Political Hay

Pennsylvania’s Capitalist Revolt

Citizens alliance of Pennsylvania turns Keystone State politics upside down.

By 7.26.12

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"Place before the eyes of men a position of POWER that shall at the same time be a place of PROFIT, and they will move heaven and earth to RETAIN it."
-- Benjamin Franklin, 1787

The former Speaker of the Pennsylvania House of Representatives is in jail.

He shares a cell with -- a former Speaker of the Pennsylvania House of Representatives.

One is a Democrat. One is a Republican.

Nothing like a bipartisan jail cell. And these two -- Democrat Bill DeWeese and Republican John Perzel -- are not the only Pennsylvania legislators to be either now in the hoosegow or on their way, fresh convictions in hand.

The Commonwealth of Pennsylvania is in trouble. And Pennsylvania's capitalists are in open revolt.

Specifically, they are banding together under the banner of a group they are calling the Citizen's Alliance for Pennsylvania -- CAP. (CAP's website can be found here.) And CAP is now roaming the state with all the subtlety of Allied forces storming the beaches of Normandy on D-Day.

Their target?

What CAP calls the "bi-partisan collusion of career politicians, labor unions and trial lawyers that has mired the Commonwealth in corruption and economic stagnation."

Ouch.

Can you say "Wisconsin"?

The labor unions in question are, but of course, precisely the same as they were in the Wisconsin showdown. Public employee unions. All of which were given collective bargaining rights in Pennsylvania in the way back of 1968 -- under a Republican governor. (You know -- that old moderate GOP shamble kinda thing.)

What really fries the shorts of CAP members is the aforementioned "collusion" they see between both parties, the kind of thing that can end up with two Speakers of the House -- one from each party -- sharing a cell in the Big House.

How in the world did a state where a citizen legislature created in 1776 -- as CAP says "replete with term-limits, part-time work status, and modest compensation" -- work its way into a situation where there are not only no term limits but where a former Senate Democratic Leader (yes, he too now in the hoosegow) can get a $330,000 a year pension? With that ex-senator not being alone in the pension goods department?

Answer: Pennsylvania has been driven to this point because of what CAP calls the "Iron Triangle" of career politicians, bureaucrats, and lobbyists. Lobbyists in particular for those public employee unions and the trial lawyers bar.

Make no mistake here.

CAP, while not affiliated with the Tea Party, is channeling precisely the same kind of outrage from a growing number of Pennsylvanians, in this case all of it targeted to state government. If one were to find an analogous group at the federal level it might better be the Club for Growth. A group, coincidentally, once chaired by onetime businessman and now Pennsylvania's conservative Republican U.S. Senator Pat Toomey. CAP is channeling the same outrage that has made neighboring New Jersey Governor Chris Christie so popular, and fueled the high ratings for governors like Indiana's Mitch Daniels, Louisiana's Bobby Jindal, and Wisconsin's Scott Walker.

What brought CAP to life in the first place is perhaps as interesting a tale as the stunning successes it has already had in its short, three-year life span.

In the wee hours of July 5, 2005 -- 2 a.m. to be precise -- the Pennsylvania legislature voted its members a salary increase that ranged, depending on the legislators length of service, from 16% to 34%. Hearings on this? Nope. Debate? Nada. "To add insult to injury," CAP members still fume a full seven years later, in a clear violation of the Pennsylvania Constitution the boys and girls in the state legislative playpen could start picking up their checks, well, pronto.

Can you say "backlash"?

Like a Fourth of July fireworks display, the state of Pennsylvania erupted. The move was on -- on the spot -- to repeal the pay raise. Not only did the repeal succeed, but a bipartisan wrath began shaking both political parties to their foundations. In the following year's legislative elections some 17 legislators went down to stunning defeats, including the State Senate's President Pro Tempore and its Majority Leader. Both men were Republicans -- and they were taken down by anti-pay raise Republicans in a primary, the challengers winning the follow-up November election.

Two years after the pay raise fury another storm hit Harrisburg. "Bonusgate." This time it involved the discovery that the leadership of the General Assembly's four legislative caucuses -- one caucus for each party in each chamber -- had been caught, in CAP's indignant words, "using millions of dollars in taxpayer money to get lawmakers re-elected." Five legislators and over a dozen staffers were sent to the slammer -- and yes, this is how two Speakers of the House from different parties wound up as cellmates.

By now, people who ordinarily spent their lives making a living in the private sector were beginning to steam. There they were, busting chops to create businesses only to find that their tax dollars were going to all manner of cozy financial arrangements for the Harrisburg political class. Eight of the top ten PACs (Political Action Committees) in Pennsylvania politics were extensions of either Big Labor or the trial bar. Together the total for the twenty largest labor and trial bar PACs was almost $30 million. The score for the capitalists? The business community? A mere $2 million. Happy campers the Pennsylvania entrepreneurial community was not.

What to do?

If Pennsylvania was being run by a collusion of public employee unions and trial lawyers, the light went on that once upon a time this had not always been so.

My home state has had a long and honorable capitalist history since its inception as a land grant from King Charles II to William Penn. The King named the then-British colony (over Penn's embarrassed objections) "Penn's Woods" -- Pennsylvania. And in these woods, capitalism blossomed, playing a central role in Pennsylvania and American history.

Perhaps the most famous entrepreneur in the state's early history was the poor but ambitious 17-year-old youth who arrived from his native Boston by sloop in early October of 1723. In Ben Franklin's pockets, writes biographer Walter Isaacson, were "nothing more than a Dutch dollar and about a shilling in copper." Plus "three puffy rolls" purchased along the way, two of which young Ben gave away to a mother and child he had met on his journey.

The state is, of course, eternally identified with the American Revolution. It was in the Pennsylvania State House in Philadelphia -- now famous as Independence Hall -- that the Declaration of Independence and the United States Constitution were crafted. Both with the guiding hand of the by-now hugely successful capitalist Mr. Franklin. And Franklin, by the way, had also served as a member of the Pennsylvania General Assembly and Speaker of the House, albeit it under the Royal government before the Revolution.

Unlike DeWeese and Perzel, Franklin managed to avoid going to jail.

The man who decided enough was finally enough is, ironically, a former state legislator himself.

But a career legislator John Kennedy was not (and no, he's no relation to those Kennedys of Massachusetts). This John Kennedy is a thorough-going capitalist. An up-by-his-bootstraps railroad builder who served four two-year terms in the House and departed, Kennedy talks lovingly of CAP's mission in Pennsylvania as what he calls "an American project… rebuilding America's First House." Which, among other things, means the considerably hard job of changing the state capital's legislative culture.

Tracing the history of the Pennsylvania General Assembly from its beginning -- which is to say out from under the Royal thumb in 1776 through its emergence in 1790 as a bicameral legislature and on to its current status of 203 House members and 50 senators, Kennedy pulls no punches:

"What we have here is a General Assembly that's been built up over 45 years to be maybe the most expensive, perhaps at times the least effective. And certainly, most recently we put 12 or 14 former members, two Speakers who are actually either going to jail or in jail because of the process that developed. It worked well for the professional politicians, not so well for the taxpayers." 

That, he says, is what CAP is all about.

Fair enough. But as any American activist can attest, beyond the stated goal in a political venture of this size and scope is the rocky road to achievement. Taking on that "Iron Triangle" is no small thing.

There is that need for what the legendary late Speaker of the California House Jesse Unruh called "the mother's milk of politics" -- money. Not to mention candidates, issue focus, and all the nitty-gritty in the down-to-earth day-to-day of politics.

CAP, to the surprise -- and anger -- of its critics, is getting the job done. In fact, the reason the three-year old group has critics in the first place is that it has made an impact.

To start they have had Scott R. Wagner.

Scott Wagner is a capitalist. An enthusiastic entrepreneur. A job creator.

This is the kind of guy who has been at the center of the storm over President Obama's gaffe-that-really-wasn't-a-gaffe about small business owners not creating their own business -- the "someone else did that" routine.

Wagner begs to differ. After allowing that he respects the office of the presidency, Wagner pulls no punches whether the topic is the President, state government, or the 13 attorneys.

The 13 attorneys? What's up with that?

You guessed it. Here is a man who founded his first business when he was 20, turning his passion for skiing into a ski shop. Working night and day, he began adding rental properties and Laundromats. By 1985 he began a waste company, developed it in 12 years, sold it -- and had so much fun he did it again, starting in 2000.

In 2000, Wagner began Penn Waste. Contrary to the impression left by President Obama, Mr. Wagner has built his business into a considerable success without the President's input. Respectfully, he calls Barack Obama "totally clueless," the presidential socializing profits routine leaving Wagner feeling "insulted." Wagner notes crisply that it was he who has "borrowed, leveraged and worked 100 hour work weeks" to build a company that now employs 300 people as it provides waste disposal services with 100 trucks in six Pennsylvania counties. All told, Scott Wagner is involved in 9 different businesses, directly or indirectly employing over a thousand people.

And the 13 attorneys.

By now you can imagine. Scott Wagner is awash in government regulations -- and he needs to retain 13 outside attorneys just to figure out how to satisfy bureaucrats he says make a profession not of helping entrepreneurs but of finding something they are doing wrong. Then fining them for it. And by the way, put Scott down as highly skeptical that bureaucrats are even capable of holding a job in the private sector.

In other words, Scott Wagner was one frustrated Pennsylvanian. Fed up.

CAP was his kind of deal.

And Scott wasn't alone. He is one of several capitalists who banded together to form CAP.

They include among others Frederick Anton, the longtime president of the Pennsylvania Manufacturer's Association. PMA has had a long and distinguished 103-year old history in Pennsylvania as an advocate for free market economics. In fact, the history of PMA itself is reflective of the once formidable role capitalism played inside a state filled to overflowing with capitalists in businesses like steel, banking, railroads, lumber, and oil. PMA was founded in 1909 by a Bucks County textile manufacturer named Joseph R. Grundy. Befitting a state with such a heavy manufacturing presence, the influence of PMA and the capitalists it represented was considerable. At one point -- in 1929 -- Grundy himself was appointed by the governor to fill a vacancy in the United States Senate.

As time wore on, however, PMA and capitalism in general began to see its influence wane as the power of public employee unions and trial lawyers -- the very targets today of CAP -- began to surge.

But as is true with other states -- like Wisconsin and its recent battle royal with its public employees -- the fruits of the union/trial lawyer alliance eventually began to sour. So many legislators from both parties were in hock to unions like PSEA (the Pennsylvania branch of the National Education Association) and the SEIU (Service Employees International Union) that, combined with the abandonment of a part-time legislature and the increasingly generous pensions legislators were giving themselves -- rebellion began to brew.

Anton himself is directly responsible for the resurgence of PMA, restoring it to a free-market prominence that resonates with its storied history. He is a leading mover not only in CAP but the conservative Pennsylvania Leadership Conference, a CPAC-esque group that has become an annual magnet for conservative leaders and free-marketeers within the state at its annual meeting, drawing nationally renowned speakers including Newt Gingrich, Bill Bennett, the late Robert Novak, Laura Ingraham, Ann Coulter, Lynn Cheney and Frank Luntz.

Also involved in CAP are business leaders Anson Flake, the CEO of HydroWorx; and Rob Reeves, the CEO of E.A. Reeves and Associates.

Put another way than a list of names, Pennsylvania's capitalists have had enough. In a state that once upon a time was identified with capitalists like H.J. Heinz, Andrew Carnegie, Thomas Mellon and his Coolidge-era Secretary of the Treasury son Andrew, the decision was made to start bringing back an old tradition of a state devoted to pro-employer and pro-taxpayer policies. To zero in on what had become words-that must-not-be-mentioned in a state that had slid into the clutches of the "Iron Triangle." Words like "Right-to-work," "tort reform," "school choice," and -- gasp! -- the elimination of property taxes. Last but certainly not least are those once cherished three words that are now making a huge comeback: the free market. 

With the group organized, CAP launched on its task: taking on the Iron Triangle.

In quick succession:

  • · CAP defeated the trial lawyers attempt to pass a bill requiring insurance companies involved in car accident cases to award unlimited bucks for "pain and suffering." CAP made the case that the bill -- sponsored by the Republican Senate Majority Leader -- would hike car insurance premiums by some 20%. How did CAP make its case? By running $25,000 worth of radio ads in five districts represented by GOP Senators. Once getting the message, taxpayers were furious -- and the bill went nowhere.
  • · Jumping into a 2010 House race against Republican incumbent Karen Beyer from Allentown, CAP found a young conservative named Justin Simmons to oppose the liberal Beyer. Once again, CAP took to the radio, going after Beyer for what was tagged as her liberal "pro-union" tax-and-spend record. In an upset, Simmons defeated Beyer and now sits in the House. And Beyer? She is working for… wait for it… the SEIU.
  • · In the fall of 2010 CAP endorsed and funded eight "conservative reform" candidates for the House. Every one of them won.

Now, here's the latest eye catcher. One that reminds of various national races such as the one that up-ended Indiana's longtime GOP U.S. Senator Richard Lugar with Tea Party favorite Richard Mourdock.

In this case the Lugar role was played by 34-year incumbent State Rep. Rick Geist from Altoona. (Full disclosure, I first met Rick Geist when he was young legislator and like him. But the point CAP was raising up there in the distant precincts of Altoona was not about Rick's likeability -- anymore than Indiana voters were judging the eminently likeable Lugar's.) Geist, like Lugar, had a senior role in the House -- in Geist's case as Chairman of the House Transportation Committee. The post, once an asset, was now seen as a liability. Not to mention that Geist had voted both for the infamous pay raise and a bill increasing legislative pensions. And proudly nominated John Perzel for Speaker in January of 2007 -- that being the Republican now ex-Speaker who has been sharing a cell with the Democrats' ex-Speaker. To make matters worse, CAP was targeting Geist for his opposition to school vouchers, right-to-work, and unemployment compensation reform. The portrait CAP presented to voters was of Geist as the Harrisburg "old bull." Mr. Anti-Free Market. Mr. Anti-Capitalist. Mr. Insider.

To oppose Geist they selected a conservative outsider named John McGinnis, spending $30,000 on the race. McGinnis, 58, is an Associate Professor of Finance at the Penn State-Altoona campus, had never run for office, and promised not to take the legislative per diem, the legislative pension, or any automatic pay raises the legislature might vote on.

The race was almost identical to the Lugar-Mourdock race. The GOP Establishment rallied to Geist -- and he lost.

But it's the aftermath of the Geist-McGinnis race that has illustrated CAP's core complaint about the Iron Triangle and the reign of insiders.

Once victorious, a Republican nominee is invited to meet with the House Republican Campaign Committee. In the case of McGinnis, the group had rallied to incumbent Geist's side, throwing in what McGinnis says was between $20,000 -$30,000 to "demonize" McGinnis personally as opposed to debating agendas. In theory, the HRCC should now be rallying to the winner -- McGinnis. Instead, the opposite. McGinnis is, he says, "uncomfortable" working with the HRCC --and the two may well go their separate ways.

This story is almost an exact replica of reports from across the country in 2010 with Establishment GOP groups. The National Republican Senatorial Committee repeatedly stepped into this trap, most famously endorsing Florida Governor Charlie Crist (ironically a native of Altoona, Pennsylvania whom McGinnis remembers) over Marco Rubio. These types of interference in local primaries infuriated the GOP base. Rubio, of course, not only trounced Crist he won the general election going away and is now on Mitt Romney's vetting list for vice-president.

After endorsing the Establishment's Congressman Mike Castle over Christine O'Donnell in Delaware, O'Donnell trounced Castle. And just as the HRCC is making life difficult for McGinnis, the NRSC did the same with O'Donnell after she won her primary --then lost the general.

The point here is that CAP has now quite effectively stepped into the breach in these kind of situations. Supporting the challenges to incumbents like Geist in Altoona or Beyer in Allentown. Even if the HRCC is not there for McGinnis in November -- CAP will be. CAP is here to stay -- whether taking on everything from legislation on car insurance to a teachers strike in suburban Philadelphia. (In the latter case, CAP ran a full page add in the local paper listing the salaries and benefit packages of every single teacher, as we reported here. The outcome not reported? The strike folded within hours of the appearance of the CAP ad.)

State Representative Steve Bloom of Cumberland County is a CAP-supported legislator. Says he about the fact of his CAP support:

"I've certainly gotten my share of flack (inside the House) for accepting CAP's endorsement -- and support. Locally I've even had some GOP moderates demand that I renounce CAP. But while I don't always agree with CAP on every race they have gotten involved in -- and sometimes I don't -- I do appreciate CAP's overall mission to support candidates like me who are committed to restoring economic freedom, limited government and personal responsibility."

Bloom also notes that for decades the Left has exerted a tight discipline on liberal legislators -- specifically public sector unions. And that outside of the NRA this has not held true for conservatives. "Conservatives should be conservatives," Bloom says, "and they should govern that way." He thinks CAP can help exert more discipline for legislators who campaign as conservatives but then change once elected.

To talk to Scott Wagner in the wake of all this is to realize the sheer anger that is in fact rolling across not only Pennsylvania but all of America. All these state legislators want to do, scorns Wagner, is get elected -- and re-elected. That's it, that's the agenda. Why? Because the legislature, says Kennedy, has become the embodiment of Ben Franklin's warning about people in a position of power who can profit from that power wanting, endlessly, to retain that power.

They want the pension -- something, by the way, that is lower than it might be today because as a state legislator in 1983 Kennedy personally put a halt to a proposed increase.

They want the salary -- close to $80,000 a year.

They want the per diem -- between $154-$163 a day -- which in turn can add up and effectively becomes a second income stream.

For entrepreneurs like Wagner and Kennedy and the PMA's Anton -- this is no longer acceptable.

CAP has now emerged as an increasingly formidable political force in Pennsylvania. They are determined to restore the role -- and the clout -- capitalists once held in a state whose famous capitalists range from old Ben Franklin to the boy pickle peddler H.J, Heinz to the Scottish and Irish immigrants Andrew Carnegie and the Mellons. Not to mention PMA founder Joe Grundy.

It's a long haul. The grip of public employee unions and the trial bar is extensive. The Iron Triangle is a bipartisan affair. Even now, says Wagner, with a GOP governor, Senate, and House, nothing has changed.

Unless, of course, CAP has fought for that change.

But both Kennedy and Wagner make it plain: CAP is in this for the long haul.

Thirteen attorneys working for Scott Wagner are thirteen too many.

For the first time in some five decades of Pennsylvania politics, CAP is asking the question once posed by Ronald Reagan:

"If not us, who? If not now, when?"

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About the Author
Jeffrey Lord is a former Reagan White House political director and author. He writes from Pennsylvania at jlpa1@aol.com.