-interest to be part of the policy discussions that ultimately shape the environment in which we do business.” He ended his speech with specific recommendations for SPN leaders in requesting corporate contributions.

A look at the donors to the Texas Public Policy Foundation, the SPN affiliate in Austin, provides a rare window illustrating how these think tanks operate today. The evidence shows that the Big Tobacco–era strategy has been embraced by other large corporations.

The Texas Public Policy Foundation, whose leaders recently stirred up controversy for surreptitiously lobbying on behalf of the government of Malaysia, received the bulk of its money from more than seventy-five business interests, including firms like ConocoPhillips, Boeing, TXU Energy, ExxonMobil, AEP Texas and Devon Energy. The largest company on the donor list, Koch Industries, gave $159,834 through its Austin lobbyist, J. William Oswald, in addition to a $69,788 donation from the Claude R. Lambe Foundation, a Koch family foundation run in part by Richard Fink, another executive with Koch’s lobbying operation. As The Texas Observer noted, the Texas Public Policy Foundation has focused much of its advocacy on issues pertaining to its corporate benefactors, including energy deregulation and opposition to Environmental Protection Agency rules to curb mercury, smog and carbon pollution.

The Texas donor list also reveals that Sharp has played a larger role in directly financing the expansion of her affiliates than was previously known. Public disclosures indicate that SPN distributed only $19,500 to the Texas Public Policy Foundation in 2010. That modest amount, which is similar in size to grants given to other state think tanks, suggests that many of the groups do not rely on a central source of cash. But the leaked document shows Sharp as the contact for a donation of $300,000 from the “State Think Tank Fund,” as well as $195,000 from the “Government Transparency Fund” and $49,306 from SPN itself—a discrepancy of $524,806 compared with the disclosed grant. Neither the State Think Tank Fund nor the Government Transparency Fund appears on Guidestar.com or the Foundation Center, repositories for nonprofit and foundation disclosures.

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Like many SPN affiliates, the Texas Public Policy Foundation has seen its budget steadily rise. In 2011, the group brought in $5.5 million in contributions, $2.4 million more than it raised in 2008. How the other state think tanks in SPN’s orbit are funded largely remains a mystery, since they, like many overtly political nonprofits, do not disclose their donors. A recent investigation by the Center for Public Integrity shows that Donors Trust, a donor-advised fund that caters to wealthy individuals, has provided much of the funding for the recent expansion in state think tanks backed by the Franklin Center and SPN.

Under Sharp’s leadership, State Policy Network has grown, opening new think tanks (now numbering fifty-nine) and forging close relations with ALEC, which brings together conservative state lawmakers and corporate lobbyists to draft “model legislation.” In 2009, ALEC gave Sharp an award to thank her for “getting SPN members more involved” with the organization. “This special acknowledgement belongs to those who have put in dedicated time and energy through ALEC,” said Sharp, who accepted the award onstage with lobbyists from Verizon and Altria.

While progressive donors have also sought to fund targeted think tank and state media outlets in certain states—namely Colorado and, reportedly, Texas—there is no comparison in terms of size and scope, or in the underhanded tactics embraced by their ideological opponents.

Brian Rothenberg, head of ProgressOhio, notes that while family foundations exist on the right and the left, corporate money has flowed almost exclusively to conservative think tanks. “Especially after Citizens United,” he says, “the right is inherently better funded than the left.” In 2011, during the effort to repeal Governor John Kasich’s collective bargaining law, unions still provided less than 20 percent of ProgressOhio’s budget.

As far as local labor activists like Brett Banditelli (who also produces the Rick Smith radio show in Harrisburg) are concerned, their side is already overwhelmed. The Franklin Center’s Pennsylvania Independent “doesn’t have much readership, but does an incredible job of setting the tone on attacks on unions before the attacks come,” says Banditelli, who notes the Legislature might first go after union pensions before changing any membership or collective bargaining rules. Banditelli says labor has been slow to adapt to the changing media environment, and teachers and workers now stand defenseless.

Also, Republicans who were newly elected in 2012 seem intent on consolidating power. Missouri’s GOP state legislators have contemplated using their supermajority to enact right-to-work legislation. The Advance Arkansas Institute, the SPN affiliate in Little Rock, produced content pushing for the strict voter ID laws recently passed by the legislature—which became Republican this year for the first time since Reconstruction.

Similarly, the Americans for Prosperity chapter in Kansas has pushed an effort to undercut paycheck dues to public sector unions this year, while the John W. Pope Civitas Institute, a North Carolina think tank, has rolled out attacks against Democratic efforts to reform the state’s infamously gerrymandered congressional lines.

Tim Phillips, the national head of Americans for Prosperity and a close adviser to David Koch, has been clear about his intention to make the most out of the Republicans’ state-level gains. Speaking at a recent press conference in Indianapolis, he declared: “We see a debate going on at the state level that is really going to define the nation.”

Meanwhile, at another Heritage Foundation gathering, Sharp and her colleagues said that their new strategy had been inspired in part by a Malcolm Gladwell article in The New Yorker called “How David Beats Goliath.” The piece, which details the ways that underdogs can win playing by their own rules, offers anecdotes on how insurgents have defeated well-equipped armies by harassing and weakening their opponents. It also describes how a computer scientist won a naval warfare simulation by spending his fictional trillion-dollar budget almost entirely on PT boats.

Referring to the Gladwell article, Sharp said PT boats are “an apt metaphor” for her network of groups because “they’re fast and maneuverable. A team of PT boats working strategically can defeat much larger and less maneuverable vessels—such as huge chunks of unions.”

In his blog, appearing regularly at TheNation.com, Lee Fang investigates the intersection of politics, lobbying and public policy. His latest dispatch: “Microsoft Helps Sponsor CPAC’s Anti-Gay Conference.”