Checks: Political Money & Democracy

Karl Rove’s “Dark Money” Machine Is Now Tax-Exempt. Here’s Why That Matters

(Photo: AP/Rich Pedroncelli)

 

If it wasn’t clear that the Internal Revenue Service has no intention of regulating politically active tax-exempt groups, it should be now.

On Tuesday, news broke that the IRS awarded tax-exempt status to Crossroads GPS, a purported “social welfare” group that constitutes one-half of the big-spending political network masterminded by GOP operative Karl Rove. The agency’s ruling came in November of last year, according to documents reviewed by the nonpartisan Center for Responsive Politics.

The ruling drew fire from such watchdog groups as the Campaign Legal Center and Democracy 21, which have lodged multiple complaints against Crossroads GPS with the IRS, the Federal Election Commission, and even the Department of Justice’s Tax Division. The complaints allege that Crossroads GPS is spending millions on direct campaign activities while masquerading as a benign nonprofit.  

“It is a dangerous victory for those in Congress who have relentlessly bullied the IRS into refusing to enforce the laws limiting the political advocacy of tax exempt organizations,” Larry Noble, general counsel for the Campaign Legal Center, said in a statement.  

The IRS became the target of GOP outrage and of multiple congressional investigations after a federal inspector general concluded that the tax agency had improperly targeted Tea Party and other groups seeking tax exemption. But critics of Crossroads GPS say the group exemplifies the problem of undisclosed political spending, which has mushroomed as tax-exempt social-welfare groups have thrown themselves more aggressively into politics.

“By allowing an organization like Crossroads GPS to spend in our elections secretly and with impunity, the IRS has all but guaranteed that similar ‘dark money’ groups will proliferate,” warned Noble.

In the six years since its launch, Rove’s Crossroads operation, which also includes the super PAC American Crossroads, has become a conservative heavyweight, spending more than a quarter of a billion dollars on elections—mostly in the form of attack ads. Crossroads GPS alone has spent well over $100 million during that time.

Crossroads GPS has already been functioning as a 501(c)4 “social welfare” organization since its inception, though until now the IRS hadn’t officially recognized its tax status. Under tax regulations, social welfare groups may engage in political activity so long as it’s not their “primary purpose.” These groups are not required to disclose donor information. In the past, the sphere of politically active social-welfare groups was dominated by such single-issue players as the National Rifle Association and the Sierra Club.

But Crossroads GPS exemplifies a new generation of social welfare groups that act blatantly as thinly veiled political organizations, campaign-finance watchdogs say. They argue that the group is exploiting the lack of enforcement from the IRS and the Federal Election Commission to give cover to high-dollar donors who want to remain anonymous. Such loopholes have given rise to unprecedented levels of undisclosed “dark money” spending in recent election cycles.

“Karl Rove is not known for engaging in social-welfare activities,” Democracy 21 President Fred Wertheimer told the Prospect. “We don’t believe that it’s anything but a political organization.”

However, Rove’s elite team of campaign-finance lawyers has successful navigated campaign-finance loopholes and stymied legal threats, and has now convinced the IRS to give the group the tax status that it has long sought. Little wonder that reform advocates are fuming.

“This becomes a license for anyone to use or create 501(c)4s for the purpose of laundering secret money into elections,” Wertheimer says. “The IRS has joined with the FEC in creating a lawless political system in which candidates, campaigns, political operatives, and nonprofit groups are basically being told, ‘You do not have to worry about complying with the laws because there will be no enforcement of the laws.’”

Wertheimer called it “a national scandal that none of the enforcement agencies are willing to carry out their statutory responsibilities.”

The IRS has been under steady attack from the GOP ever since conservatives lambasted the agency for what they said was a political witch-hunt aimed at Tea Party organizations. And Republicans have kept the tax agency in their crosshairs ever since. A GOP rider to last year’s budget deal forbids the IRS from releasing a clearer definition of “political activity” anytime in the near future.

At the same time, the Campaign Legal Center and Public Citizen are suing the FEC for dismissing the two groups’ complaint alleging that Crossroads GPS should be defined as a political committee. The FEC’s general counsel concluded that Rove’s group was likely in violation of campaign-finance laws, but the commission deadlocked along party lines and took no enforcement action on those findings. That lawsuit is still working its way through the courts.

In the meantime, the IRS ruling sends a clear signal to politically active tax-exempt groups in the mold of Crossroads GPS that it is safe for them to stay the course. That suggests that the unaccountable and undisclosed political money already dominating this election cycle will only continue to surge.

Jeb’s Campaign-Finance Solution Falls Flat with Reform Advocates

(Photo: AP/Dennis Van Tine
 

Jeb Bush caused a stir in New Hampshire Monday when he told CNN’s Dana Bash that he would “eliminate” Citizens United, the much-maligned Supreme Court decision that deregulated independent political spending. The former Florida Governor later called for a constitutional amendment to undo the ruling at a Nashua town hall.

"If I could do it all again I'd eliminate the Supreme Court ruling,” Bush told Bash on CNN. "This is a ridiculous system we have now where you have campaigns that struggle to raise money directly and they can't be held accountable for the spending of the super PAC that's their affiliate." Bush said that in lieu of a major Supreme Court shake-up, he would argue for a constitutional convention to overturn the ruling. 

The statement drew notice given that Bush has arguably been the biggest benefactor of super PACs since they were created in the wake of Citizens United. His super PAC, Right to Rise, has raked in nearly $120 million through the Bush family’s influential donor network, and so far has spent almost $60 million in the primary—mostly on attack ads that have done little to improve Bush’s dismal polling numbers. By way of comparison, the Restore Our Future super PAC that backed GOP nominee Mitt Romney in 2008 raised $150 million in both the primary and the general election.

But no sooner did Bush come out against unlimited corporate spending than his campaign quickly walked back the former Florida governor’s statements. “He’s not advocating for additional restrictions on the ability of an organization to have political speech, he’s calling for increased transparency and for balancing it back to campaigns,” Bush’s spokesman Tim Miller told MSNBC.

Translation: Bush wants to reduce the impact of super PACs by allowing political parties and campaign committees to solicit unlimited contributions, so long as they are disclosed within a 48-hour period. Many Republicans argue that the role of super PACs would shrink if big donors enjoyed more freedom to give directly to candidates and parties.

But this solution cuts both ways, says election law professor Richard Hasen, at the University of California, Irvine. Candidates would be free to allocate funds more responsibly and more tightly control their messaging, as opposed to facing potential political fallout from off-message super PACs. But lifting candidate contribution limits also has big downsides, notes Hasen.

“The closer that the money gets to the candidates, the more potential there is for donor influence,” Hasen said in an interview.

The idea that campaigns and parties should be free to raise unlimited contributions has gained substantial traction since Citizens United. The idea appeals both to some political scientists and to Republican Party leaders who see unaccountable outside spending as a threat to establishment candidates, and who regard unlimited direct contributions as a way to strengthen the parties.

A couple of other GOP presidential candidates have voiced support for unlimited contributions coupled with enhanced disclosure requirements. Texas Senator Ted Cruz introduced a bill dubbed the SuperPAC Elimination Act 2014 that would remove limits on direct contributions and require disclosure within 24 hours. “I believe in free speech and the First Amendment, which means everyone here has a right to speak out in politics as effectively as possible," Cruz said last year.

New Jersey Governor Chris Christie also supports this reform model, and said last summer that he would “let anybody donate any amount of money to any candidate” so long as they disclose the contributions.

Bush’s campaign-finance solution has fallen flat with reformer advocates, though.

“If Jeb had a magic wand to create that system … and replace [Citizens United] with unlimited contributions, that would be a worse system,” says David Donnelly, who heads the liberal campaign-finance reform group Every Voice.

“Over the course of an election cycle, there would be significant focus on recruiting the wealthiest Americans to back candidates,” Donnelly predicts of such a plan. “Candidates would spend all their time focused on those who would provide 80-90 percent of the money—one or two people could bankroll a campaign.”

Donnelly says he suspects that unlimited contributions with robust disclosure is merely a GOP talking point. “[Republicans] know they have to say something about money in politics” given ubiquitous voter disgust across the political spectrum, Donnelly says. “I think they soft-pedal the unlimited contributions to candidates,” he adds, while failing to acknowledge that Republicans on Capitol Hill have little interest in bolstering disclosure.

Indeed, Cruz’s Senate super PAC bill has yet to garner a single co-sponsor.

To reform advocates, permitting unlimited contributions to campaigns and parties would make the political money system worse, not better.

"Replacing unlimited outside spending with unlimited contributions to candidates’ campaigns would not be real reform—not even close,” People for the American Way Executive Vice President Marge Baker said. “The bottom line, which Bush still seems to miss, is that billionaires and wealthy special interests should not be able to pour unlimited money into our elections, period.”

Democratic Senators Up Pressure on SEC Disclosure

(Photo: AP/Bill Clark/CQ Roll Call)
 

A handful of Democratic senators who sit on the Senate Banking, Housing and Urban Affairs Committee have stepped up pressure on the U.S. Securities and Exchange Commission to require corporations to comprehensively disclose their political spending, even though Congress limited the agency's ability to do so in last year’s spending bill.

Senators Elizabeth Warren of Massachusetts, Chuck Schumer of New York, Jeff Merkley of Oregon, and New Jersey’s Bob Menendez—along with the good-government group Public Citizen—joined in a press call Thursday to call on the SEC to draft a rule that would require publicly traded corporations to disclose all money spent on elections. Corporate money is often funneled through trade associations and purported social-welfare groups that operate outside of existing disclosure law and have been spending unprecedented amounts of “dark” money on the 2016 presidential election.  

“Shareholders have a right to see how the companies they invest in are spending their money, but corporations are keeping their political contributions secret. Six years after Citizens United, the need for a strong corporate political disclosure rule is clearer than ever,” Warren said on a press call Thursday, the sixth anniversary of the Supreme Court’s Citizens United v. FEC ruling to deregulate independent political spending.

Such a rule would provide more information to shareholders, the senators argued, and would shine a light on corporations’ undisclosed political spending, which has exploded in the wake of Citizens United.

Earlier this month, the SEC canceled a public roundtable meeting on the rule, following congressional approval of a budget deal late last year that included a GOP rider that temporarily prohibits the agency from finalizing a rule. The SEC’s move to cancel the roundtable angered Democrats, who accused the agency of using the rider as political cover to drop the rule entirely.

Warren has publicly criticized SEC Commissioner Mary Jo White for failing to fully use the SEC’s authority, including on the corporate disclosure rule. She reiterated that criticism Thursday.

“There is absolutely nothing preventing the agency from making real progress toward an eventual rule. The SEC should stop delaying and get to work on outlining a meaningful disclosure rule,” Warren said on the call.         

Senate Majority Leader Mitch McConnell said yesterday that any action taken by the SEC on disclosure would be unconstitutional, and called the rule—along with other disclosure measures that were hamstrung in the budget deal—“terrible policy.”

“Congress has rejected these types of policies already,” McConnell said.

Democrats, however, contend that the SEC has legal room to move. The budget rider left an avenue open for the SEC to take action, explained John Coates, a securities legal expert who filed an opinion with Public Citizen after the SEC provision was included in last year’s spending bill. That’s because the rider didn’t bar the agency from using appropriated funding to plan or propose the disclosure rule.

“What Congress did instead was to ban use of funds on finalizing such a rule,” Coates said on the call. “The lead-up to a rule would require a lengthy investigation and proposal phase, for good reason.”

Progressive groups have been pushing the Obama administration to use its executive authority on a number of policy proposals that would increase transparency in election spending. Their top priority is a presidential executive order that would require federal contractors to disclose all political spending, an action that Obama is reportedly “seriously considering.” In addition to the SEC rule, progressives have also pushed the Internal Revenue Service to define “political activity” in order to hold tax-exempt social-welfare groups more accountable for their undisclosed political spending.

The SEC isn’t the only agency blocked from taking action by a GOP budget rider. Another rider in last year’s budget deal also banned the IRS from issuing new regulations to define tax-exempt “political activity.”

And while disclosure advocates acknowledge that there’s no way the SEC can legally issue the rule, they say it’s important to prepare as much as possible for when the provision expires—next year, when there will be a new president in power.

“We need the SEC to bring this rule to the five-yard line,” Schumer told reporters.

 

On Citizens United Anniversary, John Sarbanes Speaks

(Photo: Issue One)
 

Since the Supreme Court’s landmark Citizens United v. FEC ruling exactly six years ago, the massive influx of outside groups propped up by billionaire donors has sparked a national conversation about the growing influence of money in the American political system. And as the conversation advances, a whole host of solutions have been proposed for curtailing big money in politics.

On the sixth anniversary of Citizens United, which the Supreme Court handed down on January 21, 2010, the Prospect spoke with Maryland Representative John Sarbanes, one of the leading proponents of campaign-finance reform on Capitol Hill. Sarbanes talked about the impact of Citizens United on Congress and the path forward for leveling the political playing field.

A Democrat, Sarbanes has convinced the majority of his caucus to support his Government By the People Act, a bill that would institute a public financing system for federal candidates and would amplify small donations with matching federal funds.

Sarbanes says that since the 2010 ruling, which unleashed a new rash of outside spending, big money’s presence is palpable on Capitol Hill. “There’s a heightened feeling among members of Congress that you’re moving around inside a system that is overwhelmed with money,” Sarbanes told the Prospect, “and that it’s distortive of the way politics and policy gets made in Washington."

As the Prospect’s Eliza Newlin Carney writes, Citizens United has become a pivotal rallying point for reform advocates, who early on after the Court’s ruling launched an ambitious campaign to overturn it with a constitutional amendment. But at a time of historic partisan polarization nationwide, that effort faces substantial obstacles.

“I think the people assembled [around a constitutional amendment] with unrealistic expectations about how quickly you can achieve that,” says Sarbanes. “It is a tough road.”

The congressman believes that there are better ways for those who are angered about the decision, and about the role of money in politics, to take action. “If people are all dressed up, you want them to have places for them to go that are positive outlets for their anger,” said Sarbanes. He argues that the best outlet for public anger right now is at the state and local level, where campaign-finance reform measures have enjoyed much more success.

In just the last year, as I reported in the Prospect’s fall issue, both Maine and Seattle passed ballot measures that created strong public campaign-financing systems. States like Arizona and Connecticut, and major cities like New York City and Los Angeles, have also instituted innovative new ways for funding campaigns aimed at boosting the voices of average citizens.

For Sarbanes, the solution is to create competing systems of power—fueled by small donors—that can counterbalance the influence of big donors.

“If you want to address the cynicism people feel, you have to give them solutions [in which] they see themselves as power players in the system just like Sheldon Adelson,” he says, referring to the casino magnate and GOP mega-donor.

 

Obama ‘Seriously Considering’ Contractor Executive Order

(Photo: AP/Evan Vucci)

 

The New York Times reported Wednesday that President Obama is “seriously considering” an executive order that would require federal contractors to more fully disclose their political spending, a move that campaign reform advocates say would be a symbolic first step toward shining a light on undisclosed “dark” money.

The Times report follows increased pressure from campaign-finance reformers, who complain that Obama’s record on money in politics has been heavy on rhetoric but short on action. Those reformers greeted Obama’s announcement during his final State of the Union address that he would travel the country to promote campaign-finance and democracy reforms with some skepticism, but saw it as a good sign that he might be ready to sign the executive order.

So far, the administration is sticking to its official talking points. “While we will continue to examine additional steps we can take to reduce the corrosive influence of money in politics, only Congress can put an end to it,” a White House spokeswoman told the Times.

But White House Chief of Staff Denis McDonough was less shy in a press conference Tuesday. "We’ll do audacious executive action throughout the course of the year—I’m confident about that,” McDonough told the press corps. McDonough said the president is adopting a “Why not?” attitude when considering executive action during his final year in office.

"Obama is again considering imposing his ‘enemies list’ regulation by executive order,” Senate Majority Leader Mitch McConnell said Wednesday on the Senate floor. “If future Republican presidents lived by this why not standard, Democrats would be outraged." 

Senator John McCain, who has often disagreed with McConnell’s laissez-faire stance on campaign financing, backed the Senate leader up, saying that if Obama uses executive action on this issue it will likely have to go straight to the courts.

Still, it’s worth noting that Obama has faced sustained pressure throughout his second term to sign this specific executive order, but failed to take action. Republicans on Capitol Hill, who object that the order would violate the First Amendment and would politicize the federal contracting process, have reportedly exerted strong pressure on Obama not to sign it.

If Obama wants the order to shed any light on the dark money underwriting the 2016 elections, he will have to act fast. The president has pledged to take action on campaign financing. The only question now is whether he will use his executive power to follow through. 

This post has been updated to include responses from Senators Mitch McConnell and John McCain.

GOP House Member Wants to Ban Fundraising

House Republican David Jolly, of Florida, is so sick of dialing for dollars every day that he introduced legislation Tuesday that would forbid members of Congress from personally asking for money. 

“Our na­tion is un­der siege by IS­IS, and yet … I’m ex­pec­ted to be fight­ing for your safety from a fun­drais­ing call suite at party headquar­ters. I won’t do it,” wrote Jolly, a conservative who is running for the Florida Senate seat being vacated by GOP presidential hopeful Marco Rubio, in an op-ed.

Jolly’s bill is noteworthy given GOP leaders’ uniform opposition to campaign-finance restrictions. It comes at a time when conservatives have become increasingly critical of special interest campaign contributions, which they see as a tool for the GOP establishment to stifle dissent within the rank-and-file. Members of the House’s conservative Freedom Caucus were instrumental in killing a Senate leadership-backed rider to last year’s budget deal that would have increased limits on coordinated spending between parties and candidates.

To some degree, Jolly’s bill, too, appears to be thumbing its nose at the GOP establishment. 

“I think [the bill] a conversation starter,” says John Pudner, who heads a conservative reform group dubbed Take Back Our Republic and who has has been lobbying conservatives to take on campaign-finance reform. Pudner’s group wasn’t involved in drafting the bill, but he said he expects a number of conservatives to co-sponsor, and even more to at least enthusiastically support the idea behind it.

“As far as the prospects, it’s not a bill I see moving quickly,” says Pudner. “It probably moves too far for leadership to give it much consideration.”

Jolly is the second House member to openly decry the ever-growing fundraising pressures that go along with being a member of Congress.

Less than two weeks ago, Represenative Steve Israel, a New York Democrat, also penned an op-ed for the Times in which he said that the burden of fundraising was a major factor in his decision not to seek reelection. "Since [taking office in 2000], I’ve spent roughly 4,200 hours in call time, attended more than 1,600 fund-raisers just for my own campaign and raised nearly $20 million in increments of $1,000, $2,500 and $5,000 per election cycle,” Israel detailed. “And things have only become worse in the five years since the Supreme Court’s Citizens United decision.”

Former Senate Majority Leader Tom Daschle, a Democrat, said last year that freshman senators were expected to spend at least two-thirds of their time raising money, at a requisite clip of about $10,000 a day.

It’s long been an unspoken understanding that members of Congress must dedicate a great deal of time raising money for their own campaigns, as well as for their respective parties—especially as the cost of getting re-elected grows exponentially. But until recently, politicians haven’t been very candid about the details.

What Jolly’s bill, The Stop Act, aims to do is at least hold menbers of Congress to the same standard as the judicial candidates in 30 states who are prohibited from directly soliciting money. Members of Congress, however, would still be able to attend fundraisers and talk directly with donors under Jolly’s bill. 

Report: The Roberts Court’s Five Campaign Finance Reversals

(Photo: White House)

 

By now, everyone knows about Citizens United and the flood of unlimited outside spending ushered in by that infamous Supreme Court decision. But that ruling is just one of five major Roberts Court decisions that have completely reshaped the campaign-finance landscape over the past decade, concludes a new report from the Brennan Center for Justice at New York University’s School of Law.

By equating money with free speech and imposing an archaic legal interpretation of corruption, the Roberts Court has introduced an era of unlimited outside spending, undisclosed “dark” money, and disproportionate influence on candidates and parties by wealthy benefactors, the report finds. All this has come at the expense of everyday citizen participation, according to the Brennan Center.

Titled simply “Five to Four,” the report identifies five rulings—all narrowly decided by a 5-4 margin—that have unleashed the influence of private money:

Citizens United v. FEC and SpeechNow.org v. FEC (2010)

The 2010 Citizens United decision laid the groundwork for the creation of independent outside-spending groups—now largely known as super PACs—because the court majority concluded that independent election spending from non-candidate groups does “not give rise to corruption or the appearance of corruption.”

The real floodgate of unlimited money didn’t come until a couple months later when a lower court ruled in SpeechNow that, based on Citizens United’s assertion that independent expenditures can’t corrupt, there is no legal justification for limiting contributions that underwrite outside spending. The first post-Citizens United presidential election saw an influx of $600 million in super PAC spending, and the 2016 election is on pace to vastly exceed that amount.

FEC v. Wisconsin Right to Life, Inc. (2007)

Roberts’s controlling opinion in Wisconsin Right to Life found that it was unconstitutional to ban corporate electioneering activity that was “issue advocacy,” not “express advocacy”  for or against certain candidate. This gave outside groups the opportunity to run thinly veiled “issue ads” that could easily be read as implicit support or opposition of a candidate.

From there, outside groups argued that they shouldn’t have to register as political committees (and thus, be subject to disclosure laws) so long as they don’t spend more than 50 percent on “express advocacy.” This has given rise to a rash of so-called “social welfare” groups spending heaps of undisclosed money—$310 million in 2012 alone—on “issue ads” that reformers contest support or oppose a candidate in an implicit way.   

McCutcheon v. FEC (2014)

Prior to 2014, donors had faced an overall cap of about $123,000 on how much they could contribute to federal candidates and parties combined in a given election cycle. But, in McCutcheon v. FEC, the court ruled that such contribution limits were constitutional only to prevent “quid pro quo” corruption. This freed wealthy donors to contribute tens of millions more to candidates, parties, and PACs in the 2014 election than they would have previously been able to. Since McCutcheon, wealthy donors have been given even more ways to dump big money into elections.

Davis v. FEC (2008)

In an attempt to lessen the advantage of wealthy self-financed candidates, Congress included in its 2002 campaign-finance overhaul, the Bipartisan Campaign Reform Act, a “millionaires’ amendment” that allowed any candidate running against a high-spending, self-financed opponent to solicit donations larger than the contribution limits. 

But in 2008, the Court ruled in Davis that the “millionaires” provision was unconstitutional because it punished self-financed candidates for exercising their First Amendment right to spend as much of their own money as they pleased. In 2014, at least 24 congressional candidates pumped $1 million of their own money into their campaigns.

Arizona Free Enterprise Club v. Bennett (2011)

The standard set by Davis in 2008 paved the way for a series of lower court rulings that weakened certain states’ public campaign-finance systems. In 2011, the Supreme Court took up Arizona Free Enterprise, which addressed the constitutionality of so-called trigger funds that gave publicly financed candidates an extra funding boost if they were running against a big-spending opponent who had opted out of public funding.

The Roberts Court, again, ruled the trigger mechanism unconstitutional on the grounds that it curtailed the First Amendment rights of privately financed candidates. The decision struck a huge blow to the functionality of a number of state public finance systems around the nation.

As the report concludes, just a one-member shift on the bench “could permit Americans to take back their democracy in a way that is more consistent with the Constitution’s true meaning, which allows for reasonable regulation of big money in politics.”

Ethics Watchdog: NRA Is Lying About Its Political Spending

The National Rifle Association might be misrepresenting the extent of its political activity, according to Citizens for Responsibility and Ethics in Washington (CREW). The ethics watchdog filed a new complaint today with the IRS calling on the agency to investigate alleged discrepancies in political spending disclosures.

According to the complaint, the reported $12.6 million in political expenditures during the 2014 election cycle. However, it only reported $5.79 million in political spending to the IRS. And its annual audited statement showed that the group had covered $18.5 million of its PAC’s expenses—bringing the grand total of political expenditures up to $31.1 million.

When CREW first exposed the misreporting, the NRA admitted to the IRS that it had provided incorrect information in its filing. But in its most recent filing, CREW says that the NRA still hasn’t correctly documented the scope of its political spending, calling for a full investigation into the gun rights group’s political activity.

The complaint also states that the NRA told the IRS that it didn’t spend any money on lobbying despite Congressional lobbying disclosure records showing it spent millions. Additionally, the NRA told the IRS that it didn’t receive any money from membership dues despite the fact that it’s a membership-based organization that reportedly receives more than $100 million in dues each year.

“The NRA has a real problem with letting the IRS know about its political activity,” CREW Executive Director Noah Bookbinder said. “Unless the IRS takes action, there’s no reason to believe this problem will end.”

CREW has been tracking the NRA’s political spending for years, noting consistent discrepancies between FEC and IRS filings. Conservatives have repeatedly alleged that the IRS unfairly targets right-wing political groups for tax investigations. Most recently, Republicans used a budget rider to curtail the agency’s ability to issue rule-making that would better define the parameters of a 501(c)4, the so-called social welfare groups that have become a haven for undisclosed political spending.

However, getting the IRS to initiate an investigation is unlikely, given that such action will no doubt be seen in the 2016 presidential election as partisan warfare.

Is Obama Finally Getting Real on Money in Politics?

Campaign-finance reform advocates were on high alert during President Obama’s final State of the Union address Tuesday night, looking for any indication that Obama might finally take steps to curtail the influence of money in the political system.

For months, reform advocates have been running a pressure campaign aimed at pushing the White House to reshape its legacy of inaction on money in politics—one that’s been characterized by a laundry list of promises that were never fulfilled.

Obama’s speech signaled that he appears to have heard the criticism. The president admitted that one of the few regrets in his presidency was his failure to fix the nation’s broken political system, and he dedicated one of the speech’s four themes to the need to revitalize American democracy by reforming campaign financing, restoring voting rights, and ridding states of gerrymandered districts.

“We have to end the practice of drawing our congressional districts so that politicians can pick their voters, and not the other way around. We have to reduce the influence of money in our politics, so that a handful of families and hidden interests can’t bankroll our elections,” Obama stated. “And if our existing approach to campaign finance can’t pass muster in the courts, we need to work together to find a real solution.”

Obama continued: “We’ve got to make voting easier, not harder, and modernize it for the way we live now. And over the course of this year, I intend to travel the country to push for reforms that do.”

Many reform advocates say they are encouraged that the president intends to start a serious conversation on the need for reform rather than simply delivering glossy promises—something that he’s been criticized for before.

“He has been heavy on rhetoric and light on action on this topic,” says Lisa Gilbert, director of Public Citizen’s Congress Watch. “It’s a problem that they themselves have recognized; this is the first step to correcting it.”

With the president set to look for reform solutions on the road, groups like Every Voice, a leading group backing for public campaign financing, argue that Obama should capitalize on recent state and local wins in 2015.

“As he travels the country to push for the reforms he mentioned [in his address], he should talk about the ways in which Americans around the country—from Maine to Seattle and Arizona to Miami—are coming together to fight for a democracy that works for all of us," Every Voice President David Donnelly said in a statement.

Now that Obama has pledged to rededicate himself to reform in his final year in office, reform advocates are seizing on his State of the Union message to argue one last time that the president should pass an executive order that would require federal contractors to disclose all political spending. It’s an action that advocates have been pushing the president to take for years. And now that riders in last year’s budget deal have closed other reform avenues, advocates of change say the executive order is Obama’s last chance to take policy action.

Gilbert, who has led the lobbying campaign for the executive order, said she remains optimistic that Obama will sign it. Gene Sperling, a former close adviser to Obama, tweeted his support for the order. Gilbert said she views Obama’s rhetoric as a signal of things to come. “We look at this as a hopeful indication,” she says.

Still, others have stopped believing in Obama’s lofty rhetoric.

“President Obama's continued inaction is a slap in the face to anyone who voted for him after believing his promise to fix the broken system of big money-dominated politics,” Kurt Walters of the anti-corruption group Rootstrikers said in a statement. “President Obama must take immediate executive action to fight secret political spending—or deliver the apology he will owe the country for breaking his promise to take action.”

But for most reform advocates, an Obama executive order to force disclosure on federal contractors would go a long way toward salvaging his otherwise tarnished reputation as a champion of change.

Winners and Losers in the Impending Ad Blitz

The presidential candidates and the outside groups backing them are opening up their wallets in a very big way leading up to the Iowa caucuses on February 1. The ad blitz means a windfall for some businesses and a financial loss for others.

The big winners are local TV stations in the early primary states. As The Guardian reported, Republican candidates are dumping money into expensive ad buys during the upcoming Super Bowl game as they try to take advantage of the massive captive audience.

“In New Hampshire and South Carolina, where the following primary will take place on 20 February, contenders have dumped more than $1m (sic) into the Sunday evening event, according to a Guardian review of FCC filings, possibly with more cash to come,” Sam Thielman writes. “Local TV ads in those two states—which customarily range in the four and five figures—have stretched into the hundreds of thousands.”

And TV stations stand to make even more money off super PACs that are trying to buy Super Bowl ads. That’s because while TV stations are required by law to give political candidates the lowest ad rate, no such requirement exists for outside groups.

But for car dealers, the political ad onslaught is turning into a pain in the wallet. As Bloomberg’s Tim Higgins reports, car dealers are the single biggest purchasers of local TV ads in the country. And as political ads begin to take up as much of one-third of local ad spots, car dealers who rely on TV to get the word out are being priced out.

In the hardest fought political battlegrounds—contentious counties in swing states—the impact is so profound that auto sales could slow as much as 3 percent. National groups representing auto dealers are now putting pressure on broadcasters to remember who their best customers are in election years and otherwise, according to Higgins.

The one group that stands to make money no matter what is political consultants. As well-funded campaigns like that of Jeb Bush pour tens of millions of dollars into TV ads, they use consultants to handle the logistics of ad buys. In an industry with a standard ad placement commission of 10 percent to 15 percent, that translates into big bucks. Jeb Bush has already funneled the vast majority of his ad buys—about $40 million worth—through the consulting firm Oath Strategies. For more on how political consultants are cashing in, read my interview with Adam Sheingate, whose new book on the multibillion-dollar political-consulting racket is out this week.

As the market for political messages targeted to crucial audiences soars, one thing is certain: There’s a lot of money to be made, and apparently, a lot of money to be lost. 

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