What’s the Future for Campaign Finance Reform?

A man changes US dollars at a money changer in Manila on Tuesday July 5, 2005. The peso fell to a new six-month closing low against the U.S. dollar. The dollar finished at 56.245 pesos on the Philippine Dealing System, up from 56.090 Monday and the highest close since 56.255 on Jan. 6. The record low of 56.450 came in March 2004, during political uncertainty ahead of the presidential election.

A man changes US dollars at a money changer in Manila on Tuesday July 5, 2005. The peso fell to a new six-month closing low against the U.S. dollar. The dollar finished at 56.245 pesos on the Philippine Dealing System, up from 56.090 Monday and the highest close since 56.255 on Jan. 6. The record low of 56.450 came in March 2004, during political uncertainty ahead of the presidential election. (AP Photo/Aaron Favila)

November 19, 2012

In the lead up to the most expensive election in U.S. history, campaign finance reformers argued that the Supreme Court’s Citizens United decision — which upended years of hard-fought campaign finance reform laws overnight — had opened the floodgates to the influence of big money in American politics. Without tighter regulations, these advocates warned, SuperPACs and “dark money” groups would walk away the biggest winners in races across the country.

But as it turned out, some of the 2012 election’s biggest and most high-profile outside spenders were also, in the end, some of its biggest losers.

Casino magnate Sheldon Adelson contributed $53 million of his own money to conservative candidates throughout the election, nearly all of whom lost. Karl Rove’s high-profile Crossroads groups, which poured $300 million into races this year, saw a meager 1.29 percent return on their investments, according to the Sunlight Foundation. And a race-by-race breakdown of SuperPAC spending from the Center for Public Integrity illustrates that outside spending advantages don’t always spell victory.

So was the fear of big money’s outside influence overexaggerated? And do the outcomes of this election undercut arguments about the need for campaign finance reform?

Analysts who study the influence of money in politics answer no.

“It’s never been true that votes are a simple function of dollars,” says Bob Biersack, a senior fellow at the Center for Responsive Politics. “It’s much more complicated than that.”

Biersack says that the pressure of big outside money forced candidates to spend more time fundraising on their own in order to compete, instead of focusing on the issues. The danger, he adds, is that wealthy individuals can still dominate that process.

Moreover, not all the big spenders lost in this election. In fact, the impact of outside groups is much more apparent “down the ballot,” in smaller more local races, says Nick Penniman, a reform advocate at the Fund for the Republic. He points to the role big money played in state Supreme Court races across the country.

In North Carolina, for example, one outside group alone spent $1.3 million in ads supporting conservative Judge Paul Newby, who won re-election in a close race, allowing conservatives to retain their 4-3 majority on the court. His opponent, Judge Sam Ervin, had about $200,000 in support from outside groups, compared with Newby’s $2.5 million.

“In the end, the big spenders aren’t going to give up just because Karl Rove didn’t have the returns he thought he would,” adds Penniman. “The billionaire crowd can see they can play much more heavily in the political arena.”

Studies suggest that Americans are concerned about the influence of wealthy donors in politics.  Eighty-three percent of Americans believe there should be at least some limits on the contributions corporations and unions can make, according to an Associated Press poll (PDF) earlier this year. But when it comes to finding feasible solutions for reforming campaign finance, there’s little consensus, and plenty of challenges.

A Constitutional Amendment

In the 2012 election, large majorities of voters in Montana and Colorado, as well as in a number of city elections across the country, voted for resolutions affirming their support for a constitutional amendment that would overturn Citizens United.

Common Cause, one of the most high-profile campaign finance reform groups, supports an amendment, even if could take years. “The question isn’t about how long it would take, but what should our country do?,”  says Derek Cressman, who heads the group’s “Campaign to Reverse Citizens United.”

President Obama, who expressed support for an amendment in a Reddit chat earlier this year, argued that even if such an amendment doesn’t ultimately pass, the process could “shine a spotlight of the SuperPAC phenomenon and help apply pressure for change.”

But other reform advocates warn that focusing too heavily on an amendment will distract from other, more feasible efforts.

“The idea of an amendment is really effective in rallying people around the fact of a problem,” says Lawrence Lessig, a prominent reform advocate. “But it’s strategically a mistake to focus exclusively on that.”

Passing an amendment would require the approval of two-thirds of Congress, and then three-fourths of states. “Even if we amend, we still have to legislate,” says Penniman, who warns the political math is tough. “It’s imaginative, and it’s interesting, and it’s a useful organizing tool that’s generating a lot of energy right now around the country,” he adds. “I hope that energy continues and expands, and I hope we also focus on fixes that don’t involve changing the Constitution.”

Attracting Small Donors

An innovative approach to reform is attracting attention for the support it enjoys among technology industry leaders from the likes of Foursquare to Gilt Group.

In New York, Gov. Andrew Cuomo and a broad coalition of groups are expected to push a package in the coming months that includes more donor transparency, lower contribution limits, better enforcement of the rules and, perhaps most importantly, a public financing match system based on New York City’s.

In the opt-in program, candidates could receive $6 in taxpayer money for every $1 contribution from a citizen, up to a cap, at a total cost of about $2 per New Yorker each year, according to calculations by the Campaign Finance Institute.

“Two dollars is a price most New Yorkers would pay to get their democracy back,” says Sean Eldridge, the founder of Protect Our Democracy, a group leading in the reform effort. “In fact, I think we’ll save money. If you have a healthier system, you’ll reduce cronyism, and ultimately this investment in election reform will save money across the board.”

Backers like Eldridge argue the program would make public officials more accountable to all groups of people [PDF], rather than special interests and wealthy donors. They point to the system’s success in New York City, where the number of small donors has increased [PDF], and to the plan’s broad support — 74 percent, according a Siena Poll [PDF] earlier this year.

But Lessig, a professor at Harvard law and founder of the reform group Rootstrikers, says that while it’s a good idea, the New York model doesn’t go far enough. “You get a world where people can send their checks, and those checks will be matched,” he says, “but most Americans don’t have a bunch of money to hand over to politicians.”

A more “radical” idea that has Lessig’s support centers around vouchers for every citizen — essentially tax rebates that citizens can use to fund candidates they support.

In July, Rep. John Sarbanes (D-MD) introduced legislation that combines a voucher system with the principles of a public matching system for congressional elections. Under the plan, the government would give every citizen a $50 refundable tax credit to donate to candidates, and would match every $1 of private donations with $5 if that campaign rejects PAC money, and with $10 if the campaign only accepts small donations.

The point of the legislation, argues Lessig, is to get more people funding elections so that candidates are focused on the broader population, rather than small wealthy groups. He also notes that the voucher idea is the only one with Tea Party support, because conservatives don’t see it as a public financing plan that forces some to subsidize the speech of others. “We’ll never get reform until we attempt something that’s cross-partisan,” he argues, “until we talk about crony capitalism and about reforms that are respectful for the principles of the right.”

While the voucher plan has yet to attract broad popular support, the overall idea has been gaining traction within intellectual circles. Last week, a coalition of several reform groups including United Republic announced a plan known as the American Anti-Corruption Act that includes a tax rebate voucher system, as well as other broader reforms.

Voucher supporters, like Lessig, know that it would “take something extraordinary” to get these big reforms passed. “I can’t talk about a harder or more difficult reform, not because there aren’t people who share the view that the system is corrupt — they do — but because if this reform is passed, it would completely change the economy of lobbying, and lobbyists will fight that.”

Regulating the Regulators

Rather than proposing new legislation, some reformers argue the focus should be on ineffective regulation of existing laws.

The job of enforcing some of the most crucial campaign finance laws, like those restricting campaigns and outside groups from coordinating, falls to the FEC. But in recent years, the commission has been embroiled in such deep dysfunction and partisan gridlock that reformers are divided over whether it can even be repaired.

One idea for overcoming the partisan gridlock comes from a former FEC chairman.

Trevor Potter, who was a Republican commissioner from 1991 to 1995, has proposed that the commissioner nominations be agreed upon by a “bipartisan group of outsiders.” [Traditionally, the House, Senate and White House have each selected two members of the six-member commission.] President Obama has yet to appoint a single commissioner to the FEC since taking office, even though the terms of five of the six commissioners’ posts have expired.

Other reformers target the IRS, seeking more clarity in its rules governing tax-exempt non-profits, known as 501(c)(4)s, which over the last few years have flooded races with dark money contributions in unprecedented amounts. Evidence that some of these groups might be exploiting their tax-exempt status — which they get for “primarily” promoting “social welfare” — by engaging in political activity has prompted reform groups and some members of Congress to call for the IRS to review their status.

Reform organizations like the Campaign Legal Center are calling on the IRS to revise its statute governing 501(c)(4)s, while some Senate Democrats have asked the agency to issue new guidance clarifying the word “primarily.”

But Marcus Owens, who led the IRS’ exempt organizations division for a decade, told FRONTLINE the likelihood of that happening right now is slim. He says only Congress or the Treasury Department can revise the statute, and Treasury generally only revises or reinterprets rules that have hurt them in court. The issue of 501(c)(4)s being “primarily” engaged in social welfare, he says, has never come up in court as a problem for the IRS, so “there’s no motivating force for them to act.”

Though Owens says the IRS could issue guidance “of a less definitive form,” they are also unlikely to do so. Owens explains that the reason regulators never defined “primarily” to begin with is that the IRS didn’t want to limit what it could evaluate in deciding what was political activity. “There’s nothing to suggest the regulation isn’t working as is,” he adds. “From the IRS point of view, the current view works just fine.”

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