Citizens for a Sound Economy

Citizens for a Sound Economy (CSE) was a powerful industry-funded think tank, promoting deregulation. It was founded by Koch Industries interests and continues to maintain strong links. In 2003, an internal rift between CSE and its affiliated Citizens for a Sound Economy Foundation led to a split in which CSEF was renamed as a separate organization, called Americans For Prosperity.

In July 2004, CSE announced it was merging with Empower America to create FreedomWorks.

CSE was often described as a "consumer group," but according to internal documents leaked to the Washington Post, 85 percent of its 1998 funding came from major corporations. "The 'citizens' in question [are] companies like Amoco, Bell Atlantic, Citibank, General Electric and General Motors", wrote Alexander Cockburn and Ken Silverstein in the book Washington Babylon. . "During recent years, the CSE, headed by C. Boyden Gray, who acted as counsel to the president under George W. Bush, has opposed health care reform and a rise in the minimum wage, while championing corporate tax cuts, deregulation and a balanced budget."

In 1995, CSE's budget hit $10 million and its "research" - funded entirely by corporations, conservative foundations, and wealthy businessmen -- is tailored to ensure results favorable to its patrons. Hence, a recent CSE study found that the American people were furious with the Food and Drug Administration. The CSE discovered this by asking respondents if they agreed with rigged statements such as, "The additional years it takes for the FDA to approve products costs lives by forcing people, including those with incurable diseases, to go without potentially beneficial drugs." Sixty-eight per cent agreed.

Armed with this information, Gray went before a House subcommittee in early 1995 and demanded "reform" of the FDA. Gray told members of Congress that as a result of FDA dawdling, tens of thousands of Americans die annually. One particularly absurd case was that of the miracle drug nitrazepam. Deprived by FDA bureaucrats of the right to take this drug, some 4,000 people had perished. Or so Gray claimed.

Questioned by committee members, CSE's head conceded that he wasn't sure what nitrazepam was used for. Rep. Richard Durbin informed him: insomnia.

CSE has been criticised by the Nader-founded group, the Government Accountability Project (GAP), as lacking independence. In 2000 GAP spokesperson Gary Ruskin told the Washington Post, "It's part of a rent-a-mouthpiece phenomenon. ... There are mercenary groups that function as surrogates when industry feels it's not advantageous for it to speak directly."

CSE's activities
CSE produces more than 100 policy papers each year, delivering them to every single congressional office, sending out thousands of pieces of mail, and getting coverage of its viewpoints in thousands of news articles around the nation. CSE&#8217;s representatives have appeared on hundreds of radio and television shows and published hundreds op-ed articles arguing that "environmental conservation requires a commonsense approach that limits the scope of government," acid rain is a "so-called threat [that] is largely nonexistent," and global warming is "a verdict in search of evidence."

CSE claims that it has 280,000 supporters that endorse its "lower taxes, less government, and more freedom" agenda. Other CSE documents claim the organisation has 360,000 "volunteer activists."

CSE boasts close ties to Republicans. Its website carries an endorsement from George W. Bush: "Folks, you've got to get to know this organization ... They have been doing a great job all over the country educating people." Florida Congresswoman Katherine Harris - best known for her role as Florida's Secretary of State during the 2000 Presidential election - also endorses CSE, calling it "one of the most effective grassroots lobbying organizations around--anywhere."

CSE says its current priorities are advancing what its calls its "Freedom Agenda" comprising "fundamental tax reform", ending "lawsuit abuse", "work, not welfare", "school choice", "privacy" and shifting social security to the responsibility of the individual.

Allegations of illegal activities
In 2004, CSE was accused of illegitimately throwing its weight behind George W. Bush’s re-election. The group’s Oregon branch attempted to get Ralph Nader on the Presidential ballot to dilute Democratic support for John Kerry. Critics argued that it was illegal for a tax-exempt nonprofit organization to donate its services for partisan political purposes. A complaint was filed with the Federal Election Commission, but it was dismissed.)

History
In 1984 Charles G. Koch, David H. Koch and J. P. Humphries asked Rich Fink to develop a concept for a new organization that could advocate free-market policies effectively in Washington. Fink (now executive vice president at Koch Industries) produced a 110-page business plan and the CSE, along with the CSE Foundation, started operations later that year. Fink became the first president. Ever since, Koch Industries and the Koch Family Foundations have continued to give substantial financial support to the CSE and the CSE Foundation.

In 1988, Jim Miller, President Reagan's Director of the Office of Management and Budget, joined CSE's staff and board of directors. This helped raise the profile of the CSE enormously. Until then, it had campaigned mostly on tax issues (advocating a low, flat-rate tax), but now it started focusing on legal and regulatory issues, starting with a telecommunications and financial services.

In 1989, Wayne Gable succeeded Rich Fink as President. That year CSE Foundation rescued the Tax Foundation from financial trouble and restructured its management and board of directors. Gable is currently Managing Director of Federal Affairs at Koch Industries. In 1991, Gable went on the become president of the Tax Foundation, and Paul Beckner took over as president. That year, CSE launched Citizens for Congressional Reform, which went on to become U. S. Term Limit.

In 1993 C. Boyden Gray became Chairman, and CSE led a major press and public relations campaign to defeat the Clinton administration's 1993 proposal for an energy tax. "Our belief is that the tax, over time, may have destroyed our business," said Fink, who by then had left CSE's employ. While the Koch Foundations could not legally lobby against the tax, CSE rallied public opposition, especially in Oklahoma, where then-Senator David Boren agreed to help kill the tax. 

Due to the length of this article, two sections on CSE's history have been moved to separate pages. These are:
 * CSE huffs and puffs with Big Tobacco
 * "Free market environmentalism?"

CSE backs Nader's 2004 ballot bid
While CSE traditionally backs predictable conservative causes, in June 2004 it mobilised supporters in an attempt to place consumer activist Ralph Nader on the presidential ballot in Oregon. ""We disagree with Ralph Nader's politics, but we'd love to see him make the ballot," Russ Walker,the Oregon director of CSE told Associated Press. It has foreshadowed providing similar support in Wisconsin and other states.

Both the Bush and Kerry campaigns expect the result of the Presidential vote in Oregon to be close. In a close election, the seven electoral college votes the state carries could prove decisive.

In August 2003 Oregon Senate proposed to balance the state's budget by adding a range of tax measures to a bill renewing a 10-cents a pack cigarette tax that had been in place for a decade.

The bill became a tempting target for CSE, which proceeded gather 50,420 petition signatures from registered voters to place the question of overturning the bill on the ballot for February 2004.

"Our aim is to be the voice of the right like Ralph Nader is the voice of the Green movement," CSE's Oregeon director, Russ Walker, told the Statesman Journal.

As to whether the tobacco industry was helping fund the campaign remains unclear but Walker is relaxed about corporations funding their campaigns. "For me, it doesn't seem unusual that a company would look at us and say, 'You guys are doing the hard work, maybe we should give money to them,' … We by no means ever turn away that kind of funding," he told the journal.

Not only did CSE get the bill put to a vote but convincingly won the February ballot with 59% rejecting the proposed tax increase. The overturning of the bill not only triggered spending cuts of $544 million but the tobacco tax increase was defeated too.

Fresh from its win, CSE has moved to bolster Nader's faltering campaign. To be listed on the ballot in Oregon, a candidate must submit signatures of either 15,000 registered voters or gather 1000 signatures in a day.

When the Nader campaign attempted to gather the necessary signatures at a convention in April 2004, it fell well short of the target. While Nader pulled 77,000 votes in the state in his 2000 Presidential run, only 750 turned out to the convention. (Gore carried Oregon in 2000 by only 6,765). 

On Saturday June 26 the Nader campaign held a second convention in Portland. This time only 1100 attended, which is likely to be insufficient - given the presence of a number of Democrat activists inside - to reach the target figure.

Nader's difficulty in mobilising grass roots supporters presented CSE with an opportunity. Having gained over 50,000 signatures to overturn the Oregon tax bill, obtaining sufficient voters to support Nader would appear to be a relatively easy task for the organisation.

In late June the Oregonian reported that Lee Coleman, a member of the Oregon State Republican Central Committee, said that a message left on his answering machine urging his support for the Nader ballot had included a return number of the Bush-Cheney campaign office in Oregon.

Spokesman for the Bush campaign, Steve Schmidt, told the Oregonian that no paid campaign staffers were making calls to help Nader but said that some volunteers may have made calls from the campaign's office. "The campaign certainly understands that when Republican volunteers see that there are Democrat volunteers trying to restrict the choice and keep Ralph Nader off the ballot, that they should work to expand choice," Schmidt said. 

On July 1 CNN reported that a Washington D.C. group Citizens for Responsibility and Ethics in Washington (CREW) had filed a complaint to the Federal Election Commission about support by the Oregon branch of Citizens for a Sound Economy and the Oregon Family Council for the Nader 2004 campaign for President. The complaint argued that the use of phone banks to encourage conservatives to attend a Nader nominating convention was an illegal in-kind contribution to the Nader campaign. 

In a media release announcing its complaint CREW argued that while both CSE and OFC are non-profit groups, in law they are no different from corporations which are not allowed to contribute directly to political campaigns. "The costs of creating the scripts as well as the costs of the telephone calls constitute prohibited in-kind contributions. The Oregon Republican Party, which could not have legally made the telephone calls on its own, violated conspiracy laws by working with OFC on the phone bank. BC '04 improperly allowed so called "volunteers" to use BC '04 resources to assist Ralph Nader's campaign," CREW stated.

"Finally, if the Nader campaign knew about the scripts and the calls, then it violated FEC law by accepting those contributions. In any event Nader must reimburse the corporations for the costs of the phone banks," it argued. While CSE and OFC contributed its support as an 'in-kind' contribution rather than direct financial support, CREW argues that the distinction makes no difference.

The complaint was also directed at Bush's re-election campaign and the Oregon Republican Party, which CREW alleged were involved in the strategy of seeking to ensure that Nader appeared on the ballot in Oregon and thereby boosted Bush's prospects by splitting some liberal supporters support away from Kerry.

The day after the June 26 convention, CSE issued a media release to explain its support for Nader. "Oregon CSE members are working to get Ralph Nader on the November ballot! While this sounds completely backwards-- Ralph Nader opposes nearly every issue CSE fights for-- but there's sound logic behind Oregon CSE's actions. CSE does not advocate the election or defeat of political candidates, but Oregon CSE members feel that having Nader on the ballot helps illuminate the strong similarities between the uber-liberal Nader and John Kerry," CSE stated.

The phone script, in the name of Russ Walker the director of Citizens for a Sound Economy in Oregon explained to supporters that "we have to drive a wedge through the Liberal Left's base of support' by ensuring Nader obtained the requisite 1000 signatures." 

The President of CSE, Matt Kibbe, told CNN several days later that "we called about 1,000 folks in the Portland area and said this would be an opportunity to show up to provide clarity in the presidential debate." Kibbe rejected suggestions that the calls were co-ordinated with either the Bush or Nader campaigns.

In a July 2 media statement CSE said "in Oregon last week, CSE organized a phone bank to about 1,000 members in the Portland area … and asked them to attend a weekend Nader event to qualify him for the ballot in Oregon." CSE described its activism as an "effort to broaden the debate -- and ballot access."

"CSE is undeterred by these attacks, and plans to continue the Nader issue strategy with its activists in key battleground states like Wisconsin, Florida, Michigan, Pennsylvania, and elsewhere," it stated. 

For CSE, backing Nader's campaign also has the advantage of keeping its supporters mobilised, rather than have them drift away for lack of campaign activities to pursue.

The Wisconsin state director of CSE, Cameron Sholty, told the New York Times that when Nader's petition drive starts in August they will help. "We'll definitely be spreading the word that we'd like to see Nader on the ballot. ... We'll do phone trees and friends-of-friends, and those Nader events will be a great way to drive our membership to get out to sign petitions for Nader," Sholty said. 

While the controversy over CSE's support is embarrassing for Nader, CSE sees no reason to pull back. In Michigan it issued a media release announcing that was activating its email and phone trees in support of getting Nader on the ballot. 

Personnel
(as of July 2004)

Board of Directors

 * C. Boyden Gray, Co-Chairman
 * Dick Armey, Co-Chairman
 * J. Clyde Ballard, Director
 * Jim Burnley, Director
 * Charles Hilton, Director
 * Bill Jaeger
 * Matt Kibbe
 * Thomas Knudsen, Director
 * David H. Padden, Director
 * Richard Stephenson, Director

Former directors

 * James C. Miller III

Other personnel (past and present)

 * Joel Bucher
 * Wayne Gable
 * Scott A. Hodge
 * Karen Lotter/Hickey
 * Lawrence A. Kudlow, economic counsel
 * Clyde Wayne Crews, Jr.
 * Jeffrey A. Nesbit, former head of communications

Funding
The CSE - which is a 501(c)4 tax-exempt organisation - has a related funding arm, the Citizens for a Sound Economy Foundation (CSEF) which is a 501(c)3 tax-exempt organisation. (See The U.S. tax code and non profits for further details). In its 2002 Internal Revenue Service return, the CSEF listed its total revenue as being $3.9 million. CSEF budget details

According to the annual report filed by the Foundations the board members to the two entities are shared. (The 2002 return also notes three other organisations - the Taxpayer Action League, the Tax Foundation and Citizens for the Environment - are other related entities with the same board members. The Tax Foundation and Citizens for the Environment were, according to CSEF's IRS return, created during 1998).

According to internal documents leaked to the Washington Post, 85 percent of CSE&#8217;s 1998 revenues of CSE's $16.2 million came not from its 250,000 members, but from contributions of $250,000 and up from large corporations.

The then CSE President, Paul N. Beckner, rejected the notion that the organisation was a corporate megaphone. "We aren't a group for hire ... There's a bright line that defines our independence. There is only one position we can take on most issues: the one that means less government and lower taxes. We choose the issues we work on, and we decide how that money is expended." 

According to Media Transparency, between 1985 and 2002, CSEF received $16,928,712 in 108 separate grants from only twelve foundations:


 * Castle Rock Foundation
 * Earhart Foundation
 * JM Foundation
 * Koch Family Foundations (David H. Koch Foundation, Charles G. Koch Foundation, Claude R. Lambe Foundation)
 * John M. Olin Foundation, Inc.
 * Lynde and Harry Bradley Foundation
 * Philip M. McKenna Foundation, Inc.
 * Scaife Foundations (Scaife Family, Sarah Mellon Scaife, Carthage)

In 2002, CSEF gained $920,000 in grants from three of these foundations, accounting for a little under one-quarter of the organisation's revenue. The Claude R. Lambe Foundation was the most generous contributing $700,000 for general operating costs while the Scaife Foundation donated $175,000 and the John M. Olin Foundation $45,000.

Other CSE funders (not included in above funding total) have included:
 * Archer Daniels Midland
 * DaimlerChrysler ($25,000)
 * Enron
 * General Electric
 * Koch Industries
 * F.M. Kirby Foundation
 * Philip Morris (>$1 million)
 * U.S. West ($1 million)
 * ExxonMobil ($75,000)
 * Exxon ($175,000)
 * Hertz ($25,000)
 * Microsoft ($380,000)
 * U.S. Sugar Corp. ($280,000)

(source: Dan Morgan, "Think Tanks: Corporations' Quiet Weapon," Washington Post, Jan. 29, 2000.)

For a complete overview of the 1998 donations to CSE see: "Corporate Shill Enterprise: A Public Citizen Report on Citizens for a Sound Economy, a Corporate Lobbying Front Group." (Microsoft's $380,000 donation was in 1999).

Affiliations
CSE was a member of Project Relief, an alliance of corporations, trade associations, think tanks and law firms formed in December 1994 to promote the regulatory reform components of the House Republican "Contract with America." It is a member of the Cooler Heads Coalition, an industry-funded campaign sponsored by the National Consumer Coalition (an industry-funded front group) to spread skepticism about the science of global warming. It also belongs to the Health Benefits Coalition, which lobbies on behalf of the healthcare industry and has spent millions of dollars opposing a Patients' Bill of Rights and other patient protection proposals.

CSE has used the PR services of Smith & Harroff, a political consulting and advertising agency.

Other organizations with which CSE has collaborated include:
 * Consumers for World Trade
 * Competitive Enterprise Institute
 * Council for Government Reform (formerly known as the National Center for Privatization)
 * Foundation for Research on Economics and the Environment

Contact information
Citizens for a Sound Economy 1523 16th Street, NW, 2nd Floor Washington, DC 20036 Phone: (202) 783-3870 Fax: (202) 232-8356 Toll Free: 1-888-564-6273 E-mail: cse@cse.org http://www.cse.org

Undated

 * "Organized Crime Ring" Killer Koch's Citizens for a Sound Economy, Dossier by Lion Kuntz

1990s

 * "Tobacco Strategy" (internal company memorandum), Philip Morris, March 1994.
 * "Notes for Jim (Re: Steve Parrish Presentation)" (internal company memorandum), Philip Morris, December 1994.
 * David Nicoli, "Legal Analysis of January 1995 Activities," memo to Kathleen Linehan, January 26, 1995.
 * Robert Parry, "Petrodollar Scholars," The Nation, August 26, 1996.

2000

 * Philip Morris, "Budget", Bates No 2079041604, 2000 (approximate).
 * Philip Morris, "Core allies, Bates No 2077285640, 2000 (approximate).
 * Dan Morgan, "Think Tanks: Corporations' Quiet Weapon," Washington Post, Jan. 29, 2000.
 * A Brief History of Citizens for a Sound Economy, (part of "Attachment to CSE President Paul Beckner's Response to Remarks Made by Oracle CEO Larry Ellison"), news release, Citizens for a Sound Economy, June 29, 2000.

2001

 * Annual conference schedule, Conservative Political Action Committee 2001 conference.
 * Jim Burns, "Conservatives Must End Government Funding Of Non-Profits," Conservative News Service, February 15, 2001.
 * Citizens for a Sound Economy, "State Board of Education Did Their Homework:Vote is Right Decision for Texas Schoolchildren, Media Release, November 19, 2001.

2002

 * Citizens for a Sound Economy, "letter to President George W. Bush", Bates No 2085235064, January 31, 2002.
 * Curtis Moore, "Rethinking the Think Tanks," Sierra Magazine, July/August 2002.

2003

 * Shawn Zeller, "'Free Market' Crusaders," National Journal, January 11, 2003: "Just two weeks into her tenure as president and CEO of the newly formed Americans for Prosperity, Nancy Pfotenhauer is brimming over with ideas and enthusiasm for her new mission. ... Pfotenhauer said that AFP -- the nonprofit advocacy group that recently replaced the CSE Foundation after Citizens for a Sound Economy and the CSE Foundation parted ways -- wants to 'change the way decisions are made [by state and local governments], particularly on spending."
 * Statement by CSE Chairman, Former House Majority Leader Dick Armey" (CSE news release), October 31, 2003: "A note of clarification following recent media reports: Citizens for a Sound Economy (CSE) has not launched a new advocacy group. A recent dispute between CSE and what is now called Americans for Prosperity resulted in a split between the two organizations."
 * Steve Law, "Activist group brings money, draws concern", Statesman Journal(Salem, Oregon), November 1, 2003.
 * Diane Carman, "Textbooks held to bogus litmus tests", Denver Post, November 12, 2003.

2004

 * Brad Cain, "Oregonians soundly defeat tax increase, triggering cuts to services", Associated Press, February 4, 2004.
 * Jeff Mapes, "Nader's 1,000 fail to show", Oregonian, April 6, 2004.
 * Citizens for a Sound Economy, Americans for Tax Reform, Citizens Against Government Waste, "National, State Forces Unite to End Courtroom Chaos;Announce Launch of www.endlawsuitabuse.org Online Petition", Media Release, May 3, 2004.
 * Brad Cain, "Conservatives seek to help Nader - and ultimately Bush", Associated Press, June 24, 2004.
 * "GOP helps Nader Get On Oregon Ballot", Mandate Media, June 24, 2004.
 * Jeff Mapes, "Nader getting support from unlikely voters: conservative groups hope to draw votes from Democratic candidate Sen. John Kerry," Oregonian, June 25, 2004.
 * Center for Responsibility and Ethics in Washington, "CREW files FEC complaint against Citizens for Sound Economy, The Oregon Family Council, Nader for President 2004 and Bush-Cheney '04: Prohibited in-kind corporate contributions at issue", Media Release, June 30, 2004.
 * Melanie Sloan, "Amended Complaint", Citizens for Responsibility and Ethics in Washington, June 2004.
 * Citizens for a Sound Economy, "Phone Script: Conservatives for Ralph Nader?", Media Release, June 27, 2004. (This is a slightly different, later version of CSE's phone script for Nader.)
 * "Group: Bush allies illegally helping Nader in Oregon: Complaint filed with Federal Election Commission", CNN, July 1, 2004.
 * Citizens for a Sound Economy, "Left-Wing Attack Groups Target CSE: Liberal groups in panic over CSE strategy highlighting similarities between Kerry and Nader", Media Release, July 2, 2004.
 * Carla Marinucci, "GOP donors funding Nader/Bush supporters give independent's bid a financial lift", San Francisco Chronicle, July 9, 2004
 * Carla Marinucci, "Nader defends GOP cash: Candidate says he's keeping money", San Francisco Chronicle, July 10, 2004.
 * Michael Janofsky and Sarah Kershaw, "Odd Alliances Form to Get Nader on Ballot", New York Times, July 1, 2004.
 * Citizens for a Sound Economy, "Michigan CSE Turns Out Members for Nader Ballot Push: State chapter sends email to members and activates phone tree on eve of deadline, Media Release, July 14, 2004.
 * "Grant Data Matrix, Citizens for a Sound Economy Foundation," MediaTransparency.org, visited July 13, 2004.
 * "Citizens for a Sound Economy (CSE) and Empower America Merge to Form FreedomWorks", Media Release, July 22, 2004.

2007

 * Jonathan Weisman, "With Insurance Policy Comes Membership: Unbeknown to Some, Those Signing Up With Firm Are Joining Conservative Group", Washington Post, July 23, 2006.

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