“Tea Party Is An Election Category”: The IRS, Non-Profits, And The Challenge Of Electoral Exceptionalism
What the IRS scandal really shows us is that it’s getting harder and harder to draw a line between electioneering and political speech.
As the report of the IRS Inspector General shows, the agency’s scrutiny of conservative groups applying for non-profit status was, more than anything, a clumsy response to a task the IRS is ill-equipped to carry out – monitoring an accidental corner of campaign finance law, a corner that was relatively quiet until about 2010.
That corner is the 501(c)(4) tax-exempt organization, belonging to what are sometimes called “social welfare” groups, which enjoy the triple privilege of tax exemption (though not for their donors), freedom to engage in some limited election activity, and, unlike other political committees (PACs, SuperPACs, parties, etc.), freedom from any requirement to disclose information about donors or spending. The use of (c)(4)s as campaign vehicles didn’t originate with the Citizens United decision in 2010 (Citizens United, the organization that brought the case, was already a (c)(4)), but the decision seems to have created a sense that the rules had changed, and even small groups – especially, apparently, local Tea Party organizations — rushed to create (c)(4)s.
501(c)(4)s are not prohibited from engaging in political speech of most kinds. They are free to be “biased” without jeopardizing their tax exemption. They can advocate for or against legislation, they can lobby the government or criticize it. They don’t have to make any effort to be “non-partisan” – for example, they can support a proposal that is only supported by members of one party, or directly advise only members of one party. And they can engage in some activity directly intended to influence the outcome of an election, as long as that doesn’t constitute the organization’s primary purpose.
There’s some confusion about the definition of “primary purpose,” discussed in great depth elsewhere, but what the IRS was trying to do was to identify organizations that seemed more likely to be heavily involved in electoral activity. Since the organizations were new, there was no way to look at their actual activities to see whether they were mostly electoral. So the agency had to rely on clues in the applications, like names and telltale phrases. If organizations had words like “Democrat” or “Republican” in their titles, for example, it would be reasonable to look more closely at their election activities, or possible future activities, than an organization that called, for example, “Save the Turtles.” I’m told that organizations with the names of political parties do receive extra scrutiny, even if in some cases, like “Students for a Democratic Society,” the word might mean something unrelated to the name of the party. That’s what the closer scrutiny would find out.
“Tea Party” in 2009 and 2010 was unquestionably an election category – there were “Tea Party” candidates and there was a “Tea Party Caucus” in Congress. It was not unreasonable for the IRS to use that phrase as an indicator that an organization using that phrase might be more inclined to engage in elections. There are comparable phrases on the left – for example, the term “Netroots” might suggest election involvement, as there were groups that identified and endorsed “Netroots” Democratic candidates in 2006 and later. Perhaps there were simply fewer organizations applying for (c)(4) status with that word, or they came in before the 2010 flood, or perhaps the IRS did screen on that word – we don’t know.
While there’s a perfectly plausible case for the IRS to use flag-words that indicate an election-focused movement, the actual questions asked of the groups do raise some concerns. If accurate, they did seem to go beyond evidence that these organizations were primarily engaged in elections, such as questions about lobbying and the role of family members.
But the reason these questions are complicated for the IRS, or for any agency assigned to police these complicated distinctions, is this: The line between robust political speech and influencing elections has become frightfully difficult to draw. Finding the right line around what is an “election” is really the fundamental problem in campaign finance. Almost everyone accepts the premise of “electoral exceptionalism” – elections are structured and require some particular rules, different from the rules that apply generally to political speech. The rule in most states that keeps campaigners 75 or 100 feet from the voting booths is the most obvious uncontroversial restriction on political speech, and there is broad acceptance of the idea that direct contributions to candidates and campaigns should be limited to prevent corruption and dependence. But what happens after that? What about outside spending that looks just like campaign spending? We used to think there was a clear distinction between “issue ads” that were expressing a view on an issue and “electioneering communications” that were the equivalent of campaign contributions. That distinction is actually what the Citizens United case was about — the provision of the 2002 Bipartisan Campaign Reform Act that defined broadcast communications that mentioned a candidate within 30 days before a primary or 60 days before a general election as electioneering, which had to be financed with regulated funds.
That was an improvised line then, and it’s gotten even blurrier since. Part of the problem is partisanship – it used to be, for example, that there were environmentalists in both parties, supporters of social spending in both parties. A political ad about the environment was just that. But what’s an ad or brochure attacking “Obamacare” during the election year? Every Republican opposes it, and they’ve given it the name of the president. The Tea Party was based on issues, yes, but above all else, it was based on unflagging, total opposition to Obama and congressional Democrats.
To figure out where election advocacy begins and regular political speech ends in these cases was certainly more than mid-level IRS bureaucrats in Cincinnati could handle. But it’s not an easy challenge for anyone. All the noise about IRS “targeting” and about free speech and corporate speech is a distraction from a real challenge of money in elections: finding an agreement on the line around an “election,” and establishing some clear rules for what happens within that line in order to ensure that elections are fair and open and don’t lead to corruption.
By: Mark Schmitt, The National Memo, May 16, 2013
“Worsening Jobs Crisis”: America’s Middle Class Is Burning To The Ground, While Washington Fiddles With Scandal Nonsense
At last, some excellent economic news for folks long-mired in the stagnant labor market!
At least, those were the headlines recently trumpeted across the country. “Jobs Spring Back,” exclaimed a typical headline or report that companies added a better than expected 165,000 private-sector jobs in April. Wow — the thunderous, three-year boom of prosperity that has rained riches on Wall Street is finally beginning to shower on our streets, right?
Well, as dry-land farmers can tell you, thunder ain’t rain. Read beneath the joyful headlines hailing April’s uptick in job numbers, and you’ll see the parched truth.
For example, more than a third of working-age Americans are either out of work or have given up on finding a job. Also, last month’s hiring increase was almost entirely for receptionists, waiters, clerks, temp workers, car-rental agents and other low-wage positions with no benefits or upwardly mobile possibilities. On the other hand, manufacturing — generally the source of good, middle-class jobs — did not add workers in April and has cut some 10,000 jobs in the last year.
Especially problematic was the continued rise in underemployment — people wanting full-time work, but having to take part-time and temporary jobs. Underemployment is also pounding college graduates. While they’ve been more successful than non-grads at landing jobs, they’re not getting jobs that fit their career goals or even require the degrees they spent money and time to obtain. Indeed, many of those rental agents and restaurant employees you encounter hold four-year degrees, forcing everyone else to scramble for the few, even lower-paid jobs further down the skill ladder.
Meanwhile, the next graduating class is already beginning to flood into the labor market from colleges and high schools with nowhere to go.
In May, another headline shouted: “Stock Market Soars.” It expressed delight that the Dow Jones Average topped 15,000 for the first time in its history.
Yet this index of Wall Street wealth gives a totally false picture of our nation’s true economic health. Yes, the privileged few are doing extremely well. But the workaday many are struggling — and falling further and further behind as the jobs market sinks steadily from mere recession down into depression.
The monthly unemployment reports don’t tell the depths of misery that’s out here in the real world, beyond the view of Wall Street and Washington elites. For example, President Obama hailed the news that unemployment dipped to 7.5 percent in April. Unstated, though, was the stark reality that this good-news dip was not due to a jump in job offerings, but to a bad-news labor market so weak and discouraging that more and more Americans are dropping out of it or never entering it.
More than a third of our working-age population is no longer even in the job market, and only 58.6 percent of us are employed. Put the opposite way, 41 percent of the potential workforce is not working — about 102 million people. One more statistic, and it’s a chiller: More than one out of five American families report that, last year, not a single family member had a job.
Our people are trapped in a jobs crisis that is sucking the economic vitality out of our nation, but our leaders refuse even to acknowledge it, much less cope with it. In fact, corporate chieftains are deliberately exacerbating the crisis by hoarding trillions of dollars that ought to be rushed into job-creating expansions, and politicians keep adding to the casualties by gleefully eliminating the middle-class jobs of hundreds of thousands of teachers, firefighters, police and other valuable public employees.
America’s middle class is burning to the ground, while Washington fiddles with nonsense and Wall Street feathers its own nest. It’s disgraceful.
By: Jim Hightower, The National Memo, May 15, 2013
“Uniquely American And Uniquely Stupid”: The Makings Of The Next Debt Ceiling Debacle
I hate to interrupt fulminations about President Obama’s three incredible shrinking scandals with something as prosaic as concern about the GOP’s threatening to sabotage the economy, but a couple of bits of real news emerged yesterday regarding the debt ceiling (yes that, again).
It’s actually a perfect juxtaposition: On the same day that an interview with Standard & Poor’s top U.S. credit rating analyst warned of tinkering with the debt ceiling, House Republicans huddled up to brainstorm about what their price should be for not deliberately tanking the economy.
On the one hand you’ve got an interview National Journal did with Nikola Swann, “Standard & Poor’s top analyst for the U.S. credit rating.” You will recall that Standard & Poor’s downgraded its rating of U.S. debt in 2011 after the last debt ceiling showdown. And you will recall that that showdown was engineered by the GOP as a political hostage-taking situation: Virtually everyone (or virtually everyone who is responsible) acknowledges that raising the debt ceiling is necessary to avoid the U.S. government defaulting on its obligations, which would be financially cataclysmic, but the Republicans threatened to force that exact scenario if they didn’t get spending cuts.
Now the debt-ceiling-fight countdown clock is ticking once again (the Treasury started its “extraordinary measures” to avoid default at noon today), with the moment of crisis expected to hit some time between August and year’s end. Does the prognosis look any better? “We have not seen any strong evidence that the political system as a whole is more effective, more stable, or more predictable than we thought it was in 2011,” Swann told National Journal’s Stacy Kaper. “There does seem to be, especially in recent years, an overall trend in the U.S. to effectively make major policy decisions at the last moment in a crisis setting. We don’t see that as credit-positive.”
That’s delightful understatement. He goes on to say that in order to avoid another credit downgrade, the U.S. should extend the debt ceiling for five years and bring the debt-to-GDP ratio under control with a plan that is actually credible. House Republicans passed a bill (which stands zero chance of becoming law) which would allow the Treasury to prioritize government payments (which would still leave the government in a position of not paying its bills … it would just be not paying for goods and services while making sure that its debt holders are taken care of). “This does not sound like a very comfortable scenario,” he says in another bit of understatement.
The final point in the interview is the most instructive:
S&P rates over 120 sovereign governments, including all of the wealthy developed ones. Of those, there are very few that have anything similar to the U.S. debt ceiling. Of those countries that do have some kind of legislated limit on the amount of debt, that limit is set as part of the budget-setting process. It almost never is divided the way it is in the U.S. We don’t think it is helpful to credit quality.
The very idea of a debt ceiling that doesn’t rise with authorized spending is, in other words, both uniquely American and uniquely stupid. Why? Because it lends itself to the kind of irresponsible hostage taking the Republicans are gearing up to engage in yet again.
And it’s a political terrorism scheme that is increasingly disengaged from reality (to which its connection was tenuous at best anyway). To wit: The last time around the GOP objection to the debt ceiling was grounded in rising deficits; this didn’t make their threats less irresponsible but at least established a plausible-sounding connection between their threat and their demand. But the budget deficit is, as my bloleague Pat Garofalo wrote earlier this week, the incredible shrinking issue. As a percentage of the economy, it is now roughly half of what it was when President Obama took office.
But Republicans know they’ve got a hostage so they’re bound and determined to extract a ransom. Hence the brainstorming session they held yesterday where 39 different members of the House GOP conference arose to offer their idea of what policy they should demand in return for not intentionally tanking the global economy. The ideas, according to various reports, ranged from approval of the Keystone XL pipeline to doing something about partial-birth abortion.
My personal favorite item comes from Jonathan Strong’s account at National Review Online:
The Ryan budget passed by the House assumes repeal of Obamacare. So if House Republicans were to press for enactment of the Ryan budget in exchange for raising the debt ceiling, that would entail repealing Obamacare – which is why there are pangs of doubt within the GOP leadership about whether that strategy is realistic.
So GOP leadership thinks demanding that the president sign onto the radical Ryan budget is unrealistic because it would necessarily involve repealing Obamacare? As if the Ryan budget’s dramatic cuts to discretionary spending and gutting of Medicare and Medicaid would be evenly remotely acceptable were Obamacare not involved? The whole scenario yesterday has the air of fantasy – like my wife and I arguing over what we’ll do when we win the Powerball tomorrow night (she looks oddly askance at my plan to commute via jet pack).
By: Robert Schlesinger, U. S. News and World Report, May 17, 2013
“The Real IRS Problem”: The Post Citizens United Explosion Of Undisclosed Political Campaign Spending
Americans of all political stripes should be outraged at the recent revelation that the Tea Party was unfairly targeted by the IRS before last year’s election. The IRS should never base its decisions on political preferences or ideological code words, regardless of what bureaucratic challenges it may face. But the lesson that the right is drawing from the IRS’s misdeeds — the lesson that threatens to dominate the public conversation about the news — is wrong.
We’re seeing a knee-jerk reaction, particularly from the Tea Party and their allies in Congress, that is threatening to turn the IRS’s mistakes into an indictment of “big government” writ large. Some are already trying to tie the scandal to the Right’s favorite target, Obamacare, and to the Benghazi conspiracy theory.
The danger of this frame is that it will discourage the IRS from fully investigating all nonprofit groups spending money to influence elections. And it will distract from the core problem behind the IRS’s mess: the post-Citizens United explosion of undisclosed electoral spending.
Before the Supreme Court’s decision in Citizens United, only a limited number of nonprofit 501c(4) groups could spend money to influence elections — those who did not take contributions from corporations or unions. But Citizens United lifted restrictions on corporate spending in elections, setting the stage for individuals and companies to funnel unlimited money through all corporations, including c(4)s and super PACs in an effort to help elect the candidates of their choice. Spending by c(4)s has exploded since Citizens United, since the decision allowed any c(4) nonprofit corporation that didn’t spend the majority of its money on electoral work to run ads and campaign for and against candidates. And c(4)s, as long as they follow this rule, don’t have to disclose their donors under the laws currently in place.
The IRS, then, was forced to play a new and critical role in policing this onslaught of electoral spending. IRS officials clearly made poor choices in how to confront this sudden sea change and those mistakes should be investigated and properly addressed. But strong oversight of this new wave of spending remains critically important and clearlywithin the IRS’s purview.
If we let understandable concerns about bad decisions by the IRS lead to weakening of campaign finance oversight, our democracy will be the worse off for it. Instead, we should insist that the government strengthen its oversight of electoral spending — equally across the political spectrum. We should pass strong disclosure laws that cover all political spenders, including c(4)s. And we should redouble our efforts to overturn Citizens United by constitutional amendment and reel back the flood of corporate money that led the IRS to be in this business in the first place.
By: Michael B. Keegan, The Blog, The Huffington Post, May 15, 2013
“Hidden In The Footnotes”: IRS Cases Included Organizations Of All Political Views
USA Today had an item today on the IRS controversy, which seemed to reinforce much of what we already know: conservative groups seeking tax-exempt status faced unfair and unreasonable scrutiny. But deep in the article, in the 18th paragraph, USA Today added seven unexpected words: “Some liberal groups did get additional scrutiny.”
They did? Actually, yes.
The Internal Revenue Service, under pressure after admitting it targeted anti-tax Tea Party groups for scrutiny in recent years, also had its eye on at least three Democratic-leaning organizations seeking nonprofit status.
One of those groups, Emerge America, saw its tax-exempt status denied, forcing it to disclose its donors and pay some taxes. None of the Republican groups have said their applications were rejected.
Progress Texas, another of the organizations, faced the same lines of questioning as the Tea Party groups from the same IRS office that issued letters to the Republican-friendly applicants. A third group, Clean Elections Texas, which supports public funding of campaigns, also received IRS inquiries.
In fact, it’s worth emphasizing that the IRS, which has acknowledged making mistakes in this area and offered an awkward apology for agency missteps, noted yesterday that the “organizations of all political views” were affected by the scrutiny.
This certainly seems relevant to the larger controversy, doesn’t it? Up until now, the story has been pretty straightforward: conservative groups were subjected to unfair treatment when applying for tax-exempt 501(c)4 status. The IRS must remain politically neutral at all times and the right was fully justified in complaining that the agency fell far short of this standard.
But if several liberal groups were subjected to the same treatment, it reinforces a larger, less-partisan arc to the story: the IRS struggled to enforce ambiguous tax laws and was beset by bureaucratic bungling. The ratios certainly matter — if only a handful of left-leaning groups faced tough scrutiny, while right-wing leaning groups fared far worse, that would point to a more systemic problem — but we don’t yet know that for sure.
It would appear, then, that what’s needed is a detailed accounting. The inspector general’s report filled in many of the blanks, and I suspect we’ll get a more thorough examination with the FBI looking into the case and congressional hearings on the way.
By: Steve Benen, The Maddow Blog, May 15, 2013
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