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Cornell law professor exposes Washington shakedown that pays congressmen 'money for nothing'

Politicians across the country -- and in particular congressmen -- are engaged in a frenzied dance of political extortion, extracting payments from constituents for legislative inaction.

"It's a shakedown -- and it's perfectly legal," says Cornell law Professor Fred S. McChesney, who probes this political phenomenon in his new book, Money for Nothing: Politicians, Rent Extraction, and Political Extortion (Harvard University, 1997). "This is basically extortion by politicians, in that they are paid not to legislate -- they get money for nothing."

Here's how it works: A member of Congress proposes a piece of legislation with no intention of supporting the measure. The lawmaker then withdraws the legislation for a price -- that is, after the politician has extracted wealth from the various constituencies who are opposed to the measure and do not want it to move out of committee.

"It's sort of like a kid telling his father that for $5 he won't mess up the house," McChesney says. "The father will pay the $5, but he's really not getting anything for his money. It's not like the father's saying here's $5, go clean out the garage."

Microsoft Chairman Bill Gates' recent visit before a Senate committee investigating allegations of anti-trust violations has all the earmarks of the beginning of wealth extraction process, says McChesney, a former associate director of planning and evaluation for the Federal Trade Commission, who joined the Cornell law faculty this fall after teaching at Emory University's School of Law.

"Bill Gates didn't have any lobbyists in Washington; he wasn't contributing to these politicians. Now along comes an issue where the lawmakers might be able to extract some wealth from Gates by threatening to take some action against his company." According to recent reports, Microsoft has begun paying off.

Editors: For a review copy of Money for Nothing: Politicians, Rent Extraction, and Political Extortion, please contact Darryl Geddes at the Cornell News Service at 607-255-9735 or djg9@cornell.edu.

Are these payments legal? Indeed they are, McChesney notes.

The process of rewriting tax law is one of the most blatant ploys used by politicians to increase their own wealth, he argues.

"Tax reform is often only as much reform as someone is willing to purchase," he says. "Payments are made to politicians to avoid inflicting new economic pain or to obtain reform from painful provisions already in existence, in return for surrendering privately created wealth. Payment is meant to keep what one has earned. Politicians can use threatened tax changes to generate income for themselves, even when no change ultimately ensues."

Such was the case, McChesney says, with the Tax Reform Act of 1986, which provided a big windfall for many members of Congress. California vintners Ernest and Julio Gallo faced losing hundreds of millions of dollars if a measure concerning generation-skipping transfer taxes was made part of the Tax Reform Act. The Gallo brothers -- through lobbyist channels -- convinced the House Ways and Means Committee to rewrite the amendment allowing them to be free of the tax burden, according to McChesney. At the time, the Gallos had already made at least $325,000 in campaign donations. "Obviously, it was money well spent,"

The imposition of price-controls is another popular extortion threat used by politicians, McChesney says. "Indeed, no single episode in recent American politics has generated as much money for legislators as the health-care plan proposed by President Clinton in 1993 but ultimately killed by Congress in 1994," notes McChesney.

"Congress kept this package alive until it pulled in bundles of money," he says. "Some representatives kept insisting that they hadn't made up their minds about health care reform and wanted to hear from more of their constituents on the matter." Well, they did. In fact, McChesney notes that contributions to congressmen that year were up to 30 percent greater than in the prior nonelection year (1991).

"We're seeing the same extortion threat used against the tobacco industry now," he says. "Tobacco lobbyists are contributing in record amounts to politicians today."

McChesney says he wrote the book to offer an alternative view of how special interests are cultivated in Washington. The standard paradigm that one often reads about is how special interests are getting favors or how Congress is selling out to special favors. But in McChesney's model of wealth extraction, the only party receiving special favors are the politicians themselves. "They're creating their own special favors," he says.

McChesney's book does not, however, offer a solution to the problem.

"Allowing people to buy out of various legislative proposals is a good thing, especially since our government has this enormous power to regulate almost anything," McChesney says. "That's what's wrong with government; it's excess, it's power to regulate. Paying a price to escape big government, often is the only option we have."

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