Authors: David Cay Johnston
The first two Cabela's stores outside of Nebraska opened in
April and September 1998 about 170 miles apart in Owatonna, Minnesota, and Prairie du Chien, Wisconsin. The known value of the
subsidies was $4.1 million and $4.9 million, respectively. Even together those subsidies were but a small fraction of the Hamburg
giveaways.
Less than two years after Cabela's launched the Hamburg store, it opened a
slightly smaller store in Ft. Worth, not far from the heavily subsidized Texas Rangers stadium that taxpayers had financed for
George W. Bush and his wealthy partners. The Ft. Worth store subsidy was $40 million, a fourth larger than the Hamburg giveaway.
The next month Cabela's cut the ribbon at a much smaller store just 200 miles away in Buda, Texas, between Austin and San
Antonio. The Buda store was 185,000 square feet, only three-fourths the size of the Hamburg store. The tribute, though, was at
least $61 million, nearly twice the subsidy in Hamburg.
The granddaddy deal, though, was in
West Virginia. Near Wheeling, not far from Pittsburgh, Cabela's built a store even smaller than in Buda, Texas, at just 175,000
square feet, plus a distribution center. Thanks to the generosity of West Virginia taxpayers, Cabela's will realize an astonishing
$115 million for its skill not in the competitive market, but in manipulating politicians.
Cabela's
reports to shareholders are unusual in how they account for costs. The company warns investors who read through the fine detail
that its reports make it difficult, if not impossible, to compare its figures to other retail operators. Its uniquely uninformative
disclosures benefit management by masking the boost the subsidies give to profitability. Even so, some stock market analysts
have noted that Cabela's is less successful than other retailers at converting sales into profits.
My analysis of its reports suggests that at best Cabela's earns an annual profit of $12.60 per square foot of
retail space. That means it captures about 3.6 cents out of each dollar as profit. At that rate of profit the whopping $115 million gift
from West Virginia taxpayers roughly equals 52 years of profits from the store there. If the state were to get all of the sales taxes
from that store, instead of letting Cabela's pocket that tax money, it would take more than 31 years to get back the $115
million.
To get an idea of just how generous the gift to Cabela's was, it is useful to compare it to
state spending. The state could provide free lunches for 50 years to all the West Virginia children who are so poor that they qualify
for that form of welfare. Given the power of religion in West Virginia politics, the politicians who made this lavish gift, and the
wealthy Cabela family that sought it, might want to read Jeremiah 22:13: “Woe unto him that buildeth his house by
unrighteousness, and his upper chambers by wrong.”
These subsidies just keep rolling in,
except in Nebraska. Cabela's has three Nebraska stores, but evidently has not sought any subsidies for them. In 17 other states,
however, Cabela's was negotiating deals in 2007. All but one involved subsidies. Only some terms in a few of those deals are
known. Even that limited information shows that if all these deals go through the subsidies will total at least $283 million. Among
these proposed deals is $54 million of tribute for a proposed 150,000-square-foot store in the biggest little city in the world, Reno.
That subsidy is bigger than those extracted from Hamburg and Ft. Worth, even though the store would be much smaller than the
ones in those two places.
The day Cabela's Hamburg store opened in September 2003,
Weaknecht stopped by to check out the competition. “If somebody had given me unlimited money to open a store, that's what I
would have done, especially the huge inventory,” he said. Only one aspect of the operation gave him a sense that he could
compete against Cabela's. The salespeople he talked to knew next to nothing about rifles or fly rods or the conditions imposed on
hunting licenses.
Looking back on it, Weaknecht wishes he had just closed his store that day.
His sales soon fell more than 70 percent. He hung on for almost two years, his customers gone to Cabela's even though they could
have saved money at Weaknecht's. “I refused to file bankruptcy,” he said. “I just could not walk down the street and pass people I
had screwed over by not paying them.”
Nor could he imagine that in 2004, both President
Bush and Vice President Cheney would campaign at Cabela's stores. The real customers were run off and only party loyalists with
admission tickets allowed in. At four Cabela's stores, in separate appearances, the two politicians praised the chain and Cheney
indicated it was his favorite place to spend money. President Bush extolled the jobs being created at the West Virginia store
without a hint about the role of government in underwriting those jobs. They picked Cabela's in part for its audience, in part for the
symbolism of connecting their campaign with the Second Amendment voters, but also because the Cabelas are among President
Bush's top campaign contributors. Dick and Mary Cabela gave $11,000 to the Bush campaign. What they got back in the
promotional value of these campaign visits was priceless, one corporate socialist helping another further their shared interest in
avoiding the rigors of the market and instead taking from the many for their own enrichment.
Since he closed his store, Weaknecht has worked as an assistant manager for a regional grocery store chain.
Cabela's actually offered him a jobâ$13.50 an hour to be a department manager, supervising people who make $8 or $9 an hour.
Weaknecht holds a second job, too, working on his days off for his cousin's landscaping business. His wife, Julie, works, too,
instead of devoting herself full time to their children. She holds down two jobs, as a teacher's aide and at a local department
store.
The power of big retailers will crush most small businesses, Weaknecht believes. He
sees it weakening the fabric of small towns. The owners of local enterprises have a vested interest in maintaining their
communities and running the local government at a reasonable cost. The shift to chain stores may be inevitable, he believes, but
what happened to him was not.
“If Cabela's had just come to town and paid their own way they
probably would have put me out of business,” he said. “But they didn't. This is not private enterprise. They are not building their
business by their own means whatsoever. They are using the government for their personal benefit. What built America was the
private businessperson who risked his own money and built his own business. In my opinion, that is what made America what it is,
competition between businesses. We are completely losing that.”
Weaknecht has a sort of
grudging admiration for the Cabela family's Paris Hiltonâlevel shamelessness in manipulating local governments for handouts
instead of competing fair and square in the market. Weaknecht wants to believe any sensible citizen would reject welfare for the
rich as both senseless and immoral. He believes that if he had sought a subsidy, the Hamburg town fathers would have laughed at
his audacity. Yet his own experience tells him that the reality of business and politics has morphed into something else, something
beyond the pale and yet very real. So long as he can earn his own way he will, even if that means four jobs for one family and
paying off the creditors of his business so everyone he deals with is made whole. But being rich and collecting welfare, hundreds
of millions of dollars of welfare? “I tell everybody the Cabelas are the smartest business people in the world,” Weaknecht said,
“because they pulled it off.”
Not everyone has a hand out for subsidies, however. One
company actively fights against them.
I
NFLUENCING GOVERNMENT IS ONE OF THE FASTEST-GROWING
INDUSTRIES
in America. In 1975, Washington lobbyists collected less than $100
million in fees. Had their fees grown at the same rate as the economy, lobbyists would have taken in about $250 million by 2006. In
reality, they took in 10 times thatâmore than $2.5 billion.
More than 35,000 lobbyists registered
in Washington in 2006, double the number in 2000. Thousands more work the 50 state capitals and the larger city and county
governments. These official numbers understate how many lobbyists are paid to influence government because many
practitioners are not required to register. Until the end of World War II, no one was even required to register as a lobbyist. Only
since 1995 have Washington lobbyists been required to disclose fees, and then not so fully as would allow full monitoring.
Enforcement of the laws governing lobbyists are wink-and-nod except for the most outrageous conduct, and even that can go
unchecked for years.
Lobbying pays fabulously well for those who succeed. Million-dollar
annual salaries are common. Jack Abramoff sought a $9 million fee in 2003 from Omar Bongo, president of the small African nation
of Gabon, just to arrange a meeting with President Bush. Bush and Bongo met in 2004. The fee was to be paid to one of Abramoff's
multiple lobbying firms, the misleadingly named GrassRoots Interactive. It has never been established whether Abramoff collected
this particular fee. However, he collected many tens of millions of dollars from other clients before he went to prison for fraud,
including $45 million from Indian tribes who seemed to have little need of a lobbying firm and whose payments he tried to keep
secret.
Abramoff held court at table 40 of his Signatures restaurant, which was strategically
located between Capitol Hill and the White House. It offered “liberal portions in a conservative setting.” The decorations included a
copy of the pardon that President Ford granted to President Nixon. Diners sat down to custom Villeroy & Boch chargers and
special lint-free napkins. They could rent lockers to store their favorite vintages, to be followed by after-dinner cigars from the
Signatures humidor.
For select senators, representatives, and others in government the best
part was that Signatures offered them a free lunch. And breakfast. And dinner. Abramoff gave his waitstaff a list of people who were
not to be charged. Many of those who dined for free never left tips for the people who waited on them. That stinginess explains
how the enterprising reporter Glen Justice was able to get from the stiffed staff records showing that 7 percent of the restaurant
meals were given away to those Abramoff sought to influence.
Karl Rove, the man President
Bush nicknamed Turd Blossom, House Speaker Dennis Hastert, and Representative Tom DeLay were often at table 40. The people
for whom Abramoff said no bill was to be presented included Representatives Roy Blunt of Missouri, John T. Doolittle of California,
Frank LoBiondo of New Jersey, and Senators Don Nickles of Oklahoma, Tim Hutchinson of Arkansas, and one Democrat, John
Breaux of Louisiana. There were plenty of other favors. Abramoff arranged free trips in private jets to golf at St. Andrews in
Scotland and prime American courses. Politicians watched Washington Redskins football games from his luxury box at FedEx
Field. All one needed to enjoy these gifts was a willingness to be useful to Abramoff's clients, who were seeking their own free
lunch from the taxpayers.
Nobody seemed to notice that government rules prohibit such gifts
to those in office. Senators and representatives, for example, could receive no more than $100 worth of gifts from an individual in a
year and no one gift could exceed $50. At Signatures a steak cost $74. Even a hamburger cost $12.
None of the politicians admitted to eating for free at Signatures. When DeLay's office was asked about a free
meal there, an aide said he did not have any records showing that the Texas Republican ate there that day, a classic nondenial
denial. Representative Dana Rohrabacher, a California Republican whose name was on the comp list, claimed that he often took
Abramoff to lunch and picked up the tab, so there were no gifts. And so the excuses went from those officials whose staffs even
bothered to return calls asking about the freebies.
The Signatures restaurant was central to a
host of scandals. Abramoff pocketed nearly all the money from a children's charity. He seemed to work against gambling while
actually promoting it in league with Ralph Reed. He engineered favors for a company that held women in virtual slavery on
American-owned Saipan to make knitwear. The United States attorney pressing a criminal case in the Saipan case was
mysteriously removed, a precursor of later scandals about the political uses of the Justice Department.
Abramoff arranged golfing trips for DeLay and others to Scotland that cost a quarter million dollars.
Representative Bob Ney, an Ohio Republican, committed felonies to further Abramoff's interests. A rich Miami gambling ship
magnate whom Abramoff had defrauded out of tens of millions of dollars was murdered. This is likely just the tip of the proverbial
iceberg, but in an era when the Justice Department has been turned into a machine for partisan prosecutions, with a blurred if not
blind eye to the crimes of friends of the White House, it seems likely that the evidence will melt into history.
In his student days, when Reagan was president, Abramoff had served as president of a national
organization, the College Republicans. He had long and deep ties to Grover Norquist, Ralph Reed, and Newt Gingrich. In the 1994
elections, Gingrich led the Republicans to control of the House, ending four decades of Democratic Party control. Abramoff went to
work for Preston Gates, the Seattle law firm founded by the father of Bill Gates. Preston Gates was almost totally allied with
Democrats before Abramoff came along. By 2000, Abramoff had built Preston Gates into the sixth largest lobbying firm in the
nation's capital. A firm known for its links to Democrats became renowned for its clients' extraordinary success with the
Republican leadership in Congress. That year Abramoff moved on to became chief political rainmaker for the Greenberg Traurig
law firm, raising its lobbying revenues in just three years from $3.5 million to $25.5 million.
In
March 2004 the Greenberg firm fired Abramoff. It also issued a stinging statement trying, desperately, to distance itself from him.
Greenberg Traurig acted just ten days after the
Washington Post
reported on its
Sunday front page that Abramoff and a secret partner had collected $45 million in fees from Indian tribes. The fees were supposed
to be disclosed, but were not. They were wildly out of proportion to the size of the Indian casino industry. Most significant, the fees
did not seem necessary given the paucity of Indian issues on the front burners of Capitol Hill. The
Post
story became the talk of the town, partly because ever since DeLay's rise to power
lobbyists aligned with the Democrats were finding it hard to get work and partly because of the extraordinary success of Abramoff
clients in getting what they wanted from Congress and the Bush administration.
The White
House said in 2006 that hardly anyone there knew Abramoff and released a log showing he had made two visits. Within months a
lawsuit pursued by Judicial Watch showed this was a lie. Judicial Watch is a nonprofit law firm that seeks to expose government
corruption and that has been heavily funded by the right. In time its pursuit of the case brought forth White House visitor logs
showing that Abramoff had visited the Bush White House at least seven times. His close allies Grover Norquist and Ralph Reed
had made more than 100 visits. Overall, Abramoff's team had nearly 500 contacts with the Bush White House, including 82 with
Rove or his staff.
After his firing by Greenberg Traurig, Abramoff would seem to be an
unattractive prospect for almost any employer. The leaders of his own party were all busy distancing themselves from their once
oh-so-close friend. Yet within days of being fired, Abramoff and three of his associates landed at the premier lobbying firm in
Washington. They joined Cassidy & Associates, a firm founded by a Democrat who was a pioneer in showing clients how to
obtain a free lunch from Congress.
Gerald S. J. Cassidy grew up poor in Brooklyn. He started
out as an antipoverty lawyer. That got him work with the Democrats on Capitol Hill, helping expose the awful living conditions of
migrant farm workers. Then Senator George McGovern, the South Dakota Democrat, developed a fantasy in 1975 that he could run
for president again. McGovern fired Cassidy to make room on the Agriculture Committee staff for another political operative, Bob
Shrum, who stoked the fantasy.
So Cassidy opened a lobbying business. Among his first
clients were private colleges like Tufts University. Cassidy's firm invented the appropriation earmark, in which a specific amount of
money for a specified recipient is written into a spending bill. Instantly, Cassidy had plenty of clients. A tsunami of greenbacks
poured in.
Since then, appropriation earmarks have grown from a relatively few items buried in
the fine detail of the federal budget into an industry. Campaign donations, favors, and carefully nurtured relationships mix into a
taxpayer-financed pork stew. The infamous $320 million earmark for a “bridge to nowhere” that would connect an island of 50
people with the nearby Alaska mainland is the best-known piece of pork.
Earmarks now
finance everything from airport parking for private jets to a Kansas museum dedicated to prisons. A $37 million freeway ramp and
road widening for Wal-Mart's corporate headquarters in Benton, Arkansas, accounted for more than a third of all earmarks for that
state in 2005. Exxon Mobil, General Electric, and Microsoft have all benefited from earmarks in recent years, though their names do
not appear in the statutes.
Many earmarks identify the beneficiary as a hospital, college, or
nonprofit association, but they are just the entity the money passes through on its way to IBM, Johnson & Johnson, or Ford
Motor.
Religion has also discovered earmarks, a particularly curious development in taking
from the many to benefit the few. The 108th Congress, which was in office during the 2004 presidential election cycle, gave out
more than 450 faith-based earmarks to churches and religious charities. Back in the 1997â1998 Congress, fewer than 60 earmarks
went to religious groups, my colleagues Diana B. Henriques and Andrew H. Lehren found by meticulously combing through the
fine, and sometimes obscurely worded, details of budget bills. More than a hundred million dollars of cash and property or control
of property, from forest land to an old Coast Guard ship, were given to Catholics, Mormons, and independent one-church
operations. World Vision, a television-based religious charity, even got money for job training.
Thus does Caesar render that which is his onto the faithful, tearing down a wall that Thomas Jefferson
thought crucial to the liberty of the people. “History, I believe, furnishes no example of a priest-ridden people maintaining a free civil
government,” he wrote in 1813.
Jefferson would be appalled at churches hiring lobbyists to
arrange religious earmarks. In 1802, while serving as our third president, Jefferson wrote to the Danbury Baptist Association in
Connecticut about the roles of government and religion. Referring to the First Amendment's purpose, President Jefferson wrote:
“That act of the whole American people which declared that their legislature should âmake no law respecting an establishment of
religion, or prohibiting the free exercise thereof,' thus building a wall of separation between church and State.”
Cassidy is not a lobbyist for religious causes, but his success with earmarks has played a major role in
turning the First Amendment right to petition government for a redress of grievances into a booming business instead of a political
matter. The petitions of those who pay to be heardâby making campaign contributions, hiring the relatives of lawmakers, and
providing jobs for those departing Capitol Hill and the executive branch agenciesâget a full and often sustained
hearing.
So what happens to the petitions of those who just want a responsive government?
Those petitioners not seeking personal gain or offering donations? Those without the luck of a news event or celebrity backing to
draw attention to their cause? Try getting a private meeting with your Congress member as a mere constituent and see how well
you fare. Only rarely are the petitions of those who do not pay to play the basis for official action, except to drop them in the round
file.
The growth of earmarks and of turning contact with lawmakers into a business has made
Cassidy a demigod to those in the influence business. He is widely regarded as the premier lobbyist in the nation's capital. His
personal fortune is well in excess of $100 million, including an imposing mansion on Chesapeake Bay.
Cassidy says he earned it all by working hard on behalf of his clients. Many carefully crafted campaign
contributions, especially to Democrats, helped. So did bringing into his business people like Jody Powell, who was President
Carter's press secretary, and Sheila Tate, who was Nancy Reagan's press secretary. Mostly, Cassidy made his fortune from the
golden cake that is the nearly $3 trillion federal budget. He had slivers cut for his clients, who showered him with golden
crumbs.