Subject: RE: WSJ: Interest Groups Gain In Election Cash Quest
From: "Begala, Paul" <[email-masked]>
To: [email-masked], "Tara McGuinness" <[email-masked]>
Cc: [email-masked], "Jim Gerstein" <[email-masked]>, "John Podesta" <[email-masked]>, "Stan Greenberg" <[email-masked]>, "Susan McCue" <[email-masked]>, "Zach Schwartz" <[email-masked]>
Date: Wed, 19 Dec 2007 17:36:31 -0500

I'm interested in whatever affords us the greatest freedom of speech -
since our esteemed Congress decided to rewrite the First Amendment.

________________________________

From: [email-masked] [mailto:[email-masked]] On Behalf Of Tom
Matzzie
Sent: Wednesday, December 19, 2007 9:56 AM
To: Tara McGuinness
Cc: [email-masked]; Begala, Paul; Jim Gerstein; John Podesta; Stan
Greenberg; Susan McCue; Zach Schwartz
Subject: Re: WSJ: Interest Groups Gain In Election Cash Quest

We are organized as the preferred 501c4 model. Lindner is using an LLC
for Common Sense Issues. That is something to consider--all the direct
spending would be moved to the LLC and it would have to manage its
expenses and Cash on Hand at the end of the year so it is going down
close to zero. It would pay income taxes on whatever is left Cash on
Hand at the end of the year but that might be a small price to pay for
the advantages of anonymity and flexibility. The tax liability is
entirely on the LLC in that circumstance. For what it is worth, our
lawyers are looking into the LLC model too. 

On Dec 19, 2007 9:41 AM, Tara McGuinness <[email-masked]>
wrote:

	"Democrats are expected to hold that lead during the 2008 cycle.
Last month, two Democrats launched Fund for America, a 527 group that
plans to raise at least $100 million to back the Democratic presidential
nominee. Republicans say they are recruiting donors to match that
amount."

	

	Interest Groups Gain 
	In Election Cash Quest

	Analysis Shows Giving 
	To Parties Has Dipped; 
	Beyond 'Swift Boating'
	By BRODY MULLINS 
	December 19, 2007; Page A1

	WASHINGTON -- One of the defining features of the 2004
presidential campaign was the devastating attack on Sen. John Kerry by
an obscure group called the Swift Boat Veterans for Truth. In the years
since, such independent political groups have only grown stronger, and
they are poised to play an even bigger role in the 2008 elections. 

	Political groups unaffiliated with the two major parties account
for an increasingly large share of spending on federal campaigns -- 19%
of the total in 2006, up from just 7% in 2000, according to an analysis
of campaign-finance data by The Wall Street Journal. They now are
horning in on crucial campaign activities once dominated by the parties,
such as buying ads and getting out the vote. 

	[Go to charts]1 

	In Iowa, independent groups are whipsawing voters with a range
of conflicting messages. An organization called Common Sense Issues has
funded automated phone calls backing former Arkansas Gov. Mike Huckabee
and criticizing his chief Republican rivals. The Club for Growth, an
antitax group, is working to defeat Mr. Huckabee with attack ads. 

	On the Democratic side, an organization called the American
Federation of Teachers AFL-CIO Committee on Political Education has
spent $250,000 on radio ads in Iowa backing Sen. Hillary Clinton. An
environmental group called Friends of Earth Action is running ads
against Sen. Clinton. 

	Over the past four years, the national Democratic and Republican
parties have raised and spent less on elections than during the prior
four years, when adjusted for inflation. At the same time, independent
political groups have more than doubled their spending, and have begun
to rival the parties as an election-season financial force, the
Journal's data analysis shows. 

	The shift, largely the result of campaign-finance laws intended
to curtail big-money donations to parties, could further polarize the
American political landscape. Because the Republican and Democratic
parties aim to appeal to broad swaths of the electorate, they tend to be
moderating forces in politics. That isn't true of the independent
groups, which range from the Sierra Club and the U.S. Chamber of
Commerce to fringe groups like Swift Boat Veterans for Truth, which
disbanded after the 2004 election. They often pursue narrower agendas or
causes further out on the political spectrum.

	The nonprofit groups are financed by wealthy individuals,
corporations, labor unions and other interest groups. Unlike the
national parties, they face no limits on how much money they can take in
from contributors. They often don't have to disclose their donors' names
until months after an election -- if at all. 

	During the 2000 election cycle, such outside groups spent at
least $260 million on presidential and congressional races, one-fifth as
much as was spent by national political parties, according to the
Journal analysis of campaign data provided by the Federal Election
Commission and two nonpartisan organizations that track political
spending. During the 2006 midterm elections, these outside groups spent
about $600 million, almost two-thirds as much as was spent by the
Republican and Democratic parties, the data indicate. Candidates
themselves still account for the biggest piece of spending -- a bit less
than half. 

	Overall, the amount of money poured into each two-year election
cycle continues to climb. Data from the FEC and several groups that
track campaign finance indicate that total spending during
presidential-election cycles rose from $2.8 billion in 1995-96 to $3.6
billion in 1999-2000 to $4.8 billion in 2003-04. This year and next, it
is expected to hit $6 billion, political strategists say. 

	Nonparty political organizations date back many years. The
nation's founding fathers, in fact, considered it inevitable that
outside political factions would attempt to influence the government.

	The growing clout of such groups is an unintended consequence of
a 2002 law intended to reduce the influence of money in politics. The
Bipartisan Campaign Reform Act of 2002, championed by Arizona Republican
Sen. John McCain, took aim at so-called soft-money donations to
political parties. Soft money had become a major source of funding for
both parties, which used the donations to support individual campaigns.
The law barred the parties from accepting large contributions from
wealthy individuals, corporations, labor unions and other interest
groups. 

	The law elevated the importance of "bundlers" -- fund-raisers
who gather contributions from friends, employees and family and pass
them on in lump sums to political campaigns. Some bundlers had
previously given soft money to national parties. The law also prompted
donors to turn to political organizations not tied directly to the
parties, many of them offshoots of established special-interest groups. 

	There are several distinct classes of independent political
groups, each taking its name from the section of the Internal Revenue
Service code under which it is organized. Most are known as 527
organizations. Although 527 groups are recognized as political, they are
prohibited from explicitly calling for the election or the defeat of
candidates. Consequently, they often promote or attack candidates
without instructing people to vote for or against them. 

	Another class of independent groups is growing even faster --
and is flying further under the radar. These groups are organized under
section 501c of the tax code, which gives tax-exempt status to nonprofit
groups. One category, called "social welfare," is governed by section
501(c)4. Those groups can urge people to vote for or against a candidate
-- so long as campaigning isn't their primary purpose, and they don't
accept money from corporations or labor unions. Labor groups are
governed by section 501(c)5; business groups by section 501(c)6. These
501(c) organizations don't have to disclose their donors. 

	Data from two nonpartisan organizations that track campaign
finance -- the Center for Public Integrity and the Center for Responsive
Politics -- show that election-cycle spending by 527 organizations rose
from $171 million in 2000 to $316 million in 2002 to $653 million in
2004. Spending dropped to $443 million for the 2006 midterm elections.
Spending on midterm elections typically runs lower than on presidential
elections. 

	The new groups are pulling in money that the major parties used
to receive. Before the 2002 crackdown, financier George Soros donated
more than $200,000 to the Democratic Party. Since then, he has given at
least $20 million to the 527 organizations. American Financial Group
Inc. Chairman Carl Lindner previously donated more than $1.5 million in
soft money to the Republican Party. In 2006, he gave about $500,000 to a
501(c)4 group called Common Sense Ohio, which sought to re-elect several
Republican senators. In the last four years, Mr. Lindner has donated
$3.6 million to outside groups backing Republican candidates, according
to campaign-finance documents. 

	Because the IRS doesn't require 501(c) organizations to detail
election spending or to list contributors, it's difficult to track their
political activity. The Journal analyzed data on 30 separate 501(c)
groups active in elections from 2000 to 2006, culled from a variety of
sources. The data show that the 30 organizations spent at least $155
million on the 2006 elections, nearly twice what they spent in 2000. 

	The 501(c) organizations are likely to become even more
important in the 2008 election. After the 2004 election, the FEC sought
to crack down on 527 organizations that violate the IRS rule against
calling for the election or the defeat of any candidate. Now, several
large 527 groups are setting up 501(c)4 social-welfare organizations,
which are allowed to back candidates explicitly. 

	Scott Reed, a Republican strategist, says that for political
campaigns, using 501(c)4 organizations is "now the most effective way to
go because donors are safe and don't need to be disclosed." 

	The Club for Growth, the antitax group, used to use a 527
structure for its election work. But the FEC fined it earlier this year
for stepping over the line barring explicit voting recommendations.
During the current election cycle, the group is shifting the work to a
501(c)4 unit, which carries fewer restrictions. The new structure will
make the organization "bigger, better and more effective," said its
president, Pat Toomey, in a letter to members. "We now have a
significant new ability to run advertisements that directly call for the
election or defeat of candidates." Another advantage, Mr. Toomey noted,
is that "unlike the past, your donations to the Club will not be
disclosed to the public." 

	The League of Conservation Voters, an environmental-advocacy
group that was also fined by the FEC for its 527 spending, has made a
similar move.

	Another environmental group, Defenders of Wildlife, started a
501(c)4 organization before the 2006 election, partly to help wage a
campaign to defeat California Republican Rep. Richard Pombo, then the
chairman of the environment committee in the U.S. House. The group spent
$2 million. Mr. Pombo lost the election. Rodger Schlickeisen, the
group's president, says it plans to spend $5 million this election on
campaigns against four candidates, including Rep. Don Young, the Alaska
Republican who once was chairman of the same environment panel. 

	While independent groups have been building clout, the national
political parties have been losing election-spending power. In 2002, the
national parties raised $591 million in soft money, which funded about
half of their budgets for that year's election cycle. (Figures used in
this story have been adjusted for inflation.) Over the last four years,
following the ban on soft money, the national parties have had about
$200 million less to spend on campaigns, an 8% drop. 

	During the 2000 presidential election, the Republican and
Democratic parties paid for 50% of advertising in the 70 largest cities,
according to a study by the Wisconsin Advertising Project at the
University of Wisconsin. In 2004, that figure fell to 17%. Outside
groups accounted for 20% of the advertisements in the 2004 presidential
campaign, double the amount of 2000, according to the project. 

	Democrats have led the charge toward using independent political
organizations. Soon after the 2002 law took effect, several Democratic
strategists, including Harold Ickes, a former top official with the
Democratic Party, and Steve Rosenthal, who had run political operations
for the AFL-CIO, met for dinner at BeDuCi's restaurant in Washington.
They worried that the Republican Party would adjust better than the
Democrats in 2004 to the loss of soft money because it controlled the
White House, and because President Bush knew how to rake in campaign
cash, Mr. Rosenthal recalls. 

	The Democrats decided to create and coordinate a set of 527
organizations, such as America Coming Together and the Media Fund, which
would essentially act like a shadow Democratic Party. The Democratic
strategists raised $200 million from wealthy liberals, trial lawyers,
labor unions and other traditional backers of the Democratic Party, and
spent it on the campaign, according to campaign finance records. The
Democratic National Committee spent $390 million on the election,
according to campaign records. 

	All told, since the campaign-finance law took effect, the 527
organizations that support Democratic candidates have spent nearly three
times as much money on elections than those backing Republicans,
according to the Campaign Finance Institute. One reason for the
disparity is that corporations, once the largest source of soft-money
donations to the Republican Party, haven't poured much money into 527s.
Campaign-finance lawyers who advise 527 organizations say that
corporations are concerned about getting involved with groups that run
afoul of campaign-finance rules. 

	Democrats are expected to hold that lead during the 2008 cycle.
Last month, two Democrats launched Fund for America, a 527 group that
plans to raise at least $100 million to back the Democratic presidential
nominee. Republicans say they are recruiting donors to match that
amount. 

	Because they have their own agendas, outside organizations
sometimes clash with one another, the national parties, even the
candidates they support. Abortion-rights advocates say Democratic Party
officials sometimes bristle when they fund political advertisements in
support of candidates, because the ads focus attention on an issue that
can alienate some voters. Naral Pro-Choice America plans to spend $10
million on the 2008 election cycle, double its budget for 2004. It
hasn't yet endorsed any presidential candidate. 

	Sen. Clinton has been both the beneficiary and the target of
considerable spending by independent groups. Friends of the Earth
Action, an environmental group backing former Sen. John Edwards, is
attacking her for not taking a stand on a global-warming bill. Emily's
List, an organization that backs Democratic candidates who are
pro-choice, has spent nearly $300,000 so far to support her in Iowa. 

	On the Republican side, the antitax Club for Growth has clashed
with the Republican Party several times. Last year, the group campaigned
against Republican Sen. Lincoln Chafee of Rhode Island because he had
voted against several tax cuts. Mr. Chafee won his primary anyway, but
lost to a Democrat in the general election. 

	This year, the group has been attacking Mr. Huckabee for
supporting tax increases as Arkansas governor. "Call Mike Huckabee," one
ad instructs viewers. "Ask why he supported all those taxes." 

	Common Sense Issues Inc., the group backed by American Financial
Group's Mr. Lindner in 2006, is funding automated phone calls to Iowa
voters touting Mr. Huckabee and spreading negative information about his
rivals. 

	Mr. Huckabee said the mudslinging approach of Common Sense
Issues "violates the spirit of our campaign." Patrick Davis, a former
Republican Party consultant who is managing the independent campaign,
says that he hasn't spoken with Mr. Huckabee, "therefore we don't know
what the spirit of his campaign is." 

	--T.W. Farnam contributed to this article. 

	Write to Brody Mullins at [email-masked]
<mailto:[email-masked]> 2

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