Auctioning Democracy: The Rise of Super PACs and the 2012 Election
Auctioning Democracy: The Rise of Super PACs and the 2012 Election
- For-profit businesses use Super PACs as an avenue to influence federal elections. 17% of the itemized funds raised by Super PACs came from for-profit businesses—more than $30 million.
- Because Super PACs—unlike traditional PACs—may accept funds from nonprofits that are not required to disclose their donors, they provide a vehicle for secret funding of electoral campaigns. 6.4% of the itemized funds raised by Super PACs cannot be feasibly traced back to an original source.
- Super PACs are a tool used by wealthy individuals and institutions to dominate the political process. 93% of the itemized funds raised by Super PACs from individuals in 2011 came in contributions of at least $10,000, from just twenty-three out of every 10 million people in the U.S. population.
- Wealthy respondents were nearly 2.5 times more likely than average Americans to list deficits as the most important problem facing our country.
- In spite of consistent majority public support for raising taxes on millionaires, among wealthy respondents, “[t]here was little sentiment for substantial tax increases on the wealthy or anyone else.”
- In spite of recent scandals on Wall Street, “more than two thirds of [survey] respondents said that the federal government ‘has gone too far in regulating business and the free enterprise system.”
SOURCES OF SECRET MONEY
501(c)(4) Nonprofit Corporations
The IRS has never clearly defined what it means for political activity to be an organization’s “primary activity” and many 501(c)(4)s take the position that they are permitted to spend up to 49% of their budgets on political activity.26 This can include contributing to Super PACs.27
Contributions from one Super PAC to another Super PAC
Another portion of untraceable money we found in some Super PACs came from other Super PACs that had raised money from an untraceable source.
Long before the courts created Super PACs, financing political campaigns was, by-and-large, a rich person’s game.
Individuals Contributing to Super PACs
Total Super PAC Fundraising
Adding in institutional donors to Super PACs tells a similar story. Of all the itemized money that Super PACs raised, 96% came in contributions of at least $10,000. Only 1,097 donors made contributions of this size,42 the equivalent (if all of these donors were people) of less than three and a half ten-thousandths of 1% (0.000351%) of the American population. (See Table 3. and Figure 5.)
WHY BIG MONEY SUPER PACS ARE BAD FOR DEMOCRACY
Our analysis of FEC data shows that a tiny minority of wealthy individuals and institutions is responsible for the vast majority of funds raised by Super PACs. Why, exactly, is this a problem? There are three major reasons.
Wealthy Contributors Determine Who Wins Elections
Winning Candidates Are Accountable to Wealthy Contributors
Wealthy Contributors Look Different and Have Different Priorities and Opinions than Average Citizens
Wealthy contributors helping their favored candidates win elections would not systemically skew politics or policy outcomes if these well-heeled donors were like the rest of us, if on average they had the same life experiences, opinions about issues, and political views as average-earning citizens.
But, unsurprisingly, this is not the case. We have long known that large campaign contributors are more likely to be wealthy, white, and male than average Americans. And recent research confirms that wealthy Americans have different opinions and priorities than the rest of the nation.
Our research shows that Super PACs are truly kryptonite for our democracy. They are tools used by for-profit business and big donors to translate economic success into political gain—sometimes in secret.
The Federal Election Commission
- Tighten rules on coordination. As noted above, current rules prohibiting coordination between Super PACs and candidates are riddled with loopholes. The Federal Election Commission should issue stronger regulations that establish legitimate separation between candidates and Super PACs. For example, the Commission could prevent candidates from raising money for Super PACs; prevent a person from starting or working for a Super PAC supporting a particular candidate if that person has been on the candidates’ official or campaign staff within two years; and prevent candidates from appearing in Super PAC ads (other than through already-public footage).
- Require Super PACs to include basic information about the tax and political committee status of their institutional donors in disclosure filings. This simple adjustment would make it far easier for concerned citizens to “follow the money.”
The Securities and Exchange Commission
The White House
The United States Congress
- Propose a constitutional amendment to clarify that Congress and the states may regulate individual and corporate political contributions and spending. The only complete solution to the problems presented by Super PACs is to amend the U.S. Constitution to clarify that the First Amendment was never intended as a tool for corporations and the wealthy to dominate the political arena.
- Tighten rules on coordination. If the FEC refuses to act, Congress can pass legislation codifying the com- mon-sense rules recommended above.
- Encourage small political contributions by providing vouchers or tax credits. Encouraging millions of average- earning Americans to make small contributions can help counter-balance the influence of the wealthy few. Several states provide refunds or tax credits for small political contributions, and the federal tax code did the same between 1971 and 1986.61 Past experience suggests that a well-designed program can mo- tivate more small donors to participate.62 An ideal program would provide vouchers to citizens up front, eliminating disposable income as a factor in political giving.63
- Match small contributions with public resources to encourage small donor participation and provide candidates with additional clean resources. Candidates who demonstrate their ability to mobilize support in their districts should receive a public grant to kick-start their campaign, and be eligible for funds to match further small donor fundraising. This would both encourage average citizens to participate in campaigns and enable candidates without access to big-money networks to run viable campaigns for federal office.
- Protect the interests of shareholders whose funds may currently be used for political expenditures without their knowledge or approval. Congress should require for-profit corporations to obtain the approval of their shareholders before making any electoral expenditures; and require any for-profit corporation to publicly disclose any contributions to a 501(c)(4) organization that either makes an independent expenditure or contributes to a Super PAC.
- Pass or maintain state laws preventing direct corporate spending on elections. The Montana Supreme Court recently upheld the state’s longstanding prohibition against corporate spending on elections by distinguishing Montana’s specific history of corporate-driven political corruption from the factual record considered by the U.S. Supreme Court in Citizens United.64 State legislatures should build an extensive factual record to support new or existing laws that protect the rights of their citizens and safeguard their democracies from corporate takeover.
- Pass resolutions calling for a constitutional amendment. States should urge two-thirds of the House and Senate to propose a constitutional amendment by passing resolutions calling for such a step.
- Enact corporate disclosure and shareholder protection provisions. Corporations are chartered in the several states and as such states can use their authority to require the protections recommended for Congress above.