The Dark Money Conundrum

I’ve never been as motivated by “dark money” politics as others. Basically, the rich have always found ways to rig the system in a capitalist America. Whining about isn’t very helpful. But, as Rachel Cohen points out, Democrats have actually gotten pretty good at it too.

But more quietly, leaders in the progressive fundraising world will admit that transparency is just not a serious priority anymore. With imminent threats to democracy, including Republicans clinging to false theories about a stolen 2020 election and the possibility that election officials will simply reject the will of the voters in the future, liberal donors say there are just higher-order matters to focus on. “They’re understandably scared shitless about Trump getting another term, and [they] act accordingly,” said Gara LaMarche, the former president of the Democracy Alliance, a network of progressive mega-donors.

While the liberal argument to win now and focus on reform later makes some sense—the stakes are certainly high—a focus on winning at all costs comes, well, with a cost. Campaigners don’t readily give up winning strategies, and the assumption that all will be stowed back safely away if and when Democrats achieve sufficient electoral majorities starts to look fairly naïve. And all the while, the grip of the rich grows tighter on a party desperate to compete financially, hobbling options for policy that might pinch their elite class. As these happen to be among the most popular ideas with the broader electorate, furious with soaring inequality, the chase for dark money extracts a political cost that may corrode the party as much as it helps it.

WITH UNION MEMBERSHIP RAPIDLY DECLINING, progressives struggle to counteract the massive power and influence of the corporate lobby. To fill the gap, they turned to tax-exempt nonprofit organizations, of which there are two main kinds, both named for the section of the federal tax code under which they are regulated. 501(c)(3)s, also known as public charities, range from symphonies to the Boy Scouts to (full disclosure) The American Prospect. They can engage only in limited amounts of lobbying, and cannot donate to political campaigns. Financial contributions to c3s also yield donors a tax deduction. 501(c)(4)s—the social welfare groups—provide no tax deduction for contributions, but they can endorse candidates and engage in unlimited lobbying, so long as this doesn’t comprise the majority of their activities. Importantly, they need not disclose their donors.

The dark-money era brought changes to this model. As Columbia law professor David Pozen has observed, many progressive groups that formed in the wake of Trump’s ascent, like Indivisible and Women’s March, launched off the bat as c4s, and long-standing organizations like the American Civil Liberties Union, which had both c3 and c4 arms, began investing much more heavily in their c4 operations. The NAACP, after 108 years of existence, in 2017 decided to transition entirely to a c4 from a c3, precisely to engage in more lobbying.

“An increasing number of people understand that if they pool resources, they can make a difference on poverty or the environment in a way that you can’t with a standard c3,” says Aaron Dorfman, the president of the National Committee for Responsive Philanthropy. “[Donors] realize if you actually want to make a difference, you need to support movements that contest power and are dedicated to changing systems. That’s not a bad thing.”

Again, I’m relatively agnostic on this issue, but I know it means a lot to many progressives so I figured it was well worth a post.