Bloomberg News

The High Price of Anonymous Cash in American Political Campaigns

June 06, 2011

June 6 (Bloomberg) -- The 2012 election is almost certain to be the most expensive in history -- and that’s not a bad thing. Communicating with a nation of 310 million -- via town halls and television ads -- is costly. As long as campaign contributions and expenditures are well-documented, voters benefit from the increase in information and attention that money buys. But as a Bloomberg News investigation last month revealed, anonymous donors spent at least $137 million in 2010 to influence the composition of Congress. They are sure to spend more in the 2012 campaign, subverting electoral accountability with every undisclosed dollar.

Last year, Republican groups won the opacity sweepstakes. Conservative groups relying on anonymous funds outspent liberal ones by 7-1, according to the Center for Responsive Politics. One such group, American Action Network, used anonymous contributions to pay for 178 airings of an ad claiming Democratic Representative Ed Perlmutter of Colorado had supported dispensing Viagra to rapists and pedophiles. The claim was false. American Action’s chairman, political veteran Frederick V. Malek, refused to disclose his donors and claimed he was unaware of the “specifics” of the ads his group had produced. Another group, Taxpayer Network, produced attack ads against California Senator Barbara Boxer that falsely accused her of denying health care to wounded veterans.

‘Outside Groups’

American Action, Taxpayer Network and others are routinely called “outside groups” because they are not official party committees, and they are forbidden from coordinating with parties or candidates. In reality, they are consummate insiders whose efforts are choreographed. Most of the groups emerged from a nexus of entrenched party operatives and donors. For instance, American Crossroads, another group, raised $71 million for the 2010 campaign; it is the brainchild of Karl Rove. As the Bloomberg report pointed out, in addition to serving as conduits for anonymous donations, many of these groups fail to report their spending to the Federal Election Commission as required by law.

Is this anonymous flood of money the Supreme Court’s fault? The short answer is: yes on the open floodgates; no on the anonymity. In its 5-4 ruling last year in Citizen’s United, the court removed restrictions on spending. But at least there was a plausible Constitutional theory behind the ruling -- money equals speech, which cannot be proscribed. The Court’s decision was based on an explicit presumption that all donations would be disclosed, thus enabling the kind of transparency and accountability that distinguishes democracies from banana republics. As former FEC Chairman Trevor Potter wrote here, however, the FEC issued rules enabling anonymous donations to flourish, effectively undermining the Court.

Handy Excuse

Having been clobbered by anonymously financed attack ads in 2010, Democrats are now forming their own groups for 2012 -- replete with innocuous names such as “Priorities USA.” Democratic Representative Chris Van Hollen of Maryland tried to bring transparency to campaigns last year with the Disclose Act. But he was undercut by his own party when the National Rifle Association demanded to be exempted from the law, and Democrats obliged. (A few other large organizations, including unions, would have walked through the NRA loophole). Republicans, who had opposed the bill even without the loophole, were given a handy excuse to kill it.

Contractor Requirements

President Barack Obama has recently proposed extending campaign disclosure requirements to federal contractors, under the theory that some disclosure is better than none. He is mistaken. Requiring only companies with federal contracts to disclose is not only inadequate, it is potentially dangerous. Think of it this way: Do we really want the White House paying extra attention to the political activities of corporations dependent on federal largesse?

For years, Republicans and Democrats alike supported transparency in political funding. Only after anonymous donations received a green light from the FEC did Republicans switch positions. Now that Republicans control the House of Representatives, perhaps they can draw inspiration from a member of their own caucus who realized the threat posed by secret donors well before they became an actual menace. “To have all of this unregulated campaign cash going to these organizations and allowing them to engage in campaign activities without any disclosure is -- it’s wrong.” That was John Boehner in 2006, five years before he became House Speaker. He and Democratic Senate leader Harry Reid would do the republic a favor by introducing bipartisan legislation to require disclosure of all political contributions. Anything short of that standard is an invitation to scandal.

--Editors: Francis Wilkinson, David Shipley

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To contact the Bloomberg View editorial board: view@bloomberg.net.


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