Group to spend $10 million against candidates not hawkish on free market

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A group of Wall Street investors, media executives and fiscal policy experts have created a new political group that intends to spend $10 million to oust Republican and Democratic members of Congress who don't favor free-market policies strongly enough.

The Club for Growth is conducting a two-pronged campaign. One is regulated by the Federal Election Commission and deals with limited contributions. The other campaign is stealth, receiving funds from undisclosed donors, and is totally unregulated.

The club’s main campaign activities include collecting $1,000 contributions from its members — a practice known as “bundling” — and giving the contributions to supply-side economics Republican candidates.

Bundled contributions are reported to the FEC as coming from the individual member/donors. Thus it can be difficult for anyone other than the candidate or the bundling organization to find out just how much was given.

The Club for Growth’s latest bundled support has gone to:

  • Ric Keller, a Republican primary candidate in the Orlando, Fla., area, for an open seat in the state’s 8th District.
  • Mark Nielsen, a Republican running a second time in his New Haven, Conn., district against incumbent Democrat Representative Jim Maloney.
  • Jeff Flake, a Republican running in the Mesa, Ariz., district for the seat being vacated by Republican Representative Matt Salmon.

Keller has received $58,535 thus far; Nielsen would not reveal his contribution; and Flake could not be reached for comment.

The first donation by the Club for Growth went to Republican E. Scott Garrett, who is challenging moderate GOP incumbent Representative Marge Roukema in northern New Jersey. The group contributed $100,000 it had raised through its affiliated political action committee, called the Club for Growth PAC.

Moderate Republicans call meeting

The actions by the Club for Growth, founded by Wall Street stockbroker Richard Gilder and National Review magazine president Thomas “Dusty” Rhodes, so alarmed some Republican moderates in Congress that a meeting was arranged March 30.

Eric Friedman, press officer for Representative Christopher Shays, R-Conn., explaining why the meeting was called, said: “Republican moderates are mad because these people are willing to cannibalize the Republican majority over principle.” Shays was one of those present.

Others at the meeting were Reps. Jim Greenwood, R-Pa.; Fred Upton, R-Mich., Nancy Johnson, R-Conn., and Tom Davis, R-Va., who is National Republican Campaign Committee chairman.

“Our purpose was to say that if you want a pro-economy Congress, then we have a common cause,” Greenwood told the Center about the meeting: “But we think you [the Club for Growth] perhaps misinterpreted the record of fiscal and financial conservatives that are culturally moderate and those that are actually not pro-growth. I told them that their efforts were contrary to their own plans to target Republicans in primaries.”

Greenwood said he was initially one of the group’s targeted representatives, but the club revamped its strategy, changing its targets, and took him off the list.

Keller, of Florida, told the Center he was “just thrilled to have pro-business people backing me.” His Republican primary is Sept. 5.

Describing the process he underwent, Keller told the Center that he received a letter from the Club for Growth inviting him to meet and speak with members.

“They were looking at all the races across the country and they were looking at all the finalists on Feb. 14. They spoke to us and then they would ask us questions. They selected five or six people who they wanted to support.” A few weeks later, Keller heard that the club had selected him as one of its candidates.

‘Fight fire with fire’

Among the top funders of his Republican primary opponent, state legislator Bill Sublette, were trial lawyers, unions and real estate-related contributors. Keller said the assistance from the Club for Growth provides the chance to “fight fire with fire.”

Garrett’s campaign consultant, Jack Prather, told the Center that Garrett also met with the club and answered its questions. Garrett now has about $180,000 — double the war chest he had in his previous bid for the seat in 1998 — in large part due to the club’s healthy support.

The group has announced that it will support up to 15 vulnerable incumbents who meet the group’s criteria: “moving for privatized Social Security system, promoting a kind of school choice model so that every child in America can get a good education,” and reducing and simplifying the income tax. The Club refused to provide the Center its target list.

According to the Club for Growth website, www.clubforgrowth.org, president Stephen Moore, director of fiscal policy study at the libertarian Cato Institute, told a gathering of potential club members its strategy:

“We are going to find four or five conservative free-market challenger candidates who are going to take on some of the incumbent Republicans and put some real money behind those people, and I believe that if you can take out two or three of these guys, you can totally change the course of Congress because these guys will be terrified the next time around and we go to them and say, ‘You better vote the right way on this because we might go after you the next time’ and that is what makes these people think twice.”

It was founded in April 1999 and took its lead from Emily’s List, a liberal PAC supporting pro-abortion-rights Democratic female candidates. Moore called Emily’s List “the most ingenious political invention in the past 16 years.” Emily’s List takes contributions from its members nationwide and forwards the hard-money limited contributions to candidates the group supports.

Asked what he thought of the group’s method of bundling contributions, Greenwood, of Pennsylvania, said he isn’t a fan of this method of special-interest activity. “It would be better if the only contributions a candidate was permitted to receive were from residents of the district. It is a concern when a member of Congress might be financed and strongly supported by a large section outside the district, for reasons exterior to the needs of the district.”

The Club for Growth has a twist in its campaign activities that makes it more powerful and invisible than its Emily’s List model — a potential stealth issue-ad campaign funded by unlimited contributions from unknown sources.

The group takes advantage of Section 527 of the Internal Revenue Code, which allows for unlimited contributions from any source, skirting all donation limits and disclosures for running so-called “issue ads”— ads that do not directly call for the election or defeat of a candidate but unmistakably reflect the group’s position. The Club for Growth does not have to disclose its existence or its issue-advocacy activities to the Internal Revenue Service or to the Federal Election Commission. Greenwood told the Center that “the group reserved the right to do it — it was believed to be a part of its agenda.”

Phillip Kerpen, research coordinator for the group, said it planned to spend $10 million in this election cycle and that the club was considering running issue ads.

The Club has already run double-sided advertising inserts in Forbes and National Review seeking members who want to “change the balance of power in Congress.”

Outgrowth of 1980s Group

The Club for Growth is an outgrowth of a group that had been a mechanism for bundled contributions from Wall Street players since the late 1980s, the Political Club for Growth. Gilder, Rhodes and members of Gilder’s investment firm, Gilder, Gagnon, Howe & Co., were contributors. They gave $14,700 since 1993.

Club for Growth president Moore has a solid conservative pedigree. He once was enlisted by House Majority Leader Dick Armey, R-Texas, on the Joint Economic Committtee and worked for the Heritage Foundation. Leila Bate, executive director, is a former legislative director for Representative David McIntosh, R-Ind., and worked for the conservative nonprofit issue advocacy group Citizens for a Sound Economy. The group’s founders committee includes such conservatives as Brent Bozell, founder of the Media Research Center, Newt Gingrich’s GOPAC Executive Director Lisa Nelson, and philanthropist and school-voucher activist Virginia Gilder.

Other committee members from Wall Street include Frank Baxter, chief executive officer of the Jeffries Group investment firm; Terry Considine, chairman of Apartment Investment and Management Co. and former Colorado candidate for the U.S. Senate; and Brian Wesbury, chief economist at the Griffin, Kubik, and Stephens investment firm, based in Chicago.

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