Cronies: Oil, the Bushes, and the Rise of Texas, America’s Superstate
Chapter One: From Mina al-Bakr to Houston
Some of the soldiers carried shotguns, others carried Heckler & Koch MP5 submachine guns. A few carried crowbars to be used for breaking open doors. All of the men wore green jumpsuits, body armor packed with ammunition, and black balaclavas to cover their faces. Within a minute or so of boarding their 82-foot-long Mark V jet-boats, the four platoons of Navy SEALs were zipping across the uppermost end of the Persian Gulf at nearly 60 miles per hour. Speed was critical. They had to get from their land base in Kuwait to the target as quickly as possible to avoid detection and to assure the element of surprise. It was March 20, 2003. George W. Bush’s ultimatum to Saddam Hussein had expired only a few hours earlier.
The SEALs were heading into the very first battle of the Second Iraq War. Their mission was the capture of Iraq’s most valuable asset: its oil spigot.
During the First Iraq War, the generals at the Pentagon hadn’t paid attention to details. When U.S. planes began bombing Iraqi targets in January 1991. Saddam Hussein’s henchmen responded by opening the valves at various oil terminals, dumping enormous quantities of crude oil into the Persian Gulf. American ground forces began their invasion several weeks later, but by that time, the Persian Gulf was awash in oil. Several million barrels of crude oil were killing fish, sea birds, and anything else it touched. Hundreds of miles of beach were coated in oil and a Saudi Arabian desalinization plant located at Jubail was nearly forced to shut down because of the contamination. The effects of the massive spill lingered throughout the Persian Gulf for years afterward. After that fiasco, the soldiers were going to make sure that this time, they seized Saddam Hussein’s financial arteries right at the get-go.
Within a few minutes of leaving Kuwaiti waters, the SEALs’ jet-boats were within range of their targets: Mina al-Bakr, Iraq’s main oil export terminal, a sprawling metal spider of pipes, pumps, and pilings; and a smaller terminal located five miles northeast, called Khor al-Amaya. Together, the two terminals—located a few miles southeast of the mouth of the Shatt al-Arab, the river that separates Iraq and Iran—were capable of loading about two million barrels of oil per day onto supertankers in the Persian Gulf. That capacity made the terminals into the equivalent of a cash machine, a machine backed by a nearly inexhaustible supply of liquid money redeemable at dozens of thirsty refineries around the world.
Saddam Hussein’s military didn’t have a chance.
In addition to the platoons of SEALs on the jet-boats, the Navy had backup SEAL teams flying aboard a flock of UH–60 Sea Hawk helicopters hovering nearby. Snipers aboard the choppers had their rifles at the ready, scanning the oil terminals for signs of trouble. Five miles away, the USS Valley Forge, a Ticonderoga-class guided missile cruiser, monitored the action. The ship’s control room was crammed with people watching huge monitors showing a live video feed that was beamed to the ship from a camera mounted on one of the helicopters.
When the jet-boats reached Mina al-Bakr, the SEALs quietly crept up the ladders, their weapons at the ready. When they got to the main level, they stormed through the doorways and into the terminal’s control room and cramped living quarters. Instead of a gunfight, all they got was a bunch of sleepy Iraqis eager to surrender. The battle for Mina al-Bakr lasted about two minutes. “I think they were actually relieved to have the place taken over,” said one SEAL after the raid._
The takeover of Mina al-Bakr won’t be recalled alongside Gettysburg, D-Day, or Khe Sahn in the annals of American military history. But it has more than passing significance. By taking Mina al-Bakr, the American military prevented Iraq from repeating the ecoterrorism-by-intentional-oil-spill of 1991. It further assured that the upper section of the Persian Gulf near the mouth of the Shatt al-Arab was secure and that oil tankers, Navy vessels, and freighters would not be threatened by Iraqi boats.
Mina al-Bakr is significant for another reason: it’s a Texas outpost in the heart of the Persian Gulf.
The terminal may be owned by the Iraqi government, but it was built by the quintessential Texas company: Brown & Root. That’s the same Brown & Root that helped put Lyndon Johnson in power. That’s the same Brown & Root that’s part of Halliburton, the world’s second largest oilfield services firm. That’s the same Halliburton that, until the summer of 2000, employed a former defense secretary named Dick Cheney. It’s the same firm that gave Cheney a going-away present worth tens of millions of dollars for all of his hard work as Halliburton’s CEO. It’s the same firm that, in 2001 and 2002, while Cheney was vice president of the United States, paid him more than $367,000 in deferred compensation. It’s the same firm that was awarded a no-bid, no-risk, cost-plus contract by the U.S. government a contract worth up to $7 billion. o rehabilitate Iraq’s oilfields and civil infrastructure. And once the shooting in the Second Iraq War ended, one of Halliburton’s first tasks under that contract was to assure that Mina al-Bakr was open and ready for business.
Halliburton’s privileged role in Iraq has been controversial, but it’s hardly a new phenomenon. Since the 1960s, the United States has been involved in four major efforts to extend its military and commercial interests in the Persian Gulf and the Far East: Vietnam, Iran, the First Iraq War, and now, the Second Iraq War. And in each of those gambits, Texas politicians and Texas corporations have had starring roles. Whether the locale was Saigon, Tehran, Kuwait City, or Baghdad, Texas companies like Halliburton have been planting the Lone Star flag right next to Old Glory and they’ve been making big profits by doing so. All this action has led to the creation of the slogan “When cannons shoot, call Brown & Root.”
The Second Iraq War is just the latest example of Texas politicos’ and Texas corporations’ taking lead roles in America’s foreign policy and energy policy. Ever since 1973, when the Organization of Petroleum Exporting Countries threw the world into turmoil with the first in a series of price hikes, American politicians, working hand in glove with oil producers from Texas and other states, have been trying to regain some control over the world’s oil supply, and therefore world oil prices.
George W. Bush and his supporters have repeatedly said the war against Iraq was not about oil. They’ve told us it’s about stopping terrorism; it’s about weapons of mass destruction; it’s about spreading democracy in the Middle East; it’s about preserving human rights. Whatever the stated reason for the war, the facts of the military action are unassailable: the very first target of the Second Iraq War was an oil facility. And while the SEALs were storming the terminals, American and British troops were seizing Iraq’s oilfields. Special Operations forces raced into the oilfields around Kirkuk in northern Iraq. In southern Iraq, 20,000 U.S. Marines and 4,000 British Royal Marines hurried into the prolific oilfields of Rumaila and Basra.
The United States’ fundamental and overriding interest in Iraq—and the rest of the Persian Gulf—is oil. By gaining control of Mina al-Bakr and the oil fields, the U.S. sent a message to OPEC that said, in effect, we’re here and we’re not leaving any time soon.
By securing the oil targets first, the United States immediately gained effective control of the second-largest oil deposits on earth. A cynic might think there’s something malicious or untoward about fighting a war over oil, but it is hardly a new phenomenon. Oil has long been a strategic asset. Indeed, the Second Iraq War is markedly similar to the decision made in 1931 by a Texas governor, a fellow who also happened to be an oilman-turned-politician. That year, Governor Ross Sterling, who had served as the first president of Humble Oil & Refining, a company now known as Exxon Mobil, sent more than a thousand troops from the Texas National Guard into the enormously rich oilfields of East Texas to force oil producers there to bow to controls on their production volume. Sterling was forced to act, he claimed, because the oil producers in that region were “in a state of insurrection” and their actions “openly, flagrantly and rebelliously violate the laws.”
The problem for Sterling in 1931, and the problem today, is that oil production is difficult to control. The entire history of the oil business has been marked by swings between too much production, which leads to low prices, and too little production, which leads to high prices. Some critics may think that the oil industry always wants high prices. That isn’t necessarily true. The best price for the oil industry is a stable midlevel price, one that assures oil consumers, oil producers, and oil refiners that they won’t be hit with a shortage or a surplus.
Managing the supply of the world’s most precious commodity is not easily done. It requires collaboration or coercion. Collaboration—or perhaps, more precisely, price fixing—works. But price fixing has a rather unsavory history.
Sometimes coercion is the only option. It’s doubtful that the Chinese leader Mao Tse-tung ever drilled an oil well. But his line, “Political power grows out of the barrel of a gun,” also applies to the oilfield. Ultimately, the only way to control oil supplies is through the barrel of a gun. That fact has been understood in Texas for seven decades. Now it’s being played out once again in the Persian Gulf. And it’s being played out by a former Texas oilman-turned-politician, George W. Bush, and his vice president, Dick Cheney, a politician-turned-Texas-energy-man-turned-politician.
Bush and Cheney are part of a small group of powerful, Big Rich Texans who through their connections to the energy industry have exerted extraordinary influence in the United States and the world. Call them the Texas Six Pack: George W. Bush, Dick Cheney, George H. W. Bush, James A. Baker III, former Enron CEO Ken Lay, and the independent oilman and chairman of the Federal Reserve Bank of Dallas, Ray Hunt. Those six men are just the current giants in the long Texas tradition of mingling energy, business, and government for private profit.
Crony capitalism happens everywhere, you say. There’s nothing new in that—businessmen and politicians have always rewarded their friends with lucrative deals. But the virulent strain of Texas cronyism now infecting America’s capitalist democracy is more brazen than any of the strains of cronyism seen thus far. It’s more pernicious and more corrupting and the rewards being reaped by the crony class are bigger than ever before. And it’s those rascally Texans who are corralling the cash.
This book will explain how this select group of Texas Cronies came to rule America. It will expose the long history of cronyism that has bound the Texas energy business to the Texas political system and the way that tradition has now been transferred to Washington, D.C. This book will show how the Bushes, the Bakers, and the Cheneys came to power and how they enriched themselves along the way. And it will explain why, at the outset of the twenty-first century, the rest of the United States needs to care, lest Texas take over the rest of the world.
If the twentieth century was the American century, then there’s little doubt that the last half of the American century belonged to Texas. Two of the last three presidents—and three of the last eight—have been Texans. Two of those three were oilmen. And all three fought major ground wars.
Like it or not, Texas rules.
No other province has a tighter hold on America’s psyche, politics, and wallet. Whether you are buying gasoline for your car, listening to the radio, or casting your vote for president, the Lone Star State is probably affecting your experience. There are 49 other provinces—as well as 14 territories and the District of Columbia—in these United States. And a few of them—like California and New York and Florida, and maybe a few of those dinky eastern states—are fairly important. But there’s simply no denying that Texas has bulldozed its way to the forefront of America’s domestic and foreign policy. Whether the issue is energy, presidential politics, foreign policy, or business, Texas has an outsized influence on what happens, an influence far greater than that of any other state.
California is important. It’s bigger than Texas in terms of population. Its gross state product, $1.3 trillion, exceeds that of Texas by half a trillion dollars. It has cleaner beaches, nicer parks, a better climate, mountains, redwoods, surfing, the La Brea tar pits and 4,342 other wonders. But California can’t keep its lights on—or its governors in office—for very long. Regardless of whether the state is run by a bunch of granola-eating vegans from San Francisco or an oversexed Austrian bodybuilder, California’s economy is vulnerable.
California must import enormous amounts of crude oil, natural gas, and electricity to keep its economy afloat. Nothing proved California’s vulnerability better than the electricity and natural gas price calamities of 2000 and 2001. Power that had been costing $30 per megawatt-hour was suddenly costing as much as $1,500. For all of the strengths of California’s massive economy, it still depends on other states and other countries to supply the energy that keeps the lights burning inside its microchip foundries, manufacturing plants, and surfboard shops.
The energy disaster proved that California had done a terrible job of managing its energy supplies, and it also showed that the real center of power in America wasn’t Los Angeles or San Francisco but Houston. Young hot shots, gangs of pillage-and-plunder-minded energy traders from Houston’s Energy Alley, had manipulated electricity and natural gas prices in California at their whim. Their profit was California’s loss. Unfortunately for Californians, that exercise in Darwinian economics may cost them as much as $45 billion.
New York is an important state, too. And like California, it can’t keep its lights on. In the summer of 2003, the blackout that hit the northeastern U.S. and parts of Canada proved that New York has a fragile electric infrastructure prone to failure. New York City is the most important arbiter and producer of American arts and media, from opera and ballet to magazines, TV and newspapers. It’s the epicenter of world banking and finance. The Empire State has given America six presidents and 11 vice presidents. But New York’s economy and population are stagnant. Between 1970 and 2000, New York’s population growth was nearly flat, going from 18.2 million to 18.9 million residents. During those same three decades, Texas’ population nearly doubled, to 21 million people. That population shift means New York is losing clout in Congress and the electoral college. Between 1981 and 2001, New York lost five seats in the U.S. House of Representatives (and five electoral college votes). During that same period, Texas added five seats in the House and a corresponding number of electoral college votes.
California may be cool, and New York may be the Big Apple, but Texas is the Big Enchilada. And it can keep its lights on. That’s because Texas has its very own power grid with few interconnections to other states, surplus electrical generating capacity, and a surfeit of natural gas to power its generators. However, electric power is just one of a panoply of factors that have made Texas into America’s über-state.
Here are a few more:
Texas dominates the United States because the country’s population is shifting away from the old, cold, Industrial Belt states of the Northeast and Midwest to the warm states of the South and West. Three of America’s 10 largest cities—Houston, Dallas, and San Antonio—are in Texas. And current trends indicate that Texas will continue growing while the northern states shrink or tread water. Texas dominates the United States because of its enormous size and location. Texas covers nearly 262,000 square miles—that’s bigger than California and Oregon combined and nearly five times the size of Illinois. That vast expanse of acreage attracts industry, provides cheap housing, and allows a rock-bottom cost of living. Transportation companies have flocked to Texas. Trucking firms and railroads like Texas because it’s midway between the coasts and it adjoins Mexico, one of America’s biggest trading partners. Thanks to the passage of the North American Free Trade Agreement, Texas has become the primary beneficiary of the transportation systems that have been established on the trade routes into Mexico and Canada. Nearly half of all NAFTA-related trade either originates in or is destined for Texas. A massive network of rail lines in and around Houston and Fort Worth interconnect a rail system unparalleled in the United States. Texas has 14,192 miles of railroad track—far more than any other state. Those rail lines connect the rest of the country with the Port of Houston, the world’s sixth-largest port. The port takes in more foreign cargo than any other American port. And most of that cargo is oil from (in order) Mexico, Venezuela, Saudi Arabia and Iraq. The Port of Houston is now vying to become a major player in the global containerized shipping business.
Texas has an inexhaustible supply of cheap, nonunion labor. Since its statehood, Texas has been able to tap armies of immigrants from all over the world, but particularly from Mexico, who are eager to work. The state’s worst jobs—janitorial work, pouring concrete, cutting meat in a slaughterhouse, hanging sheetrock—are filled by recent arrivals from Mexico, Cambodia, Honduras, and dozens of other countries.
Three of the seven largest airlines in America, including the only profitable large one—Southwest Airlines—are based in Texas. Two of the 15 biggest airports in the world (Dallas–Ft. Worth International and George Bush Intercontinental in Houston) are located in Texas.
Texas dominates the United States politically because its representatives have commandeered the U.S. Capitol. Over the past few decades, Texas politicians have made the Capitol in Washington into an outpost of the Capitol building at Eleventh and Congress streets in Austin. And that building in Austin, by the way, is 23 feet taller than the one located in Washington, D.C.
Texans have been dominating both houses of Congress since before the New Deal. Of the last 16 terms for Speaker of the U.S. House of Representatives, five have been held by Texans. Between 1931 and 1989, a Texan was serving as Speaker of the House nearly a third of the time. In 1933, when Franklin Roosevelt moved into the White House, Texans were flush in Washington. John Nance “Cactus Jack” Garner, a rancher from Uvalde, in southwestern Texas, who’d served three decades in Congress, including two years as Speaker of the House—was Roosevelt’s vice president. Texans led six committees in the House, including Agriculture, Interstate Commerce, Judiciary, and Public Buildings and Grounds, as well as the powerful Appropriations Committee. In the Senate, the Texan Morris Sheppard chaired the Committee on Military Affairs (now the Senate Armed Services Committee) throughout the 1930s. His tenure ended only when he died, eight months before Pearl Harbor in 1941.
Texas dominates America because its representatives in Washington have steered trainloads of federal cash to the Lone Star State. Whether the issue is building dams and highways or exotic new flying machines for the Pentagon like the fatally flawed V–22 Osprey, or incredibly expensive aircraft like the F–22 and the F–35—the Texas delegation has always pushed to the front of the line. Phil Gramm, the former U.S. senator from Texas, used to say, “I’m carrying so much pork, I’m beginning to get trichinosis.”5
From the 1930s to the 1960s, Texas got far more than its share of federal bacon. One study found that during those three decades, Texas’ share of the federal pie exceeded the national average by 27 percent! In the 1960s, the clout of Texas’ politicians was made obvious during the debate over where to locate a new training center for American astronauts. The Russians had just put Yuri Gagarin into orbit, in 1961, and the Americans were determined to surpass that achievement, and do it quickly. At that time, Albert Thomas, a powerful Democrat from Houston, was the head of the committee that would choose the site. So in 1961, when it came time for Congress to choose from among sites in California, Florida, and Texas, the new space center ended up being located a few miles southeast of downtown Houston. The multi-million-dollar construction contract for the new facility was awarded to Thomas’s benefactor, Brown & Root.
In the four decades since the Johnson Space Center was built in Houston, the National Aeronautical and Space Administration has pumped at least $100 billion into the Houston economy. And all of that money went to Houston because powerful Texas politicians like Lyndon Johnson, Sam Rayburn, and Albert Thomas demanded that it be done.
Throughout the 1970s Texas continued to feed at the federal trough. For example, in 1972 Texans paid about $10.3 billion in federal taxes. That same year, the state received federal outlays totaling $12.6 billion, including $5.1 billion from the Department of Defense, an amount exceeded only by California, even though California had 70 percent more people. Much of that money came courtesy of big weapons contracts that were pushed through by Texas’ congressional representatives.
In the late 1980s, when Congress was picking a spot to build the superconducting supercollider, a gigantic atom-smashing machine, the Speaker of the House was Jim Wright, a Democrat from Fort Worth. When it came down to choosing the site for the supercollider, Illinois and Texas were the final contenders. It’s not surprising that the final site for the collider ended up being in Waxahachie, just south of Dallas. The collider project didn’t survive for long. It had a fatal collision with congressional budget cutters shortly after Wright left office. For Wright, the issue wasn’t about science or technology. “To this day, I still don’t know what things we intended to derive from the supercollider,” he told me in early 2003. “But if they were going to build it, I wanted them to build it in Texas.”
Wright left Congress in 1989 largely because of his involvement in the savings and loan debacle. And while that debacle cost the Lone Star State a powerful voice inside the U.S. Capitol, it also allowed the state to become the main beneficiary of one of the biggest transfers of wealth in modern American history. The savings and loan (S&L) disaster cost American taxpayers about $300 billion. Fully half of those losses occurred in Texas, which ended up with acres upon acres of empty federally subsidized offices, condos, and apartments that should never have been built in the first place. And it’s the suckers in the lesser states who are paying the bill for that real estate subsidy.
Wright’s downfall allowed other Texans to rise to prominence in Congress—but by now they were Republicans, not Democrats. In 1995, Dick Armey, a conservative Republican from Irving, near Dallas, became the House majority leader. He was backed up by the majority whip, Tom DeLay, the archconservative Shiite Republican from Sugar Land, a suburb of Houston.
DeLay once called himself a “free-market nut.” It’s certainly an apt description, though most Americans would probably agree that DeLay could simply leave out the “free-market” part of that phrase and be done with it. Nevertheless, DeLay, who’s now House majority leader, is the most powerful man in the U.S. House of Representatives. Just as Lyndon Johnson controlled the Senate in the 1950s, Tom DeLay dominates the U.S. House in the 2000s. Like Johnson, he is ruthless, cunning, and able to raise enormous amounts of money that he can use to bolster the campaigns and causes of his allies.
Texas also dominates the American presidency. Although Texas may not own the White House outright, it definitely has a working set of keys.
In the period between 1960 and 2004, a Texan has been either president or vice president for 24 of those 44 years. And Texas may extend that streak through 2008. Cactus Jack Garner started it. Garner was the first Texan to serve as vice president, a job he said wasn’t worth “a pitcher of warm spit.” Since Garner served his sentence as second-in-command, Texas has gone from being an afterthought in the presidential sweepstakes to being the state that a candidate absolutely must win if he wants to live at 1600 Pennsylvania Avenue.
Since 1924, when Texas voted for the Democrat John Davis instead of the winner, Calvin Coolidge, only two men have won the White House without winning Texas. Richard Nixon did it once, in 1968, and Bill Clinton did it twice, in 1992 and 1996. But Clinton was only able to win because of another Texan, H. Ross Perot, the bantam-rooster billionaire from Dallas. In both of those races, Perot ran as a third-party candidate and his place on the ballot pulled millions of votes away from the Republicans. Of course, the only reason Perot was able to get on the ballot and run credible races was his enormous wealth. In 1992, he spent nearly $70 million of his own money. In 1996, he spent another $8 million. His enormous personal fortune allowed the bullheaded Perot to make himself into the most successful third-party candidate since Teddy Roosevelt ran as a Bull Moose in 1912.
Two other Texans, both Democrats-turned-Republicans, have launched enormously expensive but unsuccessful campaigns for the White House in recent years. Former Texas Governor John Connally’s 1980 bid, on which he spent $11 million, and Phil Gramm’s in 1996, on which he spent $26 million, were both crushed by landslides of voter antipathy.
Texas has become the cornerstone of the GOP South. With Texans playing a big role in determining who lives in the White House, Texans have continued their colonization of Washington, D.C. Four of the last 15 vice presidents—Garner, Lyndon Johnson, George H. W. Bush, and Dick Cheney—have been Texans. Three of the last 14 secretaries of the treasury—Lloyd Bentsen, James A. Baker III, and John Connally—were from Texas. Two of the last seven secretaries of commerce—Donald Evans and Robert Mosbacher, both oilmen—have been Texans. The Lone Star State’s importance was captured a few years ago when Karl Rove named it “America’s superstate.”
Texas dominates America because Big Business loves doing big business in Texas. Eighteen Fortune 500 companies are based in Houston, more than in any other city except New York. In 2003, Forbes magazine included two Texas cities, Austin and Dallas, on its list of the 10 best places in America to do business. Texas has long been a magnet for corporations because of its low taxes.
Texas is one of just seven states that does not charge any form of personal income tax. In fact, Texas has a constitutional amendment that prohibits the implementation of an income tax without the consent of voters. And while the paucity of tax revenue means that Texas lags behind the other states in virtually every health and human service category, the state’s politicians continue to focus almost exclusively on how they can make the state even more hospitable to business. Through its politicians and think tanks, the state is now exporting that low-tax, low-service, laissez-faire, “Trust us we’re Big Business and we’re here to help” model to the rest of the United States.
Texas has long had a more freewheeling business culture than other parts of the country. In 2002, the Economist magazine said that Texas was “America on steroids. . . . Think of the characteristics that make America distinctive—its size and diversity, its optimism and self-confidence, its crass materialism and bravado, its incredible ability to make something out of nothing—and they exist in their purest form in Texas.”
Many of the world’s great fortunes have been made in the Texas energy business. And the state’s Big Rich are legendary. Jerry Jones, the Snidely Whiplash of the National Football League and owner of the Dallas Cowboys, made his money in the oil business after drilling 12 successful gas wells in a row. Houston’s Howard Hughes Sr. invented the rotary drill bit, which revolutionized oil drilling. He passed on his Houston-based company, Hughes Tool Company, to his son, Howard Hughes Jr., who became notorious for his manias: movies, Las Vegas, fast airplanes and even faster women. H. L. Hunt, the eccentric billionaire oilman and die-hard supporter of Senator Joe McCarthy and other right-wing extremists, made his fortune in the East Texas oilfields. But the Lone Star State has also minted plenty of millionaires who had nothing to do with the oil business. Huge fortunes have been made in high-tech, banking, insurance, and real estate. Take the boy billionaire Michael Dell, the founder and boss of Dell Computer. He lives in a dainty 30,000-square-foot home on the outskirts of Austin. But with his fortune of $13 billion or so, Dell can afford it. And his company, which specializes in made-to-order computers, continues to crush its competitors with a brand of ruthless efficiency that John D. Rockefeller would have admired. Then there’s Ross Perot, who’s worth $3.7 billion or so. He made his billions by growing the Dallas-based computer services provider Electronic Data Systems into a global powerhouse. The two-time presidential candidate ran on a platform of cutting government and government waste, but in fact made his fortune thanks to EDS’s ability to capture lucrative federal contracts.
Of the 400 richest people in America in 2003, 36, or 9 percent, were from Texas. According to Forbes, their combined wealth is nearly $80 billion. In addition to the sheer magnitude of the wealth, nearly every one of those Texas zillionaires is politically active, making big contributions to the politicians who work to allow them to keep as much of their money as possible.
The U.S. military has also been stamped with a Texas brand. Only two states—California and Virginia—get more Pentagon dollars than Texas. The commander of U.S. forces during the Second Iraq War, the U.S. Army’s General Tommy Franks, hails from George W. Bush’s stomping grounds, Midland. The commandant of the Marine Corps, General Michael Hagee, is from the Central Texas town of Fredericksburg. As the Second Iraq War was launched, two of the six members of the Joint Chiefs of Staff, the president’s top military advisers, were Texans. In the Air Force, 41 of 282 generals—almost 15 percent—are Texans, as are 43, or about 12 percent, of 366 Army generals. There is a higher concentration of Texans in the armed forces than soldiers from any other state: fully 10 percent of the personnel in the U.S. military are Texans, even though Texas accounts for just 7 percent of the nation’s population. More enlisted personnel are stationed in Texas than any other state. Policy decisions about the Persian Gulf may be set in Washington, but they are enforced by soldiers stationed at Fort Hood, America’s biggest military base, which is located less than 20 miles south of George W. Bush’s ranch in Crawford.
Texas corporations are the ones who get contracts to take care of those soldiers. Brown & Root, a subsidiary of Dick Cheney’s old company, Halliburton, does the Army’s laundry and serves meals to GIs. When sailors aboard a warship in the Persian Gulf retrieve their email, the system they use was probably put together by Perot’s old company, EDS. When pilots take off from that same ship, they may be flying in an aircraft built by Fort Worth–based Bell Helicopter.
Texas flat knows how to vacuum up federal money. In fact, given the amount of federal money that flows into Texas, the state symbol should probably be the vampire bat, not the longhorn cow or the oil derrick. Yeah, that’s pretty rough. But the truth hurts.
Not only has Texas always managed to keep its fingers in Uncle Sam’s pocket, but it has also commandeered the front porch of the American psyche. Texas myths have become America’s myths. Perhaps the most enduring of these myths is the Alamo. In 1836, 182 fighters fended off several thousand Mexican soldiers, until they were finally overrun and slaughtered. That battle was part of Texas’ struggle for independence, which made Texas into a nation before it was a state. Ever since those hapless souls died at the Alamo, Texas has worn a halo of self-congratulatory pomposity that permeates everything the state does. And that attitude isn’t going away. One historian, H. W. Brands, put it, “Texans have long prided themselves on their individuality, including their right to be wrong in their own way. For them, the Alamo is the perfect shrine.”7
A shrine it is. In fact, the Daughters of the Republic of Texas, the group that runs the Alamo, insist that the old Catholic church in downtown San Antonio be called The Shrine. Men are asked to remove their hats before entering the building and talking is to be kept to a minimum. The church is the most-visited tourist site in Texas. Three million people make the pilgrimage to the Mecca of Texas every year. For Texans, it is Gettysburg, the Boston Tea Party, and the Sistine Chapel all rolled up into one event, one memory, one place.
The Alamo, the cowboy, the Indian fighter, the wildcatter, the larger-than-life oilman—all of them Texas archetypes—have become so closely intertwined with America’s self-image that it’s impossible to tell the two sets of myths apart.
Texas’ heritage, its size, its music, its movies, and a myriad of other elements combine to give it a swagger, a belief, that its destiny is more manifest than any other state’s. In 2003, the Texas legislature—apparently because it didn’t have anything better to do—passed a law requiring the state’s schoolchildren to recite the pledge of allegiance every morning. . . to the Texas flag. It goes, “Honor the Texas flag; I pledge allegiance to thee, Texas, one and indivisible.” Texans have internalized this maniacal obsession with their state. It’s a concept best summarized by the singer-songwriter Ray Wylie Hubbard, who in 2003 released the instantaneously classic “Screw You, We’re from Texas.”8
Flags, cowboys, and the Alamo are all part of the Texas mystique. But when it comes to explaining Texas’ rise to power, it can be boiled down to one word: energy. And that leads to the thesis of this book: Texas dominates America because energy—Texas energy—dominates America. And the men who have dominated Texas energy have been extraordinarily successful at putting their politicians into power.
Texas has turned its vast energy resources into political power. This book will profile the state’s crony network—the group of loosely affiliated, rich, powerful men who exert enormous influence in American business and politics. Those men include the three Texas presidents—Lyndon Johnson, George H. W. Bush and George W. Bush—each of whom tapped into the state’s veins of Big Rich oilmen to seize the reins of power.
George W. Bush is the living embodiment of a powerful crony network that includes his father, George H. W. Bush; the Bakers, the Carlyle Group, the Texas oil business, and the Saudi royal family. Vice President Dick Cheney provides a direct link to Halliburton, with its ongoing business dealings in the Persian Gulf and its long, lucrative ties to Saddam Hussein. In 2002, Halliburton dismissed its longtime legal counsel, Vinson & Elkins. (Vinson & Elkins used to represent Enron Corp. It also used to employ a lawyer named Alberto Gonzales—who is now the White House general counsel.) Halliburton replaced Vinson & Elkins with another Houston firm, one with even more influence in the nation’s capital, Baker Botts. That’s the outfit headed by the most powerful former secretary of State in the land, James A. Baker III.
Baker Botts is no ordinary law firm. The Baker Botts franchise has been a Republican redoubt for decades. Every time over the past 50 years when the Bush family has run into a political or legal snarl, it has called on Baker Botts. And Baker Botts loves the Bushes right back. During the 2000 campaign, Baker Botts was George W. Bush’s ninth-largest contributor, giving him a total of $116,121.
Bush has rewarded the law firm and Baker with a series of very high profile appointments. One Baker Botts lawyer was named ambassador to Saudi Arabia. Another got a top spot in the Department of Transportation. In late 2003, Bush appointed Baker as his “personal envoy on the issue of Iraqi debt.” Baker was given the task of convincing countries like Japan, Germany, and France to forgive much of Iraq’s foreign debt. (Left unsaid in Bush’s appointment was that in 1989, Baker, who was secretary of state at the time, lent crucial support to federal agriculture loans to Iraq—those loans later cost the U.S. some $500 million.). Baker was successful in getting those debts reduced. He was also successful in raising his own profile and that of Baker Botts, a firm that also happens to represent America’s biggest energy company, Texas-based Exxon Mobil Corporation. The power of the Texas energy business is not a new topic. Texas politicos have long relied on the state’s Big Rich for all kinds of details.
Whether it was Lyndon Johnson using a DC–3 owned by Brown & Root, or George W. Bush flying on jets owned by Enron Corp., Texas politicos and Texas interests have been stampeding to the top for decades. Texas politicians have gained clout in Washington over the past seven or eight decades because they have a huge (and growing) block of votes, they are from a big state located in a strategic spot, and they have access to huge amounts of money.
Although much has been written about the Texas energy business, the volume of the coverage has by no means exhausted the topic or blunted its importance. In fact, the energy business is more critical today, and the stakes are higher for the American economy, than at any other time in American history. Naohiro Amaya, a Japanese politician, once called oil “the blood of the twentieth century.” If oil is the blood of our epoch, then Houston is the heart. And that heart is controlled by the need to feed America’s insatiable energy addiction. The United States is burning more fuel now than it ever has and the trend line continues ever upward. Between 1990 and 2000, America’s total energy consumption increased by 16 percent, to the equivalent of nearly 48 million barrels of oil per day. America’s share of world energy consumption is rising, too. Between 1990 and 2000, U.S. energy use increased from 25.3 percent to 27.3 percent of total world consumption. In 2000, Americans burned more fuel than all of the countries of Europe combined. Motorists in Europe routinely pay four dollars or more for a gallon of fuel. Yet Americans complain bitterly and call for congressional investigations when gasoline prices hit two dollars per gallon.
This is not to say that the United States shouldn’t use energy or that there’s anything inherently bad about this country’s extravagant energy usage. These statistics simply underscore an obvious truth: America’s economy has been built on cheap energy, and America must continue to have cheap energy—in copious quantities—to continue having a high standard of living. From the1930s through the early 1970s, Texas provided much of the oil and gas that America needed. Texas’ oil and natural gas fields yielded prodigious quantities of cheap energy that helped the country flourish. The pricing of that energy was handled by the Texas Railroad Commission, an agency that was very friendly to the state’s energy interests.
But by the early 1970s, Texas’ once-prolific oilfields were becoming depleted, and the same era saw the rise of OPEC. The balance of power shifted away from the God-fearing Baptists in Austin and Houston and toward the Allah-worshiping Wahhabis in Riyadh and Jeddah.
Of the six countries with 75 billion barrels (or more) of oil reserves, five—Iran, Iraq, Saudi Arabia, Kuwait, and the United Arab Emirates—are in Saddam Hussein’s neighborhood. Some 35 percent of all international oil production sails through the Strait of Hormuz. Michael Economides, an author and professor of petroleum engineering at the University of Houston, calls the strait, which connects the Persian Gulf with the Arabian Sea, a “geopolitical chokepoint.” He might be more correct to call it the world’s petropolitical jugular.
And if that jugular gets pinched—even a little bit—the American economy will have a coronary.
To assure that the oil keeps flowing, the United States has colonized the Persian Gulf. And the lead colonizers are Texas companies. American oilmen, particularly Texas oilmen, have long viewed the oil from the Persian Gulf as both a threat and an opportunity. In the 1950s, ’60s and ’70s, that oil was a threat because it was so cheap. Persian Gulf countries could produce oil, sell it for a fraction of what the Texans could, and still make a profit. Texas producers couldn’t compete with the Saudis, the Kuwaitis, the Iraqis, or the Iranians. So influential Texas politicians like George H. W. Bush and others got import quotas slapped on foreign oil.
Today, that same oil is an opportunity, and a political necessity. Texas companies like Halliburton, Exxon Mobil, ConocoPhillips Company, and dozens of others are eager to expand their presence throughout the region. But their overriding concern in the Persian Gulf and elsewhere is that energy not become too cheap, nor too expensive. If the oil gets too cheap, domestically produced energy gets hurt. If it gets too expensive, the overall American economy gets hurt. Thus, the United States has to have a way of controlling the supply. And controlling the supply requires military muscle. If America wants to continue having access to cheap Arab energy, then American warships and American troops will be stationed in the Persian Gulf for a long while to come—perhaps decades.
As the Strait of Hormuz becomes more important to America’s energy future, so, too, does Texas’ energy and energy infrastructure. Texas companies produce, refine, and distribute more oil, natural gas, gasoline, jet fuel, refined products, and petrochemicals than any other state. All of the major domestic integrated and independent oil companies, Exxon Mobil, ConocoPhillips, ChevronTexaco Corp., Marathon Oil Corporation, Apache Corporation, and Anadarko Petroleum Corporation, either are headquartered in Dallas or Houston or have major operations there. Of the 48 Texas companies that made the 2002 Fortune 500 list, 18 of them were energy-related. All of the 10 biggest oilfield services companies in America are based in Houston. In 2002, those 10 firms had revenues of $35.2 billion and they had operations in over 100 countries around the globe.
The enormous wealth of the Texas energy industry gives the state tremendous political power and that political power is now concentrated in the Republican Party. Nearly all of the key Texas politicians of the past quarter century have been Republicans, and all have been funded by and have championed the Texas energy business. Both George H. W. Bush and George W. Bush exemplify this. Being from the Texas energy fraternity gave both Bushes a vast reservoir of cash and political capital that they could depend upon for steady support. Being part of the world’s biggest and most important industry gave them credibility and standing in the political world that could not have come from any other business.
The three Texas presidencies are the result of the state’s century-long ascendance, a trek that began with the discovery of oil at Spindletop, near Beaumont, in southeastern Texas, in 1901. That rise continued with the discovery of the East Texas field in 1930 and the subsequent empowerment of the Texas Railroad Commission to regulate oil supplies. With the Railroad Commission came the rise of Texas politicians like Sam Rayburn and Lyndon Johnson, who did everything in their power to serve the oil industry by pushing tax privileges like the oil depletion allowance. As Johnson rose to power, he helped his biggest patron, Brown & Root. As Brown & Root and Halliburton prospered, so did Texas. With Halliburton leading the way, oil, business, government and the military became ever more intertwined in outposts such as Vietnam, Iran, and Iraq. Texas Democrats began giving way to Texas Republicans, led by energy-connected politicos like Governor John Connally and Bill Clements, an energy man who in 1979 became the state’s first Republican governor since Reconstruction. By the 1980s, the United States’ energy interests in the Persian Gulf had attained strategic importance, and it was a Texan, George H. W. Bush, who dealt with many of the leaders of the region during the Reagan administration. Domestic oil production became a driver for investment in American real estate, a fact that helped fuel the savings and loan crisis of the 1980s.
The presidency of George H. W. Bush was another assertion of Texas influence. It allowed another Texan, James A. Baker III, to become secretary of state and, later, a major player in the lucrative world of corporate lawyer-lobbyists. It allowed Bush senior’s son, George W. Bush, to tap a vast network of cronies who helped him ride out a failed career in the oil business and go on to make about $15 million from the Texas Rangers baseball team. It helped set the stage for an event that provides the quintessential example of Texas power and influence: the Florida Recount of 2000, which resulted in George W. Bush’s presidency. The first Bush presidency, which gave us the First Iraq War, also provided the basis for the Second Iraq War. Both of those conflicts were the result of Texans’ desire to control the supply of oil from the Persian Gulf in the same way they had dominated the supply of oil coming out of the East Texas field.
Texas now dominates America and much of the world, but it didn’t rise to superstate status overnight. Understanding its rise to prominence requires looking backward at an unlikely place: Rusk County, an East Texas location that none of the experts believed would ever yield a drop of oil. None, that is, except Dad Joiner.
From the book, CRONIES by Robert Bryce. Copyright © 2004 by Texas Monthly. Reprinted with permission of PublicAffairs, New York. All rights reserved.
