The Business of Politics

Commentators, noting President Reagan's popularity, the mood swing of the electorate, and the outpouring of conservative money, proclaimed in 1981 that the much prophesied "realignment" -- the Republicans' ascent to majority-party status -- was finally at hand. The Democratic camp stood in even worse disorder than usual, with a little-known Los Angeles lawyer, Charles Manatt, taking over the Democratic National Committee (DNC) and the utterly anonymous Tony Coelho, a thirty-nine year-old California congressman with no organizational experience, assuming leadership of the related Democratic Congressional Campaign Committee (DCCC), which is charged with raising money for Democratic congressmen. Twenty-five more seats in 1982 would have given the Republicans the House, and with it full control over federal decision-making. The conventional wisdom held that the Democratic Party would not get out of the Reagan revolution alive.

Needless to say, the conventional wisdom was wrong. The Democrats kept the House, and they stand a chance of recovering the Senate in next month's election. Meanwhile the party's fund-raising for itself (there are several other types of fund raising, including the kind candidates do for themselves) has become dramatically more effective. For the 1980 elections the DCCC raised $1.8 million, while its counterpart, the National Republican Campaign Committee, took in more than ten times as much. For the 1986 elections the DCCC expects to take in at least $15 million, around half the amount the NRCC will raise. Though the Republicans retain the lead in most forms of money-raising, it is an ever more modest one.

Most of the Democrats' gains stem from business gifts and direct-mail appeals -- exactly what powers Republican fund-raising. The gains have occurred as Coelho (pronounced Quell-o) has thrown himself into campaign finance with the kind of zealous stamina last seen when W. Clement Stone built a pecuniary empire by selling insurance door-to-door. A man of unusual drive and almost pious determination, Coelho has since 1981 tirelessly canvassed the country, spending 150 days a year on the road, many of them devoted to extracting contributions from businessmen and political-action-committee (PAC) managers.

It is commonly assumed that the reason for the increase in financial support for right-wing candidates over the past decade is that businessmen are all Republicans. Certainly, a high proportion of chief executive officers and of the rich are Republicans, but most business men and women are neither CEOs nor rich. Even in the Reagan era many mid-level managers and independent businessmen and a few CEOs remain Democrats, either because of upbringing or because of a preference for Democratic policies. Yet in the years building up to their 1980 defeat the Democrats seemed to write off the business community. Many businesses and PACs were simply never called on by Democratic fund-raisers.

Voters think of PACs as institutions that exist to seduce congressmen. But the system also works the other way around. Nearly all Washington dinners held "in honor" of some senator or committee chairman, for instance, are actually arranged by the honoree or a close affiliate and are attended mainly by lobbyists and PAC officials whose invitations apprised them of the $250 or $500 "donation" required at the door. Just as PACs have been able to render congressmen timorous by implicitly threatening to back an opponent, congressmen have learned to shake down the PACs with a reciprocal insinuation that they'd better give or lose ground to a competing PAC that did. Today it's probably more common for politicians to put the touch on PACs than vice versa. The Republicans have seemed to understand the possibilities since PACs began to proliferate in 1974; the Democrats have come to understand them through Tony Coelho.

James Devlin, a Texas businessman, recalls meeting Coelho in 1981. Then the chairman of U.S. Telephone Inc., Devlin was in Washington to lobby congressmen about phone deregulation. While he was waiting to meet someone for breakfast in the House dining room, Coelho walked up to Devlin cold and started giving him a sales pitch on the Speaker's Club, a new group Coelho was forming.

"Clubs" were just catching on in political circles as a polite way to combine arm twisting and elbow rubbing. Coelho's club, a bargain at $5,000, promised audiences with Speaker Tip O'Neill and other Democratic big wheels. "Tony had these little index cards he was writing on, and before I knew it, he was saying, 'I'll just put you down for $5,000,'" Devlin says. "Suddenly I felt myself in the presence of a businessman." Coelho, Devlin says, "has a style that's engaging to business people. Tony's a guy who makes lists, who summarizes, who gets to the point quickly and then moves on to the next item."

Devlin became one of Coelho's first converts. Soon Coelho was urging O'Neill, who rarely travels, to go to Dallas for a fund-raiser. Devlin had organized a party at the home of Starke Taylor, an old-money patrician and now the mayor of Dallas. "The majority of the guests were Republicans who had never had contact with Democratic leadership," Devlin explained. "I think Starke Taylor's wife wanted to keep it secret from her friends that Tip O'Neill was going to set foot in her home. Picture the setting. A palatial Dallas home, a string orchestra performing, Texas Republicans in evening clothes -- plus Tip O'Neill. And he charmed them, absolutely charmed them."

The party raised $125,000 for the DCCC. Devlin thinks it represented a turning point in Coelho's evolving understanding of businessmen. "Tony visualized that businessmen are businessmen, not ideologists," Devlin says. "Businessmen are interested in results." If Coelho could provide results -- whether consideration for legislative proposals or introductions to the right people or simply the assurance that donations weren't being squandered -- business PACs would be happy to invest a little to cover their Democratic bases.

"There's a lot of ideology out there, but what drives business is pragmatism," explains Walter Shorenstein, a San Francisco developer and Democratic donor. "I say to my Republican friends in business, 'When was the last time you had your Democratic congressman out to your golf club?' The ones who do are always quite glad they did."

Coelho admits, with a frankness that has won him a minor celebrity status among political cognoscenti, that in the dark days following the 1980 elections his appeal to donors was, as Robert Kuttner reported in The New Republic, "Business has to deal with us whether they want to or not. I tell them, 'You're going to need to work with us.'"

If that pitch sounds like a mixture of protection racket (nice little multinational you have here; too bad if anything should happen to it) and an offer to play ball, that's exactly how it was intended to sound. Political fund-raising appeals often boil down to this formula, though fund-raisers prefer lofty phrases about national purpose. In the period following Reagan's election the most persuasive argument Democrats could make to business leaders with conservative sympathies was that it would be more cost-effective to buy Democratic good will than to try to wipe out the party altogether. Democrats still had incumbency on their side in the House, and going after dozens of them would be a very different matter from going after one President or a few senators.

"The thing to do with business men and women is to appeal to their business sense," Coelho told me recently. "You can't sell them H. R. 1236. You can't sell them a legislative program. People aren't interested in that. Business men and women want to be associated with success. If they see you are going to be successful, they latch on to you. I basically went out and said, 'I'm an entrepreneur in politics. I'm going to get the Democratic Party into direct mail, media centers, computers'" Coelho continued. "I went to Texas and California. Where are the entrepreneurs in this country? The big numbers are in those states. I went to New York and later Florida, as well, but Texas and California the most. Some people will say that was where to find oil and gas money or conservative money. But I was going after a mentality. It's just like anybody else who starts a new business. Where do they find people who will invest in them? Among the entrepreneurs.

"What I wanted was to make the DCCC like a business. What I have now is a business that is successful. My business had no assets, and today has five million dollars in assets. My business had no income, and today we open up our doors every month and get three hundred thousand dollars in direct mail. The business of politics is what I'm all about."

In the campaign-finance business it is donors who are the customers, and what keeps the customers satisfied is access. Access in the Washington subculture has more to do with personal courtesy and attention than with "power" -- since even access to the President does not guarantee that you will get your way -- and so, more than votes, the products that fund-raisers sell are connections and ego strokes. Thomas Gaubert, a Dallas venture capitalist, says, "I'm one of the biggest contributors to the Governor of Texas, but can I get him on the telephone? Hell, no. Sometimes it takes a week. I call Tony any hour of the day or night and he gets back to me immediately. Some days he just calls to ask how I'm doing. That pleases me tremendously."

Coelho tripled the take from DCCC fund-raising, from $2 million to $6 million, in his first two years. Among his first management decisions was to insist that during the 1982 elections DCCC funds be used selectively: test-marketed, as it were. Previously the committee had handed out a set amount, usually a thousand dollars, to every Democratic candidate regardless of need. This was both an attempt to avoid intramural bickering and an admission that the committee had no larger blueprint. Coelho decided to ignore those Democrats with "safe" seats and concentrate resources on close races.

Many in the party old guard were furious. Senior incumbents who had served faithfully found themselves rewarded with no party funds; green or little-known candidates got the legal maximum of $50,000 in intra-party help. It was a controversial decision, and Coelho took the heat for it -- "I still have enemies in Congress because of it," he says -- though the party leadership had privately concurred, reckoning that if the stratagem failed, the young and expendable Coelho would make a handy fall guy.

When the stratagem succeeded, with the Democrats picking up twenty-six House seats during the height of the Reagan revolution, Coelho was able to claim a share of the credit. Just a few months later, in the winter of 1983, he threatened to quit as the DCCC head if he wasn't given a role in party policymaking. Coelho was in a position strong enough that he won this concession, although the DCCC chair had traditionally been strictly a money post, divorced from the issues. Soon word began to circulate that when O'Neill retired, Coelho would run for whip, the number three position in the House leadership and a proven stepping-stone to the speaker's chair. O'Neill will retire in 1987, and Coelho is at this writing considered the favorite for whip. If he wins, it will be after just eight years in Congress, an amazingly short tenure.

Another businesslike decision Coelho made early on was to invest a portion of the DCCC's rapidly increasing income. Previously, the money had immediately gone out to finance campaigns or to retire old debts; some of these venerable obligations date to the days of the Humphrey-Nixon race. Coelho set aside about $3.5 million of the first $6 million he raised to finance a media center and a direct-mail operation; at the DNC, Charles Manatt was doing much the same.

"In 1981 the average Democratic House contribution was about five hundred dollars, while the comparable Republican average was thirty-eight dollars," Coelho said. "That told me very quickly something was wrong. Here we were the party of the little guy, yet the small contributors were going Republican." By 1986 Democratic direct mail had recovered. Coelho could boast that the DCCC's average contribution was "down" to $35, with small contributors providing nearly half of the committee's take. (Different schools of thought exist on the ultimate value of direct mail as a fund-raising technique. Overhead is high, anywhere from 20 percent to 90 percent; the overhead involved in soliciting a PAC contribution, usually $30 or $40 for steak, shrimp, and drinks, consumes a much smaller proportion of the gift. The impact of direct mail appeals in general has declined as the practice proliferates and people's mailboxes fill up with unwanted and unread mail. What fund-raisers continue to like about direct mail is that it can be operated on an automated basis. No traveling, personal appearances, or handshaking is required.)

Meanwhile the DCCC, at Coelho's behest, was building his media center. Here he was playing catch-up; the Republicans, many of whom have backgrounds in marketing, had caught on much sooner to the importance of controlling the means of video production.

As early as 1981 the Republican committee was transmitting "satellite press releases" -- flattering clips of a senator or a representative that are beamed out at comparatively little expense for any local television station to use as if the station had reported the story itself. Republican officials were sending camera crews to "cover" congressional activity in such a way that their clients appeared to be at the center of the action: artful filming can transform routine questioning during a routine hearing into a face-to-face showdown between a congressman and a famous witness.

Coelho, who has six television sets in his office -- in addition to C-SPAN, he watches NBC, CBS, ABC, CNN, and PBS news shows simultaneously, scanning for pictures with political content -- preached to the Democrats the value of media and of packaging ideas, and they began to listen. "Politics has become the business of communication," he says. "If I make a sale, they react by voting for us. I still think you ought to do what is legislatively right, but the way you package your idea has become just as important."

Coelho was instrumental in fashioning Tip O'Neill into a visible media counterpoint to Ronald Reagan. O'Neill had long been uncomfortable before the camera, and no previous speaker of the House had had any standing on TV. O'Neill's predecessors in the electronic age -- Carl Albert, John McCormack, Sam Rayburn, and Joseph W. Martin -- were confirmed behind-the-scenes operators.

One of Coelho's first acts at the DCCC was to hire Chris Matthews, a young political operative with a keen understanding of television's need to reduce issues to pictures and single sentences. Coelho pushed O'Neill to take Matthews as his press secretary; Matthews, who is well liked by the Washington press corps because of his ready wit, had soon sweet-talked the networks into treating the Speaker as if he were an opposition leader in the Philippines or Nicaragua, so that sundry evening-news clips of Reagan were followed by ten-second retorts from O'Neill.

By the time Reagan's 1984 State of the Union address rolled around, Coelho had helped persuade O'Neill to film his response on the streets of Boston, talking to average voters. (But, as Barbara Matusow reported in the Washington Journalism Review, it snowed the day of the address, and O'Neill was unable to get a flight north. So the DCCC media center set up fake Boston scenes in Washington, complete, in the finest packaging tradition, with fake real people. One "typical Boston" scene, Matusow wrote, was filmed on Capitol Hill in a bar that is a hangout for congressional staffers. Cameramen had to shoot carefully around Washington Redskins posters.) Polls show that 90 percent of Americans now recognize O'Neill's name and give him approval ratings nearly as high as Reagan's. That O'Neill, the speaker of the junior chamber of Congress and a man without presidential possibilities, was able to emerge as the Democrats' leading figure when several senators and governors were competing for the distinction is a testament to the DCCC's studious exploitation of television.

Coelho has further preached to Democrats the value of "free media": rather than pay for ads, get the networks to broadcast the message voluntarily. He is especially proud of a free-media coup that took place when the DCCC held a press conference, in March of 1984, announcing an advertising campaign to embarrass Reagan on the "sleaze issue." The event was given prominent play on the evening news; the three major networks ran excerpts from tapes of the coming ad which Coelho had distributed. The ad itself never ran -- network coverage had been the goal all along.

"Our sleaze ad cost about $800 to produce, and we got a million dollars worth of publicity from it, because we put it out in a way the media could use," Coelho says. "Video media has to deal with what the picture is. Reagan understands this to perfection. If you control the picture, you in effect control how the video media presents your issues. It's totally different from the printed word."

Another example followed the first presidential debate in 1984. Coelho was shown on many national newscasts saying that the President had "looked old and acted old," a thought the Mondale camp wanted to plant but could not, for obvious reasons, let Mondale himself say. Viewers got the impression this was Coelho's spontaneous reaction to a news event and that cameramen just happened to be nearby. In fact Coelho had informed Mondale advisers that he would deliver the comment and had refined the phrasing to make it as short and punchy as possible. (Later, after the Mondale ship began to sink, Coelho distanced Democratic congressional candidates from their party's presidential ticket -- for which he was criticized in the press, though not by his fellow congressmen.)

Coelho probably could not have gotten the DCCC job in 1980 unless few others had wanted it. Not only was the party in decline but the past two DCCC chairmen, Wayne Hays and James Corman, had not been success stories. Hays, of course, was finished the day his aide Elizabeth Ray admitted, "I can't type, I can't file, I can't even answer the phone." Corman, a twenty-year House veteran from Los Angeles, lost in 1980 by 752 votes when Jimmy Carter conceded defeat while the California polls were still open, causing an exodus of Democrats waiting in line at polling places.

But Coelho, a student of congressional history, knew that earlier DCCC chairmen had included Tip O'Neill and Lyndon Johnson. The job allows a congressman to woo his fellow party members with financial support. This is a powerful, although imperfect, tool of self-advancement -- imperfect at present because Coelho continues to take money from backers in the districts of safe-seat congressmen and shift it to candidates whose districts don't produce contributions, and these transactions cause only headaches for him. In the 1986 election, for example, Coelho is "maxing out" on intraparty contributions to several close North Carolina races -- essentially shifting money from Texas, California, and New York to North Carolina -- although the state's delegation is not expected to support Coelho in his bid for whip.

The DCCC job is also renowned for allowing its holder to make the acquaintance of benefactors who might later support his own ambitions. Coelho's ambitions are a subject of considerable interest within party circles. He first won the notice of Democratic leaders in 1979, when, in his first term in the House, he sold $50,000 worth of tickets to the party's annual dinner. Most congressmen considered this duty on a par with having to unload 4-H raffle tickets; a single $1,000 sale was all that was expected of anyone.

Born to a lower-middle-class dairy-farm family in the Central Valley of California in 1942, Coelho while still a child distinguished himself as a demonic worker even by the standards of an enterprise in which a continuous tending of animals is the norm. He and his brother sometimes rose as early as 2:30 A.M. to milk cows before heading off to school. The family worshipped Franklin Roosevelt, whom they considered the savior of small agriculture. In high school and later at Loyola University of Los Angeles, a Catholic men's college, Coelho did very well both academically and socially. He planned to enter law school.

In 1963 his father's farm went bankrupt, an event that Coelho -- with a Reaganesque time sense -- blames on "Republican policies." Then, just before graduation from Loyola, Coelho decided that he wanted to become a Jesuit priest. Though it was 1964, the first big Vietnam draft year, Coelho says his decision to enter the seminary was triggered by the death of John Kennedy.

"I loved everything about Kennedy," Coelho says. "I wouldn't go out on a date if he was going to be on TV. I loved the way he sold himself and his ideas. I loved his young family and the way he involved them. I didn't know much about what he stood for, but I loved the charisma of the guy." His memory of the day Kennedy was shot is still vivid: "I had to announce that he had been assassinated. We had a ceremony in the campus chapel. The church was packed. There were people out on the steps and all over the grounds kneeling and praying that he would survive the bullet. I couldn't believe they would take him away."

As he prepared to enter studies for the Jesuit order, Coelho, who had suffered from convulsions for years, was diagnosed as having epilepsy. His parents, both of Portuguese descent, clung to a superstition that epilepsy is divine punishment for an ancestor's sin. "Their reaction hurt me -- they said no son of theirs was an epileptic." Another shock came when the Jesuits informed him that he could no longer join the priesthood, invoking a canon dating to the Middle Ages that forbade the ordination of epileptics.

"I went into the gutter," Coelho says. "I was suicidal. I learned what it is to be discriminated against."

His period in the gutter didn't last long. Within a few months of discovering his epilepsy he had a job working for -- of all people -- Bob Hope. Hope's wife, an active Catholic and a supporter of Loyola University, had heard about Coelho's misfortune.

Hope told Coelho that if he wanted to help people but couldn't be a priest, he should work for a congressman. Coelho wrote to his hometown representative, B. F. Sisk, and in 1965 was on his way to Washington, where he rose to be the congressman's top aide. Because of Sisk's committee assignment, Coelho soon found himself in charge of a potent instrument for making early insider connections -- he controlled the allocation of Capitol Hill parking places.

Sisk retired in 1978, and Coelho ran for his seat. When an opponent tried to make epilepsy an issue by saying that Coelho might embarrass the district by having a seizure during a visit to the White House, Coelho replied, "A lot of people have gone to the White House and had fits. At least I'd have an excuse." Reagan himself couldn't have made a better comeback. In 1964 a benign tumor was surgically removed from Coelho's brainstem. His seizures have diminished, and he now controls the condition with daily medication. He is active in several epilepsy awareness campaigns.

Coelho makes considerable hay of his Portuguese ancestry, frequently describing himself as "very Portuguese and very ethnic," though he was born in the United States to American parents and his appearance is typically middle American. In 1985 Coelho fought a minor political struggle to be admitted to membership in the House Hispanic caucus. "True" Hispanic members resisted, but their position was not helped by the fact that the chairman of the caucus, Representative Edward Roybal, was himself born in the United States to American parents.

As Coelho's influence with party policy-makers has increased, he has become increasingly concerned that, as he says, "there's a perception I can't do substance." The party left complains that Coelho must be a closet conservative or he couldn't get along so well with the businessmen he lobbies. His voting record, though, is mainly liberal. Coelho says that he was instrumental in persuading Majority Leader Jim Wright, of Texas, Whip Thomas Foley, of Washington, and Democratic leading light Richard Gephardt, of Missouri, to fight deployment of the MX missile. He also helped draw up the party's position paper on the 1985 Geneva summit meeting. Recently Coelho has begun to be quoted as a party spokesman -- on trade, aid to the contra rebels, agriculture, nuclear-reactor safety, and a range of other issues.

Because Coelho has no compunctions about fund-raising -- "Money is part of politics and always will be," he often says -- and does it so well, if he were a Republican he would be one of the party's darlings. Many Democrats, however, are uneasy about him.

Off the record, some Democrats maintain that Coelho is bartering away the party's populist birthright. On the record, Kuttner has called him "the Milo Minderbinder of campaign finance, with something to sell just about everybody." Thomas Edsall, a congressional reporter for The Washington Post and the author of The New Politics of Inequality, which argues that money and legislative fairness are mutually exclusive, says that Coelho "epitomizes a central tension within the beleaguered Democratic Party -- between the party's reform wing that frowns on the campaign finance world of special-interest PACs and the party's deep thirst for money." Fred Wertheimer, the president of Common Cause, has called it "institutional schizophrenia" for Democrats to rely on business funds. There is, as well, schizophrenia within the business community that funds the Democrats, as was demonstrated when Coelho brought conservative oil-drillers and liberal Jewish financiers together into the Council for a Secure America, a money conduit whose participants were united only in their anxiety about the Arabs.

But if business funding is said to be bad for the Democratic Party now, five years ago the lack of it was said to be bad for the party too. And the phenomenon is hardly confined to Coelho's DCCC. Of the top twenty-five contributors to the re-election campaign of New York Governor Mario Cuomo, the paladin of orthodox liberalism, eighteen are business interests.

The political distinction between money accepted without strings and money taken in trade can be as difficult to judge as the biblical distinction between money itself (neutral) and the love of money (root of evil). If the new Democratic fund-raising efforts are minted, the evidence would be votes in Congress. So has the Democratic Party become more pro-business since Coelho took over the DCCC?

The answer is a mild yes. But given the sentiments of the electorate and the general concern over the economy, it's hard to believe that Democrats wouldn't have grown more pro-business even if they had not received a dime from the halls of commerce. Party positions in the House do not reflect anything like the extreme rightward shift that might be expected if business support -- of the cliched conservative, big-business kind -- were truly corrupting Democratic thinking. Tax reform legislation, for example, will effectively raise corporate taxes; Democrats have resisted the Reagan Administration's attempts to lessen environmental enforcement; and so on. Most House Democrats (including Coelho) voted for the nuclear freeze, hardly an item high on corporate America's agenda.

Much of the animosity against Coelho seems to stem from apprehension over hearing him speak candidly about political money and media, rather than in the euphemisms that institutional Washington prefers. Coelho openly states political facts of life that Democrats, among others, know to be true but fear to do anything about -- by, for example enacting serious campaign reforms. One such reform, championed by Senator David Boren, of Oklahoma, would cap the total amount of contributions a congressional candidate could accept. This approach sidesteps the vexing First Amendment issue of money as speech, because individuals would still be able to give while politicians would be rescued from the arms-race-like imperative to build up ever bigger war chests. Hardly anybody professes to like the current system of campaign financing; even Coelho is uneasy with it. He recently told The Wall Street Journal, "The system at times forces Congressmen to do things that they would rather not do. I think that the process buys you out. But I don't think that you individually ... sell out. There is a big difference." Most congressmen would probably agree, and then shrug their shoulders, as if nothing could be done about this quandary. But "the process" that "buys you out" is not a law of nature; neither is it mandated by the Constitution. It is an invention of Congress and within the power of Congress to change.