“Dark Money” Still a Bit Player (Continued): A Response to Robert Maguire

Last week, I calculated that non-disclosing groups account for roughly 5 percent of overall campaign spending to date in the 2014 election cycle. From this, I argued that much of the consternation over so-called “dark money” is overblown, and that attempts to further expand compulsory disclosure requirements beyond our already heavily regulated regime may do more harm than good.

Robert Maguire of the Center for Responsive Politics disputes those conclusions in a response. Maguire is generally more concerned than I am about groups that do not disclose their donors. He views their impact on politics as larger and faster-growing than I do. In this post, I’ll attempt to lay out the reasons why I find his arguments non-persuasive.

First, Maguire raises concerns about the rate of increase of “dark money” since 2008:

“[O]verall election spending doesn’t grow at the same pace as the amount of dark money we’re currently seeing. From 2008 to 2012, for example the total cost of elections grew by nearly 19 percent, from about $5.3 billion to $6.3 billion, while the total amount of reported dark money spending grew by more than 340 percent, from $69 million to $309 million.”

At first glance, the disparity between the rates of increase of so-called “dark money” and overall campaign spending appears stark. But I think those numbers tell us more about what spending used to be than what spending will look like in the future.

Consider the following hypothetical:  suppose Group A has $100 to spend urging people to vote for Candidate 1, while Group B has $1 million to spend urging people to vote for Candidate 2. In this scenario, Group A accounts for a little less than .01% of overall campaign spending. Now imagine I give $100 dollars to both groups. Group A now has $200 to spend and Group B has $1,000,100.

If we focus only on the rate of increase, it appears that Group A is surging ahead while Group B stagnates. Group A’s spending increases 100% while Group B’s spending increases by less than a single percentage point. But if we look at overall spending, we see that very little has actually changed. Group A still accounts for a miniscule portion of overall spending – now roughly .02%. To use the language of my original article, Group A is “still a bit player.”

The real world situation with “dark money” actually isn’t very different from the hypothetical I just described. For years, legal restrictions held such spending to extremely low levels while candidates and parties raised and spent significant amounts. Recent developments – most notably the Supreme Court case Citizens United v. FEC and the D.C. Circuit Court of Appeals case SpeechNow.Org v. FEC – changed the campaign finance landscape by lifting many of those restrictions.

As a result, we should expect to see “dark money” rise faster than overall campaign spending in the first few cycles afterward. However, we have no reason to suspect this is a permanent trend or a sign that “dark money” is overtaking, or will overtake, traditional sources of political spending. It just means “dark money” had a much lower starting point. In other words: it’s a lot easier to grow by 340 percent starting from $69 million than $5.3 billion.

Next, Maguire argues that we don’t know the true extent of “dark money” because not all spending that could influence elections is reported to the FEC:

“[T]he most politically active 501(c) organizations—the ones that aren’t required to identify their donors—often engage in months of “issue ad” spending that doesn’t have to be reported to the FEC unless it occurs within 30 days before a primary or 60 days before a general election.”

To Maguire’s point, no reasonable person denies that some “issue ads” could be perceived as political attacks that may influence elections. But it’s difficult to write regulations that would result in those ads being reported without also producing “junk” disclosure and harming nonprofit organizations by forcing them to comply with the costly burdens of campaign finance reporting. I attempted to explain the difficulty of this kind of disclosure in my original article:

Studies have shown that disclosure makes people less willing to donate. That may be an acceptable burden for those giving to campaign organizations, but for multi-purpose organizations like the ACLU, Planned Parenthood, or the Sierra Club, the loss of donations would seem to outweigh the benefit of marginally expanding disclosure.

Disclosure of these donors would also provide misleading information to voters. While donors to candidates, parties, and PACs know that their contributions will be spent on politics, the same is not true for donors to multi-purpose organizations. You can support the AARP without endorsing all of its political views.

Such “junk disclosure” associates donors with messages they are likely unaware of or may even oppose. If a group spends just 10 percent of its budget on political advocacy, it would clearly be unreasonable to claim all of its donors gave for that purpose. As long as such spending occurs, however, there will always be “dark money” in the system.

The only way to completely eradicate “dark money” would be to prohibit these entities from ever speaking about candidates or to require disclosure of donors to nearly every kind of organization, which would irreparably harm charitable, educational, and social welfare organizations. No country that values freedom of speech or civic engagement should tolerate either course of action.”

Further, the debate over issue advertising is nothing new, unlike the current “dark money” hysteria. Issue advertising has existed for decades and was not affected by Citizens United. If 2014 election spending statistics are somehow biased for not including such ads, the same is true of 2000 or 1992 or any other past cycle. In fact, we have more disclosure today than we did in those cycles: the requirement to report advertising that mentions the name of a candidate within 30 days of a primary election or 60 days of a general election (so-called “electioneering communications”) did not exist until McCain-Feingold was signed into law in 2002.

Contrary to Maguire’s view, I think my methodology is more likely to overstate “dark money” than understate it. Using data from the Center for Responsive Politics (where Maguire works), I calculated all political spending by 501(c)(4), 501(c)(5), and 501(c)(6) organizations as “dark money,” even though some of these organizations voluntarily disclose information about their donors. As a result, my calculated “dark money” total is sure to include spending from groups that actually do provide information about the sources of their funding.

Next, Maguire argues that my 5 percent statistic (which he avoids citing directly) is a poor way of analyzing the extent of “dark money,” and that we should instead look at selective races:

“This spending, reported or unreported, is not being evenly distributed across all elections, either. Dark money groups spend heavily in races that have the most potential to shift control of Congress, which is why Wachob’s percentage makes little sense.”

If it “makes little sense” to calculate “dark money” spending totals, one wonders why Maguire’s organization spends so much time doing exactly that. When it comes time to look back on an election cycle, you’ll notice CRP reports total spending, not just spending in “races that have the most potential to shift control of Congress.” I guess it is okay to report selective totals as long as your goal is to make money in politics seem big and scary.

Moreover, “dark money” is not the only form of spending that is concentrated in key races. And while “dark money” is more likely to be concentrated in key races than overall spending, this is likely a result of the fact that candidates and parties spend in almost every race, and these groups’ spending is not considered “dark money.” “Dark money” groups are independent spenders who naturally have greater involvement and interest in more important races, whereas to a candidate, no race is more important than his or her own. Current spending patterns fit that logic, and I maintain that the overall percentage of “dark money” campaign spending is relevant to a discussion of how prevalent and impactful “dark money” is.

Maguire goes on to imply that we he can distinguish between legitimate social welfare organizations and less worthy groups:

“In addition, the spending that most people find troubling isn’t coming predominantly from the established social welfare organizations that Wachob references, such as the League of Conservation Voters and the National Rifle Association. These organizations do spend a lot on politics, but they also have employees, volunteers, small donors and legitimate social welfare activities outside of their political activities.

Rarely do those who oppose better disclosure point to the growing number of 501(c)(4) and 501(c)(6) organizations that have few, if any, employees or volunteers and a handful of donors who provide massive election-year revenues  that plummet in off-years.”

If “legitimate” social welfare organizations can be so easily separated from sham political outfits, Maguire should be able to describe how further regulation could make this differentiation. He does not. And in fact, common proposals to reform the regulations governing political activity by 501(c) organizations – from the Bright Lines Project to the proposed IRS rulemaking – consistently fail to accomplish what Maguire implies is a matter of choice. The question of how to balance regulation so that groups like the League of Conservation Voters and the NRA can speak, but primarily political organizations cannot abuse the tax code, is not an easy one. Maguire does his readers a disservice by presenting it as such.

Maguire concludes by asserting that there is broad bipartisan agreement on disclosure:

“Eight Supreme Court justices agreed in the Citizens United decision that disclosure is a critical part our democracy, and the public agrees. A survey released just last week by the conservative Hudson Institute and the liberal group Public Citizen showed that clear majorities find the growing political activity by nonprofits problematic and support clearer rules.”

He is partially right: most people support disclosure of significant donors to primarily political organizations. But as we’ve explained before, advocates for disclosure have a bad habit of moving the goalposts.

When Maguire notes that “Eight Supreme Court justices agreed in the Citizens United decision that disclosure is a critical part our democracy,” he fails to mention that they were speaking to existing requirements, not proposals to expand disclosure further or to new kinds of organizations. Contrary to what many disclosure proponents repeatedly suggest, the Supreme Court has not given carte blanche to disclosure requirements, and in Buckley v. Valeo ruled that donor or membership disclosure can be compelled “only… [for] organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate,” or “funds used for communications that expressly advocate the election or defeat of a clearly identified candidate.” (Buckley v. Valeo, 424 U.S. 1, 79-80 (1976))

Further, Maguire’s description of the Public Citizen/Hudson Institute poll is a gross misrepresentation of its actual results. I can’t find anything in the poll about “clear majorities find[ing] the growing political activity by nonprofits problematic.” What the poll actually says is that, “80% of voters say political operatives, wealthy donors, and organizations abusing and taking advantage of the unclear rules is a problem.” Public opposition to the biased language of “political operatives, wealthy donors, and organizations abusing and taking advantage of unclear rules” is a far cry from finding “growing political activity by nonprofits problematic.” Similarly, public support for “clearer rules” is not the same as public support for restricting political activity by nonprofits. Case in point:  CCP calls for clearer rules, but opposes further restricting the legitimate activities of advocacy nonprofits.

Sloppy polling intended to fabricate the appearance of public consensus is a tried and true tactic of advocates for an even more expansive disclosure regime, because in reality, disclosure is more complex and nuanced than they let on and not a simple choice between MORE and LESS. As CCP has been known to say on the subject, the devil is in the details. My original article attempted to illustrate some of that complexity, and explain why 5 percent of “dark money” in relation to overall spending is not cause for panic. I stand by that view.

The Center for Competitive Politics is now the Institute for Free Speech.