Most Americans probably know little or nothing about the White
House Office of Management and Budget, but Washington insiders
are well aware of OMB's power. The office's 500-plus staffers
oversee preparation of the federal budget, and they evaluate the
effectiveness of federal programs and regulations.
That's why it was seen as an unprecedented lobbying
opportunity when OMB asked the public in 2001 for suggestions
about federal regulations that should be revised or rescinded.
Plenty of corporations and trade associations responded to the
call, among them the American Chemistry Council, the American
Petroleum Institute, IBM, and Procter & Gamble. In all, OMB
received 71 suggestions from 33 different trade groups,
corporations, municipalities, and nonprofits. But of all the
respondents, none was as prolific as an obscure affiliate of
George Mason University called the Mercatus Center.
The center submitted 44 of the 71 proposals, most of them
taking a hard line against government regulation. And of the 44,
OMB gave its stamp of approval to 15-including Mercatus critiques
of a proposed Interior Department rule prohibiting snowmobiles in
Rocky Mountain National Park, a Transportation Department rule
limiting the hours a trucker can drive, and an Environmental
Protection Agency rule limiting the amount of arsenic in drinking
"Our list dominated because we were the only group doing
comments in any comprehensive way," said Susan Dudley, deputy
director of the regulatory studies program at Mercatus. "They
called it our 'hit list,' " she added with some amusement,
referring to critics of the group. Overnight, Mercatus-an
organization whose Latin moniker names the activity of markets,
trade, and commerce-became an influential player in Washington.
Of course, it didn't hurt that John Graham, the head of
OMB's Office of Information and Regulatory Affairs, was once an
adviser to Mercatus, or that three Mercatus employees, including
Dudley, were once OMB officials.
When OMB put together a similar report in 2002, the
number of overall submissions quadrupled, and the roll call of
organizations offering ideas rose from 33 to 1,700. Mercatus was
again a prolific commenter, but influencing the OMB report was
only one of several ways the group continues to turn heads.
Bush administration officials drafting the 2003 budget
proposal, for example, consulted with Maurice McTigue, head of
the government accountability project at Mercatus. And just this
week, former Reps. J.C. Watts, R-Okla., and Tim Roemer, D-Ind.,
signed on with Mercatus as part-time distinguished scholars.
Meanwhile, the center's Capitol Hill campus last year
drew more than 1,000 Hill staffers to lectures on everything from
bankruptcy law to tax policy. Mercatus topped its year off when
economist Vernon Smith, who had left the University of Arizona in
2001 to join George Mason and the center, won the Nobel Prize for
economics. Smith was noted for his work in developing role-
playing techniques that demonstrate the efficiency of markets.
The center expects that its 2003 retreat for congressional chiefs
of staff, to be held next month, will be the most successful to
date. Basketball legend Earvin "Magic" Johnson will deliver the
keynote address, outlining his efforts to start businesses in
low-income urban areas.
Mercatus promotes the idea that "free markets lead to
great prosperity," said the center's president, Paul Edwards. "We
don't believe that good ideas should stay cloistered in the
library. We want to get these ideas into the hands of people [on
Capitol Hill and in federal agencies] who can use them
The folks at Mercatus insist they shouldn't be tagged as
conservatives. "I don't consider us ideological," said Tyler
Cowen, the center's general director.
The scholars at Mercatus are an eclectic group. Cowen is
considered a leading expert in the economics of the arts.
Edwards, who became president of the center last March,
previously worked at George Mason University's Institute for
Humane Studies, a libertarian group that seeks to "enlighten"
young journalists on the benefits of free markets and "limited
government." The institute shares space with Mercatus on the
fourth floor of George Mason's law school, a distinctive modern
building in Arlington, Va.
The head of the regulatory project is Wendy Gramm, one-
time Enron board member, wife of former Sen. Phil Gramm, R-Texas,
and former administrator for information and regulatory affairs
at OMB during the Reagan administration. McTigue, whose
government accountability project publishes an annual report on
the effectiveness of federal agencies in communicating with the
public, is a former New Zealand Cabinet minister.
Making it all possible financially is the Charles G. Koch
Charitable Foundation, which got Mercatus off the ground in 1997
with a five-year, $10 million grant, and which remains the
center's largest donor. In 2001, the foundation provided a $3
million grant to lure economist Smith from the University of
Koch, the CEO of Kansas-based Koch Industries, is a
longtime funder of conservative and libertarian causes. The
Washington-based groups that his foundation has supported include
the American Legislative Exchange Council, Citizens for a Sound
Economy Foundation, and the Federalist Society. "The Koch
foundation believes that advancement of market-based solutions is
the most certain means of assuring the long-term well-being of
all Americans," explained Tony Woodlief, a foundation spokesman,
in a written statement for National Journal.
Koch's support for Mercatus has raised eyebrows among
environmental activists. In 2000 and 2001, Koch Industries paid
$40 million in fines related to violations of various
environmental regulations. Liberal interest groups, concerned
over Mercatus's comments on federal regulations, have called the
group a front for corporate interests.
Public Citizen, which is affiliated with Ralph Nader,
says in a just-released report that Mercatus's approximately $6
million annual budget comes from such big companies as BP Amoco,
General Motors, Pfizer, and Philip Morris. "Mercatus regularly
files comments with government agencies aimed at preventing
enactment of rules that could impact its patrons' bottom lines,"
the report argues.
In January 2002, the Clean Air Trust named Wendy Gramm
its "clean-air villain of the month," citing the Mercatus
Center's attacks on environmental regulations in the 2001 OMB
report. Mercatus "basically rents the [George Mason] university's
name to give a patina of credibility to Wendy Gramm's anti-
environmental agenda," the trust said in a news release.
Susan Dudley, who is the day-to-day manager of the
regulatory project, responds that Mercatus examines "regulation
from the perspective of the public interest." But she
acknowledges that the group's arguments have been controversial.
Among the most controversial were comments by Dudley on
the EPA arsenic rule, and her opposition to the Occupational
Safety and Health Administration's ergonomics rule. Dudley argued
that EPA, in requiring lower arsenic levels in drinking water,
had not demonstrated the benefits of lower levels, and that
"compelling communities to reduce arsenic takes money that could
be used to protect against bioterrorism threats, or to buy better
schools, new emergency response equipment, or increased traffic
safety." The Bush EPA took steps to reconsider the arsenic rule,
but after a public outcry, the agency approved it.
Mercatus had more success in opposing OSHA's ergonomics
rule. That rule would have required employers to take new steps
to prevent workplace injuries. Dudley, in her comment, argued
that the agency had proposed a one-size-fits-all solution that
didn't account for differences in workplace risks. In 2001,
after vigorous lobbying by an array of business groups and a
concerted effort by conservative Republicans, Congress overturned
the ergonomics rule.
Meanwhile, at the Capitol Hill campus, attendance at the
center's policy lectures has taken off in the last two years.
Cohen and other Mercatus employees sometimes teach, but more
often the center flies in professors from various universities.
Cowen said that Republican attendees outnumber Democrats but that
the numbers are close. "We have plenty of speakers who are
Democrats or left wing, and we have debates," Cowen said. "Our
audience wants that and needs that."
Richard Boykin, chief of staff to liberal Rep. Danny K.
Davis, D-Ill., calls the lectures an "intense indoctrination on
key issues facing Congress." He says he "understands the
suggestion that this is Republican rhetoric. But I think it goes
beyond that." Boykin says he often disagrees with a speaker, but
enjoys the give-and-take.
The next goal for Mercatus is to establish programs that
will appeal to members of Congress. To that end, Mercatus wooed
former House members Roemer and Watts. And in November, the
center made another high-profile hire, bringing on Lawrence
Kudlow, a former Reagan-era OMB official and conservative
television pundit, as a distinguished scholar.
Still, Lawson Bader, who heads the Capitol Hill campus,
says Mercatus isn't planning to jump into the lobbying game. "We
aren't looking to kill a bill, or put a new bill in place," he
said. "The hardest thing we have to deal with is the 'So what?'
question. My personal sense is that if we take someone who is
hostile to or naive about markets, and that person winds up being
less naive or hostile, I view that as a positive."