Wednesday, September 10, 2014

How Special Interests and Money Influence Our Government...

by: Les Carpenter
Rational Nation USA
Purveyor of Truth

Americans have been lead to believe their vote counts, that our representative democracy gives us a voice in the political process and that by our choice of representatives our voices are heard. Back in the day there may very well have been a modicum of truth to this. However we are not living in the "40's" and "50's", special interests have gained increasing influence and the tax laws have changed in ways that allow big money to have a hugely increased influence on politics and thereby on government. Big money has eagerly taken a much larger place at the table as a result. We all know money talks and we can also be relatively certain big money is not looking out for the average hard working American. Big money is looking out for big money's self interests, not yours or the nation generally.

Thomas B. Edsall, penning an informative article for The New York Times goes into a detailed discussion of the above points. What you will read is troubling. The current situation, if it is allowed to continued unabated, threatens the very fabric of our republic.

Tax-exempt “social welfare” organizations, the new political weapons of choice, are widening the gap between the rich people who control campaign financing and the economically anxious voters targeted by their ads.

We don’t know who the contributors are to Karl Rove’s Crossroads GPS because they can hide behind provisions in federal tax law designed to protect donors to “social welfare” charities, but we do know how much each gave, and we do know generally, from Crossroads’s annual 990 filings with the I.R.S., how the money was spent. In 2012, according to its own statement, Crossroads GPS spent $74.2 million not on commonly understood social welfare objectives but on direct political activities.

Crossroads raised the money for its 2012 tax-exempt activities from 291 unnamed men and women who wrote checks for a total of $179.7 million, an average contribution of $617,525 – nearly 12 times the 2012 median household income in the United States of $53,046, and 22 times the 2012 per capita income of $28,051.

The financial resources of the anonymous donors to Crossroads are striking, according to the organization’s 990 filing. Among the donors were 53 who contributed at least $1 million. Even more generously, one donor gave $22.5 million, another gave $18 million, and two gave $10 million each.

The right to veil the identity of contributors to such groups as Crossroads GPS is based on provisions in section 501(c)(4) of the Internal Revenue Code, provisions that offer anonymity to those who support tax exempt organizations engaged in activities defined as permissible by the Internal Revenue Code. Here is the language: “IRC 501(c)(4) requires that organizations operate primarily in promoting in some way the common good and general welfare of the people of the community.” The section continues, “Generally, political educational organizations must conduct their activities in a non-partisan manner.”

At the current rate of growth, the Center for Responsive Politics projects that spending in the current election cycle by 501(c)(4) groups that do not disclose donors will break all previous records, including those of 2012. Spending by these groups rose from $1.3 million in 2006 to $256.3 million in 2012, according to C.R.P.

Regulations adopted in 1959 by the I.R.S. to govern the implementation of the 501(c)(4) section of the tax code (you have to live in Washington to believe this) opened up a loophole intended for a mixed group of nonprofits – “Charitable Organizations, Churches & Religious Organizations, Political Organizations, and Private Foundations” – that Crossroads and similar groups have turned to great advantage.

Here is the regulatory language: “The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity.”

The word “primary,” in turn, has been interpreted by election lawyers and political operatives to mean that a group like Crossroads GPS, with an expressly conservative partisan orientation (or another group with an expressly liberal partisan orientation), can spend as much as 49 percent of its budget on political activities.


“The political network spearheaded by conservative billionaires Charles and David Koch has expanded into a far-reaching operation of unrivaled complexity, built around a maze of groups that cloaks its donors,” The Washington Post reported at the beginning of this year.

“It is a very sophisticated and complicated structure,” Lloyd Hitoshi Mayer, a professor at the University of Notre Dame Law School, told The Post. “It’s designed to make it opaque as to where the money is coming from and where the money is going. No layperson thought this up. It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap.”

Intrigued, I emailed Rob Tappan, a Koch Industries spokesman:

“Why is there such a complex structure of organizations? Some exist only to transfer money. Many of the organizations provide grants to the same recipients. What is the purpose of this? From a corporate point of view, this structure would seem to only create more inefficiencies and costs of operation. Is the system designed to make it difficult to follow the flow of money? Some of the organizations have changed names. Is there a reason for this? Also, some organizations have what I believe are called ‘disregarded entities’ that receive and transfer money? What is the purpose of the creation of these entities? Do these groups hold meetings to work out strategy? Is there an individual, committee or some other mechanism to oversee the activities of these groups? If you cannot answer some or all of these questions, could you point me to the person(s) who can?”

Tappan referred me to James Davis, a spokesman for Freedom Partners, a mainstay of the Koch network. In 2012, Freedom Partners spent $237.7 million, almost all in grants to other nonprofits, including at least $169.9 million to other Koch organizations.

Davis replied to me by email saying that he could only address questions about Freedom Partners and was not in a position to reply to queries about the larger structure of the Koch network: “Sorry, I speak for Freedom Partners. I can’t help.”

The steady deregulation of election financing has disenfranchised ordinary voters. Part of their disenfranchisement comes from the capacity of donors to remain unaccountable to the electorate at large. The combination of lax regulation by the F.E.C., weak oversight by the I.R.S. and a Supreme Court majority blind to the corrosive power of money in politics has created a system of campaign finance dominated by those with vast fortunes answerable to no one but themselves.

Troubling? It should be. For the full detailed article continue reading BELOW THE FOLD.

Via: Memeorandum


  1. In a land far away and a time long ago a small group of enlightened men sat down to devise an ideal system of government.....

    That system no longer exists and in its place has been placed a trough...

    A trough where special interests and corporations feast.

    These troughs are not only located in Washington, D.C. but they are also located in every capital of every state, and within every city, town, and or county which has a Chamber of Commerce or something similar called "Economic Development...something or other...."

    Corporations and or business interests really don't care much about social issues, you know like abortion, gay rights, women's issues, and or race relations, these become nothing more that wedge issues that are used to drive voters to the polls so that they can achieve their own goals.

    No one corporation and or business interest spends millions every election cycle without expecting a return on their "investment."

    The return on political contributions for corporations and business interests has been very enriching to say the least over the course of the last 34 years.

    Our country is poorer, our people are less secure, and our future is very disappointing...

    Yes, the effort of those few men so many years ago and in a country so far away was wasted....

    1. Tao, were their efforts wasted? I would argue nothing of value is ever completely wasted. The concepts of self government, rule of law, equality under the law, and all rest of good stuff that those enlightened men stood for will not die. Why? Because the quest for liberty is eternal, it is part of the human spirit if you will.

      The future looks bleak. But for those who understand the possibilities and want to see them realized are they not worth the effort to fight for them?

      We must tame the beast(s) of special interest and dam their money flow into our political/government system.

      Partisanship's time to die has arrived. The only guestion is "do we have the will to drive a stick into the heart of the beast."

  2. "The section continues, “Generally, political educational organizations must conduct their activities in a non-partisan manner.”"

    Is that even possible?

    Tao said: " and within every city, town, and or county which has....something similar called "Economic Development...something or other...."

    The Economic Development whatevers I know of are quasi government organizations which take taxpayer money and basically spend it on corporate welfare. Pure waste.

    1. Corporate/business money buys influence. More money... more influence. Influence is power. More influence... more power.

      Then there is something about money is speech. It sticks in the back of my mind.

    2. "Then there is something about money is speech."

      Money is only speech if someone is trying to cynically cut off money at a certain point with the end goal of censorship. I never forget the local newspaper during the initial controversy over McCain-Feingold. They wrote an editorial that said the bill was necessary in order to silence campaign ads. After that, I saw numerous others also saying that the end goal of it was censorship.

      Sort of like having a law to prevent newspapers from paying money for ink, with the goal of course of stopping the presses. It's all about money, not at all about freedom of the press, right?

      Anyway, I am on board with any meaningful reform that avoids censorship.

    3. dmarks, I do not know what you don't understand. Money is not speech. For example, I can speak freely about anything anywhere. I may not have access to many outlets so my influence is very limited and my views don't get much play.

      Now, if I was a multi millionaire or billionaire, or a large capital rich corporation I could by air time, afford $25,000 a plate galas rubbing elbows with the powerful in Government and have the opportunity to do some arm twisting. Said arm twisting of course in my or my corporation's self interests, not necessarily the interests of the general population or the country. IE: My money buys influence which give me power.

      So, the small time me gets to sit back and watch all influence and power that the big time me bought.

      I won't get into what is reasonable and what dollar limits should be and on who limits should be placed on. I'll just watch the effect of money on politicians who ultimately make the decisions on such matters.

      Making sense yet?

    4. PS: The megaphone of big money drowns out the voices of the rest of us. Essentially a form of censorship by your reasoning.

    5. Ahhh! There is part of the problem. What is censorship?

    6. RN said: " I may not have access to many outlets so my influence is very limited and my views don't get much play...."

      I think I get what you are saying, then. So, a law to prevent newspapers from buying critical supplies, thus, would not impact" speech" as the newspaper editor would still be able to get their message out?

      As for the "PS", I'd like a specific example of drowning out. Then I can see if any form of censorship is involved. Essential or not.

    7. I rest my case on the logic of my statements.

      Anyone can dream up absurd counters to the reality of what exists so as to convince people the existing reality is good. I ain't biting or buying.

      The examples are evident and obvious as pointed out in the article if you read it.

    8. You rest your case,which you made well, I agree. But without the evidence of "drowning out", which remains unfulfilled.

      But in regards to money not being speech, or cutting off money not being censorship, you made a good point. To take the battery out of the megaphone (your analogy) .....

  3. I would completely get rid of all 501 c 3/4s and I have to be honest with you here, just the thought of guttersnipes/whores like Karl Rove and David Brock getting a tax break is sufficient to make me vomit.

    1. Certainly no argument from this corner Will.

  4. I agree that it makes no sense at all for the likes of Rove, Brock, and Soros to be tax-free. Or any effort of the Koch Bros.

    I am open to meaningful reform, as long as we don't go back to it being a crime to make a movie critical of a US Senator.

    I would agree that all of these, unless they are actual charities, be taxed. None of the problem of the tax policy being used selectively by the Obama administration to threaten critics with tax hikes and keep its supporters tax free. If all of them are taxed, this takes this political pressure of this, and any administration, off the table.

    This is a little off topic, but I don't see why churches should be treated any differently. Tax free only if a charity. I would also narrow the definition of charity to not include operations that people get rich off of.

  5. We can't go back to it being a crime to make a movie critical of a US Senator because it NEVER was, you idiot!


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