June 21, 2012

As More Political Money Becomes Secret, Which Agency Will Step Up To Enforce Disclosure?

As More Political Money Becomes Secret, Which Agency Will Step Up To Enforce Disclosure?
Stephen Colbert outside of the FEC

An OpenSecrets investigation revealed that non-profits, which don’t have to disclose their donors, have become the real heavyweights in the 2012 election cycle, outspending their Super-PAC counterparts 3 to 2 on political expenditures. Ninety percent of these shadowy groups never reveal their donors.

The Obama administration has made positive steps towards calling for disclosure of secretive nonprofits that are now spending incredible amounts on political ads. Of course, much more could be done. The Obama administration has allowed a significant executive order, which would clean up much of the mess, to languish without action.

An alphabet soup of regulators are dropping the ball by continually passing their responsibilities off on one another in the struggle for transparency in our political process. Between the FEC, the IRS, and the SEC we should hope for some more substantive action on behalf of disclosure.

The Federal Elections Commission (FEC), whose job it is “to disclose campaign finance information,” and to” to enforce…the limits and prohibitions on contributions,” has gone about their job in a very timid way.  Many in the Political influence industry view the FEC “as a stalemated agency that fails to aggressively enforce election laws.”  Because of the bipartisan decision-making structure of the panel, this may be a fair characterization.

Recently, a petition was filed with the White House requesting the Obama administration appoint new FEC commissioners in order to embolden the FEC in its mission of disclosure.  In response, the White House issued an elusive statement.  In it, they reassert Obama’s commitment to “legislation that would allow the American people to see clearly who is funding campaign activity”.  But his current power to force disclosure by executive order, although under threat by an anti-disclosure Congress, has never been used.

The IRS has recently involved itself in the game by revoking the tax-exempt status of a small Democratic group designed to help train candidates for office.  But revoking this tax-exempt 501c status may have larger implications beyond taxes and outside this one group.  It may create a precedent whereby the IRS can investigate groups on a case-by-case basis, similar to the FEC process, to determine if they are primarily involved in political activities.  If they were, which some suggest is the case for many of these groups, then not only would their tax-exempt status be revoked, but they would fall into a legal area in which they must disclose their donors.  Still, there remain several loopholes in the tax code that could allow political lobbying groups to get around this problem.

In a different approach some lawyers and law professors are trying to achieve greater transparency in our political system through a separate means.  Some 180,000 lawyers have signed a petition asking the Securities and Exchange Commission (SEC) to require corporations to disclose all political spending.  The current system remains opaque as long as corporations give their money to trade associations and non-profit groups instead of directly to candidates.  The petition argues that this is not only bad for democracy, but also unfair to shareholders and investors in those corporations.

On the upside, the FEC approved small-donor-friendly campaign contributions by text.  This decision may help give a little extra heft to small-donor voices in this election, but small donor’s decision-making ability remains limited by unenforced transparency and disclosure laws.  As of now, voters’ access to information on candidates remains restricted and wealthy donors who wish to remain secret benefit.  All this, while the rest of us ask: who is trying to influence our elections? How can we find out? And, whose job is it anyway?