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Midterm Elections 2010: An Inside Look At The Outside Group Spending Surge Boosting The GOP

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WASHINGTON — A year ago, two top Republican strategists sat down for lunch at the venerable Mayflower Hotel, five blocks from the White House, calculating how to exploit the voter anger they had seen erupt at Democratic town hall meetings that summer.

Today, the money-raising success of the GOP-allied attack led by the U.S. Chamber of Commerce and the Karl Rove-inspired American Crossroads has stunned opponents and even its own architects. It's one big slice of the estimated $3.5 billion expected to be spent on this year's campaigning, a record for a midterm election.

Financed to a great degree by undisclosed donors – and helped by a new Supreme Court ruling – the deep-pocketed groups have become a dominant part of this election's narrative. They have reversed past pre-eminence by Democratic outside groups. And they have become a prototype for elections to come.

Their effort has been a major factor in the $264 million in spending so far in this election by outside groups – organizations separate from the political parties and candidates.

Rove, who was President George W. Bush's top political adviser, and the two Mayflower lunch partners – former GOP Chairman Ed Gillespie and Steven Law, a veteran of Capitol Hill and the Chamber of Commerce – worried that the Republican Party alone would be no match for President Barack Obama's superb fundraising.

"Clearly there was a tremendous amount of grass-roots energy building – a grass-roots prairie fire that was building in intensity," Law, now the Crossroads president, said in an interview. "We felt that one of the things we could do was pour gasoline on that."

If voters seemed angry, so was corporate America. Obama led Congress into passing health care and financial regulation overhauls and pushed for climate legislation, all of which angered the business community.

In the end, the advantage held by the GOP outside groups helped neutralize the financial edge enjoyed by the Democratic Party over the Republican Party. Together, they all have contributed to an explosion of concentrated political advertising – perhaps $1 billion worth – that rivals the annual ad spending on cereal by Kellogg's or on drugs by Viagra maker Pfizer Inc.

In the past few days, Democratic-leaning groups led by labor have begun to weigh in with their own money, anxious to match the GOP effort on the ground and on the air. Aided by more than $4 million from America's Families First Action Fund, a group gathering large donations to support House candidates, Democratic allies have managed to stay virtually even with Republican groups during the past six days, according to an Associated Press analysis of Federal Election Commission data.

The GOP plan Rove, Gillespie and Law designed was ambitious. It would require the various Republican constituencies to unite behind one economic message. The conservative movement's biggest donors would have to pony up for a midterm election with sums that would have to match or exceed their giving during presidential elections. And the groups would have to align their spending, selecting their targets and becoming almost a parallel Republican Party.

This election has emphasized the use of nonprofit, tax-exempt organizations in politics – a trend that is not new but has gained attention by the sheer size of the spending. The groups are not required to disclose their donors, adding an element of secrecy that Obama and Democrats have denounced.

The $264 million in outside group spending reported to the Federal Election Commission as of Tuesday already exceeds outside spending in the 2008 presidential year and is four times the outside spending seen for the 2006 midterms.

"It's a telltale sign that things have really shifted in a dramatic way this cycle," said Sheila Krumholz, executive director of the Center for Responsive Politics, which tracks campaign money.

Moreover, actual spending could be far higher because the reports cover only spending on communications. There is no accounting for get-out-the vote field operations by conservative and liberal groups.

The money comes amid a new landscape in campaign finance created when the Supreme Court, in a case known as Citizens United v. Federal Election Commission earlier this year, opened the way for corporations and unions to spend money in elections. While that ruling and other court decisions have created a more freewheeling environment, the lack of disclosure makes it difficult to determine whether corporations have stepped up their giving.

What's more, the special Massachusetts Senate election this year, won by Republican Scott Brown, preceded the Citizens United decision and still attracted more than $5 million in spending by more than a dozen outside groups.

The U.S. Chamber of Commerce relies on undisclosed corporate contributions and has seen its fundraising grow. Chamber President Thomas Donohue has aimed for a record goal of $75 million in political spending at the federal and state levels this election season.

Bruce Josten, top lobbyist for the U.S. Chamber, said the business group saw Democratic-allied groups in 2008 pour vast sums of money into TV advertisements and achieve historic successes and decided to "take a page out of their book, learn a lesson."

"We've been able to do what we've done because people are angry," Josten said.

Money alone does not decide political contests. In 1994, the Democratic fundraising advantage could not stop a Republican tidal wave that switched control of Congress.

But it is one significant barometer of partisan fervor.

"Money does follow momentum," Josten said. "You saw that in '08, and you're seeing it now."

Republican-leaning groups have far outpaced liberal and Democratic-leaning organizations. American Crossroads and its affiliate, Crossroads Grassroots Policy Strategies, surpassed their $65 million fundraising goal on Monday and together have spent $30 million on 14 Senate and 18 House races. The Chamber of Commerce has spent $34 million in 58 races. The American Action Network, which occupies the same 12th floor office space in a Washington office building with American Crossroads, has spent $22.7 million.

With days to go, Democratic-allied groups are weighing in, too. They are relying primarily on labor unions that are spending directly in some battleground races or financing smaller versions of the GOP-allied model.

The National Education Association, through its advocacy fund, has pumped $2.4 million into four Senate races just in the past three days, including $1 million for ads opposing Republican Senate candidate Dino Rossi in Washington state. But labor's effort is diffuse. One of the biggest union spenders – the American Federation of State, County and Municipal Employees – has spent $90 million so far in this election, according to the union's political director, Larry Scanlon. But that money includes millions that it is spending on gubernatorial and state legislative races. Its direct spending on congressional contests as of Tuesday totaled $11.8 million.

Unions also are less likely to use television advertising to deliver their message, focusing instead on mailings and door-to-door canvassing.

In addition, the millionaire contributors that helped finance Democratic outside groups in the past have largely stayed away from politics this election, and the unions, their ranks diminished by the recession, have less money to spend. Donors like billionaire George Soros have put their money into policy causes such as health care and climate change. Last week, Soros gave $1 million to the liberal Media Matters for America, a group that routinely targets Fox News. On Tuesday, he contributed $1 million in support of a California referendum to legalize the recreational use of marijuana.

Big corporate and labor money is not unusual in politics. Unions and companies used to give directly to the parties in unlimited amounts. That money was disclosed and had restricted uses. But Congress in 2002, banned such "soft money" contributions to the parties.

It didn't mean the source of the money went away from politics.

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Associated Press writer Julie Hirschfeld Davis contributed to this report.

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