News Journal: Real campaign finance reform needed to restore public’s faith in government

In October, the Supreme Court has agreed to hear a case that could destroy what is left of our campaign-finance system. The case is called McCutcheon v. the FEC (Federal Election Commission), and it would remove, for all federal elections, the total limits that any contributor could give to a political candidate or party. The present limit is $123,200 –well beyond what the majority of Americans could ever contribute.

Added to the recent Citizens United case, it would put our elections even more in the hands of the small number of very wealthy contributors who already give the vast majority of campaign contributions.

This could not be coming at a worse time in our history.

Start with a few poll numbers and statistics:

Less than 10 percent of Americans have a favorable opinion of Congress, according to Gallup. That is the lowest level of confidence since Gallup’s polling began in 1973. Eighty percent, according to a CBS poll, think most members of Congress are more interested in serving special-interest groups than the people they represent.

In the 2012 election, 28 percent of all disclosed political contributions came from just 31,385 people who make up “1 percent of the 1 percent” of 318.5 million U.S. residents, according to a Sunlight Foundation poll; combined winning House and Senate candidates received more money from that “1 percent of the 1 percent” than from all their under $200 donors.

What do those heavy contributors buy? In 2012, campaigns were won by the candidate who spent the most money in more than 93 percent of House and Senate races.

Can our democracy survive statistics like this?

Unlike most Americans, I don’t believe our elected officials are corrupt and are blatantly trading their votes for campaign contributions. But I do believe the way we finance our campaigns distorts the country’s tax code and its priorities.

Here’s how I think this happens. Two people run against each other for federal office. Candidate A wants to help people who live on a minimum wage. Candidate B wants to help reduce taxes on corporations and high net-worth individuals. My point isn’t that A is a better person than B, but that he or she is at a huge disadvantage when it comes to soliciting campaign contributions. See above: 9 out of 10 times, B will win.

The best place to look at the practical results of this is in the 73,954 pages of the federal tax code. You will find thousands of loopholes for more special-interest groups than you could imagine, but let me cite just one example. As a group, multimillionaire and billionaire hedge-fund managers are among the most significant sources of campaign contributions. The tax code allows them to pay a 20 percent capital-gain tax (the new rate for upper-income filers) on what is called “carried interest.” Carried interest is earned when the hedge-fund manager earns profits for clients. The manager has no money at risk, a necessary element in any other capital gain. In fact, carried interest usually represents the major share of a manager’s income.

A brain surgeon making a million dollars a year pays a tax rate of 39.6 percent. The hedge-fund manager who makes $100 million a year in carried interest and pays $20 million in taxes instead of $40 million is way ahead of the game when he gives $10 million in political contributions.

The Supreme Court’s 5-4 Citizens United decision in 2010 made it legal for that hedge fund (and all corporations and unions) to spend an unlimited amount of money to convince people to vote for or against a candidate. That was followed by a Circuit Court of Appeals decision, using Citizen’s United as precedent, that said any limits on contributions, including from individuals, was unconstitutional.

The result? Casino owner Sheldon Adelson reportedly contributed $40 million to so-called “super-PACs” in 2012. With McCutcheon eliminating aggregate limits direct to candidates and parties, there is nothing to stop someone from contributing a billion the next time out.

That situation could only be corrected by a constitutional amendment. Sen. Tom Udall proposed one in June that “restores authority to the American people, through Congress and the states, to regulate and limit the raising and spending of money for federal political campaigns.”

There is no way such an amendment will become law in the foreseeable future. The best we can hope for is passage of the DISCLOSE Act, which has been stalled in Congress for the past three years. It would require full disclosure by practically all entities that run ads in political campaigns. It would enforce the requirement (now an open joke) in the Citizen’s United decision that super PACs be truly independent of candidates and political parties. The ads also would have to include the names of entities that paid for them. Some corporations have shown that they will go to great lengths to keep their customers and stockholders from knowing where their political contributions are going.

I strongly believe the first step in reestablishing faith in our political institutions is the reform of laws governing campaign contributions. Without that, we risk turning our democracy over to the cynic’s golden rule –he who has the gold, rules.

Ted Kaufman is a former U.S. senator from Delaware.