Van Hollen at AEI: A Healthy Democracy Requires Disclosure of Campaign Spending

Today Maryland Congressman Chris Van Hollen discussed campaign finance and disclosure at the American Enterprise Institute (AEI). Below are his remarks as prepared for delivery:

"Thanks to AEI for the opportunity to join you today, and thanks to Arthur Brooks for his strong and innovative leadership. I've been pleased to join AEI on several previous occasions, including two years ago when Congressman Paul Ryan and I debated various budget issues. So I want to thank AEI for your commitment to the vigorous exchange of ideas that is such a vital part of a free society and the health of our democracy and economy.

"I am here today, not to discuss the budget, but to discuss a matter that goes to the heart of a healthy democracy -- and that is an open and transparent political process. Specifically, I want to make the case for a straight forward proposition -- that the public should be informed about who is spending vast sums of money to influence their decision to vote for or against candidates for public office. I can tell you that the public thinks this information is important. Polls have consistently shown that over 85 percent of the public agrees that all political contributions and expenditures should be publicly disclosed -- and this view is held by over 80 percent of Republicans, Democrats, and Independents. In addition, while the ultimate decision in Supreme Court's controversial 2010 Citizens United case was a close 5-4 split, eight of the nine Justices gave full throated support to disclosure, which they said brings "transparency that enables the electorate to make informed decisions and give proper weight to different speakers and messages."

"Now that brings me to what I am not here to talk about. I am not here to talk about the final decision in that case. I disagree with the Court's ultimate decision in Citizens United, but, for now, it is the law of the land. Nor am I here to talk about various campaign finance proposals that I think would improve our system. I am here to talk about the principle of disclosure -- that until recently seemed to enjoy strong bipartisan support in the Congress.

"And I especially wanted to make this appeal at AEI for two reasons: First, because of AEI's commitment to the vigorous exchange of ideas, and second, because on two occasions -- in June 2012 and June 2013 -- the Senate Republican Leader Mitch McConnell, has used this very podium to attack the idea that we should fully disclosure to the public the sources of campaign expenditures used to try to elect or defeat candidates for federal office. And on both occasions, he claimed to be opposing disclosure and transparency in order to protect free speech and the First Amendment.

"Here is what he said in June 2012: "The attacks on speech are legion. Perhaps the most prominent is the so-called Disclose Act." He went on to say, "perhaps one of the most important things [Republicans] did in the past few years was to block passage of the Disclose Act."

"Senator McConnell was back at this podium last June making similar statements. He said the "Disclose Act wasn't really about cleaning up politics." It was really all about the left wing "finding a blunt political weapon to use against one group and one group only: conservatives."

"Now, here's why I wanted to talk to you. I am the author of the Disclose Act that passed the House in 2010, and the author of a revised version of the Disclose Act pending in the House today. So I must be that scary leftie the Senator McConnell is talking about. I am here to tell you that his analysis is -- to put it diplomatically -- a bunch of nonsense.

"And I really hope that many of you here in this room and those watching can help get us back to the time that the bipartisan consensus that exists on this issue around the country will re-emerge on Capitol Hill.

"And who better to cite for my own position today than Senator McConnell himself. Not the Senator McConnell of 2012 and 2013 here at AEI, but the Senator McConnell who spoke to the nation on Meet the Press in 2000. And it's very important to understand the context of his statements at that time. The Senate had just voted on June 9, 2000, by an overwhelming bi-partisan vote of 92 to 6, to require groups organized under 527 of the tax code to publicly disclose their political expenditures on behalf of candidates. 527s include all political action committees, and currently include what are known as Super PACs. Now, Senator McConnell was one of the 6 to vote against 527 Disclosure, but he justified his opposition on the grounds the disclosure requirement did not extend to more groups. Here is what Senator McConnell said on Meet the Press nine days after that Senate vote.

"He mentioned that Senate vote and said that if you are going to require disclosure "it needs to be meaningful disclosure. 527s are just a handful of groups. We need to have real disclosure. And so what we ought to do is broaden the disclosure to include at least labor unions and tax exempt business associations, so you include the major political players in America. Why would a little disclosure be better than a lot of disclosure?"

"Why would a little disclosure be better than a lot of disclosure?

"I agree. The American people agree. That's what the Disclose Act does -- it calls for disclosure, not just by 527s, but the other groups Senator McConnell said should be included.

"Now, since his statement on Meet the Press, Senator McConnell has totally flip-flopped on disclosure. He has gone from saying we need more disclosure to arguing that more disclosure is some left-wing conspiracy to end free speech. He led the filibuster that blocked the vote on the Senate version of the Disclose Act in 2010. Fifty-nine senators voted to proceed with the vote, but it was blocked by Senator McConnell and a minority of 41 Senators. Since then I have introduced revised versions of the Disclose Act in both the last Congress and this Congress that addressed some of the concerns that Senator McConnell had earlier raised. But his opposition to transparency and disclosure has only hardened.

"Let's look at the objections he raised here at AEI over the last two years.

"First, he argues that the Disclose Act requires disclosure on a selective basis -- that it requires disclosure only from conservative and Republican leaning groups, and not Democratic affiliated groups. That is simply untrue. I have in my hand a copy of the Disclose Act that I have introduced in House. I challenge Senator McConnell to show me where it selectively targets conservative groups. This bill requires disclosure by all groups spending money to elect or defeat candidates regardless of their political leanings. And I invite Senator McConnell to suggest any changes he thinks are necessary to ensure that it applies in a uniform manner.

"I don't expect a call from the Senator anytime soon. And that is because the claim of selectivity is a red herring. In fact, the real selectivity problem is the one that Senator McConnell raised in 2000 on Meet the Press, when he said we shouldn't selectively limit disclosure to 527s. That the disclose requirement should apply broadly. Remember, he said, "why would a little disclosure be better than a lot of disclosure?" And the Disclose Act does exactly what he recommended -- it expands disclosure beyond 527s to other groups.

"Second, Senator McConnell says he now opposes disclosure because it will hurt our democracy and undermine free speech by exposing people who spend money in election campaigns to such awful harassment that it effectively denies them their First Amendment right to free speech. In his speech here at AEI, he urged all of you to read Justice Thomas's partial dissent in the Citizens United case on this matter. In doing so, Senator McConnell failed to disclose that all of the other eight justices in Citizens United rejected that argument, and that the Supreme Court has already developed mechanisms to address cases of extreme and demonstrable oppression.

"The Supreme Court, in cases ranging from Buckley v. Valeo (1976), to Citizens United, to the recent McCutcheon case have repeatedly argued that the disclosure of campaign contributions and expenditures advances important pubic interests, and the Court has rejected the arguments put forward by Senator McConnell and Justice Thomas. The Courts have put forward three main arguments in favor of disclosure: the public interest in knowing who is spending money to try to influence their votes; that transparency serves an important anti-corruption interest; and that disclosure helps to enforce other campaign finance laws -- like the prohibition on foreigners or foreign-owned corporations spending money in US elections.

"Here is what the Supreme Court said in Buckley with respect to disclosure of both direct contributions to campaigns and independent expenditures: "Disclosure requirements deter actual corruption and avoid the appearance of corruption by exposing large contributions and expenditures to the light of publicity... A public armed with information about a candidate's most generous supporters is better able to detect any post-election special favors that may be given in return."

"In Citizens United, eight of the nine Supreme Court Justices, including Justices Roberts, Kennedy, Scalia, and Alito, found that disclosure requirements for independent spending groups "do not prevent anyone from speaking" and serve the important public interest of "providing the electorate with information about election-related spending sources." This, they said, "allows voters to make informed choices in the political marketplace."

"As AEI's Norm Ornstein has pointed out, "it is clear from Justice Kennedy's opinion that disclosure was a key factor in unlocking the rest of the Citizen's United decision" and that disclosure was the "counterweight to the expansion of money into the electioneering efforts of corporations and other groups."

"Those eight Justices went on to say that "with the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation's political speech advances the corporation's interest in making profits, and citizens can see whether elected officials are "in the pocket' of so-called moneyed interests."

"Those are the big left wingers trumpeting the benefits of disclosure and transparency.

"In the recent McCutcheon decision, the Court again re-affirmed the importance of disclosure, citing their earlier precedents.

"Now in its decisions, the Court has addressed the specific concerns raised by Senator McConnell and Justice Thomas. Justice Thomas observed that in the 1958 case of NAACP v. Alabama the Court declared that Alabama's law requiring individuals to disclosure their contributions to the NAACP infringed the right of free association because it exposed those individuals to physical severe threats and retribution. The Court in NAACP put forward a strict test for groups seeking to avoid disclosure.

"I must say it's galling to see some the richest and most powerful people in the world suggest that they are similarly situated to the members of the NAACP who faced life and death threats during the civil rights battles in Alabama during the 1950's.

"And in the 1976 Buckley decision, the Court rejected a challenge to disclosure requirements based on the NAACP case. The Buckley Court found that the "strict test" for avoiding disclosure in NAACP did not void the campaign finance disclosure requirements upheld in Buckley. The Buckley Court did say that a group could seek an exemption from the disclosure requirements if it could demonstrate, as the NAACP did in the Alabama case, that it would be subjected to an actual -- not speculative -- burden on the freedom of association. And, in fact, the FEC has found that one group, the Socialist Workers Party, has met that test, and exempted them from current disclosure requirements.

"I also want to emphasize that the Disclose Act addresses these concerns. It does not threaten freedom of association. Any organization can continue to receive anonymous contributions to support their general mission. However, to the extent the organization wants to spend money to elect or defeat candidates, they could set up a separate election spending account and disclose the sources of contributions above $1,000 to that account.

"Moreover, the Disclose Act does not displace the current law that allows groups to avoid even those disclosure requirements if they can meet the strict test established by the Buckley Court. But that is a tough test. As Justice Scalia wrote in his concurring opinion in the Doe v. Reed case upholding disclosure requirements in a case about petitioner signers for ballot measures -- a less compelling situation than one for disclosure of political contributions, "Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed."

"You can't avoid disclosure because you might get your feelings hurt or face a public backlash. George Soros has been subjected to lots of criticism, as have the Koch brothers. That's part of the rough and tumble of a vibrant democracy and spirited debate. Individuals and corporations should not be able to spend millions of dollars on TV ads beating up or praising candidates without telling the public who they are. As Justice Scalia said, that state of affairs "does not resemble the Home of the Brave."

"Finally, Senator McConnell has been conveniently inconsistent in his application of his concern about the alleged harm of disclosure. Currently, candidates for federal office must disclose all the contributions their campaigns receive above $200 to the current limit of $2,600 per election. And Senator McConnell says he is still in favor of those disclosures, and the disclosure of contributions to political party organizations. So why is it in the public interest to require disclosure of a $200 contribution to a candidate's political campaign, and not in the public interest to disclose a $200 million expenditure to elect or defeat that candidate? Why is it okay to subject people who contribute $200 directly a candidate's campaign to this alleged infringement of First Amendment rights, but not corporations or individuals who spend millions of dollars to elect or defeat candidate? That is a total double standard.

"So it's time for Senator McConnell to stop saying the Disclose Act is some kind of leftie conspiracy or pretend it is designed to squelch free speech. It is designed to accomplish what he previously said he supported -- more disclosure, not less.

"The fastest way to implement the public's support for broad disclosure and transparency would be to pass the current version of the Disclose Act. And, as I said earlier, I would be more than happy to work with Senator McConnell to resolve any legitimate concerns.

"In the meantime, because of the lack of Congressional action, there are other efforts underway to address pieces of this issue. The one that has received the most attention deals with the IRS regulations regarding what are known as 501(c)(4) organizations, which include groups like Karl Rove's Crossroads GPS that supports Republican candidates and the Priorities USA group that supported President Obama's 2012 election.

"Why have 501(c)(4)s gotten so much attention in the aftermath of the Citizens United decision? Because, in Citizens United, the Supreme Court struck down laws that barred corporations from spending money to elect or defeat candidates for federal office. As a result, for-profit corporations and non-profit corporations can spend monies on these elections and the C in the 501(c)(4) stands for corporation. And 501(c)(4)s have become the primary vehicle of choice for individuals and corporations that do not want to disclose to the public the money they spend to try influence the public's vote.

"Indeed, Crossroads, for example, has two distinct organizational forms. First, there is the American Crossroads Super PAC, which is organized under Section 527 of the IRS code. The second is Crossroads GPS, organized under Section 501(c)(4) of the IRS code. So what's the main difference? Remember, I earlier mentioned the bi-partisan 92-6 in the Senate in June 2000 that required 527s to disclose their donors. So contributions to the Crossroads 527 Super PAC or any Democratic leaning Super PAC are disclosed.

"But that disclosure requirement, passed in 2000, does not apply to 501(c)(4)s. There was less focus on requiring disclosure from such corporations since, prior to the 2010 Citizens United decision, they were not allowed to spend any money for the express purpose of electing or defeating a candidate, although they were slowly emerging as vehicles used for what are known as sham issue ads -- ads disguised as focusing on an issue but really designed to support or defeat a candidate. Now, remember, in 2000, Senator McConnell justified his opposition to requiring 527s to disclose on the grounds that we should have more disclosure, not less. In fact, he said we should require disclosure from all "the major political players in America." Well, it is indisputable that in the aftermath of Citizens United, 501(c)(4)s are major political players. According the Center for Responsive Politics, the amount of secret money being spent by 501(c)(4)s shot up from virtually nothing before 2006 to over $256 million in the 2012 election cycle -- which comprises 85 percent of the $300 million in total secret money spent in 2012. So there you have it -- if you want to hide the money being spent to elect or defeat candidates, give it to a 501(c)(4). Indeed, Carl Forti, the political director has acknowledged that the 501(c)(4) Crossroads GPS was formed "because some donors didn't want to be disclosed."

"Now, there is a catch that explains the underlying reason for all the recent focus on the IRS actions relating to 501(c)(4)s. Under the IRS guidelines that have been in place since the 1950s, an organization can qualify for 501(c)(4) status so long as its "primary purpose" is social welfare and education. But if the organization spends more than 49 percent on political activities, like now trying to elect or defeat candidates, it is not eligible for 501(c)(4) status. This means that in order to enforce the guidelines, the IRS has to examine the activities of these organizations to determine if they meet the requirements. And, after the Citizens United decision, the IRS faced an explosion of applications from groups applying as 501(c)(4)s. The applications jumped from 1,752 in 2010 to 3,357 in 2012 -- a 90 percent jump. That's why you hear these stories about the IRS seeking information from groups about their activities. Now, obviously the IRS must apply these rules in a uniform way. But, in my view, we should never have involved the IRS in the business of having to investigate organizations -- on the right or left -- to make these determinations.

"And here's the interesting thing. The underlying statue -- the written law passed by the Congress -- never envisioned putting the IRS in that position. The statute never called for the primary purpose test the IRS developed by regulation in the 1950s. Indeed, Section 501(c)(4) of the Internal Revenue Code provides the tax exemption to "civic leagues of organizations not organized for profit but operated exclusively for the promotion of social welfare." It doesn't say a 501(c)(4) should be engaged primarily in social welfare activities, but can spend 49 percent of its funds on political activity. And I don't know of any dictionary where exclusively has come to mean primarily. And here's the other thing everyone should be able to agree on -- that while there may be a fuzzy line between what constitutes social welfare activities versus certain political activities involving issue advocacy, under no circumstances does the intended definition of social welfare activity include spending money to defeat or elect candidates for public office. In fact, the IRS regulations state clearly that "the promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of or in opposition to a candidate for public office." So you have a situation where the plain meaning of the IRS code never envisioned these organizations spending a dime to help elect or defeat candidates for public office, and yet they are now being used to funnel millions of dollars of undisclosed monies for that purpose.

"Nobody really paid much attention to this discrepancy between the written law and the IRS guidelines until after Citizens United, because until then, even under the primary purpose test, no corporation could spend money for the express purpose of electing or defeating candidates. But now -- as more and more 501(c)(4)s get into the business of spending secret money to elect or defeat candidates -- the discrepancy has become glaring. So glaring that in April of last year, I sued the IRS to enforce the plain meaning of the written statute. I would also point out that the Inspector General of the IRS, who issued the report entitled Inappropriate Criteria were Used to Identify Tax-Exempt Applications for Review, recommended that the IRS look into the measure of primary activity.

"Since then, the IRS has begun to review this discrepancy and, as a result, our lawsuit has been withdrawn -- at least for now. But please do not fall for the partisan tripe that this IRS review is some kind of political conspiracy to silence conservative groups. The reality is that these organizations are now being used by groups on the right and the left for a purpose that was never intended -- to funnel undisclosed monies into political election campaigns. If you want to spend unlimited amounts of money to defeat or elect candidates for public office there is a simple choice -- give it to a 527 organization. The difference is that 527s are required to disclose to the public.

"Let me end with an appeal to work on a bipartisan basis to restore some faith in the campaign finance process by providing for the disclosure and transparency supported across party lines by over 85 percent of the American public and eight of the nine Supreme Court Justices in Citizens United.

"In 2007, now-Speaker Boehner said "we ought to have full disclosure."

"In 2010, Representative Cantor, now the Republican Leader, said that "anything that moves us back toward that notion of transparency and real-time reporting of donations and contributions I think would be a helpful move toward restoring the confidence of voters."

"And in 2010, Representative McCarthy, now the Republican Whip said "the best way, the fairest way, is greater transparency. Let people understand where it [the money] is going and what's happening."

"Now that these three gentlemen are the three most powerful members of Republican Majority in the House, the American people should really get a vote on the Disclose Act, or a version of it. Why should the public continue to be kept in the dark about who is spending gobs of money to influence their choice of candidates?

"After all, it was Senator McConnell who said "Why would a little disclosure be better than a lot of disclosure?"

"Indeed, why would it? Let's do something about it. And if Senator McConnell wants to come back here to AEI to discuss this matter for the third year in a row, I would be happy to join him.

"Let's get this done."

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