June 3, 2019 A Key Cog in Charles Koch’s Master Plan How the Purportedly Unbiased George Washington University Regulatory Studies Center Advances an Agenda to Deregulate America

By Taylor Lincoln Download the full report 2.2 MB

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The Regulatory Studies Center, or RSC, is one of about 70 research centers and institutes operated by George Washington University, a school of 26,000 students located in the nation’s capital.

The RSC purports to be a “leading source for applied scholarship in regulatory issues” and a training ground for those seeking to “ensure that regulatory policies are designed in the public interest.”[1] RSC Director Susan Dudley has described the center as providing “an objective, unbiased look at the regulatory system, with our academic credentials.”[2]

But evidence – including the content of RSC’s work, the backgrounds of its researchers and the composition of its funders – reveals that the true purpose of the RSC is to provide scholarly rationales against government regulation, focusing on measures that would affect the fossil fuel industry, such as those to reduce pollution or combat climate change.

The RSC’s primary output consists of written materials, including analyses of discrete regulatory proposals that are submitted to government agencies under the rubric of “public comments.” Although public comments submitted by RSC researchers carry a disclaimer that they represent the views of the individual researchers, not the RSC, they are remarkably consistent in the antiregulatory views they express.

When characterizing broad regulatory trends, RSC researchers habitually cite studies – some of dubious credibility – that feed a narrative that regulations are excessive and burdensome. Meanwhile, these researchers typically ignore or downplay the benefits of regulations or dangers of under-regulating. These omissions are especially notable because the RSC was formed in 2009, just as the nation was crawling out of a catastrophic recession that was almost indisputably caused by gaps in the regulation of financial derivatives and a failure of regulators to enforce rules on mortgage lending.

The RSC appears to be influential. Many of the planks of President Donald Trump’s deregulatory agenda were put forth by the RSC long before Trump’s election. These include dramatically reducing the cost that the government attributes to carbon emissions.

The RSC does not generally disclose its sources of funding. But reports by other organizations, along with some cryptic disclosures by George Washington University and the RSC, show that its major donors include the charitable foundation operated by Charles Koch, who is the billionaire co-owner of petrochemical giant Koch Industries Inc. and financier of a sprawling political empire. Koch Industries is among the leading emitters of toxic waste and greenhouse gases in the United States, which means that it could benefit from the RSC’s policy advocacy in Washington, D.C.[3] Other RSC donors include oil companies, industry trade associations, and other foundations that support limited-government causes. Individuals who have donated include several prominent antiregulatory strategists and lawyers.

Susan Dudley – who is the RSC’s founder and director and served as the government’s “regulatory czar” at the end of the George W. Bush administration[4] – has called herself a “free-market environmentalist.”[5] This is a view often associated with a libertarian philosophy that trusts market forces, rather than laws, to achieve desired results. Dudley has opposed standards to improve air quality throughout her career. Perhaps most famously, she once argued that the U.S. Environmental Protection Agency had scored a proposal to reduce air pollution too generously because it did not account for the benefits of smog that would be lost. In effect, she argued that smog should be valued for its potential to prevent skin cancer by blotting out the sun.[6]

Dudley has been affiliated with at least eight Koch-funded organizations besides the RSC, including one dedicated to infusing libertarian viewpoints into higher education. Dudley is not alone. More than half of the RSC authors who filed public comments between 2013 and 2018 have been affiliated with organizations funded by the Koch family. These authors accounted for 75 percent of the public comments that the RSC submitted in this time period.

The RSC fits into a much broader initiative that Charles Koch has fostered for more than four decades. In a 1974 speech, Koch outlined numerous avenues to “fight for free enterprise,” which, to Koch, meant stripping the government to its bare bones. Koch rated “the educational route the most vital and the most neglected” of the options he listed.[7] “The educational method enables the businessman to work effectively without exposing himself to the same public criticism that the other methods, particularly politics, seem to evoke,” Koch said.[8]

Koch declared “the development of a well-financed cadre of sound proponents of the free enterprise philosophy the most critical need facing us at the moment.”[9] In a 1976 speech, Koch’s political aide described a strategy of establishing academic centers that would be connected to universities – thus making use of the institutions’ reputations and resources – but remain under the control of their funders. Because “visible control” could evoke opposition, the aide recommended engaging in deceptive practices.[10]

“To keep control without creating such opposition, it would be necessary to use ambiguous and misleading names, obscure the true agenda, and conceal the means of control,” a former historian for Koch Industries paraphrased the aide as saying. “This is the method that Charles Koch would soon practice in his charitable giving and later in his political actions.”[11]

By the mid-1990s, Charles Koch had become the chief patron of the libertarian movement and had played an intrinsic role in creating several major university centers, think tanks and advocacy groups.[12] An essay written in 1996 by Richard Fink, who had become Charles Koch’s chief strategist, laid out a blueprint for integrating different types of organizations to achieve policy changes. Fink conceived of a “structure of production of ideas” in which “intellectual raw materials” would be created through “research done by scholars at our universities.” The raw materials would be converted “into various types of products” by think tanks and policy groups and handed off to activist groups that would “press for the implementation of policy change.”[13]

Fink’s production line is in full gear today, and the RSC is a key cog within it.

Adam Brandon, who is president of the advocacy group FreedomWorks, wrote in 2018 that “research institutions, such as the Mercatus Center and the Regulatory Studies Center at George Washington University, work closely with the Heritage Foundation, American Enterprise Institute, and the Competitive Enterprise Institute to act as the brains of the conservative regulatory fight.” Activist groups like Club for Growth, Americans for Prosperity, and Young Americans for Liberty serve as “the muscles of the conservative movement” and take “the fight to Washington in the moments that matter most,” Brandon wrote.[14]

Today, the Koch network funds more than 50 university centers, along with dozens of think tanks and advocacy groups.[15] Koch network leaders envision these groups working together in a “fully integrated” manner. “We’ve got a constellation of network organizations that are focused on applying what comes out of the universities to change the world,” said Charlie Ruger, director of investments for the Charles Koch Foundation. “That’s sort of the core of the partnership. Money plus the network.”[16]

The Koch educational initiative has trampled academic norms, as we document in Chapter VII of this report, which draws extensively on the findings of the watchdog group UnKoch My Campus. The Koch network has usurped universities’ independence in choosing their faculty, at times insisting on veto power. These Koch-funded faculty have inserted opinions that are antithetical to scientific consensus into curricula, such as teaching that man-made climate change is a fallacy. At times, Koch-funded researchers have engaged in advocacy work that is almost indistinguishable from lobbying.

Public Citizen holds longstanding institutional positions on regulations. We generally favor rules to promote safer cars and workplaces, cleaner air, improved energy efficiency, as well as measures to prevent reckless gambling by Wall Street firms, predatory lending, and other abusive practices by the financial services industry. We believe that adoption of the sorts of policy proposals put forth by the RSC would make our society more polluted, hazardous and unequal.

We recognize – even celebrate – the rights of others to disagree with us. But it is not appropriate for George Washington University, or any university, to enable a corporate-funded, anti-regulatory group to masquerade as a neutral center of academic inquiry. George Washington University should assess whether the RSC should remain in operation and, if so, determine how to ensure that is not merely serving as a cog in an industry-backed campaign to attack regulation. At the conclusion of this report, we suggest steps for GWU and other universities to protect their integrity.

The practice of individuals who are funded by special interests representing themselves as independent scholars has the potential to deceive lawmakers and other public officials. U.S. Sen. Elizabeth Warren (D-Mass.) and U.S. Rep. Pramila Jayapal (D-Wash.) put forth legislation in the last Congress that would require disclosure of the sponsors of some research that is submitted as part of public comments.[17] Proposals such as this might provide a guide to Congress, as well as state and local governments, for ways to unmask the special interests that lurk behind purported independent scholarship.

Recommendations:

George Washington University should either close the RSC or take steps to ensure that it is not merely serving as a cog in an industry-backed campaign to attack regulation.

The University should disclose the details of the RSC’s funding arrangements, including agreements it has signed with outside funders and promises it has made in funding proposals. These steps would help the public and policymakers evaluate whether there are any cases of the RSC acting in parochial interests of its funders and if the RSC’s true purposes match its stated purposes.

The University, as well as other universities that accept funding from special interests, should adopt robust policies on institutional conflicts of interest that would provide a reasonable assurance that researchers’ decisions are not influenced by their departments’ sources of funding.

Key Findings about George Washington University’s Regulatory Studies Center:

Of public comments submitted to federal regulatory agencies by RSC researchers between 2013 and 2018 that included recommendations that would affect the stringency or prevalence of regulation:

96 percent of the comments relating to the stringency of specific regulations recommended less regulation than the proposal or status quo.

100 percent of the comments relating to overarching regulatory policy recommended changes that would result in less regulation in the future.

Of 55 public comments submitted under the auspices of the RSC between 2013 and 2018:

75 percent of the comments were authored or coauthored by individuals with past or present affiliations with Koch-funded organizations.

RSC authors with past or present ties to Koch-funded groups have been affiliated with a total of at least 28 Koch-funded entities. Eight of these authors have been affiliated with the Mercatus Center at George Mason University or other Koch-funded entities within George Mason, which is the hub of Koch’s university initiative.

Although the RSC does not disclose its sources of funding in a detailed or comprehensive way, information that is available from various sources shows that:

Key funders of the RSC include the Charles Koch Foundation, the libertarian Searle Freedom Trust Foundation and the ExxonMobil Foundation, each of which has given more than $1 million to the center.

[1] About, Regulatory Studies Center (viewed on Feb. 28, 2019), http://bit.ly/2EDnuq9.

[2] Can Regulations Come With Unintended Costs? (video presentation) The Federalist Society (posted Oct. 29, 2017), at 10 seconds, http://bit.ly/2Epk7SG.

[3] Eric Roston, Just How Much Does Koch Industries Pollute? The amount of toxic waste generated by U.S. companies, and what happens to it, is hiding in plain sight, Bloomberg (Jan. 20, 2016), http://bit.ly/2EzXR8L.

[4] Public Citizen opposed Dudley’s nomination as administrator of the Office of Information and Regulatory Affairs in 2007 and issued a report outlining the reasons. See, Gwynneth Anderson, Matt Pelkey and Genevieve Smith, The Cost Is Too High: How Susan Dudley Threatens Public Protections, Public Citizen and OMB Watch (September 2006), http://bit.ly/2XtDK4C.

[5] Bob Davis, In Washington, Tiny Think Tank Wields Big Stick on Regulation, The Wall Street Journal (July 16, 2004), https://on.wsj.com/2GOBFet and Susan Elaine Dudley Curriculum Vitæ, The George Washington University Regulatory Studies Center (viewed on Feb. 28, 2019), http://bit.ly/2Sy9dyH.

[6] Susan E. Dudley, National Ambient Air Quality Standard for Ozone, The Regulatory Analysis Program

Center for Study of Public Choice, George Mason University (March 12, 1997), http://bit.ly/2VqLmTT.

[7] Charles Koch, Anti-Capitalism & Business, Reason (Dec. 1, 1975), http://bit.ly/2IH8Wd6.

[8] Id.

[9] Id.

[10] Clayton Coppin, Stealth: The History of Charles Koch’s Political Activities (unpublished, posted on the web site of UnKoch My Campus, December 2018), p. 56, http://bit.ly/2Nww5Oc.

[11] Id., p. 56-57.

[12] Koch and Americans for Prosperity/Citizens for a Sound Economy, Koch Industries Inc. (2010), http://bit.ly/211C7bxaz. Citizens for a Sound Economy was financed by dozens of corporations, including petroleum giant Exxon, tobacco-maker Philip Morris, as well as Koch Industries. See, Corporate Shill Enterprise (CSE), A Public Citizen Report on Citizens for a Sound Economy: A Corporate Lobbying Front Group, Public Citizen (Oct. 6, 2000), http://bit.ly/2EBeEsY.

[13] Richard Fink, From Ideas to Action: The Role of Universities, Think Tanks, and Activist Groups, Philanthropy (Winter 1996), archived from the pages of the Institute for Humane Studies’ Learn Liberty program, http://bit.ly/2UflQk0.

[14] Adam Brandon, Battling Regulation Takes Education and Action, Donors Trust (Feb. 20, 2018), http://bit.ly/2H4EOGa.

[15] Charles G. Koch Charitable Foundation Form 990 (2017), p. 49-199, http://bit.ly/2UWqkzq. (Only the downloaded version matches these page counts.)

[16] Successful Models of Programs in Private Enterprise, panel discussion, Association of Private Enterprise Education (APEE), 2016 annual meeting, Las Vegas (April 5, 2016), p. 5, http://bit.ly/2tJxWX0 and Charlie Ruger, LinkedIn (viewed on April 12, 2019), http://bit.ly/2Z9UWwE.

[17] Anti-Corruption and Public Integrity Act, S. 3357 (115th Congress) (introduced Aug. 21, 2018), http://bit.ly/2wkZS4S and Anti-Corruption and Public Integrity Act, H.R. 7140 (115th Congress) (introduced Nov. 15, 2018), http://bit.ly/2HCOCXQ.