If the head of the U.S. Chamber of Commerce has his way, the President's change agenda is finished
Two days before Halloween, a squadron of protesters from the radical feminist group CodePink showed up in front of the headquarters of the U.S. Chamber of Commerce in Washington, D.C. The agitators, who were dressed as vampires, produced masks bearing the craggy visage of Thomas J. Donohue, the chamber's white-haired chief executive. Through the wonders of Photoshop, they had given him a wicked set of eyebrows, sharp fangs, and a red-stained mouth.
The protesters unfurled a black "Chamber of Horrors" banner and chanted, castigating the chamber for spending upwards of $50 million to help flip the leadership of the House of Representatives from Democratic to Republican. "Help! Help! Dracula Donohue is sucking the blood from me and you!" they wailed. "Help! Help! The Chamber of Commerce is making this election even worse. Help! Help! We're under attack. We want our democracy back!"
The 72-year-old Donohue could hear it all from his fourth-floor office, where he was trying not to gloat on the eve of a midterm election that was about to come out almost exactly as he hoped. "It sounds like our friends are here," he said.
The head of the Chamber of Commerce—the nation's largest business trade association, with an annual budget of $258 million—doesn't mind being called a bloodsucker or inspiring howls of protest. To the contrary, the opposition lets his members know he's doing his job—which makes them more likely to give money to his organization.
During the last two years, empowered by $350 million in donations from corporations such as Dow Chemical (DOW), Goldman Sachs (GS), Chevron Texaco (CVX), and many other anonymous sources, Donohue has emerged as President Obama's most effective antagonist. Almost every time the President introduced a major initiative, the chamber and its leader were primed to attack: New health-care laws imposed a "burdensome mandate on employers," and the Administration's Wall Street reforms would "choke off" business' access to capital. And don't get Donohue started on the White House's climate change proposals. It didn't matter that Obama helped resuscitate the banking system, bailed out auto manufacturers, and meddled far less with Wall Street than many of his supporters would have wished. Donohue tapped into a powerful vein of discontent within the business community and rode it like a rocket.
Perhaps not surprisingly, his enemies were enormously gratified when the chamber stumbled early in its anti-Obama campaign. In August 2009, William Kovacs, the chamber's senior vice-president for environment, technology, and regulatory affairs, called for public hearings on the validity of the climate science that had triggered the Environmental Protection Agency's decision to regulate greenhouse gas emissions. He predicted a spectacular debate much like that surrounding the 1925 Scopes Monkey Trial, in which proponents of evolution and creationism battled in court, a remark that suggested the chamber was as skeptical about the dangerous effects of global warming as some of its Republican allies. The response was swift: Five major companies, including Apple (AAPL) and Nike (NKE), resigned from the board or from chamber membership in the face of the public outcry, and some local chambers distanced themselves from Kovacs' comments. "I think the chamber's approach is somewhat old school," Valerie Jarrett, one of the President's senior advisers, complained to the Huffington Post.
As the criticism reached a boil, Donohue reminded everybody of why he's a Washington institution who has been around since 1997. He repudiated his senior vice-president's inflammatory statement and moderated the chamber's tone on global warming just enough to calm some of its critics ("So let me state without equivocation: We, the U.S. Chamber of Commerce, support strong action on climate change"). Donohue also ramped up his organization's fundraising. Its opaque 501(c) operation, which is not legally required to identify its funding sources, poured $32 million into television "issue" advertising often critiquing Obama's allies in Congress during this election cycle, according to the Center for Responsive Politics. The vast majority goes to Republican candidates. (Obama and his allies shot back, accusing the chamber of accepting undisclosed funds from foreign corporations, a charge Donohue vehemently denies.) The chamber's partner in the campaign was Karl Rove's American Crossroads, a conservative fundraising group whose president, Steven Law, is a former U.S. Chamber of Commerce general counsel. "The chamber and the Crossroads groups meet periodically and share information about where they will be engaged in the U.S. Senate and House races in order to make sure that efforts aren't doubled," said Jonathan Collegio, a spokesman for Rove's organization, on the eve of the election.
On Nov. 2, the Republican Party won control of the House of Representatives and increased its presence in the Senate by six seats, making Obama's chief tormentor even more powerful than he was before. The chamber supported the winner in 38 of 59 contests. "How do I feel? Tired," Donohue said the next day. "But that's fine. I think our guys did a great job."
He intends to spend his new political capital by reconfiguring the country's economic policies the same way that large corporations have always wanted to: by cutting taxes, slashing regulation, forging trade deals with foreign countries, and reducing the deficit.
He'd like to start by chipping away at the President's legislative achievements such as health-care and financial reform, which must still be implemented at the regulatory level. In short, the battles between the chamber and the White House are far from over. "Oh, hell no," Donohue laughs. "They are in the second inning."
Donohue's critics have taken notice. "The chamber can walk into any office on Capitol Hill and the first thing the member of Congress will think about is the $50 million that the chamber spent in this election for them or against them," says David Donnelly, director of Public Campaign Action Fund's Campaign Money Watch. "That's an incredible amount of clout to throw around."
A Grenade in His Pocket
The night before CodePink's vampires showed up on his doorstep, Donohue presided over a dinner for lawyers and lobbyists from media and pharmaceutical companies including News Corp. (NWSA), NBC Universal, Walt Disney (DIS), Merck (MRK), and Johnson & Johnson (JNJ)at the chamber's headquarters. The guests were complaining about people pirating their goods at home and in China.
Piracy is a difficult problem to solve, but Donohue was upbeat. He praised Victoria Espinel, the White House's intellectual-property czar. "She's a good person," he said. "We just need to make sure she has the resources to do her job." He said that a bill designed to crack down on intellectual-property theft was winding its way through the Senate and stood a good chance of passing, even in this contentious political environment. "It's really a bipartisan effort," he assured everyone.
Waiters appeared with plates of mesclun salad and goat cheese soufflés, accompanied by a Napa Valley chardonnay. Then they returned with the main course: port-wine-and-orange-glazed duckling, paired with a California pinot noir. Donohue kept the conversation flowing as fast as the wine. He joked with a Viacom (VIA.B) lobbyist about the fact that she had only recently left a job on the staff of one of the House's most liberal leaders. "Congratulations for switching sides," he said. He teased a Disney lobbyist about his company's plan to build a theme park in China—warning that it would take forever and to be wary of competition from the country's state-supported businesses. "He's going to be retired by the time it's done," Donohue told the group. "I told him, 'Come and see me, and tell me how you like it. Of course, there's going to be one just like it across the street.' "
As the waiters circled with warm banana-and-macadamia pudding, the conversation took on a darker tone. Donohue announced that the chamber had been digging into the funding sources of anti-globalization groups that might try to thwart their efforts overseas. "We found that 50 or 60 percent of their money comes from the same person," Donohue said dramatically. He wasn't ready to name names just yet. Instead, he acted like a man with a hand grenade in his pocket who couldn't wait to hurl it. "It's going to be a story," the chamber leader promised. The people sitting around the table seemed baffled. (Later, when asked if he was referring to George Soros, Donohue laughed and said, "That's a pretty good guess.")
Then, at 8:30 p.m., Donohue glanced at an antique clock on the sideboard and declared that it's the chamber's policy never to keep guests longer than the scheduled time. He bid his lobbyist friends farewell and prepared to head home to Potomac, Md., where he lives with his wife, Liz. "That's my favorite clock," he said.
In Praise of Relentlessness
Donohue grew up in Brooklyn and still has the accent to prove it. He got his MBA from Adelphi University in 1965 and in 1976 became a vice-president at the U.S. Chamber of Commerce. Eight years later, he was named president of the American Trucking Assn., a position he held until the chamber lured him back to be its chief executive officer in 1997. By all accounts, he reinvigorated the association. "Tom brought to the chamber an enthusiasm that it was lacking," says Senate Minority Leader Mitch McConnell (R-Ky.). "I think he turned the Chamber of Commerce into an incredibly effective organization."
One of the keys to Donohue's success was his zealous approach to fundraising and the way he used the money once he got it. John Castellani, the former president of the Business Roundtable, an association of the CEOs of the largest U.S. companies, remembers overhearing Donohue berating Phil Condit—who was Boeing's (BA) CEO at the time and the roundtable's chairman—for not giving the chamber more money. "Well, I'm the chairman of the Business Roundtable," Condit replied. Donohue wasn't put off. "Yeah, but if you would give the money to the chamber, we'd get these issues settled," he said, suggesting that there was no question which lobbying group he thought was more effective.
His members see Donohue's relentlessness as a primary virtue. "I think they admire his tenacity, his enthusiasm, and his working style," says Jim Owens, the ex-Caterpillar (CAT) CEO who retired this year. "In a job like that, you have to have an outgoing personality; otherwise, you just become part of the bureaucracy in Washington. I think there are a lot of people in the business community who are glad he hasn't become part of the bureaucracy."
Under Donohue's leadership, the chamber underwent a dramatic shift. Previously, it focused primarily on legislation. But with his newly amassed war chest, Donohue began to inject the organization much more aggressively into electoral politics. The chamber started endorsing "probusiness" candidates, most of them Republicans, and spending money on advertising to get them elected. "We've always been involved in the political process," Donohue says. But, he adds, the chamber "didn't really start spending money until I came back."
Along the way, Donohue became friendly with a number of U.S. Presidents. He had a long relationship with George H.W. Bush, whom he found "very interesting." He's even more ebullient discussing Bush's successor: "I think Clinton was a fascinating guy," he chuckles. "You could always do a deal with Clinton—as long as you watched out for the deal he did with the next guy." Of George W. Bush, he says: "I liked Bush Two as a person. I thought he showed a lot of courage in difficult times." He leaves it at that.
The warmth drains out of Donohue's voice entirely when he talks about Obama. The chamber supported the President's $787 billion stimulus package. But Donohue took it personally when the Administration banned lobbyists in the White House. "I think what we do is highly honorable," he says.
It wasn't long before the chamber and the White House were locked in disagreement. Ever the shrewd Washington operator, Donohue employs a classic tactic when he explains why he opposed nearly every major legislative step the Administration took: He was all for health-care and Wall Street reform, he says. He just didn't like the proposals the Democratic-controlled Congress came up with.
What Donohue says he objected to in the Administration's efforts, predictably, were the new regulations in the White House-backed health-care and financial reform legislation. "We are going to have a regulatory tsunami," Donohue says. "We had to look at the possibility that we were moving from a government of the people to the government of the regulators." Donohue's message was indistinguishable from that of the Republican National Campaign Committee.
In response, White House official Amy Brundage e-mailed this statement: "There are fundamental disagreements between the chamber, which vowed to fight against any new regulations, and the President, who believes the regulations are necessary to protect the American people and prevent another financial crisis, which cost more than eight million American jobs."
Even as the stock market recovered and corporate profits soared, Donohue started on another audacious offensive, to convince the public that CEOs are maligned, underappreciated, and victimized. "I mean, look at when all the banker guys were up there [in front of Congress]," Donohue says. "These are good people. … I mean, [JPMorgan Chase (JPM) CEO] Jamie Dimon is a good person, and the first thing [the politicians] do, instead of talking about the national crisis, is they spend all their time arguing about how they flew here in corporate jets. By the way, if they had all flown in the same jet, the SEC would have indicted them."
CEOs are grappling with an uncertain economy, Donohue says, and the whims of shareholders who are apt to call for their ouster unless they deliver stellar returns. "I mean, bottom line is, the tenure as a CEO isn't what it used to be," he says.
A cynic might suggest that Donohue is pandering to his constituents. If so, it works. Donohue says that during what he describes as the three-week controversy over climate change, the chamber signed up 100 new companies as members. "If you want an answer to the question, are we doing all right?" he says, "yeah, we are doing really well."
The chamber's fundraising increased significantly during the year before the midterm election, and Donohue sprinkled $1 million on issue ads in support of Massachusetts Senator Scott Brown, a Tea Party favorite who won the late Edward Kennedy's seat in January's special election, shattering the Democrats' filibuster-proof majority in the upper house. Then, almost immediately, the chamber started bombarding the rest of the country with similar spots in the congressional races, in concert with American Crossroads.
Not every local chamber welcomed the U.S. chamber's ad campaigns, many of which were starkly negative. "It's caused a lot of confusion for our members and others who think we're somehow involved in attacking Senator [Barbara] Boxer or Speaker Pelosi, and we're not," says Rob Black, vice-president of public policy at the San Francisco Chamber of Commerce.
Debbie Braun, president of the Aspen Chamber Resort Assn., has the same complaint. "We certainly do not agree with their stance on energy, and we are fairly disappointed with the negative advertising that goes on," she says. "Our membership continues to question why we would be affiliated with an organization that isn't aligned with our community goals." Donohue says he hears such complaints from local affiliates, but only very rarely.
Now, with his strategy having proven effective, Donohue and the chamber are plotting their post-election agenda. A week before the House flipped, R. Bruce Josten, the chamber's silver-maned, Benson & Hedges-smoking chief lobbyist and Mr. Fixit, said that a lot would be unclear after the election, even if the Republicans triumphed. There would be struggles over congressional committee chairmanships and lame-duck shenanigans. But he was certain of this much: The President's change agenda was history. There would be nothing like the Affordable Health Choices Act, no more Keynesian spending. "He is going to have to operate differently," Josten said.
Josten did offer a consolation prize: He had suggestions about ways the newly humbled White House could cut some deals with the GOP and still find some legislative victories. As he noted, the White House is already working on a trade agreement with South Korea that could be announced as early as next week. That may not endear the President to his union supporters, but the chamber will applaud.
The chamber's chief lobbyist also recommended that the Administration put its support behind a permanent extension of the Bush tax cuts. The White House signaled just before the election that the matter would be