Levy Lecture: Dark money casts shadow over American politics

Julie Strauss, a local lecturer on the three branches of American politics and subcategories related to each, presented a virtual Levy Lecture on April 12 titled “Dark Money: The Money Behind Our Politics.” The focus of her lecture was the history of campaign finance laws and how they’ve evolved in our political system, as well as the consequences of these laws.

Strauss’ academic background is in social sciences (Wesleyan University) and she has a doctorate in American history from Northwestern University. She began with a sentiment, attributed to Justice Louis Brandeis, a member of the U.S. Supreme Court from 1916 to 1939 and the court’s first Jewish justice. He said, Strauss related, “We could either have a democratic society, or we can have the concentration of great wealth in the hands of the few, but we cannot have both.”


In less than 100 years, Brandeis’ prescient observation may well be on its way to becoming prophecy. In the past decade, the 10 most generous donors and their spouses – 20 people – have given at least $1.2 billion to federal elections, according to Strauss.


It wasn’t always this way. Post-Watergate, Congress passed a campaign finance legislation in 1971 – later amended in 1974 – called the Federal Election Campaign Act (FECA). The law did three things: It specified how much money an individual, a political party or a political action committee could donate to a campaign; it specified how much money a candidate could donate to his or her own campaign; and it established the Federal Election Commission “in an attempt to try and regulate the money in the system,” Strauss said.


The intent of the campaign finance legislation was to reduce the influence of individuals with a capacity to donate large sums. But those who disagreed with the limits pushed back, and within a year an appeal was filed with the Supreme Court.


In January 1976, the Supreme Court issued a ruling in Buckley v. Valeo that overturned certain key provisions of FECA. The ruling determined it was unconstitutional and a violation of a candidate’s First Amendment rights to limit the dollar amount of contributions (so-called hard money) one could donate to oneself. It also removed the $1,000 limit for independent expenditures (“soft money”), provided that supporters of a candidate take actions independent of the candidate’s campaign.


Hard money donations, both names and amounts, are made public. Soft money donations are vague, and donors’ names are not publicized.


Buckley v. Valeo legitimized the concept that giving money to a political campaign was a form of protected free speech. Ultimately it also paved the way for the Citizens United case decided in 2009, which opened the floodgates to anonymous and unlimited political contributions.


While a candidate’s campaign for political office had to follow specific laws and regulations about raising money, independent groups that supported a particular candidate and were not officially aligned with the campaign had few restrictions. These groups were organized by friends of the candidate and went to work raising money and visibility, often by “going negative” about their candidate’s opponent.


Going negative has been an effective strategy, Strauss said. If an independent group raises the issues, it means the preferred candidate doesn’t have to do so. If the independent group makes accusations that are exaggerations of the truth or even lies, the candidate can rightly claim “plausible deniability.” And the person being maligned has very little recourse. Negative ads about the opponent are generally easier, faster and less expensive to produce than promoting an ad about a candidate’s virtues. Positive ads that state accomplishments about a candidate have to be accurate and are challenging to produce without any official campaign support, Strauss said. In contrast, negative ads that hint of scandal are in the clear.


Next, Strauss jumped ahead to 2002 when the McCain-Feingold legislation, the Bipartisan Campaign Reform Act, was passed. This law greatly reduced soft money donations while increasing the amount of hard money that could be raised. It also prohibited political advertisements by corporations or unions within 30 days of a primary election or 60 days of a general election.


In 2008, a conservative nonprofit group, Citizens United, filed a lawsuit to advertise and air “Hillary: The Movie” in advance of the 2008 Democratic primary elections. The Supreme Court heard the case in 2009 and decided it in 2010, declaring that the government had no right to limit independent expenditures for political campaigns made by corporations, unions, nonprofit organizations and other groups.


A second decision in 2010 by the D.C. Circuit Court of Appeals in Speechnow.org v. FEC ruled that the $5,000 limit on individuals giving to PACs violated the Constitution’s First Amendment guarantee of free speech. This led to the creation of “Super PACs,” which Strauss described as “independent expenditure-only committees that may solicit unlimited funds.”


According to Strauss, in the 2018 election cycle, the top 1% of super PACs gave 96% of all funding. More explicitly, the top 1,562 donors gave $818 million in 2018 alone. Although donors are required to make their donations public, those who contribute to super PACs are often untraceable. Strauss said people “in the know” involved with the issues on both sides of the aisle know the identities of the super PAC donors, but it’s hidden from the American public.


As Strauss explained, there are legal ways to get around the rules. Take, for example, the differences between two nonprofit entities, 501(c)(3)s and 501(c)(4)s, governed by IRS rules. The first, 501(c )(3)s, promote religious, educational or charitable missions and the names of their donors must be disclosed. The second, 501(c )(4)s, are civic organizations or citizen associations; they are permitted to lobby and the names of their donors do not need to be disclosed.


A specific type of 501(c )(3) is called a Donor Advised Fund (DAF). A DAF is a “charitable giving vehicle” administered through a public charity. A donor contributes to the DAF, the money is invested and the donor takes the tax deduction that year. The donor can allocate the distribution as desired: in small or large amounts, to many organizations or just a few, and over many years or one. The DAF offers the donor convenience, flexibility and most significantly, anonymity. Further, 501(c )(3) groups are permitted to accept donations from 501(c )(4) organizations, leading to a portion of donor names that would not be publicly disclosed.


Strauss listed several weaknesses in our current system. The IRS is understaffed and overburdened, creating an environment ripe for unscrupulous actors to take advantage of government shortfalls. There two-party system in the U.S. is weak and party leaders do not have nearly as much control of their members as they did 15 or 20 years ago.


The influence of billionaires behind super PACs that focus on specific issues like climate change deniers or gun control advocates leads to elected representatives who are heavily influenced, if not beholden, on those issues. Strauss cited an example where in the 2010 elections, there were 85 new Republican members of the House of Representatives. Of those 85, 76 signed a “no climate tax” pledge saying they would oppose climate change legislation. Fifty-seven of those had received campaign contributions from the Koch brothers’ PAC.


So as not to leave the discussion on a dismal note, Strauss referenced a 2018 Pew Research Center study that showed 77% of adults surveyed favor limits on campaign contributions and 65% favor new laws to reduce the role of money in politics.


A video of the webinar is available for viewing on the Levy Senior Center Foundation YouTube channel until midnight on April 30.


By Wendi Kromash as published in the Evanston RoundTable. Ms. Kromash is a member of the Levy Center Foundation Board; she manages and moderates the Levy Lecture Series.