Outside Political Money Moving On In

Not only is the amount of money being criticized, but also its origins. The sources are often labor unions, big corporate contributors, political action committees (PACs), and other political committees, such as so-called 527 committees. In the media, these sources are frequently described as “Washington insiders,” insinuating that nothing could be more insidious. The worst of the Washington insiders are said to be those with a mailing address on K Street in Northwest Washington. Even money coming from a hot dog stand on K Street is suspect.

The motivation
So why the enormous influx of out-of-state money this campaign season? Because several high-profile races are unusually competitive in North Carolina in 2008. Ryan Teague, staff writer for the Raleigh News & Observer, reports that “out-of-state political groups could spend nearly $10 million on North Carolina races for governor and U.S. senator, mostly on television and radio ads, and some are considering putting money into the presidential race here as well.”

While one Democrat (gubernatorial candidate Beverly Perdue) may be in the line of fire of this outside money, it is generally assumed that more money is being targeted at defeating Republicans, namely gubernatorial candidate Pat McCrory and incumbent US Senator Elizabeth Dole. It is also expected that as long as North Carolina is in play in at the presidential level, outside money will flow into the campaign of US Senator Barack Obama in order to turn the Tar Heel state “blue” for the first time since 1976. If, in the latter stages of the campaigns, some North Carolina races lose their competitiveness, that money will likely shift north to Virginia.

Jack Betts, a longtime political columnist for the Charlotte Observer, observes that another reason for the influx of cash may be attributed to two court rulings – the US Supreme Court decision in the case of Buckley v. Valeo and the application of that decision by the Fourth Circuit US Court of Appeals. The Buckley ruling of January 30, 1976 upheld federal limits on individual contributions, as well as the disclosure and reporting provisions and the public financing scheme. But the limitations on campaign expenditures, on independent expenditures by individuals and groups, and on expenditures by a candidate from his personal funds were found to be unconstitutional. The Court found that the federal law placed severe restrictions on protected free speech and freedom of association, while at the same time showing no compelling countervailing government interest necessary to support such restrictions.

With North Carolina’s $4,000 limit on donations to independent campaigns banned as a result of the ruling, 527 groups were free to begin accepting large contributions from individuals, labor unions, and corporations. This money can then be used to support to political campaigns and candidates. But 527s may not coordinate their efforts with the candidates, nor can they express explicit support for or against a candidate or appeal to voters to vote for a particular candidate. That distinction in the current 527 ad campaigns running throughout North Carolina, however, seems elusive.

Who’s contributing?
Out-of-state money is nothing new, either to North Carolina or any other state. The concern this year appears to be the amount of money that is flowing into the state. According to Teague, the Democratic Senatorial Campaign Committee (DSCC) will spend as much as $8 million on the US Senate campaign of State Senator Kay Hagan. The national Democratic Party recruited Hagan as a part of their national strategy to create a 60-vote veto proof US Senate in 2008.

According to the Center for Responsive Politics, a lot of the DSCC money has come from investment banking firms on Wall Street, particularly Morgan Stanley and Fortress Investment group.

On the Republican side, Americans for Prosperity, whose mission is “educating citizens about economic policy and mobilizing those citizens as advocates in the public policy process,” is spending $300,000 on radio ads touting Dole for her support of offshore drilling and development of oil shale. While Americans for Prosperity is a national organization, it has a vibrant chapter in North Carolina.

One of many 527 groups participating in 2008, the Alliance for North Carolina has poured $450,000 into an ad campaign attacking Pat McCrory on his stand on certain issues. The Alliance was formed as “Pioneer Majority” in 2006. It stated purpose is to “communicate independently with the citizens of North Carolina on vital public issues, including but not limited to education, economic development, health care, public safety and better government” (rumor has it that they also favor motherhood and apple pie). The primary sources for the Alliance money are the Democratic Governors Association and the National Education Association, an affiliate with the North Carolina Association of Educators.

On the Republican side, the Republican Governors Association created a political action committee and has announced it will raise $390,000, but as of the latest reporting data publicly available, it had yet to spend any money on behalf of North Carolina Republican candidates (the biggest expenditures will come in the month leading up to election day).

Transparency is lacking
In addition to the huge amount of outside money flowing to the state, the other major criticism of this process is the lack of transparency. Voters in the state can see the handiwork of these political committees, but it is difficult to track where the money is really coming from, either by source or geography.

Without transparency, ads created be these political groups tend to be more hard hitting (or negative) since they fly somewhat below the radar screen and there is no way for voters to hold anyone responsible and accountable for their actions. In fact, in the 2008 campaigns, most of the ads are outright distortions, containing only small glimmers of truth. Veteran columnist Scott Mooneyham of the Capitol Press Association writes that "In this campaign season, unlike any that I've ever seen, political ads have degenerated into outright lies. There seems to be no standard, no need for any basis of truth, no claim that's too absurd." (Southern Pines Pilot, 9/28/08). 

Concerns about the outrageousness advertising this campaign season has led the News & Observer to attempt to make clarifications to some of the claims in a series called "Fact, Falsehood -- Or Somewhere In Between". 

What can be done?
Clearly, changes are needed, though its difficult to legislate integrity in advertising.

In response to the Fourth Circuit ruling, the Alliance for Democracy launched an effort in February of 1999 to “modernize” election law and eliminate the “threat posed by wealthy special interests using new ways to overwhelm North Carolina politics with their money.”

The Alliance for Democracy called for the adoption of legislation regulating “issue ads” that run within 60 days of an election. But these kinds of ads can avoid regulation because they do not express direct support for or against a political candidate. The Alliance has asked Congress to adopt language in the federal McCain-Feingold legislation creating a “bright-line” test for issue ads that would require that issue ads that run within 60 days of an election be financed just as regular political ads.

Money and 2008 gubernatorial races
Of course, out-of-state political money is not new to North Carolina. Disclosure reports at the State Board of Elections (SBOE) show that from 2003 to 2008 gubernatorial candidate Beverly Perdue received contributions from political committees located outside the state on 35 occasions. Some of these committees contributed on more than one occasion. The total amount of these contributions was $73,100, coming from committees representing a wide variety of enterprises, including:

• Utilities
• Tobacco companies
  
• Pharmaceutical companies
  
• Democratic politicians
  
• Women’s groups
  
• Timber companies
  
• Law firms
  
• Meat packing companies
  
• Railroads
  
• Labor unions
  

For the year 2008 alone, the Perdue for Governor Committee received contributions from 15 out-of-state political committees, totaling $28,360. These contributions came from CORE PAC-Corning Inc. Employee PAC (Washington, DC, $4,000), Democratic Governors Association (Washington, DC, $360), DRIVE Political Fund (Washington, DC, $4,000), Emily’s List (Washington, DC, $500), International Paper PAC (Washington, DC, $1,000), Maximus Inc. PAC (Reston, Virginia), McGuire Woods Federal PAC (Richmond, Virginia, $4,000), Medco Health PAC (Mill Valley, California, $1,000), Novartis PAC (Washington, DC, $1,000), Wyeth Good Government Fund (Madison, New Jersey, $2,000), Kindred Healthcare Inc. PAC, Louisville, Kentucky, $500), Nelson, Mullins. Riley and Scarborough PAC (Columbia, South Carolina), NEA Fund for Children and Public Education (Washington, DC, $4,000), PBSJ Corporation PAC, Tampa, Florida, $1,000), and United Health Services of NC PAC (Toccoa, Georgia, $2,000).

While records on contributions to the Perdue for Governor Committee go back to 1989, when she began running for the state legislature, disclosure records for Pat McCrory are available only for 2008, the year he filed organization papers for his gubernatorial campaign. In his race for governor, McCrory disclosures to-date show that he received only four contributions from out-of-state political committees, totaling $3,500. These contributions came HDR Engineering (Nebraska, $1,000), Liberty Mutual (Boston, Massachusetts, $500), Vulcam Materials Company PAC (Alabama, $1,000), and Sen. Tom Wyss Election Campaign (Indiana, $1,000).

Voters on their own
Some would argue that political contributions are meant to exercise undue influence in the political system. Others believe that political money is spent because people want to support those who agree with them on the issues they think important. In reality, both hold true in the world of politics, and whether these two phenomenon balance out remains an unanswered question.

The real question is whether voters have sufficient, accurate information to make an educated judgment one way or the other. Much like jurors, voters are faced with tough decisions, particularly when faced with the current barrage of distorted and misleading campaign advertisements. Does political money sometimes allow special interests to overwhelm the political system, tilting it in a particular election? Perhaps, but that is the way in a democracy. Voters, therefore, are charged with performing their own due diligence - checking out the facts for each candidate, rather than relying on campaign advertising or rhetoric.

Do the voters always get it right? No, but they get it right enough of the time and that is about the best we can hope for.

Updated October 3, 2008