- - Friday, December 7, 2012

The country is on the verge of barreling over a “fiscal cliff.” Absent any change, taxes will spike by more than $500 billion next year (an average of $3,500 per household), which economists think could precipitate another recession. At the same time, Washington needs to find more than $1 trillion to replace the automatic “sequestration” cuts imposed by last year’s Budget Control Act. Yet the media are still castigating “dark-money” and “secret-money” groups that have been sounding the alarm about these very issues. A New York Times editorial blasted such groups for continuing their “pernicious” efforts during the fiscal-cliff negotiations and persisted in demanding that their donors be disclosed.

To understand what a public disservice is being done by the sideshow against “dark money,” it is first necessary to understand what critics are going on about. “Dark money” groups refer to social welfare organizations established under Section 501(c)(4) of the tax code. On the left of the political spectrum, well-known groups such as MoveOn.org, the Sierra Club and the League of Conservation Voters are all organized as 501(c)(4)s. Counterparts on the right include entities such as the National Rifle Association, Crossroads GPS and Americans for Prosperity. Left-wing coalitions calling themselves Americans for Tax Fairness and Action also presumably are 501(c)(4)s, although little is publicly known about those organizations, which sprang up overnight to advocate for their side in the fiscal-cliff debate. While all of these organizations mobilize public support or opposition for various policy issues, only the ones on the right tend to be criticized for their activities.

The dark-money pejorative derives from the fact that 501(c)(4)s, like the more than 1 million nonprofits in America, are not required to file detailed public reports itemizing their donors and disbursements — and for good reason. Many ideological nonprofits champion causes that otherwise would be underfunded if their donors faced the threat of reprisal. Indeed, the NAACP established this cornerstone of organizational privacy during the civil rights era when, before the Supreme Court, it successfully fended off Alabama’s efforts to delve into the group’s membership list.

Even when donor harassment is not an issue, the costs and burdens of reporting are simply too great to impose justifiably on 501(c)(4)s. It is not unusual for political action committees — which must report their donors and disbursements because the majority of their activity is election-related — to spend tens, if not hundreds, of thousands of dollars on software, consultants, attorneys and staff just to comply with the reporting requirements. Courts have recognized that this type of full-fledged reporting would not advance a sufficiently important governmental interest to outweigh the detriment to citizen groups that are not PACs.


The misplaced paranoia about spending by citizen-activist groups becomes apparent when one considers the failure to apply a similar standard to government officials’ spending. The Washington Post reported last week that President Obama was embarking on a “campaign-style series of events” and “mobiliz[ing] his re-election apparatus” to gin up public support for his policies. Has anyone asked how much Mr. Obama — whose last budget proposal, to add $3.5 trillion of debt, was rejected unanimously in the Senate and who is on track to add more publicly held debt than all of his predecessors combined — is spending on his campaign to burnish his fiscal credibility? After all, at a cost of $182,000 per hour just to operate Air Force One (not to mention all the ground logistics and security), Mr. Obama’s taxpayer-funded national fiscal-cliff flyover won’t come cheap.

More fundamentally, the whole discussion about outside spending by citizen-activist groups is a distraction. The real issue is government spending. As former Reps. Chris Cox and Bill Archer pointed out recently in The Wall Street Journal, the real national debt isn’t the oft-quoted $16 trillion. It’s actually $86.8 trillion when one accounts for all the unfunded liabilities, such as Social Security, Medicare and federal employee retirement benefits — the types of liabilities any private entity would be required to report on its balance sheets.

We have gotten to the point at which, even if the government took away every cent of every individual’s and corporate taxpayer’s income for an entire year, it still wouldn’t be enough for us to tread water. If we applied the same standards to the government that the Consumer Financial Protection Bureau and the Dodd-Frank law impose on the private sector, there would be massive criminal indictments.

Enough with the straw-man attacks against imaginary foes. Citizen-activist groups didn’t create this fiscal disaster — Washington did. Self-proclaimed foes of “secret spending” should train their fire on the bottomless sea of debt our government officials have quietly run up, which threatens the very survival of our nation as we know it. That is the real dark-money scandal.

Eric Wang is legal counsel for Americans for Prosperity.