international analysis and commentary

Funding the next campaigns: “outside” money to win elections

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With the 2014 midterm elections fast approaching, America’s relentless political machine is back on the march. Inevitably, hundreds of millions of dollars are once again pouring into campaigns across the country. And though plenty of politicians and activists criticize the current system, few are willing to make a real effort to reform it for fear of losing out to their rivals.

“It is almost certain that the overall amount of money raised and spent on Congressional and Senate races is going to easily exceed what we’ve seen in previous cycles,” says Dave Levinthal, Senior reporter with The Center for Public Integrity, a research organization in Washington. With eight months to go before Americans head to the polls, it is hard to predict exactly how much this year’s vote will cost, but it will likely be more than the $3.7 billion price tag of the 2010 elections (the most recent midterms).

Beyond the increase in overall spending, what matters is the fact that more and more money is coming from so-called outside groups, which include those Super PACs and non-profit organizations that were emboldened by the Supreme Court’s Citizens United decision (outside groups often refer to the parties as well, as opposed to the campaigns of individual candidates).

“You can love the decision, you can hate the decision,” says Levinthal, “but the reality is that it changed the way these organizations can raise and spend money in political elections, it made it much easier for them.”

According to the Center for Responsive Politics, another research organization in Washington, by the beginning of March 2010 outside groups (excluding the parties) had funneled $11.2 million into the midterms. So far in this election cycle (which comprises 2013 and 2014), they have already spent about $34.7 million.  

Take for example the March 11th special election in Florida’s 13th District, an important swing district in the most sought-after swing state. Republican candidate David Jolly defeated Democratic candidate Alex Sink in a neck and neck a race to replace Republican Congressman Bill Young, who died in October.

“The campaign has attracted a lot of attention by both sides,” says Kathy Kiely, Managing Editor of the Sunlight Foundation, a Washington-based organization that tracks and publishes all sorts of government- and politics-related data and information. “Outside groups [in this case including the parties] have spent about three times as much as candidates. I think this election is a good barometer of what is to come in this year’s midterms.”

By the time November comes around, the Senate race in Kentucky is likely to become one of the most expensive in history, if not the most expensive – for now that title belongs to last year’s special election in Massachusetts to fill the seat vacated by now Secretary of State John Kerry (Democrat Ed Markey won it). The Senate Minority Leader Mitch McConnell, a Republican, is running for reelection and is facing both a strong primary challenger, businessman and Tea Party darling Matt Bevin, and an up-and-coming Democratic opponent, Kentucky’s Secretary of State Alison Lundergan Grimes. Two other elections with high price tags will be those in Minnesota, where incumbent Democratic Senator Al Franken, who won by only a handful of votes in 2008, is up for re-election, and in North Carolina, where, according to Politico, the non-profit group backed by the Koch Brothers’ Americans for Prosperity has already spent more than $8 million in campaign ads to try and unseat incumbent Democratic Senator Kay Hagan.

Overall, spending in this cycle is likely to focus on the Senate as Republicans have a shot at regaining the majority there while they are likely to keep control of the House without much of a fight from the Democrats.

Behind all of this “dark money” are both the usual suspects and some new players. “Of the traditional groups, we continue to see the liberal Senate Majority PAC playing a large role,” says Sarah Bryner, Research Director of the Center for Responsive Politics. “While on the other side the US Chamber of Commerce is thus far the conservative group that has spent the most money.”

Karl Rove’s American Crossroads, the Koch brothers’ Americans for Prosperity and the Senate Conservatives Fund are other conservative organizations that are once more making their voices heard to the tune of tens of millions of dollars. On the liberal side, the Senate Majority PAC, the House Majority PAC, Planned Parenthood and American Bridge 21st Century are all planning on spending heavily in this cycle.

“The other group that a lot of people have been talking about is NextGen Climate Action,” says Bryner. “It was set up by a billionaire from California, Tom Steyer, who pledged to put $100 million into this election cycle to defeat members of Congress who don’t believe in climate change.”

Though increased spending by outside groups is no longer news, experts are noticing the situation is shifting, in two interesting ways. “Democrats have been gaining the advantage lately, at least among Super PACs,” says Levinthal. According to the Center for Public Integrity, in 2013 the top three Democratic Super PACs raised more than $22 million, approximately four times as much as the top five Republican ones.

At the same time, non-profit, or social welfare, organizations, have come into greater and greater favor, particularly among Republicans. While Super PACs can pour unlimited sums of money into political campaigns, they are required by law to disclose the names of their donors. Non-profit organizations don’t have to, therefore becoming the preferred vehicle of campaign financing for those individuals that don’t want to be publicly recognized.

“We know very little about who they are and what kind of spending they do,” says Kiely. The downside to this is that social welfare groups are limited in their spending in that they must devote at least 51% of their funds to non-political activities and can direct only the rest toward campaigns.

Because these non-profit organizations don’t have to pay taxes, last year they came under scrutiny by the Internal Revenue Service, the US tax authority, which tried to crack down on those that were more often blurring the lines between spending for social causes and for political purposes, therefore violating their tax-exempt status. But the IRS went about it in an odd way: since the spending was coming mostly from Republican groups, it explicitly targeted those affiliated with the Tea Party, a choice which caused huge uproar. Now, the IRS is trying to spell out more clearly which activities are to be considered of a political nature in an effort to better define how all these groups can legitimately use their money. However, the reception of these new rules has been cool to say the least. Some 140,000 comments, almost all of them negative, flooded the IRS from November through the end of February, coming from both sides of the aisle. For example, the drive against the new rules has seen the involvement of groups as diverse and ideologically conflicting as the liberal American Civil Liberties Union and Public Citizen and the conservative Citizens United and FreedomWorks. This goes to show that though everybody is weary of the influence of money in politics, nobody wants to go out of its way to change the system, not the activists and certainly not the politicians who thrive on it.  

“You talk to members of Congress and plenty of them say they don’t like how things work, since they are spending hours every day fundraising, instead of doing other things like legislating,” says Levinthal. “But nobody is willing to just unilaterally stop in the name of principle because they know that, if their opponents continued, they would be at a serious competitive disadvantage.”

This simple fact, combined with a largely conservative Supreme Court, makes it hard to believe that, despite all the outrage, things might actually change for the better. In fact, the Supreme Court is expected any day now to deliver a decision that could further ease restrictions on campaign financing by lifting current limits on donations to candidates and parties (Citizens United only eliminated restrictions on those to Super PACs and non-profits). This would open the floodgates to even more campaign dollars, raising the cost of running for office in America yet another notch.