October 31, 2006

The wealth of power: Anne Northup, John Yarmuth and the Affluent American Legislator

“Let me just say that while nothing was done that isn’t done hundreds of times each year, I believe even the perception that anyone in my family would benefit from my service is wrong.” —U.S. Rep. Anne Northup, to The Courier-Journal, in an Aug. 30, 2002 article about a letter her office sent to the Federal Communications Commission. In the letter, she requested help solving a licensing problem for Radio Sound, Inc., whose president is Northup’s husband, Woody. Northup’s office didn’t reveal the connection in the letter. She ultimately apologized and took responsibility.This year, perhaps more than any in this country’s history, voters will have a chance to express their outrage at what the vast majority say most disturbs them: corporate influence in government. If you believe polls are most consistent when in droves, then this is the year when Americans will vote against the most blatant corporate sponsorship of American democracy we’ve ever seen.Corporate power in government is nothing new. Americans have long been comfortable with their presidents and legislators existing in much higher tax brackets than themselves and their neighbors. The problem most people have is with the perception of impropriety when it comes to those finances. Something to the tune of 96 percent of the voting public, according to a CNN/USA Today/Gallup poll taken in early 2006, say the perceived corruption in this presidency and Congress will be a factor in choosing which candidate to support. Whether those numbers translate in the voting booths next Tuesday, of course, remains to be seen.Here in the 3rd District, we have a choice between two people whose politics are disparate but who share at least one thing in common: Anne Northup and John Yarmuth are among the richest one percent of Americans. Until this year, Northup was one of the 50 wealthiest legislators in the country, according to Roll Call, a Capitol Hill newspaper; she was dethroned not by a drop in her own finances but a surge in somebody else’s. That tells you something about Congress. It’s something we’ve known for a long time but haven’t, as a voting body, expressed much of a problem with in the last century or so: The people who represent us have, almost across the board, obscenely more money than we do.The real question, then, is how it factors into their political behavior. And why. Northup has a 10-year voting record to examine such questions; Yarmuth has only campaign pledges. Stocks, votes and perceptionsCongress wasn’t supposed to be a place you went to get rich, at least not to Benjamin Franklin. Most have forgotten or never knew that Franklin lobbied hard to stipulate in the Constitution that those in public service not be paid a dime. Franklin’s logic is easy to follow: public service shouldn’t be a for-profit venture. Though Franklin’s qualms went unheeded, and probably should have in retrospect, Congress took a long time to start in on the take. From 1789 to 1817, for instance, members of the legislative body were granted a whopping $1,500 annual salary. By 1935, Congress — which determines its own pay — had upped the take to $10,000, roughly the equivalent of what a full-time worker currently earning the minimum wage takes home every year, before taxes. This year, every senator and representative (except the Congressional leadership, whose salaries are higher) will make $165,200. That’s about three-and-a-half times the median household income right now in America, and a $31,600 increase since 1997, the last time these champions of the people could muster a vote to increase the minimum wage.There’s a persistent low grumbling in and around Congress — their salaries are relatively low given the gravity of their responsibilities. And considering how handsomely some would be paid in the private sector — CEOs in America now earn more than $10 million a year, on average — they think they should get to grub a little more. The audacious ones whimper about it, but most aren’t that dense. Rather, they’re deft at accumulating massive personal wealth in other ways. One is the stock market, where Congress seemingly gets what amounts to insider information, what Martha Stewart served time for. Members of Congress know when they’ll vote on legislation that affects big, lucrative companies, just like they’re aware of changes in tax laws, impending government contracts and so on.That’s certainly not to say they use it, just that it’s there.Rep. Northup, who has consistently sidestepped the corruption and scandal that has plagued the seedier, dumber parts of Congress, has seen her personal wealth grow tremendously in the decade she’s been in that august body, a period over which her actual Congressional salary jumped a comparatively paltry $43,476. Undoubtedly there are myriad reasons for this, most notably that her husband, Woody Northup, runs a successful audio equipment business. Earlier this year, the Northups reported a maximum of just more than $15.9 million in assets; they have an extensive stock portfolio that includes a significant number of companies directly affected by votes Northup casts. The vast majority of the stock is in Woody’s name; of the 72 they reported in 2005, six were in oil and gas companies, valued at as much as $650,000. Northup cast at least 11 votes last year on legislation that affects those companies’ bottom lines, including an energy bill giving such companies as Exxon Mobile and BP multibillion dollar tax breaks. She also voted against implementing the Kyoto Protocol, against incentives to develop alternative fuels and to authorize construction of new oil refineries, which is most certainly a boon to companies like Devon Energy, an exploratory oil and gas company in which Woody Northup owns as much as $250,000 in stock.The Congresswoman’s campaign manager says there’s no impropriety.“Anne Northup has a history of being independent, dating back to her time in Frankfort when she took on big tobacco,” Patrick Neely said Monday in a statement. “Her independent judgment continues to this day.”Anne Northup certainly isn’t alone in garnering financial benefit from stock invested in companies affected by her voting: a report released last week by an environmental group called Friends of the Earth Action reported up to $51 million in oil and gas holdings by current members of Congress. None of this is illegal. In fact, Congress has repeatedly quashed attempts to regulate such practices, which are often likened to insider trading. Though that distinction can be misleading — members of Congress are subject to the same insider trading laws as everyone else — there is currently no law prohibiting use of Congressional information to trade stocks. Disparate philosophiesLest we overlook the obvious, John Yarmuth is also ridiculously wealthy. Northup’s Democratic opponent reported assets this year of at least $2.68 million (members of Congress and their election-year opponents must file personal financial disclosure statements, which do not require exact amounts but give a range of values of assets). His major holdings are in family businesses — the Sonny’s restaurant chain, controlled by his brother Bob (incidentally, a staunch Republican who does support some Democrats), and the Louisville home healthcare company Almost Family, headed by his brother Bill — as well as up to $1 million in BB&T stock, an inheritance from his maternal grandfather.Jason Burke, Yarmuth’s campaign manager, said Yarmuth would donate his Congressional salary to local charities if he’s elected, and Yarmuth has pledged to never take money from corporate or industry political action committees. Yarmuth also told The Courier-Journal in June that he would divest himself of stocks that could constitute conflicts of interest with Congressional votes; that includes his stock in Almost Family.Northup’s husband owned stock last year in 14 healthcare, pharmaceutical and biotech companies, worth as much as $1.18 million. The Congresswoman likes to stress her distance from President Bush by citing her push to allow prescription drug re-importation from Canada and other countries, legislation that would bring competition to many of the companies in which the Northups are invested. However, Northup did vote in favor of the Medicare Plan D Prescription Drug plan, which forbids the federal government from negotiating price with the same drug companies. It’s not the money, it’s the policyThe vast wealth and complicated stock portfolios of most members of Congress aren’t what set voters off, according to Dr. Jasmine Farrier, associate professor of political science at the University of Louisville. She said the appearance of impropriety — that members of Congress vote to increase their take on stockholdings — doesn’t translate to outrage, because Americans are used to having rich people represent them in government. What does irk voters, she said, is the idea that a Congressperson would vote for or against legislation based on corporate influence. “It’s a larger issue of how representative the nation is of corporate interests,” Farrier said. “We have a very open system. We believe in lobbying, we believe in campaign contributions, things that don’t exist in other countries. This is all considered a Constitutional right of expression. We have Constitutional protections for uneven representation, basically, and it’s allowed for corporations to have a say. It’s allowed for rich people to have a say.” Often, of course, such wealth makes their voices louder.At present, public confidence in the integrity of Congress is at its lowest point since Americans began taking polls of such things — just under 20 percent, according to Craig Holman, Capitol Hill lobbyist for the non-profit watchdog group Public Citizen. A big reason for that is the idea of the corporate hand in the government jar, a perception that has grown immeasurably in the six years of the Bush administration.But laws governing financial ethics in Congress are strange. For instance, senior Congressional staff must avoid stockholdings that create a conflict of interest, but their bosses operate without restriction. Executive branch rules prohibit any official from acting on something that would benefit his or her stockholdings, unless a corrective action is taken. Those corrective actions, which Holman suggests should apply to everyone in government equally, are: recusal from a vote or action; waiver from an ethics commission allowing participation; divesting; or establishing a blind trust. “It’s highly hypocritical,” Holman said. “Not only is it hypocritical within Congress itself, where senior staff can’t do that but members can, it also contradicts the real ethics code that applies to the executive branch.” Holman said the same rules should also apply to Congressional spouses. Because the family benefits, he said, it remains a conflict of interest. “It’s unfortunate that so many members of Congress just have seemed to think that the ethics rules don’t apply to them and shouldn’t apply to them, even though it has to apply to everybody else,” he said. Contact the writer at sgeorge@leoweekly.com