Politics & Policy

Exclusive: In Koch World ‘Realignment,’ Less National Politics

Charles and David Koch (kochnews.com, Brendan McDermid/Reuters)

On a frigid Tuesday in February, a team of top political operatives from the Freedom Partners Chamber of Commerce, the umbrella group that controls political activities for the sprawling donor network led by billionaire industrialists Charles and David Koch, arrived in Kansas for a meeting that they hoped would turn the tide of the presidential campaign.

They’d set aside $150 million to spend on paid media alone, to be spread across campaigns at the federal, state, and local levels. Yet they had not been authorized to spend a dime on the White House race.

Marc Short, then president of Freedom Partners, wanted to change that. He led a faction inside the Koch network that had become convinced of the need to neutralize Donald Trump before his momentum made him unstoppable. Fresh off Trump’s landslide victory in New Hampshire one week earlier, and staring down another likely Trump win in South Carolina that Saturday, Short and his lieutenants had come to Wichita to present Charles Koch with a detailed, eight-figure blueprint for derailing the Republican front-runner on Super Tuesday, when eleven states would vote. They hoped to get the green light to hammer Trump with ads in the states where he was most vulnerable.

But there was an unwelcome surprise awaiting the Freedom Partners delegation inside a conference room at Koch Industries headquarters: A number of top executives and advisers from across the Koch enterprise had been invited to attend the meeting, too. They represented the so-called “corporate side” of Koch World, which had long warred with the “political side” of the empire, particularly over the consequences of the brothers’ campaign-related activities.

And there was another surprise in store: After the Freedom Partners operatives presented their proposal, Charles, whose money and approval his aides were soliciting, asked everyone present to cast an up-or-down vote. Most were vehemently opposed, but Charles still had the last word. He shrugged: The majority, he said, had spoken.

The meeting, reported here for the first time, confirmed what some Koch insiders had begun to suspect: That the brothers’ political decision-making was increasingly being influenced by their business and public-relations interests, and that as a result, their investments in electoral politics at the federal level were diminishing. While the vote-taking that day was unexpected, several of those present say, the outcome was not.

RELATED: The GOP’s Ideological Earthquake and the Aftermath

Mark Holden, general counsel of Koch Industries and chairman of Freedom Partners, confirms the meeting occurred but won’t elaborate on what transpired. He says concerns that the Kochs have pulled out of electoral politics are overblown, and points out that they have never participated in a White House primary.

Yet according to interviews with numerous people close to the brothers, including a half-dozen sources with direct knowledge of developments inside their donor network and political operation, the scope of recent changes extends well beyond their inactivity in the presidential race. These sources point to mounting evidence — reduced budgets, the shuttering and streamlining of departments, the elimination of grants to allied political organizations, and the departure of top executives — demonstrating a shift of resources and attention away from federal campaign activity.

In the months leading up to the Wichita meeting, confidantes and key allies of the Kochs, including some in the room that day, had sensed this transformation was underway. As early as the spring of 2015, some had noticed a change in the brothers’ perspectives and priorities that only grew more apparent as the year wore on.

In conversations last year, ‘there was much more an emphasis on getting back to the policy aspect, as opposed to the electoral aspect,’ says one Koch insider.

Concerned about the damage being done to their corporate brand, increasingly bothered by their public vilification, and convinced after Republicans’ 2014 Senate takeover that even significant victories were having a negligible impact on federal policymaking, the Kochs began signaling to their closest allies that they were reevaluating their approach to politics. They had always believed that building the intellectual foundation for libertarian ideas in think tanks and universities — and supporting important public-policy initiatives at the state and local levels — paid greater long-term dividends than spending on elections. And more and more, they worried that campaigns could actually prove detrimental to their educational and advocacy work. The Kochs’ corporate associates and public-relations team had warned them their involvement in politics could sully their legacies, and now they were beginning to agree.

This reassessment, coming from men who had stoically and stubbornly withstood the vituperation of everyone from President Obama to former Senate majority leader Harry Reid, was for some Koch insiders hard to believe. But it was evident: The Koch brothers, who had spent millions of dollars designing an electoral juggernaut that could overpower either of America’s two major parties, were losing their appetite for political campaigns.

In conversations last year, “there was much more an emphasis on getting back to the policy aspect, as opposed to the electoral aspect,” says one Koch insider, who like others interviewed for this story spoke on condition of anonymity. It became obvious, the source says, that the Kochs wanted to “reboot and go back to pre-2010, the think-tank and social-change model of CKI [The Charles Koch Institute], when they were very policy-driven instead of engaging in electoral politics.”

By the time of the Wichita meeting, the writing was on the wall. It was hard to believe that barely a year earlier, in late January 2015, the Kochs had pledged their network would raise and spend $889 million during the 2016 cycle, a number that accounted for both educational and political spending. Yet much had changed for the Kochs in the year since that announcement, and sources say the pace of those changes has only accelerated since.

One week after the meeting in Wichita, Short announced he was leaving Freedom Partners for Marco Rubio’s presidential campaign. As colleagues gathered over beers that Friday for a sendoff inside Freedom Partners’s Arlington, Va., office, he surprised them with an emotional speech, according to two people present. He concluded by telling colleagues that, on the Rubio campaign, he looked forward to “being in the fight.”

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Short, who wouldn’t comment on the Wichita meeting or other Koch-related activity, says he was merely sharing his excitement that day about joining Rubio’s campaign, and that he left Freedom Partners on positive terms. “Charles and David have built an amazing network of donors and activists, and their investments in future generations will pay huge dividends,” he says.

Still, the remark — “being in the fight” — sowed confusion and concern among some of his underlings. The Koch network is rigidly compartmentalized; employees are often unaware of what is happening in other arms of the operation. Few people knew about the Wichita meeting, and most Koch operatives assumed the network would wield its influence in 2016 and continue to expand thereafter.

That may no longer be the case.

Many people inside the Koch political operation know now what the brothers’ inner circle recognized many months ago: Charles and David have commenced what allies describe as a “realignment” of resources, steering their money and focus away from elections and toward a slew of the more intellectual, policy-oriented projects on which they have historically lavished their fortune.

Koch insiders describe a ‘pullback’ from electoral politics — particularly on the federal level — and a‘return to their roots’ in advocacy and education.

Holden says the Kochs “have always understood that relying on politicians and elections to change the trajectory of the country is never going to be sufficient or effective in the long-term.” But he disputes the notion that they are disengaging from politics. Instead, he says their activity has slowed because 2016 has not presented “the same opportunities for us to be impactful in a principled way at the federal level” as in previous years — something that could change in future election cycles.

The Kochs are known for their data-driven operation, one in which assessments and reassessments are routine. They commissioned a painstaking after-action report on the 2012 election, concluding they hadn’t properly understood the factors at play, and its findings sparked change inside the network.

Some allies continue to hold out hope that eventually — perhaps at their next donor seminar in August, after the party conventions — the brothers will have a change of heart. It’s understood that liberal Supreme Court appointments could gut the campaign-finance precedents that allow the Koch network to function; with enough pressure from their peers, sources say, they could yet be persuaded to get off the sidelines and mobilize their forces against Hillary Clinton. The brothers have already built an unrivaled political machine — complete with cutting-edge data analytics and voter-contact programs — capable of reengaging at a moment’s notice. And as two of wealthiest men alive, they could instantaneously bankroll a campaign against Clinton on their own.

As of now, however, Koch insiders say that’s unlikely to happen. They describe a “pullback” from electoral politics – particularly on the federal level – and a “return to their roots” in advocacy and education. If they are right, Republicans will go into this fall’s elections without the full support of their biggest benefactors, creating a void that could have lasting consequences for the GOP on the national stage.

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Americans for Prosperity’s ad on Congresswoman Renee Ellmers. (via YouTube)

In the first week of April, a decision from the top sent shock waves through Koch World: The Competitive Intelligence Team, a unit of some 30 employees tasked with conducting advanced research on liberal groups and Democratic campaigns, was unexpectedly dismantled. The CIT, which went by the dummy LLC “American Strategies Group” in public filings, was quietly established after the 2012 race, one product of the Kochs’ election autopsy. It worked under the Freedom Partners banner executing the Koch network’s long-term plans to undermine Democratic causes, campaigns, and candidates.

The group, whose existence was first reported by Politico last year, was led by veteran GOP operative Mike Roman and kept a low profile inside the Koch universe. The few who saw the offices describe a government-like space, complete with American flags and a framed photo of President Obama hanging from the wall. Even those who knew little about what the group actually did knew of its importance, and of the impact it was expected to have on elections for years to come.

RELATED: What Now, Conservatives?

Instead, as the New York Times reported last month, the Competitive Intelligence Team became the first major casualty of the Kochs’ strategic shift. The repercussions were clear, sources familiar with the situation say, and they cut both ways: Without a booming political budget, there was no way to fund the CIT’s costly operations; and without the CIT, it was clear there would no longer be a booming political budget.

James Davis, Freedom Partners’ vice president of communications, disputes that characterization. He, too, uses the word “realignment” but says that some CIT staffers moved to other departments while continuing similar work. He does not deny, however, that others declined to stay on when given the chance or were let go entirely.

Sources say the paid-media budget for all races this cycle is now $40 million, down from $130 million at the beginning of the year and $150 million a year ago.

Roman declined to comment for this story, and Davis would not discuss his employment status, but sources say he left Freedom Partners altogether six weeks after Short. The departure of two top executives in such rapid succession further fueled speculation inside the Koch network that the political budget for 2016 — and potentially beyond — had been slashed. Sources say the paid-media budget for all races this cycle is now $40 million, down from $130 million at the beginning of the year and $150 million a year ago. The sharp decrease owes largely to the fact that the Kochs are no longer planning to play in the presidential race. But it also reflects a steep decline in down-ballot spending from two years ago — an objective indication, sources say, of the shift underway.

The anti-Trump proposal considered in Wichita, then, represented a last-ditch effort not just to draw the Kochs into a White House race they wanted to avoid, but to reengage a political machine their lieutenants had spent years building and perfecting before it began to gather dust in the early stages of 2016.

Davis says “each cycle is different,” and argues that while paid-media expenditures are down significantly from 2014, the Kochs are still the biggest spender thus far on 2016 Senate races. Others emphasize that television advertising as a whole has become less effective, and say the network has expanded its footprint on the ground. According to Davis, Americans for Prosperity has upped the number of grassroots employees on its payroll to 400 from 125 in 2012.

It’s true that the network remains active. Through a combination of their affiliates, the Kochs have run ads in four Senate races: Nevada, Ohio, Pennsylvania, and Wisconsin. Meanwhile, their chief political unit, Americans for Prosperity, just launched its first-ever campaign against a Republican congressional incumbent, with a six-figure ad buy targeting Representative Renee Ellmers in North Carolina.

RELATED: Will Renee Ellmers Become Conservative Activists’ Next Primary Target?

Yet this comes nowhere near their involvement in 2014, when there were a comparable number of competitive Senate races. According to the Kantar Media Group, the Koch network advertised in 11 Senate contests during that midterm cycle, and aired nearly 44,000 ads by Labor Day. They won’t approach those figures in 2016. Koch officials see two major differences between the cycles: Trump has exacerbated what was already a more challenging political climate for Republicans in 2016, and there are fewer candidates on the ballot whom the Kochs consider ideological allies.

Florida is the only additional Senate race the network is considering getting involved in, but the primary isn’t held until August 30, and it’s understood internally that spending on TV after September, when ad rates spike, is a waste. (Freedom Partners, despite pleas from allied outside groups, refused to back Representative Ron DeSantis in the primary.) The Kochs’ political operation has spent less than $10 million total so far on paid media in this year’s Senate contests, according to public filings; by this point in 2014, they had spent over $35 million.

And in certain contests, such as the Wisconsin Senate race, Koch sources say the continued spending is aimed as much at keeping up appearances – and standing with an ally on principle – as it is on winning an election some network insiders consider out of reach.

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LIBRE Initiative volunteers at work in Las Vegas. (via Facebook)

Across the universe of right-wing think tanks, advocacy groups, and political shops, conservatives are getting a sneak preview of life without the Kochs.

That’s because their reallocation of resources is directly impacting other conservative groups that had grown accustomed to their support.

Consider the U.S. Chamber of Commerce, a major election-year spender. Tax filings show that the Chamber received a $2 million grant from Freedom Partners in 2014. But there was no such donation in 2015. It was an off-year, of course, and one in which the Kochs feuded with the Chamber over the reauthorization of the Export-Import Bank. But sources say Freedom Partners has not given to the Chamber in 2016, either — and does not plan to, despite requests from the mighty business lobby.

Another example is the National Rifle Association: According to tax filings, Freedom Partners gave $4.9 million to the NRA in 2014. But, like the Chamber, the Second Amendment champion has received nothing since. The same goes for the Club for Growth, which received $1 million from the Koch network in 2014, but has been shut out the past two years despite pleas for cash.

As one source puts it, the Kochs have turned off “the spigot.” If the goal is to steer their organization away from campaign and election activity, it only makes sense that they would stop granting millions of dollars to groups likely to spend on just such activity. Koch representatives concede they’re giving less to outside groups, but they say it’s only because they’re building up their own in-house capabilities. “We’ve been focused on building more internal capabilities so that we can increase our efficiency and effectiveness in building a movement of millions to advance a free society,” says Davis.

Of course, there are other explanations for the cash-flow shortage among conservative organizations. Some point to donors’ lingering reluctance to open their wallets after 2012, when they saw little return on their investment against Obama. And more than anything else, Trump’s emergence has paralyzed donors both inside the Koch network and out.

Within Koch World, where the drought is being felt for the first time, sources say donations began drying up following the decision to sit out the White House race.

Within Koch World, where the drought is being felt for the first time, sources say donations began drying up following the decision to sit out the White House race. “Cash flow is a huge problem because of the decision not to get involved in the presidential,” says one Koch insider. “It’s obvious: You build an operation to go into a presidential campaign, and then you adopt a Senate-only strategy, and there’s not the same enthusiasm to make donations.”

Beyond that, fewer donors are interested in funding the Kochs’ intellectual projects than in bankrolling their political efforts. The network has ballooned in recent years specifically as a result of the Kochs’ political involvement. “My understanding was that the last seminar was a huge disappointment in terms of the commitments, because there was not enough discussion about the election process,” says a top Republican operative familiar with the network’s internal operations.

Political personnel have been put on notice: Money is tight. Electoral projects that were once rubber-stamped are now subject to lengthy reviews, sources say. There are plans to streamline the network’s communications and fundraising operations by merging them across offices and divisions. Similar measures are being mapped out in states where multiple Koch affiliates are stationed. In Nevada, for example, Americans for Prosperity, Concerned Veterans for America, and The LIBRE Initiative, a Hispanic outreach group, have until now worked from separate offices, but that is likely to change soon.

Internally, the moves have been framed as “efficiency measures,” and Davis, the Freedom Partners spokesman, emphasized that the Kochs are constantly attempting to streamline their enterprise. But there is no doubt among people inside the operation that these changes were triggered by a drop-off in donations that was itself the result of the Kochs’ decision to sit out the presidential race and back away from federal politics.

As it happened, donors who wanted to tangle with Trump wound up funneling their money instead to the two people most frequently mentioned as potential successors to the Kochs atop the conservative-donor universe: TD Ameritrade founder Joe Ricketts and New York City hedge-fund billionaire Paul Singer. Ricketts and his family bankrolled the anti-Trump Our Principles PAC, which raised and spent more than $17 million, according to the Center for Responsive Politics. Singer donated to Ricketts’ group, raised money on its behalf, and leaned on his own well-cultivated but smaller network of donors to boost Rubio and topple Trump.

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Singer and the Ricketts family have shown a desire to compensate for a Koch retrenchment, and both have strong relationships in the existing Koch matrix. But administering a donor network and overseeing its political operations are not the same as serving as its primary funders. Sources note that Charles and David, who run the second-largest privately held company in the United States, have traditionally been responsible for roughly two-thirds of all donations to their own network. The brothers are worth a combined $86 billion, according to Forbes; the Ricketts family is worth $4.5 billion and Singer is worth $2.2 billion.

The Kochs pride themselves on their judgment, and supporters of their decision in February are quick to point out that the anti-Trump efforts championed by Ricketts and Singer failed. So too did the one undertaken by the Club for Growth, which involved itself in a presidential primary for the first time and, despite internal divisions, spent several million dollars attacking Trump across the Midwest. Club officials hoped their outlays would encourage a spike in small-dollar fundraising. Instead, members of its board of directors were repeatedly forced to dip into their own pockets, some regretting their initial expenditures but nevertheless feeling compelled to see the effort through. This offers some validation to the Kochs, who, like the Club, had never played in a presidential primary, and also to the advisers who counseled them against joining the anti-Trump forces.

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Electoral politics weren’t always a priority for the Kochs.

Historically, since the brothers joined their father’s company in the 1960s, they have directed the vast majority of their giving to libertarian public-policy institutes. Their primary civic goal has been to popularize libertarianism rather than to engage in politics. Both Kochs have pumped tens of millions of dollars into George Mason University’s Institute for Humane Studies, of which Charles currently serves as board chairman. Charles was a co-founder of the libertarian Cato Institute in 1977, and later that year, he bought the Libertarian Review with the goal of turning it into a flagship publication for the movement.

The brothers have for decades been regarded as major political players — in 1980, Charles convinced David to run as the Libertarian Party’s vice-presidential nominee — but until the mid-2000s, propagating their worldview in think tanks and at universities remained their central focus. The edifice that has in recent years grown into an electoral behemoth didn’t take shape until 2003, when the brothers formed their donor network.

In the Obama era, the Kochs’ semi-annual “seminars” — which began as small gatherings of think-tank donors and were not initially designed to raise money for political races — grew steadily in size and repute. The Supreme Court’s Citizens United decision in 2010, and a host of associated court rulings that followed, marked a turning point. Perched atop a network of millionaires who could suddenly funnel unprecedented sums of money into elections, the Kochs quickly became two of the most powerful and polarizing figures in American politics.

They knew that the sort of high-profile political operation donors wanted to see would take its toll not only on the business, but also on Charles and David personally.

Even before Citizens United, however, it was a policy dispute that lit a fire under the brothers and helped transform their network into a force of nature. The White House’s push to pass the Affordable Care Act in 2009 jolted the donor community. Several contributors began urging the Kochs to involve themselves more directly in politics — particularly in a push to stop the ACA and then, after its passage, to exact retribution against the lawmakers who had helped usher it through Congress. Both brothers, who had avoided investing heavily in politics, were skeptical.

But at a lunch during the June 2009 donor seminar in Aspen, Colo., Paul Ryan, the Independent Women’s Voice’s Heather Higgins, the former Koch operative Sean Noble, and Arizona-based donor Randy Kendrick framed the health-care battle in Congress as a matter of urgent importance to the group. Their presentation was met with an outpouring of public pledges from the audience. It raised $13 million on the spot and demonstrated to Charles and David how much hunger there was within the organization for them to do more.

Meanwhile, the leadership of Koch Industries back in Wichita remained hesitant. They knew that the sort of high-profile political operation donors wanted to see would take its toll not only on the business, but also on Charles and David personally. “They assiduously avoided involvement in politics until that moment when the donors forced their hands in 2009,” says one longtime donor to the network.

#related#Starting in 2010, the Kochs began to establish and utilize a vast constellation of nonprofit and limited-liability groups to collect and disburse many millions of dollars in contributions from their members while keeping their identities anonymous. That year, Republicans took back 63 House seats — and control of the chamber itself — in the largest midterm landslide since 1938. Two years later, the Koch network spent more than $400 million during the 2012 cycle, a figure celebrated on the right despite Mitt Romney’s lopsided loss. Undeterred, the network spent nearly $300 million on all activity for the 2014 cycle, political and otherwise, and played a central role in the Republican takeover of the Senate.

So when the Kochs announced in January 2015 that they aimed to raise and spend $889 million on the 2016 cycle — an eye-popping number in any context — the figure surprised no one. The announcement merely confirmed expectations that their operation would continue to expand in size and influence.

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Marco Rubio, Donald Trump, and Ted Cruz debate in Detroit in March. (Jim Young/Reuters)

The Kochs’ retreat over the ensuing year can be attributed to a confluence of forces both personal and political.

Boosted by the brothers’ network, Republicans in 2014 seized control of the Senate, further cemented their dominance in governors’ mansions across the country, and won majorities in more state legislatures than they’d held at any time since 1920. While the professionals running their political machinery celebrated those victories — and viewed them as a mandate to expand their operations — the Kochs were almost immediately disappointed by the inability of Republicans, who now controlled both chambers of Congress, to produce results.

“Charles and David had a different take on 2014 than their political lieutenants did,” says an operative with direct knowledge of the network’s internal operations. The Kochs believed that the takeover hadn’t changed a thing. No conservative policy revolution was happening in Congress. They couldn’t even stop a reauthorization of the Export-Import Bank, a symbol of Washington’s “crony capitalism.” It was just more of the same.

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Meanwhile, in October 2015, Charles, who had scrupulously avoided the media, published a book, Good Profit, which offered a look at the business principles that guide Koch Industries. The Koch network began inviting reporters to its exclusive donor retreats for the first time last year, and Charles embarked on a media blitz to promote the book. What he encountered was eye-opening: Despite his remarkable business career and decades-long involvement in other philanthropic initiatives, questions centered around one topic: his putative role as the GOP’s puppet master.

Charles, who at 80 years old had never considered himself a Republican, came to a daunting realization that was reinforced by advisers watching from the sidelines: His decades spent influencing the worlds of business, academia, and policy were being overshadowed by his activity in the last three political cycles.

The brothers had been warned about this image problem as early as January 2014, when they brought on a new public-relations team led by long-time communications guru Steve Lombardo. There were mounting concerns about damage to the Kochs’ corporate brand, and soon after Lombardo’s hire, Harry Reid took to the Senate floor to call them “un-American.” The brothers didn’t need much convincing that a rebranding effort was necessary.

RELATED: Behind the Koch Caricature: The Koch Brothers Are Nothing Like Harry Reid’s Lurid Portrayal of Them

Pained by the attacks hurled at them, and upset by the revelation in their post-2012 autopsy that Americans viewed wealthy conservatives as uncaring for the poor, they set out to soften their image. The immediate result was “We are Koch,” a multi-million-dollar advertising campaign featuring smiling minority employees and cinematic sequences of Americana.

But the seeds had been planted for bigger changes. Employees have devoted more and more time to social-welfare projects in the two years since. AFP has increasingly steered resources to its “foundation” wing, and in particular to the Bridge to Wellbeing program, which organizes free instructional seminars on everything from proper nutrition to personal budgeting to time management. In May alone, nearly two dozen such seminars were held across three states. The LIBRE initiative, meanwhile, regularly holds free classes on English proficiency, tax preparation, and GED certification. It handed out free turkeys in Florida last Thanksgiving. (Naturally, all of these efforts come with a dash of free-market evangelism.)

Even without their shifts in strategy and personnel, it’s doubtful the Kochs would have waded into this year’s White House race.

Perhaps it’s no accident that the larger rebranding effort — and ultimately, the decision to steer clear of engaging Trump — coincided with the relative sidelining of longtime Koch adviser Richard Fink. A friend and a trusted intellectual ally to both brothers since the late 1980s, Fink retired in 2015. Now living in Florida and said to be battling health problems, Fink, who could not be reached for comment, has seen his influence over the Kochs wane. For years, however, he was known to jump unflinchingly into political battles on their behalf, leading many to believe he would have advocated for mobilizing their forces against Trump in 2016.

Even without their shifts in strategy and personnel, it’s doubtful the Kochs would have waded into this year’s White House race. They were clear in the early going about what they were looking for in a candidate, and up until now, as Davis says, they “haven’t seen it.” That’s not just a knock on Trump; the Kochs never seriously considered backing any of the 17 Republican candidates, according to their allies.

The crowded GOP field caused problems for their network in the same way it divided conservatives as a whole. There were at least four candidates — Marco Rubio, Ted Cruz, Scott Walker, and Rand Paul — who had champions within the network. (All four attended Freedom Partners’ January 2015 donor summit in Rancho Mirage, Calif.) The vast majority of Koch operatives favored either Rubio or Cruz, but because support inside the network was divided between the two, they were hamstrung when it came to spending on behalf of a particular candidate, at least until the field winnowed on its own.

RELATED: The Weaknesses that Doomed Ted Cruz

Trump presented another problem. The Kochs and their fellow donors feared that attacking him would only amplify his populist appeal, and they bet early on that Trump would self-destruct. Once his staying power became obvious, opinions in Koch World differed, but one thing seemed certain: Coming out against Trump wouldn’t accomplish much if they didn’t also come out for one of his rivals. Rubio’s exit from the race in March — and Cruz’s emergence as the only alternative to Trump — heartened donors who thought the Kochs had merely been waiting for the field to shrink.

It quickly became clear, however, that the brothers were not interested — not in Cruz, whose rhetoric on immigration and foreign intervention they believed negated his finer qualities, and not in the 2016 campaign itself, which they’d already determined was a waste of their resources.

Major donors lobbied the brothers to get off the sidelines and into the game — and are continuing to do so.

With no sign of spending either against Trump or for Cruz, complaints began to fester. Major donors lobbied the brothers to get off the sidelines and into the game — and are continuing to do so. “I told them, ‘Hey, I think you got two choices: You gotta get involved or have Hillary be president,’” says Stanley Hubbard, the CEO of Hubbard Broadcasting and a longtime donor to the network who was an early backer of Scott Walker. “I think if they don’t get involved and help beat Hillary their donors will be very disappointed. We can’t always have our first choice, and if you are one of the Koch brothers I think you’d probably rather have Trump be president than Hillary.”

But the decision this spring to slash the paid media budget again — from $130 million down to $40 million — was enough to convince network insiders that the Kochs, barring a dramatic change of heart, will be playing only in congressional contests this fall. It’s possible that even their reduced budget won’t be exhausted: With Trump atop the ticket, some Koch operatives view Wisconsin and Hispanic-heavy Nevada as lost causes. And the network has already made clear it won’t spend on behalf of many GOP incumbents, such as Kelly Ayotte in New Hampshire and John McCain in Arizona, due to significant policy differences.

RELATED: John McCain Faces Unexpectedly Tough Reelection Fight in Arizona

There was talk this spring of a “contingency fund” being set aside for spending on the White House race in the event Cruz or an acceptable “white knight” emerged from a contested convention. With that scenario now off the table, the reality is that the men who have spent the past decade building the most formidable political-finance operation in the nation are unlikely to spend a dime on the 2016 presidential election. They had once reserved a generous space at the Union Club in Cleveland during the July convention, but that has since been canceled.

Holden, chairman of Freedom Partners, argues that paid-media statistics don’t factor in the network’s “armies,” which are still doing voter-contact work on the ground in key battleground states. Americans for Prosperity alone has chapters in 35 states, and more than a thousand people remain on the Kochs’ political payroll nationwide. Those field operations could still play a significant role in down-ballot races this November.

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Sen. John McCain on Capitol Hill. (Larry Downing/Reuters)

Koch allies say the brothers took tremendous interest in Bernie Sanders’ unlikely success — particularly his resonance with young voters who represent the future of the electorate — and drew stark conclusions about their own efforts. “Dumping hundreds of millions of dollars into elections doesn’t persuade enough people to achieve lasting change,” one Koch confidante says. “To achieve lasting change, the effort has to begin much earlier.”

Many are disheartened at talk of retreat, even if they are reaching similar conclusions. “We had a huge amount of success, but I think when they said, ‘We don’t know what to do about Trump,’ I think it was true and it revealed to us something we didn’t know,” says the longtime Koch donor. “We thought when the grassroots was voting for conservative candidates that they understood the policies and supported the policies, and maybe that’s not true. Maybe they aren’t educated on our policies. That may be the truth.”

#related#Even if they maintain a lighter footprint in federal politics, it’s unlikely the Kochs’ interest in campaigns will ever fade. Their bottom-up investments in education and advocacy will probably always be paired with heavy spending on local races and initiatives; they long ago concluded that their impact is greater the farther they wander from Washington, D.C.

Charles Koch provided a window into his own thinking in an interview last month with ABC’s Jonathan Karl.

“When you look back over the years, over the last several cycles, hundreds of millions of dollars in electoral politics, what have you gotten for that?” Karl asked. “What’s been the return on that investment?”

“Well, I’ve gotten a lot of abuse out of it,” Koch said. “What have we gotten for it? Well, I think there have been some good things, particularly at the state and local level.”

“At the federal level,” he added, shaking his head, “we haven’t in any way changed the trajectory of the country.”

Karl suggested it hasn’t been a very good investment. “No, no it hasn’t,” Koch replied. “It’s been disappointing.”

— Tim Alberta is the chief political correspondent for National Review. Eliana Johnson is the Washington editor of National Review.

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