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How About Some Transparency For Big Donors?

Major donors are hardly a neglected constituency, but even they deserve to know how their money is spent. Often, it disappears into the pockets of political consultants.

December 6, 2013

Nothing better symbolizes the tawdry tenor of contemporary politics than the contents of what is, according to Politico, the first candidate-sponsored TV ad of the 2014 campaign season.

A 30-second spot ballyhooing Republican contender George Demos visually links six-term Long Island Democratic House incumbent Tim Bishop with (wait for it) Toronto Mayor Rob Ford. The connection between Bishop, a former college admissions counselor, and the crack-smoking Ford is blindingly obvious: Both men hold political office in North America.

As the slithery voice-over puts it, “Tired of politicians? Then look at George Demos.”

Demos is by no means assured of winning the Republican nomination against Bishop – and the earliest the New York primary will be held is next June. But Demos, a former SEC official, has already loaned his nascent campaign $1 million. And that kind of cash means that now is the ideal time to start pummeling voters with ridiculous TV commercials. It is safe to assume that his media consultant will be well compensated for coming up with a TV script filled with such clichés, as “George Demos will fight for us because he’s one of us.”

(Political ad-makers would be tongue-tied if the verb “fight” were ever removed from the English language).

A larger message is embedded in the decision by this obscure Long Island office-seeker to launch a low-road television ad campaign at least seven months before the 2014 primary. The moral is inescapable: This is the greatest moment in human history to be an American campaign consultant.

With campaign spending setting new records every election cycle, politics today has become the equivalent of prospecting around Sutter’s Mill in 1848. There are gold nuggets everywhere. A single Senate race in the nation’s 14th largest state (Elizabeth Warren versus Scott Brown in Massachusetts) cost $71 million. Both presidential candidates and their allies spent $2.3 billion in 2012. The Center for Responsive Politics placed a $6.3 billion price tag on all federal elections in 2012. Throw in gubernatorial and other state races, and they create a more than  $7-billion industry. On the Fortune 500 list, Politics Inc. would rival companies like Owens-Illinois and Weyerhauser in total sales. 

It is a reasonable guess that around $1 billion of that money goes to pay political consultants for their services in the form of salaries, fees, retainers, victory bonuses and slices of the media budget. Almost all of this money is concealed from public view. Under Federal Election Commission filings, for example, there is no legal obligation to provide information on campaign sub-contractors or to separate a consultant’s fees and profits from expenses.

The biggest amount of swag is hidden in the television budget in the form of what has long been known as the ad-placement fee. A candidate’s media team (which sometimes includes top strategists and pollsters as well as campaign ad-makers) is allowed to take a percentage of the TV buy as its reward in addition to production costs. This fee, which can run as high as 15 percent in a congressional race, means that $1 million in ad spending listed on an FEC report may end up buying as little as $850,000 worth of TV time.

Enough with theory – here is a real-life example of the good life that comes with political consulting success.

A vicious Ohio lawsuit earlier this year exposed the inner workings of a leading conservative Republican firm, the Strategy Group for Media. In 2012 alone, the Columbus-based firm elected more than 30 Republicans to Congress, many of them Tea Party stalwarts such as Sen. Ted Cruz and Rep. Michele Bachmann. Although the firm’s founder Rex Elsass is a fervent evangelical Christian, the glue that held the firm together was more temporal than spiritual. As McKay Coppins put it in a BuzzFeed profile of the embattled Elsass, “For many of his managers, he buys Bentleys, covers down payments for expensive homes, and even assists with monthly mortgage payments.”

Yes, you read that quote correctly. The parking lot at the Strategy Group for Media looks like a Bentley showroom. Not to mention that Elsass proudly travels in his own private jet.

Before Democrats become too smug over the illusion that liberal consultants, in contrast, happily toil for Teach for America wages, it is worth reviewing some recent history. As Joe Klein recounts in Politics Lost, John Kerry’s 2004 media team broke up over how to subdivide the hefty 9 percent commission that they initially were receiving on the presidential campaign’s television buy. The result of this financial squabble: The quality and emotional power of Kerry’s television ads quickly deteriorated, which might have made the difference in an election that all came down to an 119,000-vote margin in Ohio.

Okay, political consultants in both parties are as avaricious as hedge fund managers, 24-year-olds with a hot smart phone app and plastic surgeons. So what?

The problem is that the more money political consultants rake off the top, the more money candidates have to raise to run a competitive campaign. If a candidate only buys $850,000 worth of TV time with $1 million in contributions, that missing $150,000 has to come from a new round of fund-raising.

In a political world defined by Citizens United and Super PACs gone wild, you might be tempted to scoff at any attempt to reduce the fees paid to ad-makers and campaign strategists. But the most corrupt money in politics—the cash that comes with the lobbyist backslaps and implicit quid pro quos—is most likely to be the last five or ten percent that a candidate raises rather than the initial round of donations. If trimming the profit margins of campaign consultants might mean one less law firm breakfast and one less high-roller dinner, than this would be a decided if marginal improvement.

The outlandish compensation packages for political consultants also raise the cost of campaigns in indirect ways. In general, the more money that a candidate spends, the more his campaign team prospers by getting its slices out of a larger pie. So, in the opinion of these self-interested consultants, there is no such thing as a TV commercial broadcast too early or a media budget too lavish. To pay for all this expert advice, a candidate may have to spend even more time dialing for dollars and listening to the policy laments of America’s 1 percent.

What remains fascinating to me after writing about the campaign industrial complex for nearly two decades is that political donors apparently are comfortable with being ripped off in this fashion. Even the most sophisticated Wall Street bundlers would never deign to ask a candidate what percentage of the media buy is going to the consultants. It is simply not the done thing.

Nearly a century ago, wealthy philanthropists organized the National Information Bureau to distinguish between upright and corrupt charities. That wise-giving tradition lives on. Earlier this year, the Tampa Bay Times and the Center for Investigative Reporting launched a joint project to identify the 50 national charities that squander the most money on fund-raising and administrative costs.

With the short-term prospects for campaign reform on a national level about as bleak as the chances for the adoption of Esperanto as a universal language, maybe it is time to look to non-legislative ways to reduce special-interest money in politics. That, in essence, is the rationale for a donor rights movement to make sure that political contributions are spent on campaigning rather than buckraking by the ad-makers and strategists. At minimum, there should be someone urging candidates in both parties to shun consultants who come armed with a fleet of Bentleys and their own private jets.

You can reach Walter Shapiro by email:

And follow him on Twitter @waltershapiroPD.

 The views expressed are the author’s own and not necessarily those of the Brennan Center for Justice.

(Photo: Thinkstock)