The latest Bloomberg Businessweek uses the recent IRS scandal as the starting point for a larger discussion of money in politics. The following passage is particularly interesting.
The rise of 501(c)(4) groups as political-advertising engines dates to 2004, when Democrats took the lead in exploiting them. To understand the phenomenon requires a little more campaign-finance history. Post-Watergate legislative reforms and a Supreme Court ruling in 1976 produced a confusing system that curbed contributions to candidates in the interest of reducing corruption but encouraged open-ended expenditures in the name of free speech. By the 1990s labor unions and companies were funneling hundreds of millions of dollars of “soft money” to the political parties rather than particular candidates. In 2002, Congress tried to stamp out soft money. In doing so, lawmakers inadvertently redirected the cash to outside groups—both super PACs, which are organized under Section 527 and have to disclose their donors, and more secretive 501(c)(4) “social welfare” groups.
With this outside-spending technology in place, Democratic donors raised about $200 million in 2004 to try to unseat George W. Bush. John Kerry, a phlegmatic candidate, lost anyway. Republicans didn’t move to catch up until after Obama thumped John McCain in 2008. In 2009, Rove laid the groundwork for American Crossroads, a 527 super PAC, and Crossroads GPS, its sister 501(c)(4), which would share office space, staff, and leadership. The following year, the Supreme Court issued its landmark Citizens United ruling, which invalidated legislative restrictions on corporate and union political dollars.
Outside spending increased dramatically, much to the advantage of Republicans, who rushed to set up 527s and 501(c)(4)s devoted to defeating Obama and regaining seats in Congress. Nonprofit groups spent $1 billion in 2012 on campaigns—triple the $300 million they spent in 2008—with more than two-thirds of that benefiting Republican candidates, reports the Center for Responsive Politics, a Washington-based research group.
Some will read those three paragraphs and call for taxpayer financing of elections, an idea also known as an incumbent protection act. Others will note that a government that’s grown large enough to oversee nearly every aspect of our lives is bound to attract money from those who would like to take advantage of that government oversight. Those who take the latter view might agree with the following assessment: If you want less money in politics, make government less important to our lives.
