Sunday, January 17, 2016

The Unintended Consequence of All That SuperPAC Money

Update: Hello again Crooks & Liars readers linking in through Mike's Blog Round Up today! P.S. I'm trying to think up a good title for a pro-Obama book, if anybody's got suggestions please let me know in the Comments or Tweet me at @PaulWartenberg danke and bitte

With thanks to Infidel753 who linked to this article from The Hill regarding the current status of unlimited fund-raising in political campaigns thanks to the Supreme Court Citizens United ruling.

We're into the second Presidential cycle where the effects of that Citizens United ruling is in play, which means we're getting to see the patterns of consistency how something is going to work. If the stories we're starting to hear about the frustration and messiness are accurate, then the Law of You Get What You Paid For is in full effect. As Jonathan Swan writes for The Hill:

Major GOP donors and fundraisers are wondering whether they’re wasting their money on superPACs.
They say they’re not ready to abandon the superPACs, but they’re starting to look for ways to make them more effective during a presidential cycle that has challenged conventions about how to spend political donations. 
GOP front-runner Donald Trump’s relatively cheap campaign — contrasted with the millions of dollars spent on behalf of Jeb Bush, John Kasich, Scott Walker and Rick Perry — has left  donors, fundraisers and conservative leaders questioning the value of superPACs, which got a boost from the 2010 Supreme Court decision that allowed independent groups to raise unlimited cash.
“People are upset about the Citizens United decision; people are upset about all this money flowing into politics, but at the end of the day it has no impact,” said New York financier Anthony Scaramucci, who was a national finance co-chair for Scott Walker’s presidential campaign before moving to raise funds for Bush when Walker quit the race...

The plan, apparently, was that the richest people in America would set up external Political Action Committees in such a way as to back specific candidates (it still has to be done without "direct" coordination with the actual candidate, but yeah right THAT'S ever gonna stick) and to a size that would dominate the fund-raising landscape (hence the Super- prefix). Those candidates could then, in theory, survive the rigors of a prolonged national campaign by having those deep-pocket SuperPACs pay for the more expensive things like television ads and Get-Out-The-Vote efforts.

Just saying: Theory and Practice are two separate things. Back to Swan's article:

The cautionary tale cited by nearly every donor or fundraiser interviewed on or off the record has been Bush. He has fallen in polls despite the more than $50 million already spent on his behalf by the group Right to Rise, which far out-raised every other superPAC with its mid-year haul of $103 million.
“I think the whole idea of superPACs has been overrated,” said Fred Malek, finance chairman of the Republican Governors Association.
“SuperPACs can only do so much,” Malek added, pointing out that they pay vastly higher rates for TV ads than campaigns do, meaning that eye-popping super-PAC bank accounts might not have as much buying power as they appear to.
In conversations over the past six weeks, a number of major Right to Rise donors have privately told The Hill that they are holding on to hope that the political action committee can turn things around.
And, while doubts are mounting, none of the superPAC’s largest donors interviewed was willing to publicly abandon the group’s leader, Mike Murphy. Murphy has been trying to reassure them that his is a winning strategy and that their six- and seven-figure checks are being judiciously spent.

One great Irony of the Citizens United aftermath is how the lack of regulation is harming the business model of SuperPACs. If you look at the points I put in bold, this is where that deregulation comes into question. Without proper legislation monitoring and controlling costs of a campaign, vendors or providers like the television networks can charge whatever "the market" allows (which means they can charge through the roof knowing how much money is at play). And without proper oversight of the SuperPACs themselves, there are no real guarantees all that money is being spent (if at all).

If we're looking at trends, look back to 2012. Karl Rove had set up a massive SuperPAC for a wide range of Republican candidates and reportedly spent about $103 million on attack ads alone. As the report I'm linking to notes, the backers for Rove's committee got a ONE PERCENT Return On Investment (ROI) with that effort. Do you know a lot of rich people who enjoy a one-percent ROI? If you perform that poorly, those rich people will be suing you for fraud trying to get their money back.

Think about that 2012 Election Night. Rove was on Fox Not-News, insisting that the incoming results were "wrong" and that the candidate his SuperPAC backed - Romney - was going to win Ohio. During live broadcast, he got his ass handed to him by the back-room reporters who actually did their jobs and who confirmed that the early prediction models for Ohio wasn't going for Romney. The final results proved them right and Rove a fool.

You might have heard some panic in Rove's voice. I do, when I replay that scene. There was definitely denial, but I can picture in my mind Rove was freaking out over how he was going to be getting a lot of angry calls from billionaires who were likely promised that Romney was going to win, and that Ohio was one of those key states to prove it.

Part of that was a result of the echo chamber the Republicans exist as a group. They kept re-enforcing their beliefs to where they thought it was fact. But the other part of it was Rove's apparent laziness to keep up with the actual mechanics of campaigning, and what seems to be an ill-informed idea that money alone can buy win elections. Rove acted as though all he needed to do was raise money, pay himself handsomely with the consulting fees, spend just enough on ads and signs, and let the overall size of the PAC do its job.

Didn't exactly work out, eh deep-pocket donors?

If I were one of those deep-pocket rich people, I'd be taking a closer look at how all these SuperPACs are really run. There are far too many reports like this one out of the LA Times that point out how the money going in is not going to where the donors think:

...When Juanita McMillon saw his (Ben Carson's) name, she was eager to get out her checkbook.
“I think he is sincere, and I think he is honest, and I think he is exactly what we need,” said McMillon, 80, from the small town of De Kalb in northeast Texas. She gave $350.
Her money went to the American Legacy PAC, an organization with ties to former House Speaker Newt Gingrich. With Carson as the face of its Save Our Healthcare campaign, American Legacy raised close to $6 million in 2014 — and spent nearly all of it paying the consultants and firms that raised the money. Just 2% was donated to Republican candidates and committees, financial reports show.
“I’m really careful who I give money to, but I guess I did not read it close enough,” McMillon said, adding that she had never heard of American Legacy. “I prefer to give money to individuals, and I assumed, I guess, that Dr. Carson was getting my money...”
...The fundraising operation also has proved rewarding for the consultants running it. The founder and treasurer of American Legacy, a Virginia-based direct-marketing consultant, is now a senior finance advisor for Carson’s campaign, which has paid his firms $2.8 million.
The story behind the creation of Carson’s fundraising network is another example of the way that super PACs, which are supposed to be independent from campaigns, have become more entangled with candidates than ever before. It also illustrates how effective the checks of tens of thousands of small donors, many of them of modest means, can be at enriching campaign consultants...

It's a hell of a racket, from the looks of things. Get people - the wealthier the better - invested behind a candidate or cause, get them to cough up some money - 50 bucks, a thousand, tens of thousands spread out through other third-party groups to avoid the regulations still requiring massive payments be reported - for that candidate/issue, and get paid by whatever salary or fee you set for yourself and your consulting agency.

I mean, look at that. TWO PERCENT of the finances raised actually went to campaigns. Where the hell did the other 98 percent go? Some of it to ads, some of it to the operational costs, but how much of it went to the top-tier "founders" of those SuperPACs?

If I'm putting money into something, I'd expect results. I'd expect that money going to where I'd wanted it to go, not a meager percent that's less than bread crumbs. I wouldn't want my money to go to someone else's bank account who does a half-assed job and then retires to a life of speaking engagements and cable news appearances.

This is the overriding reason for regulations to exist in the first place: to protect people from fraudulent or hazardous practices. Even for rich people who should know better, and especially for regular/low-income folks like McMillon. Without proper regulatory guidelines for how PACs and SuperPACs should spend their money, it can turn into a free-for-all with no accountability from that PAC.

You'd think that after the 2012 debacle that no one would be donating to Rove's SuperPAC again, but there he is fund-raising as though he's never been inept or disastrous running that thing. Granted, his Crossroads group isn't raking it in like before, but after last election's disaster he should have been banned from the country club dinners and charity functions.

Here's what we need to see after this coming November: a final tally of that Returns On Investments. If those SuperPACs rack up millions of dollars and end up with the same losing results for those deep-pockets that were promised wins, that will be two Presidential cycles in a row. That's the start of a trend, and part of me thinks that's far enough along for those billionaires to step back and say "we're better off with straight-up bribes to the candidates AFTER they win instead of this waste."

We'll see.


Anonymous said...

Note: I am posting as 'Anonymous' due to using my Google Account so seldom that I cannot summon it to mind and am too lazy tonight to do so.

I found your blog via a link on 'driftglass' to your 2014 post wrt why you gave up on the republican party. It closely resembles my transition although I was not quite as perceptive as you in 1992. We share the tag of moderate for essentially the same reasons. Your insights are spot on and I enjoy your blog tremendously. Keep up the good work. I do not know your age (I'm 59) and am dubious at best about things improving to any discernible degree in my lifetime, but hope springs eternal.

I look forward to including your blog on my daily reading list.

Denny Phillips (Ohio)

Paul Wartenberg said...

Thank you Denny.