The Re-Education of a Citizens United Denier

TThere is a new "third party" in politics--the corporate money party. Industry and corporate 501 c 4's are as powerful as party committees, but without party members, leaders or a public platform. As Schmitt writes, they're "a lean, mean, pure money machine."

by Mark Schmitt. Posted on The American Prospect November 5.

When the Supreme Court decision in Citizens United v. FEC came out last January, I declared myself a "Citizens United minimalist." It's not that I thought the decision was correct -- it wasn't, particularly in the precedents it overturned unnecessarily and the way it undermined the very basis of regulation of money in politics. But I believed that the specific change in the law created by the decision -- allowing corporations to engage in independent spending to influence elections, just as individuals already could -- would not be all that significant in practice.

After all, there was already a lot that corporations could do that they were not doing. Existing campaign-finance law didn't stop corporations from running ads that would influence an election without mentioning candidates by name or from running ads outside of the 30- and 60-day windows created by the law. I also doubted the scenario in which, say, Exxon-Mobil aggressively spends tens of millions of dollars to take out an unfriendly member of Congress -- publicly held and consumer companies generally shy away from such controversy, and there would be no guarantee of success.

In many ways, the first post-Citizens United election confirmed my prediction. Corporations didn't spend aggressively in their own name, and one that did, Target, on behalf of the Republican candidate for governor of Minnesota, became the focus of an aggressive boycott effort. (It should be said, though, that we only know about Target's role because it was a state race, subject to Minnesota's first-rate campaign-finance disclosure rules.)

But there's now little doubt that Citizens United had a considerable effect on this election cycle, in particular through organizations like Karl Rove's American Crossroads and Crossroads GPS, and through the massive spending of the Chamber of Commerce. The Sunlight Foundation estimated on Thursday that $126 million of $450 million in spending by outside groups was "made possible by the Citizen's United ruling," by looking at the total amount spent by groups that don't disclose their donors. But we'll probably never know for sure whether that money came from corporations or from (very wealthy) individuals -- presumably Rove's donors include both. And in many ways it doesn't really matter. Wealthy individuals usually have an interest in one or more corporations, and in cases such as Tea Party funders Charles and David Koch, whose Koch Industries is privately held, whether they take money from the corporate treasury or their personal back accounts is of little consequence.

But this is money assembled very quickly, and thus presumably in very large amounts, and certainly the Chamber of Commerce money, if not much of Rove's, came from corporations. They could have done some of this before Citizens United but didn't. What changed? Part of it was a sense that something significant had changed, and, as a couple of corporate lawyers have described it to me, executives rushed to ask their lawyers and their Washington lobbyists what the new rules were and how to take advantage of them. In addition, of course, at a time of action on health care, financial regulation, and energy, a lot of corporations felt they had more at stake than in the past. It was a change in norms as much as a change in the law.

But Citizens United isn't the only innovation that made this flood of money possible. The other key move is the use of the 501(c)4 nonprofit form to engage in purely electoral activities. This kind of nonprofit is permitted to engage in some political action, but that is not meant to be its "primary purpose." Enforcing that distinction, however, is up to the Internal Revenue Service, and as several experts told The New York Times last month, the IRS doesn't prioritize that kind of enforcement because they wouldn't collect any more taxes. The (c)4 structure allows donors to make unlimited contributions (unlike a political action committee, to which donations are limited), while also avoiding disclosure of donors (unlike the independent political committees known as 527s). Thus, Rove can assure large and corporate donors that they can avoid the exposure and controversy that Target faced.

The other question that will be asked is whether "Citizens United money" affected the outcome of the election. Sunlight says it did, noting that Republican groups spent money in races they won, and Democrats on races they lost. But that's to be expected in an election in which Republicans won the vast majority of close races. Political scientists would ask the question a little differently, as Eric McGhee did, looking at the predicted outcome of each race without the outside money and concluding that Republicans did slightly less well than they would have without the outside money. (Neither estimate includes the (c)4 money because that isn't linked to individual races; McGhee estimates that it might have affected up to 10 seats.)

But who wins is not the only question to ask about money in politics. When we think about money in politics, we tend to ask "How much?"; "Who does it come from?"; and "Does it matter?" But the better question to ask is, "Who has power?" And power can mean many things. Sometimes it's the (imagined) power of a big donor to walk into a congressional chairman's office and say, "I paid for this office." But there's far more power in being the person who can aggregate and allocate money and decide which candidates get a blast of last-minute independent spending and which get ignored. It's the power of the broker.

In the past, the party committees played that role, along with unions for Democrats and groups like the Club for Growth for Republicans. "Bundlers," who aggregated small contributions, were a concern of reformers. Starting in 2004, outside groups, mostly 527s, started to play this role, with funders who were fully disclosed. But the big change this year is that, with the combination of Citizens United, (c)4s, and a Republican establishment that didn't trust its own party chair, Rove and his allies were able to construct a full, alternate funding system. While they were not permitted to coordinate with candidates or the party, these committees have acknowledged coordinating their efforts with one another, dividing up races to avoid duplication. Such a structure has all the trappings of a political party, except without members, policy positions, leaders, or accountability. It's a lean, mean, pure money machine.

This, then, is where power lies in the post-Citizen's United world: Not with candidates or elected officials or political parties that voters can hold accountable, but with Rove and his allies, pure brokers of anonymous money, some of it corporate and some not. Democrats may or may not be able to compete in such a world -- they certainly were not outspent this year. But as power accrues to the money brokers, it shifts away from parties, elected officials, and candidates -- and thus away from voters. Citizens United isn't the only cause of this power shift, but it's certainly a big part of the story.