The Campaign Finance Institute Study II

Two days ago, Brad Smith, Robert Bauer and I criticized a recent study by the Campaign Finance Institute.

The head of CFI, Michael Malbin, has now responded to our criticism. Bauer and Smith have in turn continued the debate in posts well worth your time.

Before turning to Malbin’s reply, I might note that he did not respond to a couple of my earlier points. I argued that the sample used in the CFI working paper was biased and a poor foundation for policymaking. I also suggested that the bias in the CFI sample was interesting: it concerned organizations–on both sides of the partisan and ideological divide–that were heavily involved in national politics and elections. The CFI sample is almost certainly not representive of the entire population of nonfprofits, 527s and interest groups. It might, however, be a workable sample of groups of primary interest to members of Congress, i.e. groups that bear on a member’s primary interest in being re-elected. In that respect, the CFI study might be a poor guide to policymaking but persuasive to policymakers. That should be troubling to the rest of us.

Malbin also does not mention a political point I made in my post. Why should the Democrats give up 527s which they used to spend substantial sums in 2004 in exchange for Republicans forsaking 501c groups that appear to have laid out only a small portion of the Democratic 527 expenditures? If I were a Democrat, I would read that “compromise option” as a ”bad deal.”

Malbin states that we have misunderstood the CFI study. It does not advocate a policy, it merely points out “uncomfortable facts” to foster a needed debate. Of course, you could say that Michael Malbin might know best what the study sought to do (he heads the organization that sponsored it), and we should leave it at that. I’m not interested in questioning Malbin’s integrity so the reader is welcome to that conclusion.

But Mike doesn’t have a monopoly on the correct interpretation of this text. To see why I (reasonably) believed the study was a policy proposal, we need to head on over to the IRS website (of course!).

The Campaign Finance Institute is a nonprofit organized under section 501c(3) of the Internal Revenue Code. That means CFI can educate the public but not propose legislation. Here is the relevant advice from your friendly taxman:

In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying)…Legislation includes action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items…An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation. Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying. For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status.

So for legal purposes I went to an education meeting at the National Press Club and received educational materials prepared by CFI.

However, the CFI authors urge us to think about campaign finance matters in light of their context (that is, the political facts) rather than “legal pigeonholes.” (CFI study, p. 33) In my original post I set out the political context of the CFI study: legislation on 527s had stalled in Congress because of partisan opposition by Democrats. I could have added to the earlier post: Louise Slaughter, the ranking member on the House Rules committee, suggested in early April that Congress should broaden the 527 debate to include 501c groups which she saw as potential loopholes to current and planned campaign finance regulation. A study then appears that argues both parties use non-regulated entities to fight elections, that such spending probably corrupts representation, and that adumbrates “possible compromise” options for policymakers. (CFI study, p. 33) Given that context and this text, what is a reader to make of the CFI study? It is educational material (it fits the legal pigeonhole) that in context looks a lot like an announcement of the next item on “the reform community’s” agenda for restricting political speech.

There is also a larger legal context here that should be kept in mind. The main justification for regulating campaign finance remains preventing corruption or the appearance of corruption. However, legislative actions to prevent circumvention of laws that address corruption may also justify constitutionally restrictions on campaign finance. The CFI study argues that powerful interest groups use 527s and 501c groups along with regulated spending in elections. Its authors then ask whether those alternatives, taken as a whole, corrupt legislators on the theory mentioned in my earlier post: policymakers do not distinguish among legal categories, which is to say that disclosed spending acts like a contribution. Given that, the use of 527s and 501c groups are both corrupting and a circumvention of campaign finance law. The CFI study thus justifies extending campaign finance regulation to entities that spend money on politics but do not contribute to candidates. That is why I wrote earlier that the CFI study sought to end the distinction between politics and elections in current law and thus constituted a radical break with the past. I would be glad to know that CFI does not support ending that distinction or making that radical break. A fair reading of this study, however, suggests otherwise.