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Pay-to-Play America

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The former New York Controller, Alan Hevesi, is now in a New York prison. He received a one-to-four-years sentence after pleading guilty to corruption. As Controller, Hevesi was the sole trustee of the state's $129 billion pension fund. He took bribes from individuals who wanted access to the fund's investment decision-making, and several of his associates were also implicated in the pay-to-play scandal.

Meanwhile, in the nation's capital, we find a similar situation: not outright fraud or criminality -- yet -- but a pay-to-play environment that will someday produce another national scandal. The Supreme Court decision in the Citizens United case and the collapse of any enforcement of the country's campaign finance rules by the toothless Federal Election Commission have created an environment in which companies and labor unions are able to spend unlimited secret contributions to influence elections - both at the federal level and in the 39 states where judges are elected.

The emerging spectacle is a national embarrassment, a situation no one would recommend to a newly emerging democracy. Meanwhile, the Obama reelection campaign has set a goal of raising a record $1 billion. Republicans will now set their own goal of matching or even exceeding the Democrats' haul.

Disclosure legislation -- reforms that would guarantee timely disclosure of the newly unregulated funds that are being laundered through 501(c)(4) organizations and trade associations to be spent on elections without the donors being disclosed -- languishes in the Congress. There is little chance that a campaign finance reform bill (even with minimal disclosure provisions) will become law before 2013.

The good news, so far, is that most major corporations have not jumped at the opportunity to make nonaligned campaign contributions from their treasuries. Nonetheless, as the 2012 election grows closer, the pressure will grow from lobbyists, money "bundlers," and political operatives to loosen the taps. Smart CEOs and their companies will "just say no" to such overtures.

For more than 30 years -- since the post-Watergate reforms enacted in the mid-1970s -- companies have been able legally to make bundled voluntary contributions to candidates and parties from their executives and employees through political action committees (PACs). Those contributions are subject to strict limits on amounts and must be publicly disclosed. While considered de minimis in comparison with the previously unlimited (and, since 2003, illegal) soft money contributions, these PAC contributions are given to buy influence and access.

At one recent Committee for Economic Development forum on money in politics, two senior corporate representatives stated that their companies made PAC contributions to ensure access to congressional staff. These staff are public officials; their salaries are paid by U.S. taxpayers. So the notion that companies feel the need to "tip" Members of Congress to guarantee access to their staff is, fundamentally, repugnant but entirely typical of Washington's money and politics culture.

Members of Congress will state repeatedly that they dislike this system -- especially the amount of time they claim they must spend making telephone calls to raise money. Yet, their behavior remains unchanged, and the system is not reformed.

Instead, what we have is another Washington bipartisan Kabuki game where reform is often preached but almost never practiced. Both parties share the blame for this situation.

The Obama administration is, perhaps, the more cynical actor because its track record of saying one thing yet doing another is so blatant. At least Republicans, like Senate Minority Leader Mitch McConnell, are consistent in opposing reform.

Then Senator Barack Obama in 2007 and 2008 pledged to accept public financing and abide by campaign finance spending limits during the presidential primary and general election campaigns. But he became the first presidential general election candidate in the history of the presidential finance system to abandon the spending limits. Both before and after he was elected President, Mr. Obama pledged to reform the presidential financing system. In office, he has done nothing; it remains broken.

Candidate Obama vowed that, if elected, his administration would also reduce the extent to which major campaign funders (the so-called "bundlers" who raise $500,000 and up) received plum administration positions. Again, the opposite has occurred, with some 80 percent of "bundlers" receiving administration jobs, including several key ambassadorships. The Obama administration's record is twice as bad as his predecessor (twice as many such appointments in two years as George W. Bush had in four years), and has the largest number of political appointees serving as ambassadors since the Gerald Ford administration.

As we head into the 2012 election season, the fundamental role of money in the American political system will not change. We have created and tolerated what is effectively a "pay-to-play" system that perpetuates the status quo, stymies structural reform, and creates the type of influence-peddling schemes that give corporate America a bad image. One recent example of the harm created by this system was detailed in "Reckless Endangerment," by New York Times reporter Gretchen Morgenson and co-author Joshua Rosner. Fannie Mae, through its leadership, its lobbyists, and its deployment of campaign contributions, played a major role in perfecting the American housing bubble that nearly toppled the global economy.

Until we get serious about reforming our campaign finance system, we can expect more scandals.

Charles Kolb is president of the nonpartisan, business-led Committee for Economic Development in Washington, D.C. He served in the George H.W. Bush White House as Deputy Assistant to the President for Domestic Policy. The above views are solely the author's.

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