international analysis and commentary

Money first: the time of private donors

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They were shunned and criticized as former President George W. Bush exited the White House. Then they seemed to simply disappear. But, almost two years later with the midterm elections just around the corner, key figures from the old administration are far from dead – rather, they are alive and organizing the comeback of the Grand Old Party.

While Obama was slowly falling from grace and the Tea Party quickly taking center stage, the GOP’s old guard was silently and meticulously laying out a network of organizations designed to provide their party with the support needed to stamp out Democrats one state at a time.

They have been raising money under a tax code designed for nonprofit organizations. Most people are familiar with 501(c)(3) nonprofits – charities which are prohibited from political activity. However, longtime party operatives are working under 501(c)(4) nonprofits, known as “social welfare” organizations. The catch: these do not have to disclose their donor names and they are allowed to lobby for their primary cause, as long as half of their activity is not political.

So what is political? The problem is that what seems political in political terms, may not be considered political in legal ones. These organizations often work through television advertisements which carefully avoid direct attacks against candidates. Instead, they attack the candidate’s stance on a specific issue or policy which is center to their cause.

While both parties have tried their hands at this kind of activity over past elections, this time around Republicans are taking a lead. One of the most influential of these organizations, Crossroads GPS, is making headlines across the US. It is a sister of the political committee American Crossroads –  which was formed by Republican elite including Karl Rove and Ed Gillespie, formerly George W. Bush’s closest advisers.

While American Crossroads is a 527 political organization and registered with the FEC, Crossroads GPS is a 501(c)(4) nonprofit – meaning it can take donations from spenders who want to remain anonymous. This became key earlier this year when the US Supreme Court decided to relax restrictions on corporate campaign spending (see our Background, in Italian, on Citizens United vs FEC). The combination of these two things allows big corporations to donate unlimited amounts of funding without revealing their names.

The Obama administration has recently begun attacking what some are calling a loophole in the law. “This is a threat to our democracy,” Obama said at a rally last week in Maryland.

Karl Rove was quick to respond. This week in an interview with ABC’s Good Morning America he said, “The President is being hypocritical about this. He had no problem at all with this when groups were spending money on his behalf in 2008 and not disclosing donors.”   

When money rolls in around election time, criticism will always come from the other side. This is nothing new in American politics. Barack Obama himself raised eyebrows when he turned down public campaign financing and went on to raise a record-breaking 150 million dollars in September 2008. Critics claimed his internet-savvy model created a step back in campaign finance reform. His supporters, however, said there was nothing more democratic than supporting a campaign 200 dollars at a time through individual small donors.

This time around, the GOP is doing just the opposite. It is bringing in lots of cash, but from a small number of donors. Salon.com recently reported Federal Election Commission findings showing that American Crossroads raised more than 2.6 million dollars in August and 91% of the donations came from just three sources. Critics believe Crossroads GPS is mimicking this method.

Americans have begun to pay attention. The mainstream media is now following Crossroads and its activities. And watchdogs, who point out that neither the IRS or the FEC are checking up on the groups, have demanded an inquest.

But this coverage may backfire for Democrats. CNN recently reported that Crossroads GPS claimed to have received $30,000 in unsolicited online donations in one day alone. If true, this would prove that an organization which is widely believed to target a low number of rich donors is becoming able to reach out to individual, small donors – à la Obama.

Obama’s criticism may not be helping either. The country’s conservatives, fueled by Tea Party fervor, may be inspired to support such organizations. And Democrats are faced with a difficult choice. Will they jump on the bandwagon and try to outrace Republicans with their own 501(c)(4) organizations? Or will they choose to fight a “principled” battle – by accusing them of bending the law in a threat against democracy? For now it seems that Obama is moving toward the second option – another harder road to add to his collection. Time, however, is not in his side: any IRS or FEC investigation would be lengthy and unlikely to start anytime soon.

Money and elections, as usual – but in new ways. The real question, once the midterm is over, is what happens next. Will this trend die out after November? Or will it turn the GOP into a well-oiled machine running full speed ahead towards 2012?

Only time will tell, but it may turn out that the old Republican guard will slowly take back the nation both 200 dollars, and 2 million dollars at a time – leaving we the people with little knowledge of how they pulled it off.

See our Background, in Italian, on Citizens United vs FEC