Dark money rising
Outside money, lots of it hard to trace, is flooding political races in the US, dramatically altering the campaign playing field. Wendy Kaminer, iconoclastic lawyer, civil libertarian, and political observer, and Liam Kerr, who heads a group that’s part of the spending spree but nonetheless worries about its impact, consider what it’s doing to campaigns and what, if anything, should be done ab
Citizens United upended electoral politics across the country. The 2010 Supreme Court decision, and the court rulings and regulatory decisions that have followed, held that corporations and unions could spend unlimited amounts of money on political efforts. The case recast the role of already weakened political parties, shifting money and power further outside the party system. It forced politicians, regulators, and citizens alike to try to adjust to a new reality that continues to shift in unpredictable ways. Boston was witness to that new reality in last fall’s mayoral race, which drew an unprecedented influx of outside spending.
The arrival of big money from outside groups in local politics is far ahead of the regulations governing it. There has been a surge in outside political spending by wealthy individuals, corporations, and labor unions, through a slew of new political committees and nonprofits. Savvy political operatives are increasingly using IRS rules to shield the identity of the donors behind all this spending from public scrutiny. Dark money is now coursing its way through all levels of American politics.
To Wendy Kaminer, a noted lawyer, author, civil libertarian, and Boston resident, there are grounds for concern, and a series of thorny free-speech issues lurk nearby. A contrarian on many matters, Kaminer has spent her career taking on everyone from self-help practitioners to Biblical literalists to pornography censors. She’s a former ACLU board member who became a sharp critic of the organization over free speech matters. Fifteen years ago, in a spirited Conversation interview in these pages, she crossed swords with Rev. Eugene Rivers over church-state issues and education policy (“Education, religion, and prayer,” Winter 1999). Lately, Kaminer has earned barbs from liberal activists for her argument that the hue and cry surrounding the rise of outside spending is overblown. Kaminer has been a leading critic of activists who are trying to overturn the Supreme Court’s Citizens United decision. She views Citizens United, and its related cases, through a free speech lens. Kaminer is troubled by the increasing popularity of dark money groups, like Karl Rove’s Crossroads GPS, that use their nonprofit status to duck donor disclosure rules. But she’s equally worried that ongoing attempts to rein in hyper-political nonprofits will wind up exposing everyone from the Sierra Club to the National Rifle Association to disclosure regulations meant for political committees, not citizen advocacy groups. She believes the response to Citizens United shouldn’t be to crack down on outside groups, but to lift contribution limits on individual contributions to political candidates.
Liam Kerr is a somewhat reluctant participant in the outside money arms race. Kerr is the head of the Massachusetts chapter of Democrats for Education Reform, a New York City organization with several hedge-fund managers on its board of directors. The group was formed to provide a financial counterweight to teachers unions, and in the recent Boston mayoral race it poured $1.3 million into efforts to support John Connolly, who lost to Marty Walsh. Kerr, a graduate of Dartmouth’s business school, says the money was spent defensively, trying to offset a host of pro-Walsh labor committees.
Spending totals from pre- and post-Citizens United races in Massachusetts tell a starkly contrasting tale. Less than 1 percent of the spending in the 2006 gubernatorial race came from outside groups; in 2010, outside money reached 31 percent of the gubernatorial race’s total. The 2009 Boston mayoral race attracted just $8,700 in outside spending. Four years later, outside groups dumped $4 million into the race to replace Thomas Menino.
Outside money poured into Boston’s mayoral race from all quarters. It came from Working America, a super PAC affiliated with the national AFL-CIO; from American Working Families, a Virginia-based super PAC run by Democratic media consultant Bud Jackson; from Democrats for Education Reform; and from One Boston, a mysterious super PAC run out of a two-family home in Roslindale. One Boston’s chair and treasurer, Jocelyn Hutt, was a political unknown when her PAC dumped $480,000 into a series of pro-Walsh television ads, including spots that aired during the World Series. Hutt has declined to identify the funders behind her PAC and, under current state law, she didn’t have to file any campaign disclosures until the new year—with Walsh already settling into Boston City Hall. And if Hutt’s donors take a page from Karl Rove, and route funds into One Boston through a 501(c)(4) nonprofit corporation, they won’t face any public disclosure.
For a time, outside spending looked like it would become a flashpoint in Boston’s mayoral race. One candidate in the 12-way preliminary election, Rob Consalvo, pushed hard to emulate the People’s Pledge that Elizabeth Warren and Scott Brown struck in 2012, and have the field of mayoral hopefuls voluntarily foreswear outside expenditures. The effort gained steam in August, when the education reform group Stand for Children announced plans to spend $500,000 promoting John Connolly’s candidacy. Under public pressure, Connolly swore off all outside spending, asking Stand to stand down and also asking Kerr’s Democrats for Education Reform to pull their canvassers off the street.
Marty Walsh refused to follow suit, calling the pledge against outside money a political gimmick. Outside groups wound up spending $2.5 million on Walsh’s behalf— slightly less than what Walsh himself spent. Democrats for Education Reform jumped back into the race in October, spending money at a furious pace in a bid to catch up with the pro-Walsh PACs. Outside spending totals soared well past the $500,000 mark that ignited the Stand firestorm, but after the August imbroglio the pledge faded as a campaign issue.
Massachusetts isn’t alone. Recent mayoral races in New York and Los Angeles attracted millions in outside PAC spending. Outside groups in the recent Los Angeles school district race outspent the field by a wide margin. Democratic-aligned super PACs just poured buckets of money into small-dollar legislative races in New Jersey, while brothers David and Charles Koch, the well-known conservative activists, recently funneled money into local races in Iowa.
Locally and nationally, regulators are scrambling to get ahead of a likely wave of outside spending in 2014. The Internal Revenue Service is trying to impose new restrictions on dark money 501(c)(4) groups, which may spend unlimited sums on political races, or funnel unlimited sums into super PACs, but which are currently exempt from donor disclosure regulations. (Democrats for Education Reform, for one, channeled the funds it spent in Boston through a nonprofit.) The IRS effort raises serious constitutional questions, and is likely to invite fierce political opposition. In New York, an anti-corruption commission appointed by Gov. Andrew Cuomo is pushing for stricter disclosure of outside expenditures, lower individual campaign contribution limits, and the public financing of political campaigns. Massachusetts Secretary of State William Galvin is now calling for the disclosure of outside campaign spending in real time—one point both Kaminer and Kerr agree on.
Outside money’s rise has changed electoral politics for politicians, regulators, and citizens alike. The changes remain volatile and unpredictable. In early December, I sat down with Kaminer and Kerr at the CommonWealth offices to talk about these changes. What follows is an edited transcript of our conversation.
commonwealth: How would you both classify the outside spending we’ve seen in the Boston mayor’s race, in the Los Angeles mayor’s race, in the LA school district races? Is this a whole new dynamic, or a shift that’s been happening for a while?
wendy kaminer: I think the practice has shifted gradually. In some ways, the law has shifted more gradually than people realize. Citizens United is so widely misunderstood and over-simplified. People tend to use it as a symbol for whatever they don’t like about campaign finance. I think it’s an amplification of a gradual shift and, personally, I suspect it has more to do with growing inequality of wealth. Individuals for a long time have had the right, and I think they should have the right, to spend money in order to amplify their political opinions. I think what people often miss out in these debates is that 20 years ago you didn’t have so many people who could put seven figures into a campaign.
liam kerr: In the Boston mayor’s race, in particular, we saw by far the most aggressive spending by groups affiliated with labor unions. It’s an extension of playing the game, playing the game to win, understanding the rules better than others, having the infrastructure and treasury to act on it. History is written by the winners, and so are campaign finance laws. A single pipefitter’s union leader can contribute 30 times more to a campaign than an individual living in Massachusetts can. That certainly has something to do with the scale. You certainly have millionaires and billionaires contributing on one side, but in the case of Boston, it was labor.
cw: How did outside spending influence the way the Boston mayor’s race was conducted?
kaminer: There was a lot of goodwill toward Marty Walsh. It had nothing to do with money. What would have happened if he hadn’t won the endorsement of Charlotte Golar Richie and Felix Arroyo and John Barros? We would have had a very different race. He didn’t win those endorsements because he had more money from labor. My suspicion is, John Connolly didn’t lose because of the money. He lost because of a whole host of reasons. I’m not saying money didn’t have an effect. It’s really hard to quantify.
kerr: The financial number is the easiest gauge. There are secondary impacts that were felt greatly. We saw very clearly the ability of an outside group to go dirty without getting any dirt on the candidate. That can be invaluable. Another thing is that the opportunity cost of a candidate’s time is as high as anything in a campaign. You have a candidate who, from the night of the [preliminary] election until a week before the [final] election, is focusing nearly entirely on raising money in three-figure denominations. That candidate’s time could have been freed up, knowing there was a ton of outside money coming in. If you know there’s a decent shot that a very generous benefactor from Roslindale, who hasn’t previously been involved in politics, is willing to throw in a thousand maximum contributions’ worth of television commercials, you will spend your time differently.
cw: Liam, tell how this race unfolded through your eyes, how you conceived of your organization’s role initially, and how that changed in August when your candidate asked you to stop spending on his behalf, and then in October, when you made the decision to get involved again.
kerr: We went back to 2010, to that first election in a post-Citizens United world in Massachusetts politics, looking at the effect the Massachusetts Teachers Association had on that race. Three things stood out to us. One was the ability for this race to be shaped by outside money, and the need to be prepared for that. The second thing was the power that outside groups have from their money, even when they don’t spend. The MTA could not spend a dime in the 2014 primary and be one of the biggest players because people know they have the capacity to spend. The third was making education the top issue. We were in a Globe article soon after Menino announced he was stepping down, with some polling data from the president’s pollster, looking at some of the major issues in the race, education being number one. We started to think about taking on a role, separately from the polling on the issue. If there were to be a candidate that had education as their number one focus, we’d get ready for that. John Connolly emerged for us as the perfect combination of a viable candidate, with the focus on the style of education that the president and others are focused on.
By October, we realized the candidate we had supported might get completely blown out of the water, based on that combination of outside money on television, and negative campaigning. There was a time, given the poll numbers, and looking at the TV ads Bud Jackson had run in previous elections, we were concerned there might be a John Connolly education-focused administration that had been dragged down by negative advertising. Obviously that turned out to be not a concern we had to worry about. The negative ads didn’t come out in the way we feared they would. But that second part, the ability to really accelerate spending, coincided with the change in the polls.
kaminer: But along with those TV ads, there was so much one-to-one personal outreach. I know people who said they were called multiple times by Walsh. They were approached in person multiple times. It was an incredibly good field operation. And a very smart and appealing candidate.
kerr: We can hold two thoughts simultaneously. The Walsh team ran an unbelievable campaign. They ran a masterful campaign. We think Marty Walsh is great on education issues. He’s a great public servant. He has a very ambitious education plan that we hope he can achieve.
cw: Did your final spending break down along the lines you’d sketched out during the summer?
kerr: No, not at all.
cw: It went out the window based on the amount of time you had?
kerr: You can’t ramp up field. I’m sure John Connolly would love to be able to ask 1,000 people to just take the day off. It’s not a reality for us, or for the candidate we were supporting. We had close to 200 people on Election Day, but you can only ramp up personnel so far. If we could’ve gone straight through [without the pause from August to October], much more of our resources would’ve been dedicated toward field.
cw: What was the role of One Boston? This PAC comes from nowhere. No one has any idea who they are or what they stand for, and they drop half a million dollars on TV ads during the World Series. How much do they change the post-election conversation?
kaminer: I wouldn’t begin to quantify the effect of that spending, but I would say it exemplified the need for disclosure. I think you’ll find wide support for disclosure, even among strong First Amendment advocates who would oppose depriving any corporate entity of the right to spend money on political speech.
cw: Is it fair to say One Boston’s ad buy resonated in ways that the Working America or American Working Families or Democrats for Education Reform spending didn’t? Because of the fact they just appeared out of nowhere?
kerr: That did seem to cross the line with people. That was an instance when people said, we have so little idea who these people are. I think it did get people looking at the broader role of outside money in the race, although not nearly as much as I would’ve thought. Coming out of the Citizens United ruling, John McCain and others said, wait for the backlash, there’ll be a great backlash against this. One thing [Working America and American Working Families] really understood was, people don’t care.
kaminer: You could look and say there was a real double standard here, the way Connolly turned down the money, and the benefits Walsh may have gained from the outside money. It was interesting to see that turning down this People’s Pledge didn’t seem to have any negative repercussions.
cw: Despite the fact that, if you poll on outside money, it polls terribly.
kaminer: It may poll very badly as a general proposition, but it comes down to a particular race with particular candidates. First of all, remember that most people are disengaged. The minority of people who get engaged, a majority of them aren’t getting engaged until fairly close to the election. They’re more swayed by their impression of each candidate. Especially in a local race, where there is an opportunity for candidates to do a lot of retail campaigning, and everybody has to know somebody who is strongly endorsing a candidate, I don’t think you can dismiss the importance of those types of personal factors.
kerr: We’re asking a lot of the general public here. A campaign will try to get on the front page of the Globe to say, we had a big fundraising haul this period. But then, they don’t really want anyone to know about all the outside money they get. And there were such similar headlines for both. Around October 15, there was a big headline that Connolly had raised something like $700,000, and that was supposed to be a good thing. So the average voter picks up the paper and says, wow, he raised $700,000, he has momentum. But then the next week the headline says, groups have spent $700,000 supporting Marty Walsh, and that’s bad? I don’t think that translates to average voters.
kaminer: It is an interesting phenomenon, that you can get this general recoil against the idea of a lot of spending, especially outside spending, yet it’s very hard to figure out what the actual effect is in particular races.
kerr: It’s also a very small Venn diagram between people who both get excited about criticizing Citizens United, and are willing to criticize anything a union does.
kaminer: Or anything the candidate they support does. So the people who were yelling about the Koch brothers spending, were they yelling about George Soros, too?
kerr: You see the same thing even with Obama. In 2012, he’d been criticizing Citizens United for two years, and then he spun off Priorities USA [a super PAC that spent $66.5 million supporting Obama]. If you do have an issue you care about, the finance piece takes a back seat.
kaminer: The original sin of all of this, the origin of all these problems we have, was the 1976 decision in Buckley v. Valeo. It affirmed the First Amendment right of individuals to make independent expenditures, but upheld limits on individual contributions to candidates. What that did over the decades was divert a lot of money that I suspect would have gone to candidates and political parties, to these outside groups. It really contributed to the weakening of political parties, which in my opinion is not a very good thing. Political parties were weakened at the expense of a lot of these dark money groups. I don’t know if the Pandora’s box of independent spending has been opened. I don’t know if it would begin to close a bit if we lifted limits on contributions to candidates. But, if I were queen, that’s what I would do.
cw: So this gets into, how do we respond to this new world? I’ve heard a lot of talk around here about raising contribution limits as one possible response. New York is considering lowering contribution limits and doing public campaign financing. Does any of this effectively get at the issues we’re talking about today?
kaminer: It remains to be seen. I think we need to figure out disclosure for dark money groups. And, at the same time, I think we should not just raise but lift limits on contributions to candidates that would be subject to full disclosure. There’s a very important case before the Supreme Court this term, which challenges limits on aggregate contributions to candidates and political parties. If you lifted the aggregate limits, you could max out to as many candidates as you wanted to, you could give as much money to the party as you wanted to. There would be less money, I suspect, that would be going to these really unaccountable dark money groups.
kerr: I definitely agree that the weakening of the parties is problematic. You have, on both sides, a shrunken core structure that’s formal and public and accountable, and these really powerful groups on the outside. The limits are a good question at both the state and federal level. The $500 state limit, given what we’ve seen from outside groups in the last few cycles, it’s like we’re saying to a teenager that their curfew is 7 p.m., and they sneak out at 8 p.m. and steal a car and go to a kegger—maybe we should just let you stay out until 11. It’ll be safer for everybody.
cw: If the problem you’re trying to correct is the volume of money in the system, the answer is to allow more money to flow into the system?
kaminer: That’s not the problem I’m trying to correct. The problem I’m trying to correct is, one, unaccountable dark money in the system. That’s a really serious problem. The other problem I’m trying to correct, and I wish somebody would figure out a way to do it, is the problem of the growing concentration of wealth and inequality, which I said at the outset is a big piece of this.
cw: Lawrence Lessig at Harvard Law School has argued quite strongly that the problem is the amount of money in the system, that the problem is the divergence between the size of the electorate and the tiny slice of it that is involved in politics financially. Super PACs widen that disparity. So simply raising the individual contribution limits, or removing the individual limits on total contributions, doesn’t really do anything to involve more people financially, or to blunt the impact of super-wealthy individuals on elections.
kaminer: It’s not a simple problem, and there’s not going to be one way to correct it. If we’ve learned anything else from the history of campaign finance restrictions, we should learn something about the law of unintended consequences.
cw: At what level are reforms going to have to happen? How much room is there for state or local regulators to shape the activity of outside groups? Right now, we have state and local regulators responding to a federal Supreme Court case.
kaminer: We had a case before the Supreme Court in the last year or so that came out of Montana, where Montana tried to defend its ban on independent expenditures by corporations, and the court wasn’t going to hear that. I don’t think there’s much states can do to regulate, much less prohibit, independent expenditures by corporations and unions. The Supreme Court has declared it protected political speech. What the states do have the power to do is reconsider their own limits on contributions to individuals. We have a real serious imbalance, when you look at what the limits are on contributions to candidates, versus the free rein given to outside spending.
kerr: I generally agree there’s little that can be done at the state level, given the mandate from the Supreme Court. I think the local office of political finance here does a good job. They’re very proactive, very professional, and are working to increase disclosure. I think there are things that will be tightened up, and given the experience of this past year, should be tightened up around disclosure. You spoke about unintended consequences a moment ago. You do have a number of very smart, wily people working full-time to push as hard as they can within the bounds of the law. When you do shift one lever, those people will find a way.
kaminer: Money always finds a way. It’s a fact of life. It will always be a moving target.
cw: Have we seen the last People’s Pledge?
kaminer: Not necessarily.
kerr: In August, you would have said, will we see outside money again? It can change. Money finds a way, politicians find a way to do things that will give them the slightest edge in winning.
kaminer: I think that Marty Walsh had a lot of advantages, particularly advantages that helped him decline to sign the pledge and not pay a price for it. Other politicians in different races might not be in that position. It depends on what the equation is in any individual race. Personally, I don’t like people’s pledges, because I don’t think it’s candidates’ business to tell me whether or not I can engage in political speech during a campaign. If they want to punish [themselves] because I engaged in political speech against their wishes, well that’s their problem.
kerr: What’s fascinating is the game theory. We tried to understand what cards everyone was holding, and we thought Walsh would sign the pledge. I was surprised he didn’t. They could’ve kept getting $15,000 direct campaign contributions from every union local in the country, and they would have insulated themselves from negative attacks. It was clear we wouldn’t go negative on someone who was so close with us on the issues, but another group, knowing what cards everyone had, another group could have sprung up and gone negative on him.
cw: You talk about game theory. The interesting thing about outside money in general is the way you can run different scenarios on how it comes into play. There are several different scenarios where outside money could come into play in a governor’s race. It’s very much a prisoner’s dilemma-type situation, where if you’re running against Martha Coakley and you expect EMILY’s List to spend on her behalf, and you’re a partisan of someone else, do you then have to match that money? There’s a possibility that national Republicans think they could make some great headlines taking back Massachusetts after eight years of Deval Patrick. So your calculus as a campaign adviser, as a wealthy supporter on the other side, in my mind it sets up where people raise and spend money defensively, because they expect someone else to.
kerr: The top argument against a Boston mayoral challenger over the last 50 years was, oh, they’ll never raise the money. Nobody will give them $500. What if a challenger coming up to Menino this time had a group ready to go? It changes a lot of dynamics. It changes the way people govern.
cw: If you’re a state legislator, or if you’re the head of the state Office of Campaign and Political Finance, what’s at the top of your to-do list between now and next November?
kerr: Disclosure. Immediate disclosure.
cw: Can disclosure work in a world where the feds don’t have a handle on 501(c)(4)s?
kerr: It’ll at least bring the issue to a head in the media. Even if you say your number one donor is a nonprofit, that leaves it up to the nonprofit’s donors to disclose themselves. Even if disclosure doesn’t lead all the way, or doesn’t change people’s perceptions, at least it brings it out in the media, so at least the public can pay attention to what’s going on.
kaminer: I don’t think you’re going to find a lot of disagreement on disclosure. But again, you run into serious constitutional problems when you talk about disclosure and 501(c)(4)s. The problem is finding a way to do it that doesn’t force disclosure on groups that shouldn’t be forced to disclose. It’s something the IRS really has to struggle with. The 501(c)(4) designation has been abused. But there are a lot of very real social welfare groups and advocacy groups that perform essential functions in a democracy. We should not have them subject to the same set of rules, especially the same set of disclosure rules, that we subject groups organized primarily, if not exclusively, for partisan electoral purposes. I do think it’s very important to try to find some way of distinguishing between partisan electoral groups and these legitimate social welfare groups. The legitimate social welfare groups have an important right to privacy, the partisan electoral groups in my view do not.
cw: How difficult is it to crack open disclosure on 501(c)(4)s, specifically?
kaminer: I think it is, and it should be, pretty near impossible, when you’re talking about legitimate (c)(4)s. Let’s say you want to give money to a gay rights organization and you live in a fairly homophobic community or you work for a fairly homophobic employer. You would suffer real consequences if your membership or your donations to this group were known. Those are very important rights. I don’t think we should diminish the importance of the right to anonymous speech.
cw: One of the things you just said, and I think points toward the thorniness of this issue, was, “legitimate (c)(4)s.” Who determines what a legitimate (c)(4) is? Where do you draw the line?
kaminer: Law is an exercise in line-drawing. I know it’s a large thing to put aside, but let’s put aside the practical political obstacles to getting anything done right now, and let’s just talk about what the ideals are. I don’t think it’s all that hard to fashion rules that would distinguish Crossroads [the 501(c)(4) Karl Rove founded] from Planned Parenthood or the ACLU.kerr: Use a percentage. There’s a number.
kaminer: I just don’t think it’s that hard. If 60 percent, or even 48 percent of what you do, is partisan electioneering, I think you should be distinguished from all these other (c)(4) groups. I think advocacy groups are easily distinguished from groups that don’t do anything but advocate for particular candidates in particular elections.