This article originally began as an investigation into how SuperPACs affected the government shutdown and debt ceiling fight. The findings, however, revealed a worse offender.
Did Ted Cruz, or the caucus known as “default deniers,” benefit from SuperPAC spending in 2012? Did SuperPACs put pressure on Senate Minority Leader Mitch McConnell to avoid compromise? Did they even change the debate?
The answer turns out to be a fairly resounding no.
SuperPACs spent more opposing Cruz than supporting him. Many of the most prominent deniers received no SuperPAC support (and in some cases, more SuperPAC money was spent against them). McConnell ultimately helped broker a deal ending the shutdown.
SuperPACs have had a somewhat mixed record overall. The 2012 election saw almost no changes in power; the 2010 cycle would’ve likely been bad for Democrats because of issues like healthcare reform and the economy, with or without SuperPACs.
That doesn’t mean SuperPACs aren’t bad, just that they haven’t done a number on our political system—yet. Letting wealthy Americans write massive checks to steer political agendas is distasteful, but less so when that money doesn’t even yield victories. (Case in point: American Crossroads, which spent over $100 million in 2012, had an abysmal success rate in terms of spending that produced the desired result.)
Other groups are much, much worse. These groups are known as 501(c)(4) “social welfare” organizations.
Under the law, they can participate in elections, as long as it isn’t their “primary purpose.” It’s generally assumed less than 50 percent of 501(c)(4) funds can be spent on politics and the rest must go to “social welfare.” (That’s a broad term—more on that later.)
What makes 501(c)(4)s scary, especially compared to SuperPACs, is the potential for secrecy.
Dancing in the Dark
Like campaigns and political parties, SuperPACs are regulated by the Federal Election Commission (FEC). That means they must disclose their donors and spending publicly, theoretically allowing people to reconsider the message when they find out who’s bankrolling the SuperPAC.
On the other hand, 501(c)(4) organizations, a creation of the tax code, are overseen by the IRS. While 501(c)(4)s must file paperwork with the IRS disclosing their donors, the government does not make that data public. If sunlight is the best disinfectant, as the saying goes, the creation of more 501(c)(4) groups means many more germs.
The trend is certainly pointing that way—political spending by 501(c)(4)s jumped to $256 million in 2012, up from $1.2 million in 2006.
Scarier still, a 501(c)(4) can actually be used to get around the reporting requirements for SuperPACs.
Comedian Stephen Colbert, who founded his own SuperPAC and 501(c)(4) to satirize Citizens United, explained this process when he invited attorney Trevor Potter on The Colbert Report in September 2011. (Go to the 4:00 mark):
When 501(c)(4)s spend money attacking or supporting candidates, they have to report that spending to the FEC—but not their donors. That leaves a massive loophole for big donors to jump through.
To avoid making politics their primary activity, these groups often run “issue ads” that don’t technically support or oppose candidates by avoiding use of certain “magic words” (such as “vote for,” “elect,” “defeat,” and so on). In practice, many issue-focused ads serve the same purpose as attack ads aimed at candidates. But, since they don’t call for people to vote a certain way, they officially count as a “social welfare” campaign.
Perhaps the most famous example of “sham issue ads” are the Swift Boat ads from 2004, which viciously attacked Democratic nominee John Kerry’s service in Vietnam without specifically calling for his defeat (negating those same “magic words”).
What Can Be Done?
There are some ways to potentially close this loophole, though none of them are politically easy. One would be to ban 501(c)(4) groups from engaging in political activity. According to OpenSecrets.org, this is already what the law already requires, but the IRS has not been enforcing it that way.
Another is to force 501(c)(4)s to report their donors publicly, though the Supreme Court ruled against mandatory disclosure in NAACP v. Alabama in 1957, which makes that strategy legally questionable.
The IRS could also scrutinize groups more carefully when they apply for tax-exempt status (though there was a small brouhaha surrounding that practice not long ago).
It must be said: Many 501(c)(4) groups don’t engage in this kind of activity, actually serving their communities well. Nor is there anything wrong with them mobilizing individuals to contact policymakers—that kind of direct engagement is laudable.
The ones that do enter the electoral process, however, pose a real threat to transparent democracy—much more than the controversial SuperPAC.