Bogus Cato anti-welfare study

Nowadays, thanks to the Internet and the abundance of hawk-eyed journalists and economists, it takes only days to debunk the dishonest, slanted "research" of Koch-funded think tanks like the Cato Institute, that attempted to prove that welfare pays better than a job.

Rick Ungar of Forbes summarizes what's wrong with the Cato "study":

Cato has rigged the result by taking only the most highly paid recipients of welfare (women with two children) as their basis for comparison, and then proceeds to pretend that all of these recipients receive benefits from each and every one of the eight programs included while completely omitting those on welfare who receive dramatically less. Then, for extra measure, the study falsely pretends that working families receive absolutely no welfare benefits whatsoever in order to make minimum wage earners look like their income is lower than a welfare recipients’ take.

Ungar concludes thusly:

If the problem is real—and I acknowledge that, to some extent, it is—you ought to be able to provide real data to get to your proposed solutions. When an organization like Cato is forced to offer up one of the most bogus studies I can recall as the means in which to make a point, rest assured that reasonable, thinking Americans will be left to conclude that the conservative side of this argument offers no real solutions—only false propaganda—and that will benefit exactly nobody.

The Conservative Case For Welfare Reform Suffers Massive Blow Via Cato Institute Study

By Rick Ungar

September 3, 2013 | Forbes

URL: http://www.forbes.com/sites/rickungar/2013/09/03/the-conservative-case-for-welfare-reform-suffers-massive-blow-via-cato-institute-study/

Cato: Beware proxy wars

Here's a Cato Institute scholar saying what I've already said, but since the messenger matters to conservatives as much as the message....

The danger of America's 'proxy war'

By Erica D. Borghard

August 14, 2013 | CNN

The past few months have been difficult for the Syrian rebels as government forces, bolstered by Iranian support and Hezbollah fighters, have routed anti-Assad fighters around Damascus and Homs. However, recent reports suggest Syria’s rebels have successfully seized the key Minakh air base in Aleppo and are orchestrating a push to challenge Bashar al-Assad’s control of Latakia, a regime stronghold. If the rebels can consolidate these reported gains, it would certainly suggest a shift in momentum.

Yet the seesawing dynamic of the Syrian civil war suggests that these advances are likely to prove fleeting, and U.S. policymakers should not point to them as evidence that the Obama administration’s decision to arm the rebels represents sound policy. In fact, providing arms to the Syrian rebels is unlikely to decisively tip the scales to their advantage. As I argued in a recent Cato Institute paper, the United States is instead likely to be dragged into a more extensive involvement later – the very scenario advocates for intervention claim they are trying to avoid.

Waging war by proxy, whereby states provide nonstate groups with arms and other resources in exchange for fighting on the former’s behalf, is an attractive policy option for states when they are hesitant to use force directly. In this case, the Obama administration’s decision to arm the Syrian rebels is taking place in a broader context of American retrenchment and public wariness about extensive foreign interventions.

Advocates of arming the Syrian rebels claim that U.S. policy objectives in Syria can be achieved at a relatively low cost without forcing the United States to commit to a large-scale intervention. However, the very aspects of proxy warfare that appeal to states – their covert, indirect and informal nature – also create the conditions for unwarranted commitment by states to conflicts.

First, the United States could become locked into a path of increasing involvement in the Syrian conflict through the institutional incentives that are present in covert operations. While the White House publicly announced on June 13 that the U.S. government was initiating a program of lethal support to the Syrian rebels, it was in fact already authorized under current covert operations law. Accordingly, the president can authorize covert action, provided he or she informs congressional intelligence committees, and is not required to make the nature of the operation known to the public.

What this means is that the specific parameters of the U.S. intervention in Syria remain vague and underspecified.

The secrecy surrounding aid to the Syrian rebels creates a real risk that the U.S. could get locked into even greater commitments in Syria later. Delegating authority for alliance management to bureaucrats, the CIA in the case of Syria, and providing them with a broad and ill-defined mandate to execute policies, impinges on political leaders’ abilities to use threats to influence the behavior of their nonstate allies. Specifically, proxies will not take threats to withhold or moderate support seriously if the political leaders making the threats cannot rein in the individuals responsible for executing them.

Second, the United States could get trapped in an over-commitment in Syria through erroneous understandings of credibility and reputation. The fact is that despite claims by some policymakers, U.S. credibility is not at stake in Syria. The idea that Obama’s failure to adequately support the rebels would undermine the administration’s reputation for resolve in other arenas is misguided because Syria does not threaten core U.S. national security interests. Other states assess credibility based on a state’s power and interests in the issue at hand, on a case-by-case basis, rather than past behavior. Iran, for example, should not infer from Obama’s actions in Syria that the United States would not stand firm with regard to its nuclear program.

The rebels’ military vulnerability exacerbates these two problems. Their military deficiencies raise the question of what the United States should do if they are still unable to achieve and maintain pivotal military gains on the ground after receiving U.S. arms. As it becomes apparent that U.S.-backed rebels cannot complete the job, the United States will be tempted to escalate its involvement in the civil war to achieve its political objectives.

One thing should be clear: the United States should not have initiated a program to provide arms to the Syrian rebels. If our government is not careful, it will get sucked into an even deeper – and extremely costly – international commitment.

Evil Koch bros. sue to take over Evil Cato Institute

This is fun to observe from the sidelines, like watching on Jerry Springer how a dysfunctional family gets in a goofy brawl or girlfriends are pulling one another's hair out, where all sides are so repulsive and stupid that nobody can possibly be in the right and it doesn't matter who wins.

But the most entertaining part is Teabagging, astroturfing FreedomWorks playing the role of Jerry's bouncer Steve Wilkos, trying to break up the fight between Cato's board and the Kochs with such official, "just calm down" statements:

While we [Freedomworks] do not pretend to know all of the particulars of the dispute over ownership shares, it is clear that this hostile takeover bid, if successful, will do irreparable harm to the credibility of Cato, and equally important, will undermine our community's intellectual defenses at a time when the progressive left seems more committed than ever in their aggressive pursuit of government control of the American economy and the most personal decisions of its individual citizens.

"The credibility of Cato"!  "Intellectual defenses"!  Ha-ha, that's great stuff!   

FreedomWorks, Koch Brothers Clash Over Cato Institute Takeover Bid

By Paul Blumenthal

April 12, 2012 | Huffington Post

URL:  http://www.huffingtonpost.com/2012/04/12/freedomworks-koch-brothers-cato-institute-takeover_n_1420918.html

Ames: CATO, Reagan said 'Deficits don't matter'

Everybody gets duped once in a while. Hell, I voted for Obama, thinking I was getting a real anti-war progressive. Alas, I got duped. Obama is in fact a moderate Republican... or what used to be called a moderate Republican until about 10 years ago.

What matters is how you react when you're finally faced with the truth: Do you double down on your delusion, go permanently schizo with cognitive dissonance, or do you face up to it and admit you were fooled?

This article is full of quotes that should bring on that moment of truth for you slash-the-debt/tea-party types.

Let me know which way you go.

Libertarian Liars: Top Reagan Adviser, CATO Institute Chairman William Niskanen: "Deficits Don't Matter"

By Mark Ames

November 21, 2011 | The Exiled

URL: http://exiledonline.com/libertarian-liars-top-reagan-adviser-cato-institute-chairman-william-niskanen-deficits-dont-matter/

'Ideological slander'? Euro-socialist stocks outperform U.S.

"Countries with typically high levels of government involvement in the economy, such as Sweden, Denmark and Canada, do not appear to have experienced stifled economic growth relative to countries where government involvement is more limited, like the US," according to a report by Stewart Partners.

Indeed, "many socialized governments provide critical support for business growth, including first class infrastructure built by the public sector, retraining of workers and public education systems that result in better-prepared workforces, comparative to the US."

This shouldn't come as a surprise, I mentioned it back in July 2010: "On four broad categories of economic freedom -- (1) legal structure and security of property rights; (2) access to sound money; (3) freedom to trade internationally; and (4) regulation --. the United States was slightly 'freer' than Sweden, the United Kingdom, Austria, Finland, and Switzerland. Meanwhile, Ireland, the Netherlands and, by a wide margin, Denmark were found to have freer markets."

See for yourself in the annual report on Economic Freedom of the World by the libertarian, Koch-funded CATO Institute to see how countries measure up.

Just remember: there is not a clear correlation between economic freedom and the relative size of the government's role in the economy.

U.S. Stocks Outperformed By France, Sweden Since Reagan Era

By Alex Wagner

June 20, 2011 | Huffington Post

URL: http://huffingtonpost.com/2011/06/22/stocks-socialized-us-countries-reagan_n_882270.html

Cato VP gives lesson in free markets, small gov't

Listen up, teabaggers and Repugs, this article was written by a vice president at the libertarian Cato Institute.

He's going to give you a lesson in (1) free markets, (2) small government, and (3) average vs. "elite" Americans' real views on spending and the economy. You're not going to get this lesson on talk radio or FOX, so read and understand this.

Then come back to me if you have any questions.

Another Culture War? No Thanks

A libertarian critiques a call from the right for a showdown on economics.

By Brink Lindsey

July 2, 2010 | The American Prospect

"America faces a new culture war," declares Arthur Brooks, president of the conservative American Enterprise Institute, in the opening sentence of his new book The Battle: How the Fight between Free Enterprise and Big Government Will Shape America's Future. "This is not the culture war of the 1990s. This is not a fight over guns, abortions, religion, or gays. … Rather, it is a struggle between two competing visions of America's future. In one, America will continue to be a unique and exceptional nation organized around the principles of free enterprise. In the other, America will move toward European-style statism."

And who, according to Brooks, are the combatants in this conflict? Wearing the white hats, "70 percent of Americans support the free enterprise system and are unsupportive of big government." Wearing black hats, meanwhile, is what Brooks calls "the 30 percent coalition": the "intellectual upper class" of academics, journalists, and well-educated professionals; African-Americans and Hispanics; and the young. In other words, pretty much the usual suspects from culture wars gone by.

Although he mentions the Tea Party movement only in passing, Brooks' call to arms is very much in the spirit of that populist uprising. He seeks to "rally the 70 percent majority in the battle for the soul of America": In other words, as the Tea Partiers often put it, it's time for "real Americans" to "take our country back." Just as the protesters vent their fury at coastal elites and, especially, elitist-in-chief Barack Obama, so too does Brooks. "The intellectual upper class has become the most important party in the 30 percent coalition -- the chief adversary of the free enterprise system today," he writes. "And at the head of the intellectual upper class are our current leaders in Washington DC -- starting with activist, bestselling author, and Ivy League academic, President Barack Obama."

Let me make it clear at the outset: When it comes to specific questions of economic policy, Brooks and I probably agree on a great deal. Indeed, I'd bet that my opinions are much closer to his than they are to the typical reader of The American Prospect. I thought that the stimulus bill was, by and large, a waste of money, and the takeover of General Motors and Chrysler, a travesty. I opposed the recent health-care legislation and the climate bill and card-check legislation. Hey, I'm a vice president at the Cato Institute, so none of this should come as a big surprise.

But Brooks' book isn't about policy; it's about ideology and how to engage in politics. And it is, I'm sorry to say, a thoroughly wrongheaded way to approach these questions. The attempt to turn economic policy disputes into a populist cultural crusade rests on deep-seated confusion about the nature of those disputes and how best to effect constructive policy change. Brooks' key move is to cast our "free enterprise system" as an instance of American exceptionalism -- in contrast to the social democracy of Europe and other advanced nations. Thus, economic policy becomes fodder for cultural politics: Supporters of free markets are defending a unique and precious American heritage, while members of the "30 percent coalition" have thrown in with the foreigners -- worst of all, with effete, decadent Europeans.

To treat Brooks' narrative seriously, it's helpful to break down the concept of the "free enterprise system" into two separate and distinct elements. The first is free markets; the second, small government. They need not be a package deal. Governments can effectively stifle enterprise and competition without spending a lot of money, while a large public sector and a vibrant private sector can go hand in hand. So let's look at each component separately.

First, free markets. Is Brooks' distinction between all-American freedom and European-style statism a valid one? And here at home, do elites really support the state while everyone else supports the market? No and no. When it comes to establishing and maintaining open and competitive markets, the U.S. institutional and policy environment isn't really that exceptional at all. Meanwhile, elites are actually more likely to support free-market policies than is the American demos.

Plenty of European countries have markets about as free as those in the land of the free. Look at the ratings provided by the annual Economic Freedom of the World report, co-published by the Cato Institute. On four broad categories of economic freedom -- (1) legal structure and security of property rights; (2) access to sound money; (3) freedom to trade internationally; and (4) regulation --. the United States was slightly "freer" than Sweden, the United Kingdom, Austria, Finland, and Switzerland. Meanwhile, Ireland, the Netherlands and, by a wide margin, Denmark were found to have freer markets. Note that the two highest scorers have two of the biggest welfare states in the world -- which just goes to show that blurring issues of regulation and redistribution, as Brooks tries to do, leads to intellectual confusion.

So much for American exceptionalism in actual policy results. Meanwhile, how market-friendly is American public opinion? Not very, according to economist Bryan Caplan. In his book The Myth of the Rational Voter, Caplan documents the existence of strong and widespread anti-market biases in the American electorate -- in other words, sharp divergences between public opinion and the accepted view among most economists. Thus, ordinary voters are more likely to say a price increase was caused by intentional gouging rather than the interaction of supply and demand; they are more likely to blame problems in the economy on companies downsizing or "shipping jobs overseas"; and they tend to underestimate recent economic gains and express more pessimism about the future. On the other hand, the better educated are more likely to think like economists and see such changes as unavoidable. So it looks like Brooks actually gets things backward here: From a free-market perspective, the dreaded intellectual upper class is more solution than problem.

Brooks' narrative works somewhat better with respect to conflicts over the size of government. Here, at least, there is a clear distinction between the United States and Europe. Levels of social welfare spending in Europe are generally much higher than they are in the U.S.

Does America's smaller welfare state reflect important cultural differences between us and folks on the other side of the Atlantic? Yes, probably, but the main one is hardly worthy of defending. A 2001 paper, "Why Doesn't the United States Have a European-Style Welfare State?" by economists Alberto Alesina, Edward Glaeser, and Bruce Sacerdote, provides powerful evidence that race is at the center of the story. There's a strong negative relationship between a country's racial heterogeneity and its levels of social spending, and within the U.S., states with larger black populations spend less on welfare programs. "Americans think of the poor as members of some different group than themselves, while Europeans think of the poor as members of their group," the paper concludes.

[ In other words, Americans who oppose welfare are doing so mainly for racist reasons that they themselves may not want to admit on a conscious level, or at least in polite company. But Americans would admit it to USA TODAY/Gallup --> see the 13th paragraph down. - J ]

Don't get me wrong: I'm no fan of the European welfare state. There are sound economic reasons for rejecting it as a model. Most decisively, the aging of the population and the continued development of promising but expensive medical treatments are rendering it unaffordable, and fiscal constraints will sooner or later lead to significant restructuring here as well.

But Brooks doesn't want to use economic arguments. He counsels against "getting stuck in the old arguments over money." Instead, he wants to defend America's track record of more modest social spending on cultural grounds. And that is a really bad idea. Our tragic history of race relations may have inhibited spending, but we should be ashamed of that cultural heritage. We certainly shouldn't embrace it and brag about it. Brooks apparently doesn't realize what he's doing; he thinks he's touting good old Yankee self-reliance. But his argument is offensive even if he's oblivious to how offensive he's being.

In any event, it's not anti-poverty programs that are threatening to send the U.S. budget spiraling out of control. Rather, it's the middle-class entitlements, Social Security, and especially Medicare. And you can't blame those programs on the machinations of the dastardly "30 percent coalition," because they are overwhelmingly popular across the electorate. According to an April New York Times poll, 76 percent of Americans think "the benefits from government programs such as Social Security and Medicare are worth the costs of those programs." And amazingly, the percent only drops to 62 when the sample is restricted to the 18 percent of people who say they support the Tea Party movement!

Here again, Brooks' effort to turn economic policy problems into "us versus them" cultural conflicts collapses in failure. On the vexing question of how to defuse the entitlements fiscal time bomb, there is no "us" and "them." The politics of us versus them is almost always ugly and illiberal. And on the policy questions that Brooks is concerned with, there's no need for such deliberate divisiveness. Yes, there are strong disagreements about market regulation and the proper size and scope of social spending, but these disagreements are not based on some irreconcilable differences in values. Vigorous support for continued economic growth is nearly universal across the political spectrum. How else will we put jobless Americans back to work, and how else will we pay for the activities of government, without a strong, dynamic private sector? A similarly broad consensus exists for the following two propositions: On the one hand, a government safety net is needed to protect Americans from various hazards of life; on the other hand, that safety net shouldn't bankrupt us.

Figuring out how to restore growth and how to construct an effective but affordable safety net, are questions for debate, analysis, and democratic decision-making. My answers to those questions may differ from yours, but dividing up into warring tribes and demonizing each other aren't the ways to figure out who's right.

Tea Party's financial backing from Stalin

Then they got really rich by cheating American Indians. Wonderful people, the Koch's.

So CATO, Heritage, and these other free-market-loving organizations owe their donations to Stalin. Jeez, what irony!

This is one of the most interesting stories I've read in a long time.

CLASS WAR FOR IDIOTS / TEA PARTY / APRIL 17, 2010

A PEOPLE'S HISTORY OF KOCH INDUSTRIES: HOW STALIN FUNDED THE TEA PARTY MOVEMENT

By Yasha Levine

This article was first published on Alternet.org

"I would rather live under a bridge than live under socialism"

—tea bagger slogan

Everyone knows that Tea Party revolutionaries fear and hate socialism about as much as the Antichrist. Which is funny, because the Tea Party movement's dirty little secret is that it owes its existence to the grandaddy of all Antichrists: the godless empire of the USSR.

What few realize is that the secretive oil billionaires of the Koch family, the main supporters of the right-wing groups that orchestrated the Tea Party movement, would not have the means to bankroll their favorite causes had it not been for the pile of money the family made working for the Bolsheviks in the late 1920s and early 1930s, building refineries, training Communist engineers and laying down the foundation of Soviet oil infrastructure.

The comrades were good to the Kochs. Today Koch Industries has grown into the second-largest private company in America. With an annual revenue of $100 billion, the company was just $6.3 billion shy of first place in 2008. Ownership is kept strictly in the family, with the company being split roughly between right-wing brothers Charles and David Koch, who are worth about $20 billion apiece and are infamous as the largest sponsors of right-wing causes. They bankroll scores of free-market and libertarian think tanks, institutes and advocacy groups. Reason magazine, Heritage Foundation and Cato Institute are just a few of Koch-backed free-market operations. Greenpeace estimates that the Koch family shelled out $25 million from 2005 to 2008 funding the "climate denial machine," which means they outspent Exxon Mobile three to one.

I first learned about the Kochs in February 2009, when Mark Ames and I were looking into the strange origins of the then-nascent Tea Party movement. Our investigation led us again and again to a handful of right-wing organizations and think tanks directly tied to the Kochs. We were the first to connect the dots and debunk the Tea Party movement's "grassroots" front, exposing it as billionaire-backed astroturf campaign run by free-market advocacy groups FreedomWorks and Americans For Prosperity, both of which are closely linked to the Koch brothers.

But the Tea Party movement—and Koch family's obscene wealth—go back more than half a century, all the way to grandpa Fredrick C. Koch, one of the founding members of the far-rightwing John Birch Society which was convinced that evil socialism was taking over America through unions, colored people, Jews, homosexuals, the Kennedys and even Dwight D. Eisenhower.

These days, the Kochs paint themselves as true-believer Libertarians of the Austrian School. Charles Koch, the elder brother who runs the family business in Wichita, Kansas, quotes the wisdom of proto-libertarian "economist" Ludwig von Mises, but also sees himself as a thinker in his own right. In 2007, Charles made his contribution to the body of free-market thought with an economic theory he calls Market-Based Management® (trademark protected, of course), which he lays out in a book titled the Science of Success. A Forbes reviewer seemed a bit disturbed by Charles' overt socialist leanings, writing that the "author professes an almost Marxist faith in the 'fixed laws' that 'govern human well-being.'"

David Koch is the highbrow brother who lives in New York. He ran as the Libertarian party candidate for president in 1980 and says that his dream is to "minimize the role of government, to maximize the role of private economy and to maximize personal freedoms." Apparently everyone's a free-market enthusiast at Koch Industries, including their spokeswoman, who recently wrote a letter to the New York Times stating that "it's a historical fact that economic freedom best fosters innovation, environmental protection and improved quality of life in a society." It might be true somewhere for someone, but not for the Kochs—they owe it all to socialism and totalitarianism.

Here is a better historical fact, one that the Kochs don't like to repeat in public: the family's initial wealth was not created by the harsh, creative forces of unfettered capitalism, but by the grace of the centrally-planned economy of the Soviet Union. This deserves repeating: The Koch family, America's biggest pushers of the free-market Tea Party revolution, would not be the billionaires they are today were it not for the whim of one of Stalin's comrades.

The story of how the Koch family amassed its socialist wealth starts at the turn of the 20th century with the birth of Fredrick C. Koch. Fred was born in a tiny town in north Texas town to a Dutch immigrant and newspaper publisher. The historical record is not clear about the family's wealth, but it appears that great-granddaddy Koch was not hurting for cash, because Fred Koch turned out to be a smart kid and was able to study at MIT and graduate with chemical engineering degree. A few years later, in 1925, Fred started up the Winkler-Koch Engineering Company with a former classmate, quickly developing and patenting a novel process to refine gasoline from crude oil that had a higher yield than anything on the market. It was shaping up to be an American success story, where anything was possible with a bit of elbow grease and good ol' ingenuity.

The sky was the limit—until the free market rained on Fred's parade.

See, Fred was living through the Roaring Twenties, a time of big business, heavy speculation and zero government regulation. Much like today, cartels were free to form and free to fix—and so they did. Sensing a threat to their royalty-revenue stream from Winkler-Koch's superior refining technology, the reigning oil cartel moved in to teach the young Koch how the laissez-faire business model worked in the real world.

"[W]hen he tried to market his invention, the major oil companies sued him for patent infringement. Koch eventually won the lawsuits (after 15 years in court), but the controversy made it tough to attract many US customers," according to Hoover's Company Records service. Just like that, Winkler-Koch Engineering found itself squeezed out of the American market. They had a superior product at a cheaper price, but no one to sell it to.

Luckily, there was one market where opportunity beckoned—and innovation was rewarded: the Soviet Union.

Stalin's first Five Year Plan was just kicking into action a nation-wide industrialization effort, and the Soviet planners needed smart, industrious college grads like Fred Koch. The Soviet Union was desperately trying to increase its oil refining capacity, so oil engineers were especially in high demand—and well paid, too.

"We are the world's greatest market, and we are prepared to order a large amount of goods and pay for them," Joseph Stalin told an American journalist in 1932. Stalin wasn't kidding. From 1926 to 1929, the Soviet oil industry bought $20 million worth of equipment from America. And Koch was about to get in on the action.

In 1929, after hosting a delegation of Soviet planners in Wichita, Kansas, Winkler and Koch signed a $5 million contract to build 15 refineries in the Soviet Union. According to Oil of Russia, a Russian oil industry trade magazine, the deal made Winkler–Koch into Comrade Stalin's Number One refinery builder. It provided equipment and oversaw construction:

The first Winkler–Koch plants were set up in Tuapse in 1930. The cracking unit operated commendably, and would in the future be the type preferred by the heads of the Soviet Union's petroleum industry when purchasing new cracking equipment.

In 1931, two Winkler–Koch cracking units were launched in Baku, another two in Batumi, and six at once in Grozny; the last had a combined refining capacity of 900,000 tons per year. In 1932, a Winkler–Koch unit commenced operations in Yaroslavl.

At the time, the Soviet Union's oil industry was a total mess. Equipment built by Western engineering firms was always breaking down or didn't work at all. Western engineers were constantly being accused of espionage or sabotage, real or imagined, and booted out of the country. Soviet workers suspected of colluding with the foreigners were simply taken out back and shot. Winkler-Koch made sure they were running a tight, effective operation. Unlike their Western competitors, Koch pleased his Soviet clients by ensuring top quality and helping the cause of socialism.

Koch lived up to the slogan: "Work hard enough for Comrade Stalin to thank you!"

The Soviet oil planners were delighted with Koch's refineries, which "operated commendably, and would in the future be the type preferred by the heads of the Soviet Union's petroleum industry when purchasing new cracking equipment." The Communists were so impressed they kept giving Winkler-Koch business and regularly sent Soviet engineers to train in Wichita. It was a sign of growing mutual trust.

By the time he got out in 1933, Koch earned $500,000, which was a ton of money for a kid fresh out of college. This nut of money served as the foundation for the family's future wealth, which Koch no doubt started acquiring at rock-bottom prices. After all, 1933 was one of the two worst years of the Great Depression—all assets were priced to go at 90% off. In the end, the capitalist-hating socialists ended up treating Koch fairly, way better than the monopolistic thrashing he got from his native land. So you'd think he'd at least something good to say about the Soviet Union when he got home?

Nope, not at all. He hated the Commies real bad. But for some reason he kept it to himself until the late 1950s (possibly because he was still doing work for the Soviet Union). Then, after coming back from a trip to the Soviet Union in 1956, he flies off the handle. According to a 1956 AP article, Fred Koch was among eleven prominent residents of Wichita, Kansas, "left for Moscow by plane today in an effort to convince the Russian people that Soviet propaganda about capitalists is untrue." Sounds like the perfect cover for a business trip.

It's not clear what he was actually doing there. But whatever the outcome—maybe he didn't get the contract he was expecting or maybe he got swindled out of some investment or maybe he plain ol' hated the thaw of post-Stalin Russia—Fred Koch came back a pissed-off anti-Communist freak and joined up with the right-wing Bircher freak show. He bankrolled a John Birch Society chapter in Wichita and attempted to open a Bircher bookstore, which wasn't too popular and had to close.

He warned of a massive Communist conspiracy to take control of America, saying that the Reds were eroding American universities, churches, political parties, the media and every branch of government. "Maybe you don't want to be controversial by getting mixed up in this anti-communist battle," Koch said in a speech to a Women's Republican Club in 1961. "But you won't be very controversial lying in a ditch with a bullet in your brain." Strong words for a strong Stalin Queen—must've rocked the stockings off the Bircher groupies.

In 1961, Koch published a pamphlet called "A Businessman Looks At Communism," in which he recounted his travels with a "hardcore Communist" named Jerome Livshitz. It was from him Fred Koch had first learned about the commie conspiracy to take over America:

The government detailed a little man by the name of Jerome Livshltz to go around to our various installations with me. Livshitz had taken part in the revolution of 1905, and had spent twelve years in the U.S.A. as a revolutionary, most of the time in jails….

In the months I traveled with him he gave me a liberal education in Communist techniques and methods. He told me how the Communists were going to infiltrate the U.S.A. in the schools, universities, armed forces and to use his words, "Make you rotten to the core." I believe that due to his American experience he was one of the original architects of the Communist plan of subversion of the U.S.A.

My associate and I pulled him from under an overturned car in Tiflis, and he was amazed. "Why did you save my life?" he said. "We are enemies. I would not have saved you. Perhaps when the turn there, I will spare your lives." He told me that if his own mother stood in the way of the revolution he would strangle her with his bare hands. This is the mark of a hard-core Communist. They will do anything—anything.

Fred Koch's paranoia continued to spiral out of control until his thumper quit in 1967. But by that time his son, Charles G. Koch, had already taken over control of the family business. He appropriated his father's Communist paranoia and made it the basis for the family's free-market business philosophy.

"Once, my father ran a business in the ex-Soviet Union, and all engineers who worked with my father were imprisoned by Stalin later. My father, who had experienced this, became an anti-communist and thought the value of economical freedom and prosperity was more important than ever before," Charles said during an interview with a Korean newspaper in 2008, leaving out the part how evil socialist cash is the foundation of the Koch family's wealth.

Once he took over, it was clear that Charles had big plans for Koch Industries. He was going to push the limits of corporate growth by plowing 90% of the company's profits back into till and diversifying to the max. It worked. The company expanded at an unreal rate: its revenues increased from $100 million in 1966 to $100 billion in 2008—that's 1,000-fold growth!

Today, it operates thousands of miles of pipelines in the United States, refines 800,000 barrels of crude oil daily, it buys and sells the most asphalt in the nation, is among the top ten cattle producers, and is among the 50 largest landowners. Koch Industries also plowed hundreds of millions of dollars into right-wing organizations like Institute for Humane Studies, the Cato Institute, the Mercatus Center at George Mason University, the Bill of Rights Institute, the Reason Foundation, Citizens for a Sound Economy and the Federalist Society—all of them promoting the usual billionaire-friendly ideas of the free market, deregulation and smaller government.

If that expansion looks too fast to be legit, that's because it was.

William Koch, the third brother who had a falling-out with Charles and David back in the '80s over Charles' sociopathic management style, appeared on "60 Minutes" in November 2000 to tell the world that Koch Industries was a criminal enterprise: "It was – was my family company. I was out of it," he says. "But that's what appalled me so much… I did not want my family, my legacy, my father's legacy to be based upon organized crime."

Charles Koch's racket was very simple, explained William. With its extensive oil pipe network, Koch Industries' role as an oil middleman–it buys crude from someone's well and sells it to a refinery–makes it easy to steal millions of dollars worth of oil by skimming just a little off the top of each transaction, or what they call "cheating measurements" in the oil trade. According to William, wells located on federal and Native American lands were the prime targets of the Koch scam.

"What Koch was doing was taking all these measurements and then falsifying them on the run sheets," said Bill Koch. "If the dipstick measured five feet 10 inches and one half inch, they would write down five feet nine and one half inches."

That may not sound like much, but Bill Koch said it added up. "Well, that was the beauty of the scheme. Because if they're buying oil from 50,000 different people, and they're stealing two barrels from each person. What does that add up to? One year, their data showed they stole a million and a half barrels of oil."

In 1999, William decided to take his brothers down. He sued Koch Industries in civil court under the False Claims Act, which allows whistleblowers to file suit on behalf of the federal government. William Koch accused the company of stealing hundreds of millions of dollars in oil from federal lands.

The band of brothers settled the case two years later, with Charles agreeing to pay $25 million in penalties to the federal government to have the suit dismissed. It turned out to be a great deal for Charles and David, considering that in the 1980s their "adjustments" allowed Koch Industries to siphon off 300 million gallons of oil without paying. It was pure profit–free money–to the tune of $230 million.

At the trial, 50 former Koch gaugers testified against the company, some in video depositions. They said employees even had a term for cheating on the measurements.

"We in the company referred to it as the Koch Method because it was a system for cheating the producer out of oil," said one of the gaugers, Mark Wilson.

Ah, finally! We've stumbled upon the secret to the family's success! At the bottom of it all, the Koch Method that funds all the libertarians is nothing but good old-fashioned plunder. Or, as Koch hero Ludwig von Mises might say, "The Koch Method is just an unceasing sequence of single scams."

Yasha Levine is a mobile home inhabitin' editor of The eXiled. He is currently stationed in Victorville, CA. You can reach him at levine [at] exiledonline.com.

Further reading

1. The investigation that broke the Tea Party movement wide open:"Exposing the Rightwing PR Machine: Is CNBC's Rick Santelli Sucking Koch"

2. CNBC Bitch-Slaps Santelli Into Line, FreedomWorks Admits It Organized "Grassroots" Tea Parties, Jon Stewart Cancels Santelli & Megan McArdle Queefs On Our Founding Fathers

3. How FreedomWorks Gave Teabaggers a Dirty Sanchez

4. AstroTurf Revolution Dispatch: Activists Teabag Media