US Elections Special: How Limits on Campaign Financing Are Being Demolished for 2012

The 2012 elections are now less than a year away, and it would take a brave person to predict which party will end up winning the Presidency, and/or control of Congress.

There are two new, related electoral factors that will determine the results of that contest. Indeed, the historical interest in this election may ultimately lie in how it was won, and not in who won it.

One of those trends is the increasing ideological polarisation of American politics --- the failure of the Congressional "super-committee" this week to reach an agreement on economic policy is only the latest example of this development. This “hyper-polarization' is not just a present-minded myopia, but the outcome --- if Peter Orszag and others are correct --- of the long-term growth in income inequality in the United States.

The other trend, and an integral part of this politics of conflict, is the effort by actors on both sides of the political divide to Get Out Their Vote and to persuade moderates to join them. This election will be especially notable, and may become infamous, for the GOTV impact of ideological interest groups --- from partisan websites and bloggers to think tanks to pressure groups like Tea Party and MoveOn.org to grass- roots advocacy organisations like actblue.org --- through their direct or indirect financing of candidates.

The ugly issue of campaign financing is not new, but it has risen in prominence because of the January 2010 decision by the Supreme Court decision, which has opened the doors for corporations, unions, and individuals to make unlimited anonymous contributions to political campaigns. The ramifications of that decision, as they will affect next year's campaign are not yet fully known, but as Slate argued last month, “Federal campaign finance law is unraveling even faster than pessimists expected after Citizens United.”

Richard L. Hasen, a professor of law and political science contends that the decision could lead to “the return of soft money" in US elections. As of now, no-one is quite sure how much money --- other than it will be historic in its amount –--- will be spent next year or from where those funds will come.

However, consider this example from The New York Times. Its report describes how a series of ads supporting Senator Ben Nelson (D-Nebraska), “innocuous enough on their face", could “ open the door to a flood of similar ads financed by outside groups and even businesses working directly with political candidates — a sharp departure from past practice.” The Citizens decision was framed so that political candidates could not coordinate their campaigns with advocacy groups, but that separation, which in theory prevents politicians from becoming beholden to the groups who "bought" their election, is increasingly under threat.

In its 5-4 vote, the Supreme Court decided in the Citizens United case that corporations and unions, on grounds of freedom of speech, could provide unlimited funds to political campaigns "independently" supporting a candidate. Hypothetically, this meant that the (imaginary) International Oil Syndicate could release as many ads as it wanted, stating they supported the (imaginary) candidate Inoils Pocket because he supported more offshore drilling. Conversely, they could air messages attacking Inoils Pocket's opponent, Crew Zader, because he believed in the false science of climate change. At the end of the messages, however, it was to be made clear that International Oil Syndicate were paying for these ads. Corporations, like individuals, have the right to political speech, but it should not be hidden.

Two months later, that doctrine began to be eroded with the Federal Court decision in SpeechNow.org v. Federal Election Commission. This ruling stated that political committees could now raise unlimited donations from individuals, unions, or corporations ---formerly limited to $5,000 for each entity --- to campaign on behalf of a candidate as long as these expenditures were independent of the official campaign.

Now an ad, or lots of them, supporting Inoils Pocket could come with the message "paid for by Friends of Inoils Pocket PAC". International Oil Syndicate would be listed as a contributor to this new Super PAC (officially called "independent expenditure-only committees"), but only in reports submitted to the Federal Election Commission, many of which are not available to the public until the elections are over.

The Super PAC can now raise huge sums of money with the ending of limits on donations, flooding the candidate's constituency with relentless advertising. In effect, International Oil Syndicate could give millions of dollars to support Inoils Pocket campaign, with the voter being little the wiser.

Now the situation is even murkier. These Super PACs are classed as "527 groups" by the Internal Revenue Service, as they are political advocacy groups and must reveal their donors. Moreover, conributions to "527 groups" do not receive a charitable tax deduction. But these 527 organisations have used a loophole in tax law --- charitable 501(c) groups, who do not have to publicise their donors, fund the 527 political action committee.

So International Oil Syndicate can contribute to the educational charity "Global Warming Debunked" who, as part of their allowance by tax law to contribute to political education, give money to Friends of Inoils Pocket Super PAC, who pay for the ad. Now International Oil Syndicate's name is not connected to the campaign of Inoils Pocket in any way. Instead, on the return to the Federal Election Commission, the money comes from "Global Warming Debunked".

That is our hypothetical case. Last year, however, a real-life version emerged. Karl Rove, the campaign strategist for George W. Bush, and others formed the Super PAC "American Crossroads" and the non-profit "social welfare" organisation "Crossroads GPS". In 2010, American Crossroads raised $28 million, a number sure to be dwarfed in 2012. No one knows who gave the money, since it has been funneled through Crossroads GPS.

Opensecrets.org, an arm of the Center for Responsive Politics, is attempting to bring some transparency to this murky world of campaign finance. In May, it reported, “Seventy-two percent of political advertising spending by outside groups in 2010 came from sources that were prohibited from spending money in 2006.”

Some experts on campaign finance argue that the Supreme Court decision has not significantly affected the process. Professor Michael Franz claims:

While interest groups were major players in the 2010 elections, the form and rate of that involvement was not dramatically different from past participation. Candidates and parties in 2010 still sponsored 85 percent of all ads in Senate races and 88 percent of ads in House races.

This research may be obsolete two years later, however, with an increasing percentage of election spending coming from Super PACs. This could be the year that those Super PACs emerge as the "kingmakers" --- albeit hiding the identity of the kingmakers who lie behind them --- of American politics.