Campaign financing machine cranks up for midterm elections

Every election season seems to bring a new money machine that’s primed and ready to spend big on campaigns. In 2008, it was the collective, Internet-driven offerings of small donors who supported Barack Obama. This time, it’s the spending power of special interest groups that are separate from the official party fundraising system.

These groups are spending five times more on the 2010 midterm elections ($80 million) than they did in 2006 ($16 million), according to an analysis by The Washington Post.

Unfortunately, it is not possible to tell where many of the donations come from.

Four years ago, almost all donations from interest groups were disclosed, including donors’ identities. This time, because of the popularity of a type of nonprofit known as 501(c) for its tax status, less than half of the spending is traceable back to donors. The tax code doesn’t require donor disclosure from these nonprofits.

Whether money flows to Democrats or Republicans (and the interest groups heavily favor conservatives this time), record spending undermines American democracy. At a minimum it reinforces the appearance that money influences votes.

Just as harmful is when voters can’t see who is behind the money that is behind political ads. “Transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages,” the US Supreme Court found in a landmark campaign finance ruling in January, Citizens United v. Federal Election Commission.

Even as eight of the nine justices upheld the idea of disclosure, the court’s 5-to-4 court majority did open the floodgates to election spending by corporations, unions, and other special interest groups.

It ruled that these entities can spend unlimited amounts directly on political messages as long as there’s no coordination with campaigns. The decision was based on the court defining nonperson entities like corporations as having free-speech rights under the First Amendment.

The driver behind the sharp rise in special interest spending is this year’s high political stakes in Congress. In recent weeks, Republican interest groups have outspent Democratic ones by a ratio of 7 to 1, the Post found. (Democrats, though, have the upper hand in traditional fundraising through their various party committees, according to the nonpartisan Center for Responsive Politics.)

If the political stakes are the driver, the vehicle is the court’s January decision. Corporate, union, and other liberal and conservative special interest money is flowing quickly to newly founded “super PACS.” While that money must be disclosed, it allows for direct spending on targeted races – as the court supported.

Other money is flowing to the 501(c)s, which allow for donor anonymity. This group includes trade associations such as the powerful US Chamber of Commerce, which plans to spend more than twice what it did on the 2008 presidential campaign.

Also bulking up are 501(c)4 groups, or social nonprofits. Technically, their primary purpose must be to promote social welfare, not political campaigns. Democratic Sen. Max Baucus of Montana has called for an IRS investigation of these nonprofits to see if they have veered too far from their central mission.

Congress can’t undo the court’s misguided decision to allow corporations, unions, and other groups unlimited spending on campaign ads.

But it can pass a law that requires transparency in their campaign financing. They narrowly missed that chance this year. They should try again next year, when the heat of the campaign season is behind them and cooler heads prevail.