Michael Malbin, President of the Campaign Finance Institute and an honorable adversary, is critical of my criticism of CFI's study of non-profit election activities, claiming that I treat it, "as if the study recommends new regulation of these activities," when it only seeks to foster a "conversation" that "needs to take place." Specifically, what I wrote was, "it is clear in the end where CFI thinks the debate ought to go - Congress needs to expand its regulatory reach."
Professor Malbin continues:
"The paper said that you could not look at PACs, 527s and 501(c)s in isolation from each other. It also predicted that regulating contributions to 527s would be likely to drive money into 501(c)s, particularly if the IRS fails to monitor political expenditures. It did not say that political activity by nonprofits should therefore be regulated more than they are under current tax law. It specifically said, for example, there is still room for debate whether contributions from individuals to any truly independent nonprofit group (including a 527) should be subject to limits."
Yet later on in this post, Professor Malbin notes that, "a CFI Task Force in 2001 recommended that any organization spending more than $50,000 per year on election communications -- regardless of the organization's corporate form -- should be required to disclose contributors who give more than a threshold amount." That, it seems to me, is an expansion of Congress's regulatory reach, is it not? There is no indication that this report is intended to repudiate that earlier CFI Task Force.
It is true that the report includes the language Professor Malbin quotes above. This comes immediately after the report informs us that, "a group's, and its donors', financial weight in elections is greater than it appears to be in conventional discussions, as is the threat of 'undue influence' over elected officials."
The report then quotes at some length Sierra Club President Carl Pope, making an argument for why no added regulation of 527s is needed, and concludes (p. 31-32), "Whether or not the facts ultimately vindicate or refute Pope's position, we believe it is necessary to conduct the debate and explore the policy alternatives on a terrain that goes beyond the intellectual straightjacket of legal categories established 30 years ago. There are a range of policy options." (p.32).
Let's dissect that. Pope lays out the argument for leaving 527s no more regulated then they are now (which is by no means unregulated). The report immediately expresses doubt about Pope's argument - it may be true, but it may not. Next, we need to get out of the legal categories established 30 years ago. This seems to reference the 1974 Amendments to FECA and even more so, the 1976 Supreme Court decision in Buckley v. Valeo, which is largely responsible for the current status of 527s. And, "there are a range of policy options" for dealing with these problems - presumably the problem of "undue influence," which is greater than generally thought.
So, groups pose a greater threat of "undue influence" than the public and policymakers think. The argument against added regulation is open to debate. In this ensuing debate we must break free of the old rules, which are the very rules that have left certain activities relatively free from government interference. And there are many policy options to deal with this. Forgive me, but that sounds very much like a fox asking to tear down the fence surrounding the chicken coop, so he and the hens can debate what to do about the problems the hens are causing. Maybe the fox will decide that the fence was a good idea after all, or even that it's walls ought to be higher and more secure. But you'll forgive the hens if they aren't buying it.
In the end, though, we needn't guess. For all Professor Malbin's protestations, the report does specifically call for more regulation. "The disclosure system could and should be improved." (p. 33). Frankly, I don't think by "improved" that CFI means we should have more reasonable (read higher) limits before things need to be disclosed, let alone any broader reduction in regulation, though I would be happy to be corrected on this point. No, CFI uses this paper to propose, at an absolute minimum, more disclosure, and they specifically suggest a few areas for that new disclosure: about transfers between groups, about internal communications, and about sponsors of political ads on the airwaves (p. 33). And, as I noted in my original post, the Report also specfically notes general ways in which 527 regulation might be drawn in a manner that would not simply lead to all newly regulated 527 activity being shifted over to 501(c) organizations. True, this report does not go so !
far as to say that such regulation is therefore desireable; it leaves open the notion that the anti-regulatory argument might be right. But I think that when you add it all up, and given CFI's history of working for more regulation, my initial summary is fair: " it is clear in the end where CFI thinks the debate ought to go." Again, I would be happy to be proven wrong.
Meanwhile, by all means, let us have such a debate. That has been my goal for 15 years, while well-funded "reform" groups have dominated the discussion and (CFI a notable exception) cast personal aspersions on all who disagree. My experience is that with the folks at CFI one can at least have an honest debate. But let's not those of us who favor greater freedom of speech enter into this debate with rose-colored glasses about what the reform organizations hope to accomplish through such debate.
And if we're going to make this a truly "holistic" debate, let us make it truly holistic. Let's discuss "the press," especially when they receive grants from large foundations with agendas such as Pew's grants to NPR and the American Prospect, or when, like the Philadelphia Enquirer in 2004, they state that acheiving a partisan result in the fall is a major objective of the paper. Let us discuss hollywood filmmakers. Let us discuss booksellers and publishing houses. Above all, let us discuss organizations such as CFI, or John McCain's Reform Institute, and other campaign finance "reform" organizations, and even think tanks such as Brookings and Cato. Let us demand that their forms of political influence be put on the table as well, and let no political player cheaply surrender it's particular form of influence while others retain theirs. Let us further agree that a truly "holistic" debate ought not have as its agreed starting point that existing regulation, let alone f!
urther regulation, is compatible with the First Amendment, properly interpreted. Let us also ask if the regulations enacted to date have accomplished anything verifiably worthwhile, and if so, at what cost? On that basis, I'm happy to participate. I'm not eager to participate, however, in a debate that seems to start from the position that what is currently regulated must remain regulated; that certain organizations' types of influence - including those of my debating partners - are not on the table; and that everything else - that is, most of what I care about - is up for grabs.
Finally, I think my criticisms of the study, and in particular its choice of groups to study, remain valid, and frankly, should be viewed as part of the debate that CFI seeks to foster. Certainly part of that debate must consists of examing the likely effects of policies adopted for large, enduring groups that engage in a good deal of certain activities, on smaller or short term groups, or groups that do not engage extensively in such activitites. This does not mean that the information in the CFI report is not useful (I indicated, I think, that it was), only that it is by no means complete, and one would usually not want to make general policy prescriptions on the basis of exceptional groups and organizations. That is a shortcoming in the CFI report, and should be part of the conversation. Let that debate begin.
- Brad Smith
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From: Michael Malbin [mailto:mmalbin@cfinst.org]
Sent: Tue 7/25/2006 2:58 PM
To: 'Rick Hasen'; election-law_gl@majordomo.lls.edu
Cc: John Samples; Bob Bauer; Allison Hayward; Smith, Brad
Subject: RE: Campaign Finance Institute Study on Nonprofits
Response from Michael Malbin of the Campaign Finance Institute to this post from earlier today:
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"When Democracy is the Problem"
Brad Smith offers these thoughts <http://campaignfreedom.org/blog/id.37/blog_detail.asp> on the CCP blog (see also Bob Bauer <http://www.moresoftmoneyhardlaw.com/updates/outside_groups.html?AID=776> and John Samples <http://www.cato-at-liberty.org/2006/07/24/the-future-of-campaign-finance-restrictions/#more-607> ) criticizing the new Campaign Finance Institute working paper on nonprofits <http://www.cfinst.org/studies/pdf/NonprofitsWorkingPaper.pdf> . [END]
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Response from Michael Malbin of the Campaign Finance Institute:
Brad Smith, John Samples and Bob Bauer have all criticized the recent Campaign Finance Institute study, Nonprofit Interest Groups' Election Activities and Federal Campaign Finance Policy by Stephen Weissman and Kara Ryan, as if the study recommends new regulation of these activities. (Samples uses the word "proposal." Smith says that it is "clear" where we think the debate ought to go.) Since I cannot figure out how to post to their blogs, I am sending this to the Election Law list and to them individually.
The claims simply are not true. The paper said that you could not look at PACs, 527s and 501(c)s in isolation from each other. It also predicted that regulating contributions to 527s would be likely to drive money into 501(c)s, particularly if the IRS fails to monitor political expenditures. It did not say that political activity by nonprofits should therefore be regulated more than they are under current tax law. It specifically said, for example, there is still room for debate whether contributions from individuals to any truly independent nonprofit group (including a 527) should be subject to limits.
The study did focus on large, enduring, politically active organizations because these generate sustained pressure on the system and force us to confront the easy assumptions that have driven much prior debate. These groups' own leaders describe their organizations in public statements and in court depositions as spending millions on election related projects while they generally report little or nothing in political expenditures on their 990 Forms. Based on this, the report argued that there ought to be better definition and disclosure of election expenditures on the 990s. It also argued that to the extent that 501(c)s spend major amounts on elections, there will inevitably be pressure to look at the funding sources for these expenditures and not just at the amounts. And before anybody jumps on me, note that the words in the last sentence say "look at" not "limit". Some will push for contribution limits, others will ask for disclosure, others will seek to roll back the!
disclosure currently called for by the IRS.
Let me also note in the interest of full personal disclosure that a CFI Task Force in 2001 recommended that any organization spending more than $50,000 per year on election communications -- regardless of the organization's corporate form -- should be required to disclose contributors who give more than a threshold amount. To protect an organization's ability to receive anonymous contributions for non-election activities, the report recommended that organizations put their election funds into a separate bank account and that the required disclosure be limited to that account.
Whatever one may think of this idea, any policy (including the current IRS rules for Form 990s) presupposes an ability to distinguish electoral from non-electoral expenditures. We know that any such definitions are bound to be controversial. Arguments over similar definitions have kept many lawyers in business for years. We also are well aware that a bad definition could harm activities that ought not to be harmed. That is why the conference was structured to include representatives from the nonprofits as well as campaign finance law specialists. The paper is a path breaking study that puts uncomfortable facts on the table. It was meant to be the opening gambit in a conversation. It was not a "proposal." Whether one likes the facts, that conversation needs to take place.
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Michael J. Malbin
Executive Director
Campaign Finance Institute
1990 M Street NW (Suite 380)
Washington, D.C. 20036
PH: 202-969-8890
FAX: 202-969-5612
email: mmalbin@CFInst.org
web: http://www.CFInst.org <http://www.cfinst.org/>
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