US Elections: The Power of Money and Democrat Losses in Congress (and the White House?)

EA's US Politics correspondent Lee Haddigan offers an update on the campaigns for the 2010 Congressional elections:

There is a growing pessimism emanating from the White House that the Democrats are facing major losses in the November mid-term elections.

An interview with President Obama in The New York Times reveals that the administration blames its failure to convince traditional Democrats, and those attracted to the party in 2008 by Obama’s message of hope and change, on poor communication. The policies of the last two years that are drawing widespread criticism are not the reason for Democrats’ lagging poll figures, the interview claims; it is the fault of an inexperienced administration to explain why those reform attempts were the best remedy for the nation’s ills. 

At the same time, the President and his staff have continued their assault on the pernicious influence of special interest groups, including foreign corporations, on American elections. Last Sunday, in a speech in Philadelphia, Obama explained that Democrat candidates are facing unprecedented levels of attack ads, financed by organizations with “unlimited amounts of money” who do not have to disclose from where their funds come. He asserted, “it could be the oil industry, it could be the insurance industry, it could even be foreign-owned corporations.” 

Appearing on national television, White House Senior Adviser David Axelrod defended a recent Democratic National Committee ad that alleged the US Chamber of Commerce was using money from foreign members to help pay for the Chamber's campaign against Democratic candidates. Axelrod also criticised the American Crossroads Fund, claiming special-interest funding of tens of millions of dollars of attack ads on Democrats. He repeated the call for groups involved in electioneering to disclose the identity of their donors.

The Chamber of Commerce immediately denied the charges, for which the White House has no proof, and American Crossroads announced later that the accusations had merely resulted in a spike in their donations.

The issue could be dismissed as part of the silly-season politics that afflict elections in the last few weeks before polling, if not for the fact that Axelrod has identified a trend that will significantly impact all future campaigns. Axelrod complained that interest groups “are now the major force in some of these campaigns”: “It’s never happened before, that organizations are spending this kind of money.”

Consider that the Chamber alone is spending $50 million supporting candidates who back free market policiesand that American Crossroads recently stated it has a target pot of $65 million to purchase television ads backing Republican candidates. Crossroads is also part of an alliance of groups paying for a $50 million week-long ad barrage supporting Republicans in House of Representatives races where the Democrats currency have a financial advantage. This coordinated "House surge strategy" will spend more than the entire budget of the House Election Committee of the Republican National Committee. 

These spending levels have led campaign finance experts to label 2010 as a historic election. The traditional ability of Democrats to raise more money for election campaigns through the official campaign committees and political action committees has now been eroded and overtaken by outside political groups. This phenomenon led to the recent decision by the Democrats  to withdraw funding for candidates in seats they were unlikely to win, concentrating their resources on races where they believe they still have a chance of victory. 

The world of election funding and influence is and always has been a murky one. But as President Obama has repeatedly recognized since the Supreme Court decision that allowed this unprecedented spending to occur, and especially after the Administration's failure to pass the DISCLOSE Act to address the problem of donor anonymity, it will be a crucial factor in his re-election bid. The simple fact is this election is a trial run for some conservative groups before the big test in 2012.

In recent months President Obama has highlighted the political influence of 501(c)(3) groups like Americans for Prosperity, 501(c)(4) organisations like American Crossroads, and 501(c)(6) associations such as the Chamber of Commerce. (The one group he has not mentioned are 501(c)(5) trade unions.). The 501 designates these organisations' incorporation under the federal tax code, and it points to Obama's strategy to nullify the influence of these outside political groups in 2011-12. Currently, the Internal Revenue Service is responsible for oversight of the political activities of these 501 organizations, but the division monitoring them is not designed as a regulatory agency, only as a revenue-collecting entity.

It is worrying for Democrats that, under existing tax laws, groups can pop up, spend unlimited money on a specific campaign, and then disappear after the election is over. The 501 organizations do not have to seek the approval of the IRS until they file their first tax form, usually after more a year of existence. This means that group incorporated this year do not have to defend their political activity until well after the polls, by which time the donors and organisers have established a new group ready to fight the next election.

If Obama hopes to win in 2012, he has to rein in the mammoth political spending of these conservative 501 organisations. But Democrats will have no chance of overcoming a Republican filibuster in the next Congressional session to enact legislation that will end the spending of the groups, either through a new attempt to pass the DISCLOSE Act or by revamping the Federal Election Commission.Nor will any argument put forth by liberals persuade these groups to voluntarily reveal the identity of their donors. And there is no chance of using the judiciary, bar an unexpected change in personnel on the Supreme Court, to force changes in the current federal campaign laws. The only option left to Obama is to convince the IRS to become a watchdog of the political activities of the 501 groups, under the powers of inspection that it already possesses.

Democrats are becoming resigned to losing heavily in November. And, as politicians are apt to do, they are looking for someone other than themselves to blame. The argument, put out by Obama himself, runs that the electorate would fully support progressive policies if only the message was not insidiously sabotaged by the dirty campaign money of wealthy individuals and big business. 

The Citizens United ruling of the Supreme Court, and the resulting spending during this election, has only reinforced this liberal worldview. So although the Democrats may have given up on this election, expect the real fireworks to begin next year as they try to fend off the assault of a Sarah Palin or Mike Huckerbee, bankrolled by conservative 501 groups, on the reelection bid of President Obama. The current president may like to present himself as the representative of a new transparent politics, but if he doesn’t get down and dirty next year, come January 2013 he will find himself on the outside looking in.