Business and the Rise of K Street

excerpted from the book

The Paradox of American Democracy

by John B. Judis

Routledge Press, 2001, paper

p109
Business and the Rise of K Street

In the decades after World War II, many businessmen and -women steered clear of politics. They voted, and sometimes contributed to candidates, but they rarely participated in political movements or policy groups. Among those that did, the small businessman and the head of a family-owned enterprise were most likely to join the Chamber of Commerce and to oppose most kinds of government economic intervention. Some corporate executives and investment bankers joined the NAM or the Liberty League, but others worked with policy groups such as the Committee on Economic Development, which saw the government as having a role in tempering the business cycle and in limiting the inequities or addressing the externalities of unregulated capitalism. They were an important group within the American elite.

These business leaders initially acquiesced in and in some cases actively supported the consumer and environmental movements of the sixties. They served on the boards of the Ford Foundation and the Brookings Institution. They looked kindly on collective bargaining and were comfortable serving with labor leaders on policy groups and commissions. Some of them, like Ford CEO Robert McNamara and investment bankers Douglas Dillon and George Ball, were appointed to cabinet positions. But in the I9705, many of these corporate leaders and bankers abandoned their commitment to disinterested public service and to a politics that transcended class. They turned against union organizers, environmentalists, and consumer activists with the same resolve that an older generation of business leaders had turned against the AFL, the IWW, and the Socialist Party. They set up lobbies in Washington. They ran "advertorials" attacking their political opponents. They established political action committees that bankrolled hundreds of candidates. And in the process, they turned American politics decisively away from democratic reform.

What precipitated this momentous change was the economic downturn that began in the late I9605 and that foreshadowed a protracted slowdown that persisted well into the I9905. That slump altered business leaders' views of themselves and their enterprises as profoundly as it changed students' views of the future. In the sixties, Ralph Nader had been a thorn to General Motors, but a hero to many other Americans, including businessmen. In the seventies, business leaders demonized him. Businesses had acquiesced in wage demands from labor unions, while labor unions had not conducted a major strike since I959. Now they vigorously resisted, setting off a new class struggle. Labor relations became as parlous as they had been forty years before.

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The Business Roundtable

During the I9205, businesses sought to win political power and to quash union drives, but most of their organization took place on a local or regional level. The National Metal Trades Association, one of the main groups promoting the "American plan," was primarily an Eastern and Midwestern group confined to one kind of industry. The NAM, based in New York, did not work closely with the Chamber of Commerce, which was based in Washington. Businesses and banks hired publicists and public relations firms, but they didn't band together to influence public opinion through think tanks or policy groups or through funding joint political action committees. From the I9305 through the I9605, businesses were deeply divided in their approach to government. While organizations like the NAM and the Liberty League had advocated intransigence, many corporate CEOs looked toward more moderate and conciliatory voices like that of the CED and the Business Advisory Council (later renamed the Business Council) for leadership. But all that changed in the I 970s.

The CEOs of large banks and corporations helped to create during that decade a powerful network of national organizations, think tanks, trade associations, policy groups, and lobbies, headquartered in Washington. Blue-chip corporations like General Motors and banks like Chase Manhattan began contributing to conservative political groups. Bankers like Citicorp's Walter Wriston, who had backed President Johnson earlier, gravitated to the Republican right. Of course, there were still sharp conflicts among industries and business organizations, and between large and small business, over specific provisions and bills. But businesses, believing that they faced common organized adversaries, created overlapping and interlocking organizations, which, when directed toward a single end, such as the revision of the tax code or the reduction of labor's influence on Capitol Hill, were irrepressible.

The first efforts at reviving business's influences took place at the NAM and the Chamber. Both organizations had become irrelevant during the I9605, but in I973 the NAM's new chairman, Bert Raynes, decided to move the NAM's headquarters from New York to Washington. Explained Raynes, "The thing that affects business most today is government. The interrelationship of business with business is no longer so important as the interrelationship of business with government." Raynes converted the NAM's twenty-eight-person policy staff in Washington to lobbyists on Capitol Hill, and established a full-time liaison with other corporate lobbyists in Washington. The NAM and the Chamber also discussed merging. It didn't happen, but they did establish a joint political action committee and began to work together for the first time on specific issues. By the late seventies both groups were being credited with helping to turn Congress around. The Chamber itself enjoyed a revival in the last half of the seventies. Its membership grew 30 percent a year; it went from a $20 million budget and 50,000 members to $65 million and 2I5,000 members by I983, with a staff of I,000.

But the main thrust of business lobbying came from an entirely new organization. Two of the industries that first experienced the slump of the late 19605 were construction and steel. Construction companies found their profits eroded by the high wages they had to pay for hard-to-find skilled workers. Steel companies worried not only about a slowdown in construction but also about foreign competition. Foreign imports controlled less than 2 percent in 1958; by I968, they accounted for almost I8 percent of American steel consumption. Steel company profits plummeted from I968 to I970. At the instigation of former U.S. Steel president Roger Blough, one hundred steel and construction companies formed the Construction Users Anti-Inflation Roundtable in I969 to pressure unions to hold down their wage demands.

Then, in I972, Fred Borch, the chairman of GE, and John Harper, the chairman of Alcoa and a member of Blough's group, went to Washington to meet with Secretary of the Treasury John Connally, Deputy Treasury Secretary Charls Walker, and Federal Reserve Board Chairman Arthur Burns about the growing hostility toward business. Connally, Walker, and Burns urged the executives to found a new organization that would be confined to CEOs and that would lobby Congress and the White House directly. With Bryce Harlow also advising them, Borch and Harper organized the March Group, which they intended to be a small, select body. But growing interest among CEOs persuaded them to merge with Blough's group to form the Business Roundtable in I973. Within five years, the Business Roundtable boasted I92 member companies, including 113 of the top Fortune 200. Together, the Roundtable's companies accounted for nearly half of the country's GNP.

The Roundtable was different from past business organizations in several important respects. Unlike the Chamber of Commerce and the NAM, it was strictly limited to major corporations and to their CEOs.

John Harper was the first president, followed by Thomas Murphy of General Motors, Irving Shapiro of Dupont, and Borch's successor at GE, Reginald Jones. These CEOs actually did much of the lobbying. Writing in Harvard Business Review in I98I, Albro Martin commented:

The Business Roundtable almost seems a belated recognition of the frequently demonstrated historical principle that royalty always commands more attention, respect and awe than the lesser nobility. Neither the National Association of Manufacturers nor the U.S. Chamber of Commerce can do what a uniquely conceived and specially powered lobby of the largest and most responsible economic interests in the country can achieve.

The Business Roundtable differed from the Committee on Economic Development (CED), an organization that had also attracted Fortune 500 CEOs. The CED was not a lobby, but a research organization that publicized its results in order to promote policies and directions. The Roundtable lobbied for and against specific initiatives. In its initial decades, the CED's businessmen and social scientists did not see themselves as members of an interest group. Business leaders like Paul Hoffman and

Beardsley Ruml and economists like Herbert Stein attempted to be above both party and class. They framed their proposals in terms of the national interest and argued for their worth on the objective grounds of social science. The CED occupied a gray area between an interest group and an elite policy organization. The Business Roundtable was purely an interest group led by CEOs looking out for their own companies' balance sheets. It didn't employ intellectuals like Stein, but publicists and press flacks. Unlike the CED, it also didn't respect the parameters of countervailing power. It had been founded by men who wanted to quash government regulation of corporations. That remained its thrust, even while, on purely social matters that didn't threaten the power or profitability of their institutions, a few of the Roundtable's leaders might embrace the cause of the downtrodden.

The New Think Tanks

Kristol, Powell, and Simon convinced many corporate leaders that it was important to wage a battle for public opinion. Businessmen and corporate foundations began steering their money to opponents of corporate regulation. They endowed university chairs for free enterprise studies, financed special business institutions, and gave money to new kinds of think tanks. These think tanks bore roughly the same relationship to Brookings that the Business Roundtable bore to the CED. They were not, in Robert Brookings's words, "free from any political or pecuniary interest," but were expressions of political and economic interests. Yet their experts and spokesmen sought and often enjoyed the same exalted status as the social scientist from Brookings.

The two most important new think tanks were the American Enterprise Institute (AEI) and the Heritage Foundation. The AEI had begun as an ideological trade association, founded as the American Enterprise Association in I943 by Lewis H. Brown, the president of Johns-Manville, and a group of like-minded businessmen. Brown had been a tentative supporter of the New Deal, but had become uneasy about Keynesian economics and public works spending, which he believed would undermine the work ethic. Other early association backers were much more stridently anti-New Deal. With a budget of only $80,000, the association hired academics to write reports that were indistinguishable from those of the NAM. In I954, General Electric executive A. D. Marshall, who had become the association's president after Brown's death in I95I, was ready to shut the association down. But as a last resort he appointed a Chamber of Commerce economist, William Baroody, to be its executive vice president.

Baroody, like Nader, was the son of Lebanese Christian immigrants. Born in Manchester, New Hampshire, in I9I6, he worked in New Hampshire's Unemployment Compensation Agency in the I9305 and in the Veterans Administration after World War II before joining the Chamber of Commerce, where he met and impressed Marshall. Baroody was not himself an intellectual, but he had a deep appreciation for the role of ideas. He wanted to convert Brown's association into a Roosevelt-esque "brain trust" for a future conservative administration. He recruited two little-known economists, Milton Friedman from the University of Chicago and Paul McCracken from the University of Michigan, as academic advisors. He also persuaded the trustees to change the name to the American Enterprise Institute to distinguish it clearly from a trade association. (Baroody himself wanted the even more neutral name, the Institute for Public Policy Research.)

In I964, Baroody organized a "brain trust" for Goldwater's presidential campaign. But this proved to be a thankless task in more ways than one. After the election, Representative Wright Patman's House Subcommittee on Small Business subpoenaed AEI's tax records, and the IRS began a two-year investigation of whether Baroody, by his participation in the Goldwater campaign, had violated AEI's tax-exempt status. Baroody became very guarded in how he characterized AEI, and he recruited token liberals and Democrats to justify his claim that the institute was nonpartisan. Baroody also got his staff to produce torturously even-handed and often out-of-date legislative analyses of Congressional bills.

But Baroody retained his older vision of a conservative brain trust. He argued that policy research was monopolized by liberals and liberal institutions, among which he included Brookings, even though Brookings for most of its history had been seen as probusiness. He claimed that by funding AEI, businesses and foundations would be preventing a monopoly of ideas. His favorite line, borrowed from McCracken, was that "a free society can tolerate some degree of concentration in the manufacture of widgets, but it will have trouble surviving a monopoly or near-monopoly of ideas as they affect public policy."

Under Baroody, the AEI's funding rose steadily-from $230,000 in I960 to $600,000 in I965 to $900,000 in I970-but it was still considerably less than the $5.5 million Brookings spent annually. Then, in 1971, Harlow and Laird, who was an old friend of Baroody and for whom Baroody's son, William, Jr., served as press secretary, kicked off a $25 million fund-raising dinner for the AEI at Laird's private Pentagon dining room. Over the next decade, AEI's annual budget climbed to 54.I million in I975 and to S9.7 million in I980, $500,000 more than Brookings. AEI became the favorite cause of corporations that were worried about government regulation and the power of Nader and the AFL-CIO. By 198I, more than 600 corporations were contributing 4o percent of their annual budget. Baroody was now able to recruit the top CEOs to fund-raising posts, including Walter Wriston of Citibank, Willard Butcher of Chase Manhattan, David Packard of Hewlett-Packard, Thomas Murphy of General Motors, and Reginald Jones of General Electric. The AEI also enjoyed the support of corporate foundations, which, heeding the advice of Kristol and Simon, began to concentrate their donations on organizations like AEI. These included Olin, the Sarah Mellon Scaife Foundation, the Smith Richardson Foundation, and the J. Howard Pew Freedom Trust. The Pew Foundation alone (based on Sun Oil stock) gave X6 million to AEI between I976 and I98I.

Baroody continued to insist publicly that AEI was above politics, but beginning in November I976, it became the government-in-exile for Ford and Nixon administration officials. Gerald Ford himself joined AEI, as did Robert Bork, Arthur Burns, and Simon. Its fellows and scholars produced hundreds of studies decrying government regulation of business and attacking legislation offered by the consumer, environmental, and labor movements. Many of its studies on regulation were written by James C. Miller III, who would become head of the Federal Trade Commission in the Reagan administration, and Murray Weidenbaum, who also edited the AEI journal Regulation. Simon chaired its program on tax policy; former CEA chairman Herbert Stein put out the AEI Economist; Jude Wanniski wrote his primer of supply-side economics, The Way the World Works, as an AEI fellow; former Secretary of the Treasury George Shultz served on the board of advisors for regulatory policy; and Kristol and Michael Novak developed the political outlook that would be labeled neoconservative. The Economist magazine characterized AEI as "always unapologetically conservative." When Reagan won the election in I980, he would call on more than thirty AEI fellows to join his administration.

The Heritage Foundation, which opened its doors in I973, sought to influence Congress and the White House not simply over the long term, but on a daily basis. Except in the strictest legal sense, it was a lobby. It did not produce scholarship, but quick takes on policy and op-ed pieces. And it was the coordinated expression of a political faction within the Republican Party. Yet, like Brookings, it sought to present itself as a think tank. Instead of presenting its experts as being above politics, it marketed them as a counterbalance to the views of Brookings and to prevailing "liberal" opinion in Washington.

Heritage was the invention of two Capitol Hill political aides, Paul Weyrich and Edward Feulner. In the spring of I97I, two days after the Senate had defeated the Nixon administration's plan to fund a supersonic transport plane (SST), Weyrich, who was working for Colorado Republican Senator Gordon Allott, received an analysis of the SST plan from the AEI. When Weyrich called AEI to find out why the report had arrived late, he was told that Baroody, still fearful of the IRS, didn't want to be seen as influencing the actual vote. At breakfast the next day, Weyrich expressed his frustration to Feulner, and the two men decided the Republicans needed a research organization that would have what Feulner later called "quick response capability."

That fall, Weyrich heard from Allott that beer magnate Joseph Coors wanted to help stem the tide of antibusiness sentiment in the country. Coors had been "stirred," he explained later, by Lewis Powell's call to arms against the critics of free enterprise and had become convinced that business was "ignoring" a crisis. Weyrich persuaded Coors to give $250,000 to begin an Analysis and Research Association on Capitol Hill. After a year of squabbling at the new association, Coors told Weyrich to find a new venue, and Weyrich and Feulner turned to the Schuchman Foundation, named after a young conservative who had died at age twenty-seven. Heritage was started as part of this foundation and then, when it received tax-exempt status, broke off on its own. In the process, Weyrich and Feulner also recruited a new financial angel: Richard Mellon Scaife.

Scaife, an heir to the Mellon fortune, had been a financial backer of Barry Goldwater and of AEI during the I9605. After his mother, Sarah Mellon Scaife, died in I965, he and his sister inherited control over the Sarah Mellon Scaife Foundation, the Carthage Foundation, and the Allegheny Foundation. From I965 to I973, he fought with his sister, who wanted to spend the foundations' money on art and population control, but in I973, Scaife became chairman of the Sarah Mellon Scaife Foundation and won control over the family funds, which he then used to back new right, conservative, and business organizations and publications. Scaife initially put up $900,000 for Heritage-more than triple Coors's contribution-and over the next eight years contributed at least $3.8 million.

In I973, Heritage was incorporated with Weyrich as its director and Forrest Rettgers of the NAM as its chairman. Weyrich only lasted a year. In I977, Feulner was persuaded to leave the House Republican Study Group, of which he was the director, to become the president of Heritage. Edward Feulner was like William Baroody: an extraordinary promoter and fund-raiser who appreciated the power of ideas. In his first eighteen months at Heritage, he raised its annual budget from less than one million dollars to 82.8 million. Feulner was not only able to lure foundations like Smith Richardson and Olin, but also Fortune 500 corporations and banks, including General Motors, Chase Manhattan, Pfizer, Mobil, and Sears. One of Feulner's biggest catches was oilman Edward Noble and his Samuel Robert Noble Foundation. (When Noble later became the head of the Synthetic Fuels Corporation in the Reagan administration, Heritage suddenly fell silent about the waste generated by this ill-begotten agency.

Feulner also established Heritage's political style. Unlike the AEI, it defined itself openly as a "conservative" organization. With few exceptions, Heritage did not hire recognized scholars, but Ph.D. candidates and aspiring journalists and publicists to produce "backgrounders" on current legislative battles and foreign policy issues, which were then mailed (and later faxed) to politicians, public officials, and journalists. The backgrounders were article-length. Heritage vice president Herb Berkowitz later explained that Feulner "wanted products to meet a briefcase test, so a busy executive can throw it into his briefcase and read it in an hour or less." Unlike the AEI legislative analyses, Heritage's backgrounders took sides and recommended action. Journalist Burton Pines, whom Feulner made director of research and later vice president, said, "We're not here to be some kind of Ph.D. committee giving equal time. Our role is to provide conservative public-policy makers with arguments to bolster our side."

In Feulner's first years, Heritage was probably more successful at marketing itself than marketing its recommendations. It was less important than AEI in altering the debate over business and the economy in Washington. Other organizations, such as Paul Nitze's Committee on the Present Danger, played a more decisive role in attacking the Carter administration's foreign policy toward the Soviet Union. But when the Reagan administration and Senate Republicans took power in I980, Heritage, with its backlog of backgrounders, which it synthesized into a large volume, Mandate for Leadership 1980, was best positioned of all the new institutions to play a decisive role in Congress and the White House. By I985, its annual budget would equal that of AEI and Brookings.

Besides Heritage and AEI, business funded scores of other think tanks and policy groups inside and outside of Washington-from the Capital Legal Foundation (an anti-Nader outfit) and the Center for Strategic and International Studies to the Institute for Contemporary Studies in San Francisco and Murray Weidenbaum's Center for the Study of American Business at Washington University in St. Louis. It also subsidized sympathetic economists, including Milton Friedman, Karl Brunner, and James Buchanan. Together, these think tanks, policy groups, and academics inundated the pages of magazines and newspapers and filled up the mailboxes of journalists and Congressional staff with their own version of economic and social reality.

The New Ideology

This version of reality pivoted on a simple formula: government rather than business was responsible for America's ills-from inflation and high energy prices to the slowdown in growth and the rise in unemployment. It was a reassertion of Jacksonian economics and an attempt to undermine the basis of democratic reform in the twentieth century. AEI economist Warren Nutter put it this way: "The serious economic pains now being experienced are symptoms of political ills, not of flaws in the economic system. The basic problem is too much government, not too little."

Inflation was caused by government deficits rather than by corporate greed or OPEC. Slow growth was caused not by overcapacity and a lack of demand, but by government regulations, which increased business costs, government spending, and taxes, which deprived the private sector of funds, and by rising wages. Faster growth could be achieved by eliminating costly environmental, workplace, and product regulations, reducing government welfare spending, cutting taxes, and easing wage growth. These measures would increase growth by increasing the "supply" of capital for investment. Wrote General Electric CEO Reginald Jones in Harvard Business Review in I975, "Business must convince an indifferent public and skeptical Congress that this country is facing a severe capital gap."

This analysis was presented in articles in the AEI's Regulation and Kristol's The Public Interest and in books and studies published by AEI, the Institute for Contemporary Studies, and other think tanks and policy groups. It reached America's business and professional classes through the editorial page of the Wall Street Journal, Fortune, Forbes, and other business publications. It reached the general public through the Reader's Digest and the business and editorial pages of many newspapers, including the Washington Post. Said Weidenbaum of his critique of regulation and big business, "We helped business get interested in the thing. We knew we scored when we got into comic strips. You change public understanding that way. Broom Hilda did five comic strips in a row showing OSHA penalizing her for her broom."

Business won the public to its view of reality. Americans' distrust of government regulation and intervention began about I973-at the same time when simultaneous unemployment and inflation, or "stagflation," was taking hold and when the think tanks, policy experts, and CEOs were beginning to make their opinions known. Distrust of government economic intervention then rose steadily through the decade. By the early 19805, it had begun to surpass the distrust of big business or corporate power... That change in attitude was rooted in a change in economic reality, but it was reality as interpreted by Herb Stein, Murray Weidenbaum, and the AEI.

By challenging the public perception of stagflation, these policy experts made it easier to defeat proposals aimed at strengthening regulation and prepared the public for the effort in the early I980s to weaken regulations and regulatory agencies.

The Rise of K Street

To counter environmental and consumer movements and to influence Congress and the new regulatory agencies, the CEOs also hired thousands of lawyers and public relations specialists to lobby on their behalf. Together, these hires created a new political culture in Washington dominated by the Gucci-shod lobbyist. They gave business an enormous advantage in the policy and political arena over its adversaries.

In I97I, only I75 businesses had registered lobbyists in Washington. By I982, 2,445 had. The number of corporate offices increased from 50 in I96I to 500 in 1978 and to I,300 by I986. By I978, I,800 trade associations were headquartered in Washington, with 40,000 employees; by 1986, there were 3,500 associations employing 80,000.47 From I973 to I983, the number of lawyers grew more than threefold from II,000 to 37,000. By I988, I,634 out of every I00,000 Washingtonians was a lawyer, the highest proportion of any American city. A few of these were public interest lawyers and lobbyists for women's, consumer, and environmental groups, but the great majority worked for businesses. By I978, businesses were spending about XT billion on lobbying in Washington and $1 billion on politics and public relations.

Many of the new lawyers and lobbyists specialized in regulatory issues. From I887 to I963, fourteen new federal agencies and commissions had been established. From 1964 to I975 alone, fifteen new federal agencies and commissions were added (see table). As a result of the I946 Administrative Procedure Act, these agencies were highly susceptible to pressure and review from lobbyists. Regulators from these agencies had to involve affected parties at every phase in the determination of rules; and almost every step in rule-making could be subject to court challenge. Decisions were finally made not by an authoritative bureaucracy-the entirely misleading stereotype promulgated by the enemies of regulation-but through what political scientist Hugh Heclo called "issue networks" that linked government officials, regulatory agencies, and cabinet depart

These new lobbyists not only had to possess some technical expertise, they also had to master the complexities of the post-Watergate Congress. In the Eisenhower years, for instance, lobbyists had primarily relied on their connections to House speaker Sam Rayburn, Senate majoriq leader Lyndon Johnson, and a handful of committee heads to make political deals. The speaker and majoriq leader would also tell a lobbyist whose campaigns to fund. But the political reforms of the I9705 made things more difficult. Partly in response to Watergate but largely as a result of the civil rights struggles of the I9605, Democrats did away with the seniority system, which had vested power automatically in aged Southern House members and senators who inherited control over key committees. After I974, committee chairs had to be elected by the Democratic Caucus, and could no longer command the automatic loyalty of junior members. The House and Senate leadership could still control the appointment to committees, but the committees began to spawn scores of subcommittees, so that almost every politician who was reelected could command a position of authority. In I945, there were I35 committees and subcommittees in Congress; by I975, there were 3T3. Each House member and senator had to develop his or her own position, which might often be at odds with leadership. The lobbyist could no longer simply rely on a connection to the majoriq leader or the speaker; he or she had to establish connections with hundreds of legislators and be prepared to help, cajole, and if necessary pressure them from within their districts or states.

In 1974, Congress, in response to Watergate, passed campaign finance reform. It limited the amount of money that a candidate could receive from any contributor while authorizing corporations and unions to form political action committees to donate money to candidates. The legislation made it less likely that a candidate would become the ward of a single large contributor. But after the Supreme Court in 1976 threw out the limits on candidate expenditures, while retaining the limits on campaign contributions, candidates had a much harder time raising enough money. Fund-raising became a major part of their job. And they looked for lobbyists for help-not so much for their own contributions, but for organizing fund-raising events and bundling donations. Thomas Boggs, one of Washington's most successful lobbyists, became known for hosting events for as many as 125 politicians during each election season.

Few lobbyists could contact several hundred House members and a score of senators, draft complicated amendments, organize grassroots pressure in multiple districts, and raise money. So companies now hired teams of lobbyists, policy experts, public relations flacks, and pollsters. And the law firms themselves diversified. Arnold & Porter, one of the city's largest law firms, started its own lobbying firm, APCO Associates, which included non-lawyers in its management. Washington law firms also routinely hired economists, and in I990 the District of Columbia Bar ruled that non-lawyers could become partners in law firms. Several law firms, including Robert Strauss's Akin, Gump, Strauss, Hauer & Feld, started their own political action committee.

There was an intimate relationship between the lawyers, lobbyists, policy specialists, and PR men of K Street and the new business think tanks and policy groups. They worked together to counter the consumer, environmental, and labor movements and to thwart or subvert the new regulatory agencies. No lobbyist better symbolized the breadth of this relationship than Charls Walker, a voluble Texan who would later be credited with alchemizing Carter's efforts at tax reform into a business tax cut and with securing the bountiful business provisions of Reagan's 1981 tax cut. In 1973, frustrated that he would never become Secretary of the Treasury, he left the government to form a lobbying firm of his own, Charls Walker Associates. He immediately attracted high-profile corporate clients, including Harlow's Proctor and Gamble, AT&T, General Electric, and the Business Roundtable itself, which he had helped to found.

Walker understood that lobbying could not be confined to buttonholing legislators. In 1975 he took over a faltering organization called the American Council for Estate and Gift Taxation and converted it into a coalition aimed at winning new tax breaks for business. Renamed the American Council for Capital Formation and housed initially on 1425 K Street, it stood for the view that American business's problems were due to a lack of capital to invest and could be solved by granting a range of very generous tax breaks, from a reduction in capital gains tax rates to accelerated depreciation on investment. Walker was the chairman; Robert Keith Gray, a Nixon White House official turned public relations expert, was the president. Walker quickly recruited a raft of Fortune 500 members who contributed $200,000 the first year to its operation. Walker also recruited powerful Democrats like Clark Clifford, former Secretary of the Treasury Henry Fowler, and super-lawyer Edward Bennett Williams to serve on the board of directors.

The American Council adopted a coalition strategy. Instead of trying to win individual concessions for companies, Walker got a group of them to back a common position. (The NAM and the Chamber of Commerce were also coalitions, but they were so large that they could usually only reach agreement on what to oppose.) The council engaged in influence-peddling (Walker numbered among his friends Senate Finance Committee chairman Russell Long), along with grassroots lobbying in the districts of members who resisted his entreaties. Walker pioneered the tactic of getting local company officials, armed with local job loss and gain figures, to meet directly with their House or Senate member.

Most important of all, Walker used the fiction of the "council"-a name suggesting an ordinary policy group or administrative body-to present self-interested lobbying in the guise of social science. He appointed a board of scholars that included three future chairs of the Council of Economic Advisors-Murray Weidenbaum, Harvard's Martin Feldstein, and Stanford's Michael Boskin. The council's scholars issued studies-many of them subsidized by the council-that purported to show that business tax breaks would benefit all Americans. Walker himself wrote op-eds in which he was identified not as a lobbyist, but as the chairman of the council or simply a former Treasury official. The ploy allowed the public to believe that the council's positions were based entirely on disinterested social science and on the knowledge and expertise gained from public service.

Walker's council summed up the multidimensional strategy of the business counteroffensive of the 19705 that Lewis Powell and Irving Kristol had helped to inspire. He understood that it wouldn't be enough just to grab legislators in the Capitol cloakrooms. Lobbyists had to organize political campaigns, raise money for candidates, and hire academics and other policy professionals to lend legitimacy to their positions. This strategy would eventually corrode the public's faith in elite opinion and encourage a perception of K Street as a vipers' nest of corruption. But in the late 19705 it worked brilliantly.

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