Campaign Finance Reform, Reformed

This campaign finance reform initiative is the second in recent years to be blocked by conservatives in the House and the Senate. The first, the DISCLOSE Act calling for increased disclosure of those donating to campaigns, also failed to receive the 60 votes needed to clear the Republican filibuster in 2012. In response to the filibuster of his amendment, Udall commented that Republicans “choose to support a broken system that prioritizes corporations and billionaires over regular voters.” He’s not wrong, but he’s not right either. Campaign finance reform is necessary, but not for the reasons Udall lists. The issue of money in elections has been written to death since the 2012 presidential elections. Some are supporters of money in elections, some believe it to be unfair, and more than a few are in the middle. But reading extant commentary on campaign finance often leaves something to be desired, particularly answering what the Citizens United decision actually changed about elections. How much did Citizens United impact Americans elections? Not as much as all of the attention would make one think. Instead, what has changed is how much we know about the money influencing elections.

Matt Bai explains that the changes resulting from the Citizens United were “more incremental than transformational.” First, the time boundary for airing issue advocacy ads was eliminated. Furthermore, outside groups can now directly express whom they are supporting or criticizing in their ads, up until Election Day. Second, 527s are no longer necessary, replaced by Super PACs that can raise money from both individuals and corporations. That’s pretty much it. The increases in campaign financing in the 2012 elections is made clear by Bai when he states, “While individuals and companies could still contribute huge sums to outside groups, they were to some extent deterred by the confusing web of rules and the liability they might incur for violations.” He concluded, “What the new rulings did…was to ‘lift the cloud of uncertainty’ that hung over such expenditures.”

Therefore, the problem of money in elections did not originate with Citizens United, as most people believe.  Critics of this opinion might source the huge increases in campaign spending after the Supreme Court decision in 2010, but as Bai explains in his article, campaign spending had been on the steady increase even before 2010. The level of outside money in elections increased 164 percent from 2004 to 2008 and 135 percent from 2008 to 2012. And although the sheer amount of money in elections today seems halting, the percentage increase in outside spending into presidential elections has stayed steady since Citizens United. The blame should rest rather on the Bipartisan Campaign Reform Act, and in turn the 2003 McConnell decision.

The Bipartisan Campaign Reform Act was enacted after two senators, John McCain (R-AZ) and Russ Feingold (D-WI), grew uneasy about the role that soft money (money donated to political parties in such a way that leaves the contribution unregulated by the FEC) was playing in elections, along with the proliferation of issue advocacy ads (ads referring to candidates for federal election without expressly advocating for their election or defeat). The Bipartisan Campaign Reform Act of 2002 (commonly known as the McCain-Feingold Act) banned “soft money” contributions to federal or state candidates and national, state, and local political parties, while also prohibiting issue advocacy ads from airing in the 60 days prior to a general election, or 30 days prior to a primary election. The Act was upheld by a 5-4 Supreme Court vote in McConnell v. Federal Election Commission (2003).

The ban on soft money left corporate and individual donors with no other option than to take their donations to outside groups, effectively shrinking the power of parties. According to the Washington Post, national party revenue has been on the steady decline since 2002 — $1.48 billion in the 2002 midterms election cycle to $1.23 billion in the 2010 midterms (adjusted for inflation in 2012 dollars), a 17 percent drop. But proof that such declines are not the effect of Citizens United lie in the fact that in 2006, party fundraising was just $1.24 billion (in 2012 dollars) – a whopping $240 million less than before McCain-Feingold became law. During presidential elections, declines still exist but are not as steep. Another astounding statistic from the article shows the drop off of political ads by the parties themselves. In 2000, the Republican and Democratic parties aired two-thirds of all advertisements in the presidential general election. In 2004, parties aired only one third. In 2008, parties aired less than one fourth of ads. By 2012, just 6 percent of all advertisements was sponsored by the political parties. The Post calls this an “atrophy” of parties, who are no longer able to carry out core functions, outsourcing position research and voter list management and, in turn, becoming dependent on outside groups.

These extra-political party groups are the true danger to the election process. Outside entities have become an integral part of electioneering since the McCain-Feingold Act and they do not operate under the same conditions as super PACs. Udall calls for the reversal of the Citizens United and Buckley decisions to regulate campaign finance, but this action would be largely unnecessary and have little impact on the heart of the problem — the undisclosed sources of money that are influencing our elections — because classifying donations as “free speech” has little relevance in this regard. It would be naive to assume that decisions like Citizens United and Buckley played no part in creating this trend toward outside money in elections. Despite the fact that these now undisclosed donors had the opportunity to donate unlimited sums before Citizens United, they were deterred from doing so due to complicated rules and laws of financing campaigns. Bai explains that, “What the new rulings did was to ‘lift the cloud of uncertainty’ that hung over such expenditures.” Citizens United did play a part in incentivizing outside money into elections. But the avenues existed before the decision, and it was the elimination of soft money that pushed these donors to the outside groups, groups that don’t require disclosure. So while Citizens United may have been a tipping point for these huge donations from unknown donors, the problem had its roots in the McCain-Feingold Act. And unfortunately, much of the time, these undisclosed donors are not as innocent as billionaires with an interest in politics.

Groups that are not required to disclose donors come in two basic types: 501(c)4 and 501(c)6. The 501(c)4 groups are the social welfare groups mentioned earlier. These non-profit groups receive tax-exemption and freedom from disclosure as long as they are “primarily” engaged in enhancing social welfare, leaving them with a lot of leeway to participate in elections in the manner they choose. According to an examination from ProPublica, most of these groups do “nothing to justify the money they receive from taxpayers, pouring much of their resources into political races.” The report found that many groups stated on their initial tax filing that they would not engage in politics, but later filings found they in fact spent millions on such activities. Examples include the American Future Fund that reported it would not participate in politics but reported $8 million in political spending in 2010. The Republican Jewish Coalition did the same. These groups also attempt to underreport their spending on campaigns. The Center For Individual Freedom spent $2.5 million on ads in the 2010 midterms criticizing democrats, but informed the IRS it had spent nothing, calling the ads “educational” or “legislative activities.” In this way, these “social-welfare” groups are protecting their tax-exempt, non-disclosure status by taking advantage of IRS ambiguity in defining their activities.

The 501(c)6 groups – the second type of tax-exempt non-disclosure group – are even more malicious in the information they withhold from voters. These groups are able to facilitate the movement of donations from trade associations into campaigns. Trade associations, organizations founded and funded by businesses that operate in a specific industry, are often multinational in scope — that is, said groups are often funded by industry members operating around the world. In effect, interests outside of the US are able to donate money to influence elections within the country. A chilling example of such influence is explained by Lee Feng in The Nation. Feng relates how the American Petroleum Institute – an oil industry trade association – funneled millions into influencing support for conservative candidates during the 2010 midterm elections. The truly disturbing aspect of the story is that, among the executives leading the API was Tofiq Al-Gabsani, a registered lobbyist for the Saudi Government and chief executive of Saudi Refining, Inc. The Saudi Refining, Inc. is a wholly owned subsidiary of the Saudi Arabian Oil Company, better known as Aramco. Aramco is one of the top donors to the API, and as a result, Al-Gabsani is one of a select few on the Board of Directors that controls the organization’s political campaigns. Even more chilling, Feng explains, “API-funded groups were a force behind the tidal wave of negative advertisements to hit Democrats in the 2010 midterms,” especially targeting Democrats who had worked on carbon-emission regulation. Feng continues, “The ads bankrolled by entities like API helped deliver one of the greatest midterm election upsets in American history…But perhaps the most profound aspect of the Democrats’ defeat that year: the window for confronting global warming all but closed.” An astounding 86 percent of incoming Republicans signed an oil industry–sponsored pledge to oppose all climate regulation, therefore solidifying a democratic defeat in the midterm as an API victory. This story isn’t unique to the oil interests outside the US; other trade associations like the Chamber of Commerce have been known to accept contributions from multinational interests such as Chevron Texaco, Aegon, and Dow Chemical to spend on influencing legislation and campaigns in the US.

Isolated examples like these don’t address the immensity of the problem that non-disclosure groups present to US elections. According to the Center for Responsive Politics, campaign spending by non-disclosure groups increased from $5.8 million in 2003-2004 to $310.8 million in 2011-2012, representing an increase of more than 5000 percent. This money is often called “dark money” because of its unknown origins. In 2006, almost 100 percent of outside spending on campaigns was disclosed, but since the 2012 elections, that number is down to less than 50 percent. “The role played by outside groups that don’t disclose their donors is bigger than its ever been before and is historically significant,” states Adam Skaggs, senior counsel to the Brennan Center for Justice’s Democracy Program.

So, Udall was right in the sense that campaign finance needs to change. But money isn’t the problem in American elections; it’s which groups are spending this money and how they’re spending it. No one, not even the justices in the majority for the Citizens United decision, could have predicted the consequently enormous lack of transparency. Ironically, the Citizens United decision endorsed transparency. Justice Anthony Kennedy, in the majority opinion, wrote, “Disclaimer and disclosure requirements may burden the ability to speak, but they ‘impose no ceiling on campaign-related activities,’ or ‘prevent anyone from speaking.’ The Buckley Court explained that disclosure can be justified by a governmental interest in providing ‘the electorate with information’ about election-related spending sources.’” He concluded, “Transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Unfortunately for Kennedy, voters are no longer able to receive the transparency needed to make these “informed decisions.” Non-disclosure rules prevent the electorate from effectively understanding which interests are backing which campaign ads. For instance, would ads attacking Democrats’ pushes for global warming legislation have been successful if the electorate had known that Saudi oil companies were responsible? Therefore, it becomes necessary to realize that big money in elections has become the norm. It has, in the last decade, become a natural component of elections, and there’s no reason to try and stop this evolution. Wealthy interests exist on both sides of the aisle. Although it may seem as if this money slants more towards Republicans, Democrats can surely marshal the same financial support if needed. Republicans want to see change (i.e. the election of Mitt Romney) and want to see their interests embodied in this change. That costs money. Not as many people are willing to spend millions of dollars to maintain the status quo. For this reason, Democrats haven’t seen the same quantity of outside spending as Republicans have. But that doesn’t mean that billionaire democrats with political interests don’t exist. And in this way, money isn’t the real problem in elections—the real problem is disclosure.

To prove this point, a recent Janus Forum discussion took place here at Brown focused on campaign finance reform. Both Professor Lessig and Professor Volokh made important points on the regulation of money through decisions like Buckley or Citizens United. The professors agreed that imposing limits on campaign expenditures was wrong. Lessig called for a fundamental change in the system of campaign finance, giving the example of vouchers distributed to the population that would allow them the right to voice their support of candidates using money. While Professor Volokh didn’t necessarily agree with a large-scale change in the system, he instead brought up a fundamental structure within the existing system—the structure of inequality. He made the point that although, for example, the New York Times, a publication reaching millions of readers, is able to slant their writing in support of a candidate, individuals who don’t have this same ability to reach millions have never declared the New York Times writing slant to be unjust. American’s believe that even though the New York Times has the unequal opportunity to effectively spread their opinion and influence, an opportunity that a vast majority of Americans don’t have, they have the right to do so. It is in this same way that wealthy individuals and corporations (the New York Times is a corporation after all) should have the right to influence the American people using their money, independently of campaigns. Therefore the fundamental problem with the campaign system is not equality or money. But people who read the New York Times know that they are in fact reading a publication by the New York Times. It says so on the top of the page in pretty large letters. Readers have the ability to either trust the publication and accept its view, or distrust it and disagree precisely because they actually know who is publishing the view. The same basic ability is not afforded to Americans when influenced by non-disclosure groups.

What needs to be addressed is disclosure, not money. In fact, the DISCLOSE Act filibustered in the Senate in 2010 would have aided in this endeavor. The Act would have required the trade associations and welfare groups to reveal their spending. But dozens of trade groups joined together to fight the bill before the Republican-led filibuster blocked its debate. A letter from the groups expressed their dislike of the legislation, and among the signers of the letter, one could find Saudi Aramco’s trade association, the American Petroleum Institute. The facts are eerie and present an uneasy future for US campaign finance, but Congress needs to find a way to pass such legislature despite influence from interests like Aramco. The effects of such spending are yet to be seen for the upcoming midterms, but they will assuredly, and unfortunately be a large factor. The most democratic of processes must be taken from shadowy and undisclosed interests and placed back into the hands of the American public.