Dollarocracy (10 page)

What changed in 2012 was the price of that carousel ticket. It went way, way up—to more than $10 billion.

That number provides our place of beginning. Let's consider what $10 billion bought in 2012 and what it is still buying as you read these words.

The $10 billion total figure we use here, which is merely a baseline, is a good deal greater than the estimated fund-raising figures reported around Election Day 2012. “Total Cost of Election Could Be $6 Billion,” read the
New York Times
headline.
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“Election Costs to Exceed $6 Billion in 2012,” announced
Businessweek
.
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“Did That $6 Billion in Campaign Spending at Least Help the Economy?”
Time
magazine asked after the election.
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Even campaign finance reformers declared, “After $6 Billion Election Campaign, Movement to Get Money Out of Politics Starts a ‘Prairie Fire.'”
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Everyone seemed to agree that $6 billion, more than had ever been spent in an American election season, more than had ever been spent in any election season anywhere, was astronomical. And everyone was right. The figure was roughly $2 billion over the amount spent in 2004, the last election cycle where an incumbent president was seeking reelection.
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The fund-raising for the Obama-Romney race alone was ten times the level seen in 1996, the previous cycle where a young Democratic president was challenged by a senior Republican. We happen to think that multibillion-dollar spending spikes and tenfold increases in the amount of money raised are consequential.
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It's just that the spending was more astronomical than the headlines suggested. The $6 billion figure was based on an estimate by the ablest analysts of federal election spending, the folks at the Center for Responsive Politics, who released the number in an October 31, 2012, report that had the group's executive director, Sheila Krumholz, declaring, “In the new campaign finance landscape post–
Citizens United
, we're seeing historic spending levels spurred by outside groups dominated by a small number of individuals and organizations making exceptional contributions.” Krumholz was absolutely right in that regard, as she was when she added, “One thing we can say for certain is that the transparency the Supreme Court relied upon [in its
Citizens United
ruling] to justify this new framework has been sorely lacking.”
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Another certainty is that the regulatory agency tasked with overseeing elections, the Federal Election Commission (FEC), is worthless. “Virtually from the beginning,” Thomas Ferguson, Paul Jorgensen, and Jie Chen wrote, “dark forces of law and politics have combined to render the agency almost impotent as a regulator.”
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Today, the FEC's “powers” are “so weak that for most offenses it can only ask political groups to enter a voluntary process in which they bargain to agree to a monetary settlement,” as the
Washington Times
reported. “But campaigns have learned not to fear the body, and even those fines are often simply ignored.”
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This lack of enforcement means that accurate reporting of donations and spending is not a life-and-death concern. Likewise, it means the Supreme Court's call for independent super-PAC money not to be coordinated with a candidate's campaigns has been routinely and effectively flouted.
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The
New York Times
noted that “the result is a striking degree of symmetry” between campaigns and the “independent” groups supporting
them.
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Even the Internal Revenue Service (IRS) has exhibited little interest in making sure the various relevant nonprofit groups play by the rules.
Politico
's examination of the IRS's role concluded the service had a “feeble” grip on big political cash and was a “toothless tiger.”
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The metaphor widely used is that this is a wild, wild west environment where people shoot first and worry about the legal niceties later, much later, if ever. And there is no sheriff on the horizon.

Accordingly, the Center for Responsive Politics report from late October 2012 acknowledged, “What remains unknown—and may never fully be accounted for—is how much money secretive ‘shadow money' organizations spent, with some investing massive sums on ads, but also on unreported and purportedly ‘non-political' activities, as the election neared. It may take years to determine how much they spent. Furthermore, it likely will never be known who provided the vast majority of this money, which includes at least $203 million in the last two months.”
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Bloomberg Businessweek
wrote that “a Cayman Islands–style web of nonprofit front groups and shell companies . . . are increasingly being used to protect the identity of donors who want to get involved in politics in big ways without leaving a trace.”
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Thanks to a leak to the Center for Public Integrity, we know the pitch made to donors by one such shadowy group, Colorado's American Tradition Partnership (ATP). It led a successful fight to overturn Montana's one-hundred-year ban on corporate money in elections (a topic we explore in
Chapter 3
) and promised its prospective funders that “no politician, no bureaucrat, and no radical environmentalist will ever know you helped.”
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As the Center for Media and Democracy, which tracked what has variously been referred to as “shadow money” or “dark money” more closely than any group in 2012, explained it:

           
Unlike PACs or Super PACs formed exclusively for electoral purposes and which report all of their expenditures to the Federal Elections Commission (FEC), “dark money” groups are officially organized as social welfare nonprofits under section 501(c)(4) of the tax code or as trade associations under section 501(c)(6). Because these groups are supposed to primarily advance some sort of social welfare, or in the case of a 501(c)(6) the interests of a particular industry, they need only report their
electoral
expenditures to the FEC, rather than all of their spending.
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But—and this is a Grand Canyon–sized “but”—

           
electoral activities have been narrowly construed to only require reporting of expenditures on ads that explicitly call for the election or defeat of a candidate, allowing these groups to avoid disclosure by running “issue ads” that criticize a candidate on issues like taxes or healthcare but stop short of explicitly telling viewers to vote for or against. The omission of an explicit call for a candidate's defeat or victory allows the groups to claim with a wink-and-a-nod the ads were about “issues,” despite clearly being intended to influence the election.
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So it is that the roughly $44 million that Karl Rove's Crossroads GPS spent between January 2011 and June 2012 on issue ads scorching President Obama and Democratic candidates for the U.S. Senate went unreported on most formal measures of political activity. Elaborate schemes cloak the identity of donors. A loophole, upheld by a federal appeals court, allows dark money groups to hide the movement of money not expressly given to fund specific issue ads. Donors who wish to remain anonymous simply give to the general fund. Similarly, transfers of money among supposedly independent groups, party committees, and candidate-tied super-PACs are “governed” by so many different sets of “rules” that campaign activity can be shielded from even minimal accountability during the course of an election season, as well as for months, even years, afterward.
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Perhaps forever.

What we do know is that in 2012 “outside money” overtook traditional campaigns and political parties as the main source of election funding and that within the category of outside money, the entirely secretive dark money groups were a significant factor. The dark money total discussed in late October media reports—$203 million—kept rising after major media outlets seized on the $6 billion figure for “total” spending. By mid-November, Center for Media and Democracy executive director Lisa Graves was noting, “At least $400 million,
and probably much more than that
, was spent by groups organized as ‘nonprofits' that do not disclose their donors or report many of their electoral expenditures, so little is known about who funds them, who is really calling the shots, and whether or not they are illegally coordinating with candidates.”
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What did Graves mean by “probably much more”? Hundreds of millions more, she told us. And she was right.

Only after the 2012 election, and after the media had fixated on the $6 billion figure, did we learn that Sheldon Adelson had spent “far more” on his
various political charities than had been imagined. How much more? On the eve of the election, the boldest estimate of his campaign giving put the figure at $52.2 million.
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One month later, in early December 2012, $150 million in campaign spending by Adelson and his wife had been identified. And that number was all but certain to rise.
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Because he approached the campaign with such billionaire bravado, Adelson was one of the more transparent, easily identified big donors. Others, for instance those who worked at the state and local levels to shift control of legislatures and school boards as part of long-term strategies to privatize education, by design flew well under the radar. But not so far under that the real cost of unlimited spending cannot be detailed.

Let's look at the data. And in so doing, let's go deeper. Let's look at how money is gathered and spent to influence every nook and cranny of American public life. We're going to introduce you to a lot of numbers because, as former president Bill Clinton famously said during the 2012 campaign, it is about “the math.” But our point in detailing where the $10 billion was collected and where it went is not to provide an accounting of dollars and cents. Our point is to provide a sense of how the money-and-media election complex is fueled. And why.

We are more than happy to accept the Center for Responsive Politics' well-calculated $6 billion figure for relatively transparent spending on the 2012 federal races as a baseline. We also accept the well-reasoned assessments of the researchers and analysts who track the no-man's-land of campaign finance abuse when they say that dark money spending in 2012 was “much more” than $400 million. How much more is the question, and when we consulted with analysts from the Center for Media and Democracy, they replied that the number could easily exceed $1 billion. Very easily.
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This dark money is overwhelmingly, though not exclusively, Republican.
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Liberal dark money that ran ads for a Libertarian candidate in the 2012 Montana Senate race may well have contributed to Democrat Jon Tester's narrow re-election.
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But this is an area ideally suited for billionaires and corporate interests to operate surreptitiously, and it shows all signs of growing in importance.

By pulling the dark money discussion into the sunlight, and by acknowledging the immense amount of in-kind support that elected officials, political
parties, business associations, and unions provide to candidates in organized but essentially unaccountable dark aid, we can reasonably assert that the federal elections figure for 2012 exceeded $7 billion.

But federal elections were not the only ones on which Big Money was spent in 2012. The 2012 election cycle saw unprecedented spending at the state and local levels of government and on state and local recalls, referendums, and initiatives. In other words, if there was an election in 2012, there was Big Money spent on it—often, though not always, by the same wealthy individuals and corporations seeking to influence the direction of the presidential race and of congressional contests.

Much of the real power to influence public expenditures and policies rests in the statehouses, and some of the biggest spenders in American politics have recognized this fact. For instance, the Koch brothers may have started as big players on the federal level. But they long ago recommitted to a state-based strategy of funding gubernatorial and legislative campaigns in order to elect not just conservatives but also lockstep supporters of their antiunion, anti-public-education, antigovernment agendas. And they have coupled this money with huge amounts of structural support for the American Legislative Exchange Council (ALEC), in which representatives of major corporations participate in the drafting of “model legislation” that can then be forwarded on for introduction and passage by allied legislators.
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Similarly, billionaire Dick DeVos, an heir to the Amway door-to-door retailing fortune, and his wife, Betsy, both longtime leaders of the Michigan Republican Party, once bragged about their role in national politics. Betsy wrote in 1997:

           
[My] family is the largest single contributor of soft money to the national Republican Party. . . . I have decided, however, to stop taking offense at the suggestion that we are buying influence. Now, I simply concede the point. We expect to foster a conservative governing philosophy consisting of limited government and respect for traditional American virtues. We expect a return on our investment; we expect a good and honest government. Furthermore, we expect the Republican Party to use the money to promote these policies, and yes, to win elections.
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In the years since Dick DeVos spent $41 million on a losing Michigan gubernatorial race, however, they shifted more and more of their substantial giving to groups that work to elect state legislative supporters of school privatization schemes.
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And it was a significant shift. In 2007, Dick and Betsy DeVos were fined $2.6 million each, for a total of $5.2 million, for illegally funneling $870,000 from a Virginia-based political action committee into the Ohio affiliate of their All Children Matter operation. The transfer was eighty-seven times higher than that allowed under Ohio law and amounted to one of the most blatant assaults on campaign-finance limits in the state's history. The fines were imposed accordingly—amounting, as reported by the Ohio Elections Commission, a bipartisan grouping that unanimously imposed the sanctions, to “easily the largest fine the Ohio commission has levied.”
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