Before Citizens United, the maximum amount one person could give to a candidate was $2,500; for a political action committee, $5,000; for a political party committee, $30,800. Now, the sky's the limit for a super-PAC, and even more disturbingly, any donor can give an unlimited contribution to a 501(c)(4)—outfits defined by the IRS as "civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare"—and to make matters worse, that contribution will remain eternally secret. In this way, American politics is descending further into the darkness, with 501(c)(4)s quickly gaining influence as "shadow super-PACs."
A recent analysis by the Washington Post found that, at a cost of $24 million, 40 percent of the TV ads in the presidential race so far came from these tax-exempt "social welfare" groups. The Karl Rove-founded American Crossroads, a leading conservative super-PAC attacking Democratic candidates and the Obama administration, also runs a 501(c)(4) called Crossroads GPS. It's raised twice as much money as its sister group, all from donations whose sources will remain hidden from American voters. Serving as a secret slush fund for billionaires evidently now qualifies as social welfare.
The Income Defense Industry
In his book Oligarchy, political scientist Jeffrey Winters refers to the disproportionately wealthy and influential actors in the political system as the "Income Defense Industry." If you want to know how the moneyed class, who prospered during the Bush and Clinton years, found a way to kill or water down nearly everything it objected to in the Obama years, look no further than the grip of the 1 percent of the 1 percent on our political system.
This simple fact explains why hedge fund managers pay a lower tax rate than their secretaries, or why the United States is the only industrialized nation without a single-payer universal healthcare system, or why the planet continues to warm at an unprecedented pace while we do nothing to combat global warming. Money usually buys elections and, whoever is elected, it almost always buys influence.
In the 2010 election, the 1 percent of the 1 percent accounted for 25 percent of all campaign-related donations, totaling $774 million dollars, and 80 percent of all donations to the Democratic and Republican parties, the highest percentage since 1990. In congressional races in 2010, according to the Center for Responsive Politics, the candidate who spent the most money won 85 percent of House races and 83 percent of Senate races.
The media loves an underdog story, but nowadays the underdog is ever less likely to win. Given the cost of running campaigns and the overwhelming premium on outspending your opponent, it's no surprise that nearly half the members of Congress are millionaires, and the median net worth of a US senator is $2.56 million.
The influence of super-PACs was already evident by November 2010, just nine months after the Supreme Court's ruling. John Nichols and Robert McChesney of The Nation note that, of the 53 competitive House districts where Rove's Crossroads organization outspent Democratic candidates in 2010, Republicans won 51. As it turned out, however, the last election was a mere test run for the monetary extravaganza that is 2012.
Republicans are banking on that super-PAC advantage again this year, when the costs of the presidential contest and all other races for federal posts will soar from $5 billion in 2008 to as high as $7 billion by November. (The 2000 election cost a "mere" $3 billion.) In other words, the amount spent this election season will be roughly the equivalent of the gross domestic product of Haiti.
The Myth of Small Donors
In June 2003, presidential candidate Howard Dean shocked the political establishment by raising $828,000 in one day over the internet, with an average donation of $112. Dean, in fact, got 38 percent of his campaign's total funds from donations of $200 or less, planting the seeds for what many forecast would be a small-donor revolution in American politics.
Four years later, Barack Obama raised a third of his record-breaking $745 million campaign haul from small donors, while Ron Paul raised 39 percent from small dollars on the Republican side. Much of Paul's campaign was financed by online "money bombs," when enthusiastic supporters generated millions of dollars in brief, coordinated bursts. The amount of money raised in small donations by Obama, in particular, raised hopes that his campaign had found a way to break the death grip of big donors on American politics.
In retrospect, the small-donor utopianism surrounding Obama seems naive. Despite all the adulatory media attention about his small donors, the candidate still raised the bulk of his money from big givers. (Typically, these days, incumbent members of Congress raise less than 10 percent of their campaign funds from small donors, with those numbers actually dropping when you reach the gubernatorial and state legislative levels.) Obama's top contributors included employees of Goldman Sachs, JP Morgan Chase, and Citigroup, hardly standard bearers for the little guy. For obvious reasons, the campaign chose to emphasize the small donors over the big ones in its narrative, as it continues to do in 2012.
Interestingly enough, both Obama and Paul actually raised more money from small donors in 2011 than they did in 2008, 48 percent and 52 percent of their totals, respectively. But in the super-PAC era that money no longer has the same impact. Even Dean doubts that his anti-establishment, internet-fueled campaign from 2004 would be as successful today. "Super-PACs have made a grassroots campaign less effective," he says. "You can still run a grassroots campaign but the problem is you can be overwhelmed now on television and by dirty mailers being sent out…It's a very big change from 2008."
Obama is a candidate with a split personality, which makes his campaign equally schizophrenic. The Obama campaign claims it's raising 98 percent of its money from small donors and is "building the biggest grassroots campaign in American history," according to campaign manager Jim Messina. But the starry-eyed statistics and the rhetoric that accompanies it are deeply misleading. Of the $89 million raised in 2011 by the Obama Joint Victory Fund, a collaboration of the Democratic National Committee (DNC) and the Obama campaign, 74 percent came from donations of $20,000 or more and 99 percent from donations of $1,000 or more.
The campaign has 445 "bundlers" (dubbed "volunteer fundraisers" by the campaign), who gather money from their wealthy friends and package it for Obama. They have raised at least $74.4 million for Obama and the DNC in 2011. Sixty-one of those bundlers raised $500,000 or more. Obama held 73 fundraisers in 2011 and 13 last month alone, where the price of admission was almost always $35,800 a head.
An increase in small donor contributions and a surge of big-money fundraisers still wasn't enough, however, to give Obama an advantage over Republicans in the money chase. That's why the Obama campaign, until recently adamantly against super-PACs, suddenly relented and signaled its support for a pro-Obama super-PAC called Priorities USA.
A day after the announcement that the campaign, like its Republican rivals, would super-PAC it up, Messina spoke at the members-only Core Club in Manhattan and "assured a group of Democratic donors from the financial services industry that Obama won't demonize Wall Street as he stresses populist appeals in his re-election campaign," reported Bloomberg Businessweek. "Messina told the group of Wall Street donors that the president plans to run against Romney, not the industry that made the former governor of Massachusetts millions."
In other words, don't expect a convincing return to the theme of the people versus the powerful in campaign 2012, even though Romney, if the nominee, would be particularly vulnerable to that line of attack. After all, so far his campaign has raised only 9 percent of its campaign contributions from small donors, well behind both Sen. John McCain, 21 percent in 2008, and George W. Bush, 26 percent in 2004.
In the fourth quarter of 2011, Romney outraised Obama among the top firms on Wall Street by a margin of 11 to 1. His top three campaign contributions are from employees of Goldman Sachs ($496,430), JPMorgan ($317,400), and Morgan Stanley ($277,850). The banks have fallen out of favor with the public, but their campaign cash is indispensable among the political class and so they remain as powerful as ever in American politics.
In a recent segment of his show, Stephen Colbert noted that half of the money ($67 million) raised by super-PACs in 2011 had come from just 22 people. "That's 7 one-millionths of 1 percent," or roughly .000000071 percent, Colbert said while spraying a fire extinguisher on his fuming calculator. "So Occupy Wall Street, you're going to want to change those signs."
Ari Berman is a contributing writer for The Nation magazine and an Investigative Journalism Fellow at The Nation Institute. His book, Herding Donkeys: The Fight to Rebuild the Democratic Party and Reshape American Politics (Picador) is now out in paperback with a new afterword. Follow him on Twitter @AriBerman. Follow TomDispatch on Twitter @TomDispatch and join us on Facebook. To stay on top of important articles like these, sign up to receive the latest updates from TomDispatch.com here.