In the last six months, the disclosure rules covering the sources of money spent on elections have changed dramatically -- twice. Despite those changes, one thing has stayed the same: moneyed interests have remained able to spend tens of millions of dollars on elections without having to publicly reveal who is doing the spending.
In March, a federal court ruled that Federal Elections Commission disclosure regulations were too weak, in violation of Congress's instructions to the agency. The court said that any group (or individual) that runs a type of advertisement called "electioneering communications" must publicly disclose the identities of its donors. These are the so-called "issue ads" run shortly before an election that mention a candidate but stop short of telling the audience to vote for or against the candidate.
In response to the ruling, organizations switched to a different type of advertisement called "independent expenditures" -- ads that expressly call for a viewer to vote for or against the targeted candidate. Prior to this ruling, many groups had avoided independent expenditures for tax reasons, but they were willing to face the tax consequences once it became the only way to hide their donors from the public.
Last month, a federal appeals court overturned the March ruling. The court also gave the FEC the chance to revise its regulations to ensure greater disclosure, but the commissioners deadlocked, voting along party lines and leaving the old, weak regulations in place. Groups are once again free to run electioneering communications without having to disclose their donors. Sure enough, many organizations have turned back to electioneering communications.
One of the biggest spenders, Americans for Prosperity, announced it would switch to "issue ads" after the March ruling because, in the words of its president, Tim Phillips, "this election is too important." Since early August, it spent $31 million on ads opposing Obama's reelection.
AFP isn't the only group looking for donor secrecy. Trade groups, like the U.S. Chamber of Commerce, have spent millions on political ads without revealing who foots the bill. The American Bankers' Association has now created a new tax-exempt organization to allow its member banks to anonymously spend money to influence this year's election, targeting between six and 12 competitive U.S. Senate races. Interestingly, the ABA already had a political action committee that has given more than $2.8 million to political candidates in this election cycle, but has to report its donors. Why create a new organization? So that banks can spend in secret.
Although super PACs have been a popular villain for those worried about the political spending that has exploded since the Supreme Court decided Citizens United, the reality is that tax-exempt groups like the ABA's new creation have spent more in this election than super PACs. This spring, 90 percent of advertising by outside groups was paid for by these tax-exempt organizations. Two conservative groups, Crossroads GPS and Americans for Prosperity, spent more than the top four super PACs combined -- $173.8 million. Super PACs have to report their donors, but groups like AFP and the Chamber do not. It's a good bet that this difference in secrecy is precisely the reason that super PACs are not as popular.
Congress could fix this problem and close other loopholes that allow corporations to secretly influence elections, but it has done nothing -- even though the Supreme Court strongly favored disclosure in Citizens United.
Fortunately, as detailed in a recent Brennan Center for Justice report, there is another route to transparency. The Securities and Exchange Commission regulates publicly traded companies and has the authority and responsibility to protect investors and the public interest. The SEC should add information about corporations' political spending to the list of mandatory disclosures required of all publicly held corporations.
A proposal requiring disclosure is now pending before the Commission. It has received nearly 300,000 comments, virtually all in support. As SEC Commissioner Luis Aguilar put it in a speech endorsing the proposal:
Arming investors with the information they need to facilitate informed decision-making is a core responsibility of the SEC. In fact, it is one of the factors that led to the creation of the SEC. It is one of the SEC's core functions to identify gaps in information that investors require, and then close that gap as quickly as possible.
Voters deserve to know who is spending tens of millions of dollars to sway their votes. The big spenders trying to control the course of American politics should not be able to manipulate weak disclosure rules to keep their funders secret. While the ability to impact this election cycle has faded, a meaningful disclosure rule that would bring transparency is still within the SEC's reach. The agency should act now.
Ian Vandewalker serves as counsel for the Brennan Center's Democracy Program where he works on voting rights and campaign finance reform.