We Need the DISCLOSE Act

Yesterday, Senators Sheldon Whitehouse, Charles E. Schumer, Michael Bennet, Richard Blumenthal and Elizabeth Warren of Massachusetts re-introduced the DISCLOSE Act, a comprehensive disclosure legislation that came within one vote of overcoming a party line filibuster and adopting comprehensive disclosure legislation. This time, Congress should pass the DISCLOSE Act and require disclosure of contributions to organizations engaged in political spending.

When the Supreme Court struck down corporate and union spending limits in Citizen’s United, Justice Anthony Kennedy wrote for the court that, “disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way.” Later, when court struck down aggregate limits in McCutcheon v. FEC, Chief Justice John Roberts noted that, “With modern technology, disclosure now offers a particularly effective means of arming the voting public with information.” On at least two occasions then, the Court has chosen to remove limits on political spending on the implicit premise that this spending would be disclosed.

Sadly, Citizen’s United did not lead to more disclosure but instead to a wave of dark money. A recent study by the Center for Responsive Politics finds that “the percentage of spending coming from groups that do not disclose their donors has risen from 1 percent to 47 percent since the 2006 midterm elections.” The rise of dark money has been lopsided because unions are held to a far different standard than corporations are when it comes to political spending. 

First, unions must publicly disclose all of their spending and also itemize payments over $5,000 with the date, name and address of the recipient, and purpose of the payment. Union members, the general public and journalists have easy access to union political spending with an online, searchable database. Union members can therefore decide whether the union leadership is spending money in line with their preferences and vote out the leadership if they are not. Further, some union members who dislike the way the union is disbursing funds can receive a refund of a portion of their dues. In some instances, public sector unions must seek the consent of members before they can make political contributions.

In addition, unions are far smaller than corporations and rarely use 501(c)4s to influence political campaigns. As Robert Maguire of the Center for Responsive Politics tells us, “even if unions funneled every dime  liberal 501(c)4s spent over the four years from Citizen’s United to present, that spending would still be nearly four times less than what their conservative counterparts spent in 2012 alone.” He notes that, American Encore, a Koch-backed conservative foundation, spent more money on the 2012 election than all of the union spending and liberal 501(c)4 spending from 2010 to 2014 combined.  

When unions give to 501(c)4s, they must disclose their donation, when a corporation does, no such disclosure is required. Therefore, corporations now funnel hundreds of millions through “social welfare groups,” which have exploded in the past few years.

Center for Responsive Politics, OpenSecrets.org

Shareholders or employees who disagree with the way a corporation is spending money have no right to redress. While a growing number of corporations (about 100) have chosen to voluntarily disclose their donations, they frequently do so after elections cycles and often choose not to disclose more potentially controversial donations. Even Aetna, which has received praise for its disclosure policies, gave $7 million to two 501(c)(4) groups in 2012 but didn’t disclose their contributions even though they had an agreement with their shareholders. This isn’t the case everywhere: in Britain corporations must receive shareholder consent for their political budgets.

Corporate spending and union spending aren’t just different in terms of how they are regulated, they also represent the interests of different groups. Princeton political scientist Martin Gilens has used extensive polling data to compare the preferences of Americans across the income spectrum with organizations that influence the political process. He notes in his book Affluence and Influence, “based on unions’ strong tendency to share the preferences of the less well-off and the large number of policy areas they are engaged in . . ., unions would appear to be among the most promising interest group bases for strengthening the policy influence of America’s poor and middle class.” Corporate donors and business lobby groups, on the other hand, tend to pursue policies that are not in line with the preferences of most Americans. This bolsters the case for making disclosure for all groups mandatory.

Author's Calculations based on Affluence and Influence, Table 5.7

In fact, polls show that 9 in 10 Americans believe there is too much corporate money in politics and majorities across the political spectrum support more disclosure. A bipartisan group of law professors have petitioned the SEC to “develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.” A petition urging the SEC to require corporate disclosure has more than 500,000 citizen signatures as well as the support of more than 70 members of congress and Vanguard Founder and CEO John Bogle. 

However, the SEC has removed developing such rules from its agenda. Disclosure is a simple proposal that has been endorsed by the Supreme Court, the American people, law professors and politicians from both sides of the aisle. Recent evidence suggests that disclosure would increase policymaker's responsiveness to their consituents. In the absence of SEC action, the DISCLOSE Act is the best way forward. While it’s only the first step in taking back our democracy, it should be an easy one.