For the first time since the public financing system was created, neither candidate accepted public funds for the general election or the spending limits that come with them — the likely death knell for a cornerstone of the post-Watergate campaign finance reforms intended to limit the influence of money in federal elections.
Well before that decision, it had become clear just how deeply the campaign finance landscape has been changed by a 2010 Supreme Court decision, Citizens United v. Federal Election Commission.
In the case, a bitterly divided court ruled 5 to 4 that the government may not ban independent political spending by corporations, as well as labor unions and other organizations, in candidate elections.
Citizens United is the Supreme Court’s most controversial decision since Bush v. Gore in 2000. It has been criticized for contributing to a political landscape awash in money.
In June 2012, the court reaffirmed the ruling in a brief unsigned, 5 to 4 decision that summarily reversed a decision of the Montana Supreme Court, which had upheld the state’s existing restrictions on corporate donations.
The Montana court had ruled that the state’s distinctive history and characteristics warranted a departure from the principles announced in Citizens United.
Background: The Citizens United Case
The Supreme Court ruling in Citizens United was a vindication, the majority said, of the First Amendment’s most basic free speech principle — that the government has no business regulating political speech.
The dissenters said allowing corporate money to flood the political marketplace will corrupt democracy.
Shortly after the Citizens case, with the 2010 midterm elections begun, torrents of money, much of it anonymous, gushed into House and Senate races across the country.
Alarmed, Democratic officials argued that it amounted to an effort on the part of wealthy Republican donors, as well as corporate interests, newly emboldened by regulatory changes, to buy the election.
The 2010 campaign led to the rise of what became known as “super PACS,’' or political action committees. Nicholas Confessore, covering campaign finance for The New York Times in 2012, defined the groups this way: A super PAC is a political committee whose primary purpose is to influence elections that can take unlimited donations from corporations, unions or wealthy individuals, so long as the money is spent independently of the candidate’s campaign.
Then in June 2011, the justices in a 5-to-4 decision struck down an Arizona law in June 2011 that provided escalating matching funds to candidates who accept public financing. Writing for the majority, Chief Justice John G. Roberts Jr. said, “Laws like Arizona’s matching funds provision that inhibit robust and wide-open political debate without sufficient justification cannot stand.”
The case that landed in the Supreme Court in 2010 had unlikely origins.
It involved a documentary called “Hillary: The Movie,” a 90-minute stew of caustic political commentary and advocacy journalism. It was produced by Citizens United, a conservative nonprofit corporation, and was released during the Democratic presidential primaries in 2008.
Even before the landmark Supreme Court ruling, a series of other court decisions was reshaping the political battlefield by freeing corporations, unions and other interest groups from many of the restrictions on their advertising about issues and candidates.
After the Watergate scandal drove President Richard M. Nixon from office, Congress enacted a comprehensive system of limits on contributions.
But they ran up first against the court’s 1976 Buckley v. Valeo ruling that set limits to those limits, holding that campaign contributions should be protected as free speech.
When an advisory opinion by the elections commission opened the door to soft money in 1978, the parties swiftly exploited it.
By the 1990s, they were routinely raising the six-figure contributions that the law had sought to bar.
Congress fortified those rules by eliminating soft money with the 2002 campaign finance law known as McCain-Feingold, and since then activists and operatives have played cat-and-mouse with regulators in the search for other loopholes.
The Supreme Court began to poke new holes in the system in a 2007 ruling that outside groups could pay for critical commercials attacking individual candidates on specific issues up to the day of the election, as long as the ad did not explicitly urge a “vote for” or “vote against.”
Still, the 2010 Supreme Court decision remains the touchstone.
The legal changes directly wrought by the case have turned out to be quite subtle, according to campaign finance lawyers and political operatives.
Instead, they said, the case has been more important for the psychological impact it had on the biggest donors.
Corporations now can be more direct.
But many heads of corporations and superwealthy individual donors who were not even part of the court case have taken away a much more simplified, overarching message, according to lawyers who advise corporations on election law and to political power-players soliciting giant checks.
Section 501(c)(4) Advocacy Groups Shrouded in Secrecy
The Citizens United decision and other regulatory actions have largely deregulated the campaign finance system. As a result, wealthy donors have been pouring hundreds of millions of dollars into the 2012 presidential and Congressional elections, mostly in support of Republicans. A group of conservative donors led by Charles and David Koch, for example, have pledged to raise as much as $400 million for issue groups, including the Koch-founded super PAC Americans for Prosperity.
In addition, many donors have put their money into tax-exempt advocacy groups known as 501(c)(4)s that are not required to disclose their identities to the Federal Election Commission, leaving unknown the true scale of outside money flowing into the 2012 campaigns.
The court’s decision also opened the door for corporate spending on elections.
There is growing evidence that large corporations are trying to influence campaigns by donating money to tax-exempt organizations that can spend millions of dollars without being subject to the disclosure requirements that apply to candidates, parties and super PACs.
The secrecy shrouding these advocacy groups makes a full accounting of corporate influence on the electoral process impossible.
But glimpses of their donors emerged in a New York Times review of corporate governance reports, tax returns of nonprofit organizations and regulatory filings by insurers and labor unions.
Corporate donors include American Electric Power, Aetna, Prudential Financial, Dow Chemical and the drugmaker Merck.
The review found that corporate donations — many of them previously unreported — went to groups large and small, dedicated to shaping public policy on the state and national levels. Some of the biggest recipients of corporate money are organized under Section 501(c)(4) of the tax code, the federal designation for “social welfare” groups dedicated to advancing broad community interests. Because they are not technically political organizations, they do not have to register with or disclose their donors to the Federal Election Commission, potentially shielding corporate contributors from shareholders or others unhappy with their political positions.
Obama, Romney and Parties on Track to Raise $2 Billion
President Obama and Mitt Romney are both on pace to raise more than $1 billion with their parties by Election Day, according to financial disclosures filed by the campaigns on Oct. 25, 2012.
From the beginning of 2011 through Oct. 17, Mr. Obama and the Democrats raised about $1.06 billion, and Mr. Romney and the Republicans collected $954 million, including some money for the party’s Congressional efforts, setting up 2012 to be the most expensive presidential campaign in history.
But the sources of that money, raised over the course of a deeply polarizing campaign, echo the sharp divisions between the two men and their parties over issues like abortion rights, the role of government in regulating industry and the country’s economic future.
Wall Street has invested more heavily in Mr. Romney, a former financier who has pledged to repeal Mr. Obama’s new financial regulations, than in any presidential candidate in memory. Employees of financial firms had given more than $18 million dollars to Mr. Romney’s campaign through the end of September and tens of millions more to the super PACs supporting him.
Insurance companies, doctors and law, accounting and real estate firms are giving less to Mr. Obama and the Democratic National Committee than they did four years ago, according to data from the Center for Responsive Politics.
Yet donors in other industries have stepped in. With Mr. Obama making repeated trips to Silicon Valley and holding round tables with executives there, the technology industry has donated about $14 million to the president and the Democrats, substantially more than in 2008.
Retirees, the biggest single source of money for both sides, have given the Democrats much more than they did four years ago, as have employees of women’s groups, retailers and hospitals and nursing homes.
To make up for the loss of business money that flowed to his campaign four years ago, Mr. Obama has also turned to the very smallest donors, building an army of millions of supporters who have given as little as a few dollars each.
About 4.2 million people sent donations to Mr. Obama and the D.N.C., his campaign said on Thursday, roughly one million more than in 2008.
Over all, 55 percent of the Obama campaign’s money through the end of September came in donations of less than $200, including from many people who have repeatedly sent in small checks over the course of the campaign.
Just 13 percent of his checks were for $2,500, the maximum that donors are allowed to contribute for either the primary or general election.
Mr. Romney, by contrast, has cultivated business leaders and benefited from a Republican donor establishment that is eager to defeat Mr. Obama, raising an unprecedented amount of money from wealthy donors who gave the maximum allowed.
Just 22 percent of his cash has come from donations of less than $200. Through the end of September, 45 percent of checks to Mr. Romney’s campaign were for the maximum $2,500 contribution.
The overall totals do not include hundreds of millions of dollars being raised and spent by super PACs and other outside groups.
The Republican Race: A New Breed of Superdonor
In the first seven weeks of 2012, about two dozen individuals, couples or corporations gave $1 million or more to Republican super PACs.
Collectively, their contributions totaled more than $50 million, making them easily the most influential and powerful political donors in politics today.
They have relatively few Democratic counterparts so far, with most of the leading liberal donors from past years giving relatively small amounts — or not at all — to the Democratic super PACs.
Unlike in past years, when wealthy donors of both parties donated chiefly to groups that were active in the general election campaign, the top Republican donors are contributing money far earlier, in contests that will determine the party’s presidential nominee.
Who are they?
Some of the superdonors — like Harold C. Simmons, a Texas businessman who has contributed more than $14 million to Republican super PACs so far this cycle — are longtime backers of independent groups that were active in past campaigns.
Several attend the exclusive, secretive gatherings of wealthy conservative donors hosted twice a year by the billionaire Koch brothers. Many move in the same social or political circles: Sheldon Adelson, a billionaire casino executive, serves on the board of the Republican Jewish Coalition with Paul Singer, a hedge fund executive and a top contributor to Restore Our Future, the super PAC backing Mitt Romney.
In June, Mr. Adelson and his wife gave $10 million to Restore Our Future, throwing their support to Mr. Romney. Prior to that, the Adelson family almost single-handedly bankrolled Winning Our Future, a super PAC backing Newt Gingrich, a Romney rival, during the primaries, giving the group more than $20 million.
They are by far the most prolific campaign donors in the country.
In an interview with Forbes magazine, Mr. Adelson suggested he would consider personally spending as much as $100 million on the 2012 elections.
Some of the million-dollar-plus donors, however, are relatively new to the world of big-league political giving and appear to be motivated by personal connections to particular candidates.
Paul B. Edgerley and his wife, Sandra, for example, together gave $1 million to the pro-Romney super PAC. Mr. Edgerley is an executive at Bain Capital, Mr. Romney’s former firm.
Many wealthy donors have put their money into issue advocacy groups that are not required to disclose their identities to the Federal Election Commission, leaving unknown the true scale of outside money flowing into the 2012 campaigns.
A group of conservative donors led by Charles and David Koch, for example, have pledged to raise as much as $400 million for issue groups, including the Koch-founded Americans for Prosperity, and Mr. Adelson himself has financed such organizations in past elections.
Obama Endorses a Democratic Super PAC
In early February, President Obama signaled to wealthy Democratic donors that he wanted them to start contributing to an outside group supporting his re-election, reversing a long-held position as he confronted a deep financial disadvantage on a vital front in the campaign.
Aides said the president had signed off on a plan to dispatch cabinet officials, senior advisers at the White House and top campaign staff members to deliver speeches on behalf of Mr. Obama at fund-raising events for Priorities USA Action, the leading Democratic super PAC, whose fund-raising has been dwarfed by Republican groups.
The new policy was presented to the campaign’s National Finance Committee and announced in an e-mail to supporters.
For his re-election campaign, he did not object to the formation of Priorities USA Action, which is run by two former White House aides, but had done nothing overtly to help the group.
His past criticism of outside groups, some Democrats said, had made it hard to persuade donors to back Priorities USA Action, contributing to its problems in keeping up with conservative groups.
The same goes for Democratic donors, many of whom object to the idea of super PACs.
The Mood Shifts Among Democratic Donors
By September, Democratic super PACs were finally drawing the kind of wealthy donors who had already made Republican outside groups a pivotal force in the 2012 campaign.
James Simons, a Long Island investor and philanthropist, gave at least $2 million to Priorities USA Action, and $2 million more to two allied groups supporting Democrats in Congress, making him the biggest Democratic super PAC donor in the country.
The billionaire George Soros committed $1 million to Priorities USA Action in late September, according to two people with knowledge of the decision.
A longtime political adviser to Mr. Soros, Michael Vachon, made the announcement at a luncheon hosted by the Democracy Alliance, a group of liberal donors.
Mr. Soros will also give an additional $500,000 to two super PACs backing congressional Democrats. Other donors at the lunch were expected to commit between at least $10 million more to Democratic super PACs, suggesting that many — like Mr. Soros — had overcome their aversion to the advertising-oriented super PACs.
The luncheon, which was headlined by Bill Clinton, suggested a rapprochement of sorts between progressive donors who have traditionally favored movement-building and Democratic strategists who badly want large checks to finance the party’s emerging super PAC apparatus, which only in the closing weeks of the election had begun to draw significant financial support, much of it from traditional party sources like Hollywood, trial lawyers, and unions.
The Democratic super PAC donor world remains far less robust than the Republican one.
Total giving to the four Democratic groups reached $74 million through the beginning of September, not including donations to two affiliated tax-exempt groups that do not have to disclose their donors and fund-raising to the Federal Election Commission.
That is far less than the $300 million that two groups co-founded by the Republican strategist Karl Rove are aiming to raise.
But officials with the groups said they believed they had reached a tipping point, persuading skeptical Democrats to embrace the new vehicles for unlimited spending.
New Kind of Super PAC Takes Aim at House Races
In the shadow of the supersize super PACS that have reshaped the battle for the White House and Senate, a new and potentially potent kind of super PAC is proliferating in the closing weeks of the campaign and taking aim at House races.
With some of the groups backing Democrats and some supporting Republicans, they are picking a few Congressional races in which advertising is cheaper or the airwaves less cluttered and transforming them with a barrage of outside money, swamping incumbents and challengers alike.
In Utah and Georgia, a group known as Center Forward, headed by a retired Democratic lawmaker turned Beltway lobbyist, has spent $1 million attacking two Republican candidates.
In Florida, the Treasure Coast Jobs Coalition has spent nearly $1 million against Patrick Murphy, a Democratic candidate, and supporting Representative Allen B. West, the Republican incumbent.
Now or Never PAC, a Missouri-based group, has spent more than $900,000 to aid a Republican incumbent in neighboring Illinois, Representative Joe Walsh, a Chicago-area lawmaker who had been outspent by his Democratic challenger until the group entered the race.
The emergence of smaller super PACs helped fuel a surge in September advertising by outside groups in House races: Far more money was being spent far earlier than for the 2010 elections, when Republicans won control of the House.
Through the beginning of October, super PACs and other outside groups reported at least $38.5 million in independent spending to the Federal Election Commission, nearly seven times as much as they spent during the same period in 2010.
Almost all of that money was spent in September, according to a New York Times analysis, as outside groups reacted to swings in the presidential race and exploited redistricting, which has left many incumbents with thousands of new constituents who are unfamiliar with them.
And Democratic-leaning groups have narrowed the spending gap, with about $19.8 million of the total backing Republicans and $18 million backing Democrats.
Those totals do not include issue ads that groups are not required to disclose to the Federal Election Commision, or the significant spending — of both disclosed and secret money — that big-spending groups like the U.S. Chamber of Commerce have already planned.
Incumbents Consider Tighter Rules on Attack Ads
An expansive onslaught of negative political advertisements in Congressional races has left many incumbents, including some Republicans long opposed to restrictions on campaign spending, concluding that legislative measures may be in order to curtail the power of the outside groups behind most of the attacks.
While Democrats have long denounced the Citizens United decision, some Republicans are now growing more disenchanted with the system that has allowed the barrage of ads, often by shadowy groups, and the effects it has had on what they see as a sullen and disenchanted electorate.
Representative Dan Lungren, a California Republican and the chairman the House Administration Committee, which has jurisdiction over campaign finance issues, has been a target of negative advertisements.
He has drafted legislation that he said would force more responsibility for the tone and messages of the campaign onto the candidates and the political parties and away from the third-party groups.
The staff of Senator Lisa Murkowski, Republican of Alaska, is also working on proposals.
The Citizens United ruling was expected to be an unalloyed advantage to Republicans, who have a deeper bench of rich individuals and corporations willing to finance candidates.
And indeed, the decision has appeared to benefit Republicans over all in the 2012 election cycle, as Republican money has poured into the presidential contest.
But the impact of Citizens United has come with complications, with some Republican incumbents in the House at a disadvantage.
In October, before Republicans surged ahead with an additional $25 million, the total spending and reservations for ad time in the House campaigns had been dead even at $89 million, according to the National Republican Congressional Committee.
Conservative donors were confident that the House Republican majority was secure and sent their money elsewhere.
Democratic donors, including unions and environmental groups like the League of Conservation Voters, have been more strategic, concentrating their fire on a handful of vulnerable House Republicans.
Mr. Lungren said the attacks on him began just months after the 2010 election, with radio advertisements and automated phone calls.
They accelerated into an onslaught of television commercials in what became the most expensive House race in the country. Mr. Lungren’s Democratic opponent is Ami Bera, a doctor.
The odds of legislation passing remain unclear. Senator Mitch McConnell of Kentucky, the Republican leader, has vehemently opposed efforts to require the unveiling of secret donors.
Since the Supreme Court ruling, Democrats in Congress have tried to legislate curbs on campaign advertising. Representative Chris Van Hollen of Maryland and Senator Charles E. Schumer of New York drafted the Disclose Act, Democracy Is Strengthened by Casting Light on Spending in Elections, which narrowly passed the House in 2010 and received majority support in the Senate but fell one vote short of the 60 votes needed to break a Republican filibuster.
In the last two years, however, support has waned considerably. When Senate Democrats tried again in May, the measure got just 51 votes.
But the barrage of advertisements in the 2012 campaign has the potential to change the political dynamic. Since the beginning of the year, more than three million political advertisements have been broadcast across the country, according to Kantar Media, a research firm that tracks political advertising, and the final weeks of the campaign are likely to be the most intense.
Letting Strategists Off the Leash
The intensifying flood of uncapped donations to outside political groups is transforming not just campaigns but the entire business of politics.
Once seasonal affairs, campaigns from the presidential race down to House contests are becoming longer and more intense, driven by deep-pocketed donors eager to see incumbents pummeled throughout the political cycle.
Decisions about attack ads and negative campaigning that once weighed on candidates are now made by consultants and donors with little or no accountability to the public.
And for a growing number of strategists and operatives in both parties, the very nature of what it means to work in politics has shifted.
Once wedded to the careers and aims of individual candidates, they are now driven by the agendas of the big donors who finance outside spending.
Amid the first presidential campaign since the Supreme
Court opened the door for super PACs and unlimited campaign spending, it is still unclear how voters will respond.
But the political professionals who make a living from the billions of dollars spent each cycle on campaigns are quickly embracing the shift.
In the insular but fast-growing world of super PACs and other independent outfits, there are no cranky candidates, no scheduling conflicts, no bitter strategy debates with rival advisers.
There are only wealthy donors and the consultants vying to oblige them.
Unlike political parties and candidates, super PACs and other outside groups can accept unlimited contributions.
They have no field offices and few paid staff members and spend virtually all of their money on political advertising, traditionally the best-paying political work.
For brand-name political operatives, super PACs offer much of the impact of campaign work with few of the headaches.
While many Republican and Democratic candidates are forcing consultants to accept flat fees and smaller advertising commissions, independent spending also offers a rapidly expanding market. Through mid-May, outside groups had spent more than $124 million in this election cycle, according to the Center for Responsive Politics, double the rate four years earlier.
Very Fine Line Between Candidates and ‘Super PACS’
When Mitt Romney’s presidential campaign needs advice on direct mail strategies for reaching voters, it looks to TargetPoint Consulting.
And when the independent “super PAC” supporting him needs voter research, it, too, goes to TargetPoint.
Sharing a consultant would seem to be an embodiment of coordination between a candidate and an independent group, something prohibited under federal law.
But TargetPoint is just one of a handful of interconnected firms in the same office suite in Alexandria, Va., working for either the Romney campaign or the super PAC Restore Our Future.
Elsewhere in the same suite is WWP Strategies, whose co-founder is married to TargetPoint’s chief executive and works for the Romney campaign.
Across the conference room is the Black Rock Group, whose co-founder — a top Romney campaign official in 2008 — helps run both Restore
Our Future and American Crossroads, another independent group that spoke up in defense of Mr. Romney’s candidacy in January 2011. Finally, there is Crossroads Media, a media placement firm that works for American Crossroads and other Republican groups.
The overlapping roles and relationships of the consultants in Suite 555 at 66 Canal Center Plaza offer a case study in the fluidity and ineffectual enforcement of rules intended to prevent candidates from coordinating their activities with outside groups.
And there has been a rising debate over the ascendancy of super PACs, which operate free of the contribution limits imposed on the candidates but are supposed to remain independent of them.
In practice, super PACs have become a way for candidates to bypass the limits by steering rich donors to these ostensibly independent groups, which function almost as adjuncts of the campaigns.
Inquiry Escalates by New York’s Attorney General
In June 2012, Attorney General Eric T. Schneiderman of New York began investigating contributions to tax-exempt advocacy groups that are heavily involved in political campaigns, focusing on a case involving the U.S. Chamber of Commerce, which has been one of the largest outside groups seeking to influence recent elections but is not required to disclose its donors.
Mr. Schneiderman issued a wide-ranging subpoena to executives at a foundation affiliated with the chamber, seeking e-mails, bank records and other documents to determine whether the foundation illegally funneled $18 million to the chamber for political and lobbying activities, according to people with knowledge of the investigation.
The investigation was also looking at connections between the chamber’s foundation, the National Chamber Foundation, and another philanthropy, the Starr Foundation, which made large grants to the chamber foundation in 2003 and 2004. During the same period, the National Chamber Foundation lent the chamber $18 million, most of it for what was described as a capital campaign.
By August, Mr. Schneiderman’s inquiry into tax-exempt groups had escalated. Mr. Schneiderman had requested requests tax returns and other financial documeints from dozens of such organizations, including three major Republican-affiliated groups, Crossroads Grassroots Policy Strategies, co-founded by the political strategist Karl Rove; American Action Network; and American Future Fund. His office has also requested information from Democratic groups, including Priorities USA Action, which was founded by two former aides to President Obama; Patriot Majority USA; and America Votes.
The requests appeared to be an early but aggressive step by Mr. Schneiderman’s office to curtail the intense secrecy enveloping these advocacy groups, which are playing a pivotal role in this year’s battle for the White House and Congress yet, because they are categorized as “social welfare” organizations, are free from virtually all of the rules and restrictions that apply to candidates and “super PACs.”
Under New York law, tax-exempt groups — including foundations, trade associations and social welfare organizations — that do business or raise substantial amounts of money in New York must file auditors’ reports and their federal tax returns with the attorney general’s office.
With New York both the center of the country’s financial industry and home to many of its leading conservative and liberal donors, that jurisdiction could give Mr. Schneiderman oversight power over many of the biggest-spending groups.