The Anti-Corporate PAC Movement: Effective Reform or Political Strategy?

The Anti-Corporate PAC Movement: Effective Reform or Political Strategy?

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A growing group of Democratic candidates, fed up with special interests in politics, is declaring open season on corporate Political Action Committees. But getting corporate dollars out of elections will be more complicated than that.

Beto campaign signs outside a school in Fort Worth, Texas. – Creator: William Hodjatie. All rights reserved.

With the midterm elections around the corner, Texas has moved to the center of the American political debate. In what pundits have dubbed “Beto-mania,” Democrats nationwide are placing their hopes on Robert Francis “Beto” O’Rourke, a representative from El Paso, to unseat incumbent Senator Ted Cruz. Democrats have not clinched a victory in a statewide race in Texas since 1994 and Republican candidates there have frequently won by double-digit margins. But this year’s Senate race has been much closer than expected: while Cruz maintains a lead in recent polls, Democrats now have a real chance of reclaiming a Texas Senate seat after almost 25 years.

Yet, the significance of the Cruz-Beto race goes beyond its potential implications for Democrats to retake the Senate in November or for the party’s future prospects in Texas politics. At the core of Beto’s campaign lies an important debate that has plagued American politics for years: who should be allowed to donate to political campaigns and how much? Beto has made the fight to get “big money out of Washington” a cornerstone of his campaign. He has become one of the most prominent figures of a movement among Democratic candidates who are eschewing funds from Political Action Committees (PACs) — organizations that collect campaign contributions from their members and donate them to a candidate’s campaign — and he even introduced legislation that would prohibit all federal candidates from accepting PAC donations.

In particular, Beto and fellow Democrats are refusing to accept donations from PACs set up by corporations, in an effort to highlight the need for comprehensive campaign finance reform. It is a popular stance among both left-leaning voters and even among many Trump supporters. Yet, contrary to public perception, refusing corporate PAC campaign contributions has next to no impact on actually getting big money out of politics.

Texas-sized campaign budgets

Texas has become one of the most expensive Senate races in this election cycle. Together, Beto and Cruz had collected over $95 million by the end of September, according to the Center for Responsive Politics, a nonpartisan watchdog tracking money in U.S. politics. Beto has significantly outraised his opponent, with over $60 million in donations, more than any other Senate candidate; compared to Cruz’s $35 million, which still puts him in third place among all Senate campaigns. Even more impressive is how fast Beto has brought in the cash. From July to October alone, he raised $38.1 million in donations — a record in Senate history.

Further setting Beto apart from Cruz is not just the amount of money he has raised but also the source of those donations. The entirety of Beto’s funds come from individual contributions. Almost half (45%) come from small individual donors giving $200 or less. The rest is accounted for by large individual donations of more than $200 each.[1] To date, Beto has not accepted any donations from PACs, including corporate PACs.[2]

Meanwhile, Cruz received only 30% of his funds from small individual donors, with the bulk ($14 million) coming from large individual donors. That number is significantly higher when taking into account transfers from Cruz’s Joint Fundraising Committee, which almost exclusively receives large donations.[3] Unlike Beto, Cruz also received over $1.2 million from (primarily corporate) PACs.

Source: Center for Responsive Politics. Data was collected on 10/25/2018. Totals are rounded to the nearest number. For Cruz, “transfers from authorized committees include donations made through his Joint Fundraising Committee and Leadership PAC. – Creator: Jonas Heering. All rights reserved.

The anti-corporate PAC pledge

By attacking special interest groups and condemning the influence of money in politics, Beto is tapping into growing public cynicism about the role of money in politics. A recent survey by the Pew Research Center revealed that 72% of Americans believe that wealthy individual donors have more political influence than others. And 77% support limits on the amount individuals and groups can donate to political campaigns.

In the 2016 presidential election, candidates on both sides appealed to voters’ frustration with special interests. Donald Trump repeatedly pledged to “Drain the Swamp” in Washington and at least partially self-funded his presidential bid; similarly, Bernie Sanders railed against lobbyists and corporate money from the outset of his campaign and relied primarily on small individual donations. Since then, more and more political candidates have opted to eschew corporate PACs, in favor of small-donor driven campaigns.

According to End Citizens United, a PAC that endorses politicians in favor of campaign finance reform, over 200 federal candidates in this election cycle rejected corporate PAC money. Of those, 124 won their primaries and advanced to the November general elections. Among them are political newcomers such as Connor Lamb, who won in an upset earlier this year in a state that Trump carried by almost 20% in 2016; incumbent Senators such as Elizabeth Warren and Kirsten Gillibrand; and, of course, Beto O’Rourke. Despite bipartisan public support for stricter campaign finance regulation, only two Republican representatives have joined the anti-corporate PAC movement so far.

Still, rejecting corporate PAC money is primarily a symbolic move designed to mobilize voters who are frustrated with current campaign finance regulations, rather than an effective strategy to get corporate interests out of politics. Corporate PAC contributions generally make up a minor fraction of overall campaign fundraising. In the case of Ted Cruz, the $1.2 million he received directly from corporate PACs only make up 3.6% of his overall funding.[4] In addition, corporate PACs almost exclusively fund incumbent candidates, meaning that challengers like Beto might only forgo a minimal financial advantage by rejecting corporate PAC donations.

Critics also point out that anti-corporate PAC campaigns unfairly equate corporate PAC donations with money from corporate funds. In fact, businesses are prohibited by law from directly contributing to candidates or their own business’ PACs. Instead, corporate PACs simply bundle donations from individual employees and then transfer the funds to a candidate in the company’s name. Additionally, corporate PACs are barred from contributing more than $5,000 to a candidate per election, a drop in the bucket of multi-million dollar campaign budgets.

From corporate PACs to super PACs and political nonprofits

If corporate PACs play such a minor role in the way businesses influence politics, why have reform-minded candidates made boycotting them such a major part of their platform? The answer is buried in the complexity of the American campaign finance system. The main way corporations influence campaigns is not through corporate PACs, but by funneling money through a variety of other organizations — most notably through so-called “Super PACs” and political nonprofits.

Super PACs are a type of independent spending committee that proliferated in the wake of the Supreme Court decision Citizens United v. FEC (Citizens United). In the 2010 landmark ruling, the court ruled that corporations and labor unions can spend unlimited amounts of money on election purposes as long as they do not coordinate their activities with a candidate’s campaign. As a result, corporations can donate directly to a super PAC but not to a campaign. Super PACs can then use those funds to advocate for or against a specific candidate (or multiple candidates), mostly through advertising campaigns.

In reality, however, super PACs are often set up and run by candidates’ former campaign aides, family members, or close allies, thus bringing into question whether they can actually be considered independent. For example, the pro-Cruz super PAC Texans Are is run by a former Cruz strategist. In the 2018 election cycle, Texans Are has already spent close to $4.4 million on election activity opposing Beto, including attack ads. Overall, super PACs benefitting Cruz have already spent over $7 million leading up to the midterms.

Source: Center for Responsive Politics. Data represents totals as of 10/25/2018. – Creator: Jonas Heering. All rights reserved.

Along with super PACs, corporations can funnel their money through political nonprofits, most notably through so-called “social welfare organizations.” These tax-exempt groups include, for example, the National Rifle Association and Planned Parenthood. Like super PACs, they can accept unlimited donations from corporations and individuals and are prohibited from coordinating their political spending with candidates. Yet, while “social welfare organizations” can only engage in limited amounts of political activity,[5] many of them have found a way to circumvent this rule. They air “issue ads” that advocate for or against a specific issue without explicitly urging viewers to vote for or against a political candidate.  Unlike super PACs, these nonprofits do not have to disclose the identity of their donors, which is why they are often referred to as dark money groups. They can also contribute unlimited amounts to super PACs, making the funding source of some super PACs equally untraceable.

Little hope for institutional reform

For advocates of campaign finance reform seeking to curtail corporate political spending avenues for action are limited. Legislative leaders cannot alter a Supreme Court decision (Citizens United). And with the confirmation of Justice Brett Kavanaugh, the solidly conservative Supreme Court is unlikely to overturn the ruling in the near future. Congress could try to circumvent Citizens United by introducing a constitutional amendment which would effectively overrule Citizens United. But that would require a two-thirds majority to pass both the House and the Senate. Such legislation was introduced in the past and garnered the support of 54 Democratic senators, still well short of the 67 votes required. Even if Democrats pick up some Senate seats in the upcoming midterms, they will be far from the two-thirds majority to pass such legislation in the near future. Republicans are unlikely to come to their aid, because despite broad public support for campaign finance reform, the party’s national platform explicitly describes campaign spending as an expression of free speech protected under the First Amendment.

Furthermore, candidates themselves have no influence over outside spending by super PACs and political nonprofits, since campaigns are by law prohibited from coordinating with these groups. Even candidates who reject the concept of super PACs cannot stop them from airing ads on their behalf. Earlier this year, Beto specifically asked a Democratic mega-donor-backed super PAC to stay out of the Texas race, but despite his appeal, outside groups have spent a little over $700,000 to bolster his Senate bid.

With a conservative Supreme Court and a stark partisan divide in Congress, candidates eager to get corporate dollars out of elections have little hope for institutional changes in the near future. And with a complicated legal system that allows corporations to spend on politicians’ behalf, even if they publicly oppose this, candidates like Beto have little room to act.

Getting rid of corporate PACs alone will not get business’ money out of politics. Nor will it curb the disproportionate influence large individual donors wield over elections. But by rejecting corporate PAC contributions, candidates like Beto are focusing on the one thing they can do: highlighting the issue of special interests in politics and taking a first — even if symbolic — step toward more comprehensive campaign finance reform.

 

[1] The maximum an individual can contribute to a candidate directly is $2,700 for each the primary and general election, making it a total of $5,400 per two-year election cycle.

[2] Those looking at Beto’s financial records might notice that he did receive money from an organization called J Street PAC. However, as the following article explains, this does not represent a PAC contribution: https://www.politifact.com/texas/statements/2018/aug/20/beto-orourke/beto-orourke-says-he-doesnt-accept-pac-donations/.  

[3] For more information on Joint Fundraising Committees, see: https://www.opensecrets.org/jfc/. For those interested in the exact breakdown of Cruz’s funding, visit: https://www.fec.gov/data/committee/C00542423/.

[4] The actual amount of corporate PAC donations is slightly higher, as Cruz’s joint fundraising committee, the Ted Cruz Victory Committee, also received some PAC donations.

[5] De facto, they cannot spend more than 49.9% of their expenditures on political activity.

 

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