Battle of the Super PACs

It is becoming clear in the Republican race for the presidential candidacy: Not topics, but instead the account balance decides the success of an election campaign in the U.S. Anyone whose own budget is not sufficient is slipped a check by business friends — quite legally. Because the rules for donations are in fact strict, but there is a loophole.

A well-made, but not really objective 30-minute documentary and a few nasty TV commercials have changed the dynamic in the U.S. election campaign. For the first time, Mitt Romney sees himself on the defense, and must answer to accusations that he ruined businesses as a hedge fund manager and put workers on the street.

It remains open what effect the campaign against the vastly superior favorite will have on the voters in South Carolina, who will vote on the Republican candidate for president this coming weekend. Yet it is clear that this attack would not have been possible without a relatively new element that threatens to reduce America’s election campaign to the question of who has the richest and most willing to contribute friends: the phenomenon of the so-called super PACs.

Simply said, they are election associations to which private individuals and firms are permitted to make unlimited contributions. The complicated financial regulations that apply to the actual election organizations of the individual candidates have no meaning for the super PACs — PAC stands for political action committee. That is, however, more of a formality: All super PACs that currently support one of the Republican presidential contenders are led by friends or former colleagues of the respective candidate.

The Supreme Court Opened a Huge Loophole

The foundation of the super PACs became possible after the Supreme Court upset the financial regulations for elections in 2010. In the U.S., strict limits apply to contributions that individual citizens are permitted to support their respective candidate: $2,500 per candidate at most; in a presidential election double that amount. Businesses, together with organizations and unions, are permitted to give the candidate nothing.

The Supreme Court did not touch this ruling, but, however, opened a huge loophole: It permitted the formation of the formally independent super PACs. No spending limits apply to them. And, above all, businesses and organizations are permitted to give unlimited amounts of money. As justification, the court at that time pointed out that the right to express opinions was also valid for businesses or organizations. That itself could not be limited by well-intentioned regulations that were intended to curb the influence of money on elections in the U.S.

Super PACs have great influence on events for the first time in this presidential election. The 30-minute film and the anti-Romney commercials that the TV stations have been broadcasting in South Carolina for days were financed by the organization “Winning Our Future”: They spent almost $4 million, more than $2.6 million in the past week. That became possible due to a large contribution from millionaire Sheldon Adelson. The casino mogul from Las Vegas gave the super PAC a check for over $5 million at the beginning of the year. Adelson is friends with Gingrich: “I consider Gingrich the best candidate, and he would be the best president,” he said on the record.

The Contribution Is an Act of Friendship

In fact, the contribution is indeed an act of friendship to save Gingrich’s under-financed campaign from folding. At the beginning of December, Gingrich went into the Iowa primary as the favorite. When the voters had voted on January 3, he only made it to fourth place. That was without doubt the result of a large-scale campaign in which an organization named “Restore Our Future” presented Gingrich as an unpredictable loose cannon and a doubtfully ethical candidate. “Restore Our Future” is Romney’s super PAC. In Iowa alone it gave $3 million; in the total primary campaign almost $8 million up to now. No other super PAC has made so much money available. The biggest financer of this super PAC is the millionaire John Paulson, a close acquaintance of Romney.

The success of Rick Santorum in Iowa also did not come about by good old campaigning and profiting from the word of mouth propaganda of enthusiastic followers. The super PAC affiliated with him, “Red White and Blue Fund,” which alludes to the national colors of the U.S., spent more than a half a million for TV advertising. Alone, Santorum wouldn’t have been able to finance that: His election committee only spent $22,000, if nothing else, because they had received so few contributions.

A contribution-happy billionaire likewise stands behind Santorum’s super PAC: Foster Friess, an investment fund manager from Wyoming. “If Newt is already getting five million,” he said a few days ago, “it is only reasonable if Rick also gets a little something.” He didn’t name a sum. Doesn’t have to. The super PACs — and that is a further loophole in the regulations for election campaign financing — only have to name their contributors when the voters have already decided.

Link tip: The podcast Freakonomics just presented a study that examines whether one can buy election results. An economist has recalculated how these change when the expenditures for the election campaign rise. The result: Double the input nets only one percentage point more, according to him.