Dave Obey's Big Payoff

 

Dave Obey isn’t bone-tired after all.

When the former House Appropriations chairman stunned the Beltway — and his district back in Wisconsin — and announced he was retiring at the end of the last term, he said he hated to do it.

“There is so much that needs to be done,” said the man who was at the pinnacle of his career and one of the most powerful politicians in America. “But, frankly, I am bone-tired. When I first put my name on the ballot for the state Assembly in 1962, I was 23 years old. Now 48 years later, I will soon be 72.”

“The wear and tear is beginning to take its toll,” Obey said in May 2010, talking like a man who thought his days on Earth were numbered. “Given that fact, I have to ask myself how I want to spend the time I have left. Frankly, I do not know what I will do next.”

He does now.

Obey has joined Gephardt Government Affairs, which describes itself as one of Washington’s “most effective legislative strategy shops.” He’s not a registered lobbyist, not like the firm’s leader, former congressman and presidential candidate Dick Gephardt. Not yet, anyway. The one-year “cooling-off period” that prevents former House members from lobbying former colleagues will not expire for Obey until January.

But former politicians like Obey don’t have to directly lobby anyone to make money in the Capitol; and Gephardt has not been shy about touting his friend’s “ability to negotiate, problem-solve and develop legislative strategy.” Obey, said Gephardt when the hiring was announced in June, “will be an incredible asset to our team.”
After all, as Gephardt also said, “No one knows the federal government’s funding process better than he does.”

Observers in Washington D.C. — inured to the sight of former lawmakers cashing in on their time in Congress — are not surprised at the move. But this is not just any former lawmaker. Obey is uniquely connected and knowledgeable about how vast amounts of money flow in Washington. The committee he ran is responsible for more than $1 trillion in annual discretionary spending.

He’s also the guy who, to borrow former Milwaukee Mayor John Norquist’s description of Obey when he retired, “worked for people who couldn’t afford a lobbyist.”

When Obey announced he was retiring, there was ample speculation that he was afraid he might lose to Sean Duffy, the young Republican from Ashland County who eventually won the seat. But he himself noted that he’d won 25 elections and suggested other explanations.

Obey wasn’t just tired, he said. He was tired of the labyrinthine ways of Washington. He told the Milwaukee Journal Sentinel that, while he didn’t know what he would do next, “There has to be more to life than explaining the ridiculous, accountability-destroying rules of the Senate to confused, angry and frustrated constituents.”

There was no reason, in sum, not to accept his suggestion that age was catching up to him. But what has transpired since begs another possibility:

Did Dave Obey just decide it was time to cash in?

Supporters to whom Obey is a liberal icon blanch at the suggestion.

“I don’t think that is the case at all,” says Jerry Madison, who ran Obey’s district office in Wisconsin for years. “He and Gephardt were close friends in the House. … They go back a long way. I know he had offers to do that [sort of thing] long before he retired.”

If Obey just wanted to make money, in other words, he could have left government a long time ago — or worked the system while he was a part of it instead of supporting ethics reform limiting congressional compensation.

Providing what he called “historical perspective” on congressional compensation during a debate on the floor, Obey himself touted his role as an ethics reformer. “As many of you know, in 1977 I chaired the reform task force which first produced broad-scale limitations on outside income for members of Congress and which first provided meaningful disclosure of members’ financial affairs,” he said during a debate on the Government Ethics Reform Act of 1989, according to the Congressional Record.

“Former Speaker of the House Tip O’Neill wrote in his book that he thought that my chairmanship of that task force cost me the Budget Committee chairmanship of this House in 1980 because our package at that time cost a number of members well over $100,000 a year,” Obey said at the time.

“I think that judgment is correct. I was willing to pay that price because I thought what we did then was right and I think what we are doing today is right. What this package does today is to complete the job that my commission started and got about half done in 1977,” he continued.

The Government Ethics Reform Act of 1989 — which Obey voted for — was multifaceted and did limit outside income to members of Congress. It also directly affected how much money they are paid and, as a result, the size of their pensions.
The act Obey spoke strongly in favor of raised congressional pay to $96,600 in 1990 and then to $125,100 in 1991. It also set up automatic cost-of-living increases that eventually raised congressional salaries to $174,000 by the time Obey served out his last term in early 2011.

He went so far as to suggest in 1989 that some of his colleagues were hypocrites for privately opposing ethics reform and specifically limits on honoraria. “Those who know me know that I do not suffer hypocrisy very easily,” said Obey. “I think we have often seen hypocrisy on this issue.”

Critics have long derided the automatic yearly pay increases as secretive and a classic example of how little-understood House and Senate rules enable members to avoid straight up or down votes on controversial issues such as their own salaries — which, in turn, help determine the size of their pensions.

There is a “long history behind various schemes concocted by Congress to avoid accountability over raising their own salaries,” says Pete Sepp, a spokesman for the National Taxpayers Union. He feels lawmakers should vote up or down on their own raises that rather than resorting to a secretive system that grants Congress automatic pay increases.

Congressional compensation, Sepp points out, is an issue that voters understand well. “They don’t know whether $5 billion is too much to pay for an aircraft carrier,” he says. “They do know whether $174,000 is too much or too little to pay a congressman.”

Or whether congressional pensions are too generous — or secretive.

Neither the U.S. Office of Personnel Management nor the office of the Chief Administrative Officer of the U.S. House of Representative would even confirm whether Obey is taking his government pension — the sort of refusal, according to Sepp, that Washington insiders sometimes defend by referring to a court ruling in a case called NARFE v. Horner in 1989. The secrecy might be legal, but Sepp finds it hard to stomach.

“I don’t see how information can be released on active employees and what they are making, but pension amounts that retired lawmakers are getting are somehow privileged, secret information,” he says.

Sepp’s organization takes it upon itself to provide estimates of what former lawmakers are likely receiving.

Like other members of Congress elected before 1984, Obey was originally enrolled in the Civil Service Retirement System and, although he would have had the option of transferring into the Federal Employees’ Retirement System in the mid-1980s, he likely stayed with the CSRS if he was like most others with the same choices at the time.

There were options within the CSRS itself as well. But that plan typically requires Congress members to contribute 8% of their pay (matched by the government) while also giving them higher accrual rates than those received by most other federal employees — let alone virtually anyone in the private sector.

The annual pension amount — capped in the first year at 80% of final earnings — is based on years of service, salary and whether the former member of Congress accepts a slight reduction in exchange for a portion of the pension being paid to his spouse in the event of his death, according to Sepp.

All those factors make precise estimates impossible. But Obey, Sepp estimates, is likely receiving about $125,000 per year in pension payouts, assuming he’s taking a reduced amount.

Members of Congress used to be eligible for even more, says former Obey aide Madison.

“There were retired congressmen who were making more than they were [while] in Congress,” says Madison. “I know they can’t do that anymore. That was another reform measure that [Obey] worked on.”

In small town Wisconsin, people see it differently. B.J. Guderian used to travel the country selling custom-made jewelry until the economy went south. She settled down in Merrill, part of Obey’s 7th  Congressional District, just a few years ago and hasn’t been there long enough to have any well-formed opinions about him. But she knows what she thinks about government salaries of $174,500 and pensions that start at $125,000 and grow from there.

“I think it is absolutely obscene,” she said, sitting behind a display of homemade greeting cards she now makes and was selling one recent day in Wausau’s downtown square. “Why 125,000? That is not even reasonable. You have how many people losing their homes?”

“It’s not like they’re saving lives,” said Guderian of the politicians. “They’re screwing things up.”

Obey was never one of the wealthier members of Congress. His net worth paled by comparison to wealthier colleagues like Jim Sensenbrenner, Tom Petri and Herb Kohl, all of whom are worth millions.

Obey, in contrast, had few investments for a man his age, according to financial disclosure statements filed while he was in office. His biggest assets when he retired, other than equity in property that didn’t have to be disclosed on the forms, were a Fidelity IRA likely worth around $50,000, a Congressional Federal Credit Union account worth between $50,000 and $100,000 and a CD likely worth around $15,000. Assets on the disclosure forms are reported in ranges, but all told they added up to maybe $250,000.

As part of the team at Gephardt Government Affairs, Obey could make many multiples of that.

Bob Livingston, the Republican from Louisiana who chaired the House Appropriations Committee before resigning in 1999 in the wake of disclosures about an extramarital affair, made more than $1 million in his first year as a registered lobbyist, according to the Center for Responsive Politics.

There is no reason Obey couldn’t quickly make that sort of money, and do it legally.
If Obey is providing only strategic advice, “he would not be breaking the letter of the law” during the cooling-off period, says Michael Beckel, a spokesman for the center. “And certainly it is no surprise that there are corporations and lobbying firms, clients, out there who would want to tap into the expertise Mr. Obey brings to the table.”

Gephardt’s firm makes plenty of money, more than $6 million just in lobbying fees in 2010, according to the center. The firm has served a wide range of clients, including Anheuser-Busch, Boeing, General Electric, Goldman Sachs, NBC, Visa, Waste Management and the governments of Turkey and El Salvador. The firm also lists a pro bono client on its website, Segs4Vets.

Madison isn’t sure how much Obey is working for Gephardt Government Affairs right now. Gephardt’s hiring announcement did mentioned that Obey is also a senior fellow at the Wisconsin Institute for Public Policy and Service, which is housed in the new UW Center for Civic Engagement on the UW-Marathon County campus in Wausau.

The center is a testament to just how successful Obey was in directing money to projects and places he favored. In fact, a plaque just inside the main entrance extends “special recognition” to Obey and his staff, including his former chief of staff, Christina Hamilton. The reason: half of the money for the $10 million center came from congressionally directed spending grants that Obey, who attended the University of Wisconsin, secured as earmarks, the Wausau Daily Herald has reported.

Obey is not drawing a salary from the institute, but he also doesn’t appear to spend much time there — apparently leaving ample time for him to work on K Street in Washington.

Obey was on the phone when Wisconsin Interest called the firm in September, and is “fully engaged,” according to a story written for the National Daily Journal in June and posted on Gephardt’s website. He is working on issues ranging from trade to transportation to education to health care to U.S. policy in the Middle East, according to the story. His former chief of staff, Hamilton, has also joined the Gephardt firm and is reportedly working for health, energy, transportation, trade and appropriations clients.

Hamilton, according to the firm’s website helps clients “navigate the [Appropriations] Committee and related agencies successfully throughout the federal government’s budget and appropriations processes.”

Obey himself, according to the site, “provides invaluable insight to clients regarding their federal legislative strategy and issue management throughout the interagency budget and appropriations process.”

Hundreds of former members of Congress have made fortunes advising clients after leaving their House or Senate seats — many trading on their insider information to become millionaires. Obey is far from the first to join the parade.

Asked what, if anything, is wrong with somebody like Obey working for a lobbying or so-called legislative strategy shop, Beckel said that “on the one hand, there are people who can use their expertise to assist clients of all stripes,” ranging from nonprofits to unions to corporations. But “most often” they serve “special interest groups and corporations with very deep pockets; and any time the decision-making process is influenced by politics and money and connections rather than the merits of the issue at hand, there is potential trouble.”

It is, at any rate, somewhat jarring to compare what admirers said about him when he retired with what he is doing now.

Former House member and current Milwaukee Mayor Tom Barrett, for instance, called Obey “a voice in Congress for those too often pushed aside by special interests and powerful insiders.”

Perhaps Obey still believes there really is so much that needs to be done — although trying to do it from the outside would seem a far cry from having the ability to pull the levers himself as appropriations chair. Whatever influence Obey has now is but a fraction of what he had a year ago when he almost single-handedly steered billions of dollars into programs and projects.

Only Obey knows how that might skew a man’s perception of what real money is, bend it wholly beyond the comprehension of folks back home like Guderian who find a $125,000 annual pension — especially one with built-in cost of living increases — obscene.

Like congressional salaries, that $125,000 estimated annual payment will automatically grow over time until he dies. If he lives to the age of 85, as mortality tables suggest a man who just turned 73 will on average, Obey would collect approximately $2  million in federal pension benefits even assuming a relatively conservative 3% growth rate and no payments to his wife. And that, of course, will apparently be just a supplement to the money he makes elsewhere.

Congress members haven’t always had pensions. They gave them to themselves in the 1940s after arguing, in part, that they “would contribute to independence of thought and action” and be “an inducement for retirement for those of retiring age or with other infirmities.”

Nowadays, for lawmakers such as Dave Obey, they are often just one lucrative financial inducement among many others after they hang it up — if, that is, they are not too bone-tired.

Mike Nichols is a Senior Fellow at the Wisconsin Policy Research Institute.

 

Sidebar: Obey Earned a State Payout, Too

In addition to his federal pension, Dave Obey qualifies for Social Security and earned a pension from the state of Wisconsin, where he served in the Assembly for six years in the 1960s. Before 1984, members of Congress did not pay into, or receive, Social
Security. That changed with a 1984 amendment to the Social Security Act. Assuming Obey, like virtually all others first elected in the 1960s or 1970s, chose to remain in the Civil Service Retirement System, he would have had to choose between two options when the law changed.

Either choice would have required him, starting at that point, to pay a percentage of his income up to the Social Security wage base (6.2% of his income up to $106,800, for example, when he retired in 2010).

He could have chosen to pay that 6.2% on top of the 8% he paid into his CSRS plan. If so, he would now be receiving both his CSRS pension and Social Security.

He could instead, however, have chosen a so-called “CSRS Offset” plan. Under that scenario, he would have paid a total of 8% of his salary into, essentially, an integrated CSRS/Social Security plan. In that case, his pension would now be reduced by the amount he receives in Social Security.

Like the federal government, the state of Wisconsin will not comment on whether Obey is receiving a pension. It is likely, however, that he either took a lump-sum payout at some point or is now collecting a small, monthly check.

State pensions are typically determined by years of service, average highest salary and a multiplier. Obey never made more than $8,400 per year as a member of the state Assembly, and during most of his time in Madison earned considerably less. He was only 30 years old when he moved to Congress and wouldn’t have been eligible to collect a traditional pension from the state until he turned 55. The amount would have been less than $1,000 per year in 1969 dollars that would have grown based on investment performance. It’s possible, however, that he took a one-time “separation benefit” sometime after leaving the Assembly and before reaching retirement age.

-M.N.

Photography by Associated Press

© 2015 Wisconsin Policy Research Institute, 633 W. Wisconsin Ave Suite 330, Milwaukee, WI 53203
This site is powered by the Northwoods Titan Content Management System