Devil in the Details


It's no secret that the Heritage Foundation is conservative, but there's a significant distinction between advocating an ideology and actively assisting a candidate for political office. Doing the former is common among tax-exempt nonprofit groups like Heritage and its liberal counterparts; doing the latter is illegal.

Heritage's support of Bob Dole's presidential campaign dangles right on the edge of illegality. In exchange for Dole's signature on a fundraising letter, Heritage gave the candidate one-time use of its mailing list for his own fundraising purposes.

The Internal Revenue Service prohibits tax-exempt organizations from attempting to influence the outcome of an election. Giving something of value, like a mailing list, to a political candidate would certainly violate this regulation. John von Kannon, a Heritage spokesman, argues that it was a fair trade, and thereby legitimate. "We have determined that the value of his signature is equal to the value of the list," he says. Heritage's list rents on the open market for $26,643.33. It would be an astonishing coincidence if Dole's signature is worth precisely that amount.

As a nonprofit, Heritage also cannot endorse a candidate. Dole is of course free to endorse whomever he chooses, but the letter, envelope, and enclosed "Reform Facts" brochure (see opposite page) suggest more than one-way support. Dole's name appears above Heritage's on the envelope and at the top of Heritage's stationery.

The letter reads like a Dole for President ad, mentioning Heritage only incidentally. Dole requests that the reader fill out a survey (with questions like "Which Cabinet Departments would you reduce or cut entirely?") and mail it, along with a donation, to him at the Heritage Foundation-it's not all that clear for whom the donation is intended. Heritage's implied endorsement of Dole couldn't be much stronger.

While Heritage is subject to IRS regulations, Dole has to worry about Federal Election Commission laws. A spokes man for the FEC said that Dole and Heritage would have to definitively prove that the signature's value is equal to or greater than the value of the list. If it weren't, then Heritage would be giving Dole an in-kind donation. Since corporations cannot give anything of value to candidates (and the candidate cannot accept it), both Heritage and Dole would be in trouble with the FEC.

Even if the IRS and FEC determine that the signature-for-list trade does not violate these laws, there's still the matter of how much Dole can spend on his own campaign-since he received federal matching funds, he is limited to $50,000 of his own money. According to both Heritage and Dole, the list was fair compensation for the signature, so Dole essentially put the payment towards his campaign. If he doesn't declare it as a personal contribution and spends more than the limit in other funds, he would be in violation of yet another FEC regulation.

Evidently, Dole's tough-on-crime stance doesn't extend to nonprofits who flout the IRS, or to campaigns that find loopholes in FEC laws.

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In the letter discussed above, Dole takes a second out of his campaign pitch to mention that: "The Heritage Foundation actually lives by the free market system they advocate. Heritage accepts no government funds and relies on voluntary gifts to support their work."

As we pointed out above, Heritage is tax-exempt, one of the biggest forms of government subsidy available.


In its ongoing efforts to turn Americans against social programs like Medicare, the Heritage Foundation has resorted to phony arithmetic. A June 18 press release from the think tank warns in bold capital letters: "Average Household Faces $14,000 Tax Bill To Keep Medicare Afloat." The press release, and corresponding study by Stuart M. Butler, detail the rising costs of Medicare and the resulting tax burden.

Butler's analysis claims that over the next nine years (1997-2005), every household in the country will end up paying $14,000 to cover additional costs for the Medicare program. Butler reasons that the hospital insurance portion, Part A, will require $400 billion in increased funding, and Part B, which covers doctor visits and other services, will cost $1.2 trillion. Since about 30 percent of that is paid by beneficiaries, the taxpayer share will come to $950 billion. The Medicare program will therefore require a total of $1.35 trillion over the next nine years, which he divides into a $14,000-per household share. Butler calls his results, "grim reading." They are, but not in the way he meant it.

Richard Kogan of the Center on Budget and Policy Priorities analyzed Butler's calculations for The American Prospect. He discovered that Butler fails arithmetic. Using data from the Congressional Budget Office, Kogan figured the increased costs for Part A to be $331.6 billion, $68.4 billion less than Butler's estimate. But the real dishonesty is in the Part B costs. Butler uses the total Part B costs and adds them to the increase in Part A costs, resulting in an incredibly misleading number. The additional Part B costs come to $273.4 billion, as op posed to Heritage's $950 billion.

The real increase in Medi care costs (Part A + Part B) totals $605 billion, not $1.35 trillion. In a single year like 1996, this would mean an additional $195 in taxes per typical household. Over nine years, the additional cost per household would equal $1,752, not Butler's $14,000. Inflation will, of course, cause incomes (and with them, taxes) to rise, but the percentage of a household's income that goes to cover additional Medicare costs will stay constant.

Butler's ultimate point, that the Medicare program needs adjustment, is not particularly controversial. Indeed, a straightforward analysis of the problem might prove helpful, but the Heritage Foundation's attempts to promote its agenda through deceptive accounting is just dishonest.


In the July 8, 1996 edition of Heritage's online feature "The Right Numbers," the conservative foundation notes that the AmeriCorps national service program costs $26,654 per participant. This figure, which is indeed accurate, was widely cited by congressional Republicans when they tried to kill the program last fall. But what AmeriCorps's GOP critics and the Heritage Foundation neglect to add is that taxpayers don't actually pay that amount.

Thanks to private donations and corporate sponsors, the average cost to the taxpayer is about $19,000. In some states, the cost is even lower-the Massachusetts program costs just $10,500 per participant. But even these figures are misleading considering that AmeriCorps volunteers perform needed maintenance and repairs that the government would otherwise have to pay someone else to do-most likely at a higher cost-or go without.

AmeriCorps cuts costs, encourages public-private cooperation, and teaches young people the value of discipline and hard work. Remind us again why the Republicans want to do away with it?

-Robyn Gearey, Jonathan Cohn

Heritage responds in The American Prospect November-December Issue


Give the Concord Coalition credit. When Bob Dole released an economic plan audaciously promising both a balanced budget and a 15 percent across-the-board tax cut, the Coalition-a vocal advocate for balanced budgets-took out a one-page ad in the New York Times critical of the proposed tax cuts. Even Warren Rudman, a close friend of Dole's who is one of the Coalition's founders, signed it.

Alas one will not find such consistency at some other groups who claim to worry about the deficit. Take Citizens for a Sound Economy, a grassroots organization that has been a relentless critic of Clinton's budgets. "The President's budget supposedly balances by 2002, but it fails to state, in detail, which discretionary programs would have their spending growth restrained," a CSE paper from June reported. "By avoiding an explicit description of changes to programs, the President manages to avoid tough decisions, while putting on the appearance of balancing the budget. This is a classic example of Washington politicians trying to pull the wool over the public eye."

So what does CSE have to say about the Dole plan, whose supply-side fudges and backloads make Clinton's look like grammar school fibs? They like it, says Leila Bate, CSE's director of tax and budget policy. "He did as much as he could to appease both the supply-siders and the deficit hawks. He is trying to stay on track to a balanced budget by 2002. . . . Growth should be the goal."

- J.S.C.

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