The Big Mac Attackby Curt
Guyette How Special Interest Groups & Their Think Tank Waged the Real Engler Revolution
--The Mackinac Center for Public
Policy
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INVESTIGATIVE REPORT Lawrence Reed wants your mind. Not that he would use those exact words -- --Reed's too smooth for that. Professorial, low-key and boyishly handsome, the point man for Michigan's premier think tank possesses the polished confidence of a true believer. And he's looking for converts. As head of the Mackinac Center for Public Policy, winning powerful allies and influencing public opinion is key to his mission. So, if you haven't yet been won over to Reed's free-market philosophy, be prepared. The center's influence -- along with its budget -- is growing by leaps and bounds. Before you go ceding to Reed your political point of view, though, stop just long enough to ask him who's bankrolling the Midland think tank he's been running for the past eight years. Ask him to name names and quote dollars. Ask him for specifics. After all, if you're handing over something as valuable as your philosophical allegiance, you should at least know who's paying for it, right? So go ahead and ask. Then sit back and watch Lawrence Reed run for cover. "WE KEEP information about our contributors confidential," says Reed. He's sitting in an empty Mt. Clemens banquet room where he's just finished talking about his think tank with the local chamber of commerce. Not that the bankers and shopkeepers of Mt. Clemens show much interest in who's paying Mackinac's bills. In fact, most of them seem eager to swallow the center's free-market economic theory along with the artichoke hearts and glazed chicken. Slash taxes. Support private schools with public money. Put churches in charge of caring for the poor. Eliminate minimum wage and curtail unions' power. Let corporations run our prisons. Reed's brief speech strikes a responsive chord. A line of people hoping to find out how they can climb on the Mackinac Center's bandwagon queues up afterward. These are heady days for the center. Since its quiet inception 1987, it has grown into a powerful voice in Michigan, providing an academic foundation that supports the brand of conservatism favored by the Republicans who control the Legislature and governor's office. With a staff of 15 and an annual budget of $1 million, the center and its affiliated scholars pen studies, write newspaper opinion pieces and appear on talk radio and local cable TV shows. A speakers bureau sends representatives to civic groups and schools, where they lecture about the power and the glory of free enterprise. The center's pundits also stand willing to analyze current events for local news media. By the center's count, it was mentioned some 1,500 times in Michigan's print media last year. But for all the media attention the Mackinac Center has generated, one question has remained unanswered. Who's paying for all this? It's a query Reed refuses to answer, except in the most general of terms, pointing out several times that the center now has 800 contributing members. "Our funding sources are primarily foundations," he says, "with the rest coming from corporations and individuals." The way Reed sees it, his funding sources are irrelevant. Look at the scholarship, he advises, that is what's important. "Revealing our contributors would be a tremendous diversion," says Reed. "There would be a lot of folks out there who don't know how to rebut what we say, so they would instead try to draw all sorts of warrantless inferences." Reed has good reason to worry about providing his critics with ammunition. A Metro Times investigation into the Mackinac Center's funding has found that a handful of special interests play a crucial role in supporting the think tank. Between 1988 and 1994, the center took in about $2.3 million. The insurance industry, which stands to benefit from the center's research, contributed at least $306,000; Dow Chemical, Dow Corning and foundations spawned by the Dow fortune -- which, again, stand to benefit from Mackinac's work -- contributed more than $335,000. Plus, Amway Corp. and several foundations tied to the Religious Right have donated more than $390,000. There is one more special interest that has benefited from the Mackinac Center's work, only this one isn't a corporation or sectarian movement. It's Gov. John Engler. Together, they're changing the climate of political opinion in Michigan. Whether the changes are good for the state as a whole is open to debate. But there's no doubt that a few key investors in the Mackinac Center have gotten far more than their money's worth out of the deal. WHEN references to the Mackinac Center crop up in Michigan's mainstream media, the nonprofit organization is consistently referred to as a "conservative, free-market think tank." This non-partisan image has been carefully cultivated during the past decade. "The Center was founded in 1987 by a group of citizens who met on Mackinac Island and shared a common interest in making Michigan a better place to live, work and operate a business," is how one Mackinac Center publication explains it. It's a reassuring, almost benign vision. But it's only part of the picture. First of all, forget about Mackinac Island. The Center really began in a Lansing law office and the group of citizens consisted primarily of three people: attorney and lobbyist Richard McLellan, insurance company executive D. Joseph Olson, and John Engler. This was three years before Engler became governor, and long before the current speculation that he's a contender for the Republican Party's 1996 vice-presidential nomination. Back in 1987, when Engler was still speaker of the Michigan Senate and looking for a way to leap up the electoral ladder, he needed an ally to help boost his stature -- a think tank. Getting one started didn't take much effort. Using an already-established nonprofit called the Cornerstone Foundation as the conduit, the "group of citizens" funneled $24,000 into what would become the Mackinac Center. Its primary purpose, according to articles of incorporation filed with the state's Department of Commerce, would be "To conduct policy research on matters affecting the people of the State of Michigan and to propose approaches to public policy issues consistent with traditional American values of maximum individual freedom, limited government and a competitive economic system." Critics say the center had another purpose. "The Mackinac Center is a public relations tool for the GOP," says Democratic Party spokesman Steve Gools. "They've been playing the conventional media in Michigan like a fiddle for years." Nonetheless, the think tank's administrators frequently downplay their connection with Engler. "Engler has no more to do with the agenda of the Mackinac Center than the man in the moon," Reed was once quoted as saying. Indeed, Engler's official ties to the center were severed early. In 1988 he was gearing up to make his gubernatorial run and he stepped down from the Cornerstone Foundation board, leaving his close personal adviser and political ally, McLellan, and insurance executive Olson to manage the Mackinac center's board of directors. "Starting the Mackinac Center was really a very bright thing for Engler to do," observes state Rep. Maxine Berman (D-Southfield). A critic of both the Engler administration and the Mackinac Center, the liberal Berman is nonetheless impressed by the political acumen Engler displayed. "He needed a conduit to legitimize his ideas and give them additional play. The Mackinac Center served that purpose." Lawrence Reed makes much of the point that the center and Engler haven't always agreed on issues, and in a few recent instances that is true. But the undeniable fact is the Mackinac Center was unwavering in its support when Engler required it most. Back in 1990, candidate Engler needed all the help he could get. Locked in a fierce battle with incumbent Gov. Jim Blanchard, he found a steadfast ally in the Mackinac Center. The think tank issued two studies highly critical of programs established by Democrat Blanchard while promoting positions espoused by Engler. It was as if Engler had a private PR firm at his campaign's disposal. Plus, the center wasn't subject to the financial disclosure that would have been required had there been a formal relationship. "We want to get the center going in time to have an effect on the elections," wrote Reed in a fundraising letter in 1989. He later told a reporter not to take that statement too literally, that he merely meant an ideological influence. There is a reason Reed makes that qualification. The IRS, after all, gets a little testy when 501 (c) (3) nonprofits like the Mackinac Center spend too much of their tax-free incomes lobbying. And nonprofits are strictly prohibited from directly supporting candidates for public office. As Michigan's treasurer under Blanchard, Bob Bowman fended off Mackinac's attacks on his boss' Home Ownership Trust and Education Trust programs during the '90 election. He's amazed the Mackinac Center is allowed to claim nonprofit status. "They're totally partisan," says Bowman, who now works for ITT in New York City. "As far as we were concerned, they were part of the Engler campaign." Mackinac's support of Engler didn't end with his election. "Keeping The Engler Revolution On Track" was the title of a study released in 1992. The following year, the center gave Engler a grade of "A-" in its mid-term review of his performance. The center was also there supporting the governor's position on important public votes, such as 1992's Proposal C, the "Cut and Cap" property tax reduction Engler pushed hard for. An opinion piece by Reed published just days before the Prop C election in 1992 shows how close the center can come to being an outright advocate: "To the Michigan family, the worker, the small business person, a growing economy is what puts bread on the table," it read. "A growing government generally does not. Proposal C is a clear step toward more jobs and income in the private sector and less growth in the public sector." Every year, when it reports its tax-exempt income to the Internal Revenue Service, the Mackinac Center is asked this question: "During the year, have you attempted to influence national, state, or local legislation, including any attempt to influence public opinion on a legislative matter or referendum?" And every year the Center puts an X in the box marked "no." Reed admits the center walks a tightrope, but contends it stops short of ever endorsing a particular candidate, piece of legislation or ballot measure. "It's a fine line," he says. "But I don't think we've gone over it." JOHN Engler wasn't the only member of the Mackinac Center's little "group of citizens" who has reaped a fertile harvest from the seeds sown nearly a decade ago. Meet D. Joseph Olson, the man appointed by John Engler in 1994 to oversee regulation of Michigan's insurance industry. Olson came to the job with unique qualifications: a longtime executive with Citizens Insurance company, Olson was also a registered lobbyist for the industry and, as a board member of the Michigan Insurance Federation, directed the sizable flow of cash generated by that organization's political action committee. Like Engler, Olson was there at the founding of the Mackinac Center; unlike Engler, he stuck around, chairing the center's board for eight years before Engler appointed him insurance commissioner. And just as he directed money as a lobbyist, Olson funneled considerable insurance industry support into the Mackinac Center's coffers. According to IRS 990 forms obtained by Metro Times, Citizens Insurance contributed at least $168,000 to the Center between 1988 and 1994. But it wasn't just Citizens supporting the cause. In all, the insurance industry contributed at least $306,000 to the center during its first seven years. That figure doesn't include any contributions in amounts less than $5,000, nor does it include the $63,000 the insurance industry gave to Cornerstone before it officially split from the Mackinac Center in 1989. That much money might not seem all that significant now that the center is working with a million-dollar annual budget, but it proved crucial during the early days when Mackinac was struggling along with an income of only $200,000 to $300,000 a year. In September 1987, operating on seed money provided in large part by Citizens and another insurance company, the center produced its first report. "The Michigan Accident FundÉA Need For Privatization" suggested selling off the state's fund for injured workers. Privatization of government functions has long been a keystone of conservative thought. The Mackinac Center is no exception, publishing dozens of articles in the past eight years on privatizing everything from prisons to water treatment plants. But it is no coincidence that the center's first treatise on the topic zeroed in on the Accident Fund. At the time of the report, the insurance industry wanted to sell off the fund. As a quasi-public agency, it was able to offer bargain rates on workers compensation insurance, forcing the private sector insurers to cut premiums. With the insurance industry providing critical funding to the center in its infancy, and an industry executive heading its board of directors, there is little wonder that the fund was its first target. Cut to June 1990: In the midst of a hotly contested election with incumbent Gov. Jim Blanchard, Engler makes a key campaign speech (appropriately enough, on Mackinac Island). "I am going to work with the Legislature to bring meaningful reform to our workers and unemployment compensation systems," promised Engler. "We can start by getting the state out of the business of writing workers compensation insurance and putting the Accident Fund in the hands of private entrepreneurs." Cut to 1994: With his party finally in control of both houses of the Legislature, Engler is at last in a position to make good on his 4-year-old campaign promise. Although it continued to provide small businesses with $230 million in low-cost workers comp insurance and ran a surplus, the profitable Accident Fund was sold to Blue Cross/Blue Shield. Along with funding the Mackinac Center, Citizens -- the state's leading private provider of workers comp insurance -- aided Engler as well. Nine top executives of Citizens contributed a total of $21,725 to Engler's two gubernatorial campaigns and another $3,150 to his officeholder's expense fund. Reed bristles at the suggestion his think tank is anything less than a collection of independent academics who produce factual reports and opinion pieces. "Isn't it possible to separate the funding from the policy?" he asks. "If we were for sale, it wouldn't have taken us eight years to get to a million-dollar annual budget. We'd be at a billion dollars by now." "There is no conspiracy here," he continues. "If we were really carrying water for the insurance industry, we would have done a lot more on the issue. If anything, the subject has been under-addressed by us." Indeed, of the 38 in-depth studies the center released between September 1987 and December 1994, seven related directly to insurance industry issues. Others focused primarily on privatization of government services, tax cuts, organized labor issues, overhauling the education system, and welfare reform. Whether the Center has done too much or too little in regard to insurance matters is open to debate. But what can't be questioned is that the Mackinac Center has never disagreed with its benefactors in the insurance industry. DURING the same June 1990 campaign speech on Mackinac Island, candidate Engler also called for tort reform. "I'm going to declare war on the small flock of vultures in the legal profession in this state who," he charged, "in my judgment, are more responsible than anyone or anything else for the skyrocketing medical malpractice and product liability costs that are driving businesses, hospitals and other health care providers to the verge of bankruptcy." Just six months prior to that, the Mackinac Center had released a major study titled "Tort Law and the Products Liability Insurance Crisis." It was the second time in less than two years the center had raised the cry for reform. Which brings us to the Dow empire. When Engler gave that speech on Mackinac Island, Dow Corning, maker of silicone breast implants, was being pushed toward bankruptcy because of product liability. A partnership between Dow Chemical and Corning (the company that makes Corningware), Dow Corning was facing massive lawsuits from women who claimed devastating side effects caused by leaking implants. As far back as 1979, Dow knew the implants posed the potential for problems, but according to numerous court documents, failed to make the information public. Although too late to gain protection from implant victims who had already filed suit, there was no telling what other liability catastrophes lurked in the future. "Dow was leading the pack," recalls Rick Gamber of the Michigan Consumer Federation. "There is no doubt in my mind that they were at the forefront of lobbying on the issue." In addition to the public lobbying efforts, Dow Chemical, Dow Corning and at least two private foundations spawned by the Dow fortune were also contributing heavily to the Mackinac Center. In 1988, when the center was struggling to stay on its feet, Dow Chemical kicked in $15,000 -- the single largest contribution of the year. During the next six years contributions from Dow Chemical, Dow Corning, the Towsley Foundation (started by Dow heiress Margaret Towsley) and the Gerstacker Foundation totaled $335,000. The Gerstacker Foundation was founded by Carl Gerstacker, formerly the CEO of Dow Chemical. One of its board members is state Sen. Bill Schuette. Gerstacker's stepson, Schuette owns at least $1 million in Dow Chemical stock, according to his financial disclosure statements. In 1994, Schuette played a key role in maneuvering tort and liability reform through the Legislature; legislation Gov. John Engler gladly signed, fulfilling another campaign promise. That doesn't mean Dow supported the center, or Engler, simply because of liability reform. There are a whole host of issues, ranging from trucking deregulation to property tax reductions, where Dow's corporate interests and the public policy advocated by Engler and the center have dovetailed. The Mackinac-Dow ties reach even deeper. A Dow Corning executive sits on the center's board and a former Dow Chemical project manager is now in charge of media relations for the think tank. None of which does anything to dissuade the center's boosters from proclaiming its independence. "I wouldn't say they are unbiased," explains Engler intimate and Mackinac co-founder Richard McLellan. "In fact, they would probably get upset if you said they were. They have a clear mission there. But I can tell you for a fact that they are independent. No one tells them what to do over there." AS MEMBERS of the Mt. Clemens Chamber of Commerce sit chewing their lunch and waiting for Lawrence Reed to speak, a lively discussion takes place at one table between a former high school principal who now sells real estate and a young woman who runs an employment agency. "I'm a big fan of Larry Reed's," chirps the woman. "I follow him around to hear him speak whenever I can." The real estate agent, heavyset and middle-aged, isn't quite so sanguine as they discuss the center's policies, especially those regarding government anti-poverty programs. "You're too young," he tells the woman. "But I'm old enough to remember the Depression and seeing whole families standing by the road begging for food." Someone else at the table remarks that, no matter what, poverty will always be with us. "That's right," says the Reed acolyte. "Jesus said there would always be poor people. Why should government even bother to do anything about it?" Just cut taxes so that everyone working has more money in their pockets, and just watch those donations to charities soar, argues the woman. The sentiment is a familiar one. You can read all about private-sector benevolence in a book called Compassionate Capitalism, written by Amway co-founder Rich DeVos-a major Mackinac Center contributor. When asked afterward if the Religious Right plays much of a role in the center, Reed says no. "To say that we are connected to the Ralph Reeds and Pat Robertsons would be a real stretch," he says. "That's not our bailiwick." He's right in that the center stays away from such hot-button debates as abortion and concentrates on economic issues. But a look at some of the center's funding suggests that it's really a stretch to say no ties bind the center to the Religious Right. Three foundations in particular -- DeVos, Prince and Merillat -- are major contributors to fundamentalist Christian organizations. The Prince Foundation, started by the late auto parts manufacturer Edgar Prince, gives almost exclusively to evangelical Christian groups and organizations such as the Promise Keepers and Youth for Christ. It also contributes to the Mackinac Center-a $70,000 check in 1993 and another $70,000 in 1994. The Ruth & Orville Merillat Foundation, which states as its primary purpose to support "churches and religious welfare," also counts the Mackinac Center in its list of grantees. Started by one of Amway's co-founders, the Richard and Helen DeVos Foundation, which has about $147 million in its kitty, is more diverse in its giving. Its largest contribution in 1994, for example, was a $1 million donation to the Butterworth Hospital in Grand Rapids. But it, too, contributes substantial amounts to such groups as Campus Crusade for Christ and anti-abortion organizations such as Right to Life. It may well be that the heads of these foundations are fully in support of the Mackinac Center's economic policies. You won't hear Amway calling for stronger unions or higher corporate taxes. But there is also no doubt that these foundations are particularly interested in education reforms being pushed by the Center. If the reforms are instituted, they'll open the door to using public money to pay for religious schooling. Teach Michigan, the Michigan Center for Charter Schools and Michigan Family Forum all received funding from at least one of the three foundations, and all campaigned to overhaul the school system. "You don't have to come from a religious point of view to support school reform,"contends Reed. "And if we're supposed to be a Christian group, how do you explain the fact that we also receive funding from Jewish organizations?" Mackinac was in the thick of that fight as well. When Engler unveiled his charter school plan in October 1993, the center was publishing a series of articles promoting the concept and attacking the Michigan Education Association, the primary opponent of the plan. Over a six-month period beginning in September, the center published three major studies and a dozen opinion pieces about public education, including a paper describing a legislative compromise eventually reached as "The Christmas Eve Hijacking." Once again, the pattern of Mackinac Center supporters also contributing to Engler repeats itself. Members of the DeVos clan alone gave more than $46,000 to Engler's two gubernatorial campaigns. These days Reed proudly hands out copies of a National Education Association newsletter that describes the center as a "right-wing think tank" that has "actually changed the face of Michigan's political and bargaining climate through its enormous influence on the politics and appointments (made by) Gov. John Engler. "The Engler administration has actively pursued the Mackinac Center's extremist economic agenda...and has declared open war on the opponents of its privatization blitz, particularly the Michigan Education Association," it reads. "We use that in our fundraising," grins Reed, who then pulls out a letter of praise from the Heritage Foundation. "Within the public policy movement, the Mackinac Center for Public Policy is recognized as a key leader at the state level," writes Edwin J. Feulner Jr., Heritage Foundation president. "Keep up the good work. There is still much to be done." AS THE center continues to grow in stature, it's becoming less reliant on the special interest money that nursed it through the difficult early years. Now that its base of support is broadening, the center is distancing itself a bit from Engler. Although the two continue to march in lockstep on most issues, there have been a few degrees of separation. Last year, for example, Reed criticized the governor for the stance he took regarding tax breaks for businesses looking to locate in the state. Even the disagreements, though, seem unlikely to hurt Engler as his national prestige mounts. "The Mackinac Center is so far to the right, it helps make Engler look more moderate," says one political observer. If things work out the way he wants, Engler might soon be on his way to Washington, D.C. And the think tank that shares at least some of the credit in making that scenario possible continues to roll. "We're not going anywhere," promises Reed. Keep that in mind. |