Big money groups and donors have long played a role in our elections, but court decisions have opened the floodgates to more unlimited & anonymous contributions through new funding vehicles. How much is that changing our politics? Stan Oklobdzija finds that networks of dark money groups like those funded by the Koch brothers are helping move our political parties to the extremes in primary elections. But Anne Baker finds traditional Political Action Committees are responding to the flow of new money and holding up surprisingly well because candidates still need hard money to compete.

The Niskanen Center’s Political Research Digest features up-and-coming researchers delivering fresh insights on the big trends driving American politics today. Get beyond punditry to data-driven understanding of today’s Washington with host and political scientist Matt Grossmann. Each 20-minute episode covers two new cutting-edge studies and interviews two researchers.

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Grossmann: This week on Political Research Digest: the impact of campaign finance after Citizens United. For the Niskanen Center, I’m Matt Grossmann.

Big money groups and donors have long played a role in our elections. But recent court decisions opened the floodgates to more unlimited and anonymous contributions through new funding vehicles. How much is that changing our politics?

In a a new paper, “Dark Parties: Citizens United, Independent Expenditure Networks, and the Evolution of Political Parties,” Stan Oklobdzija of the University of California San Diego, finds the networks of dark money groups, like those funded by the Koch brothers, are helping move the parties to the extremes in primary elections.

I talked to him about these networks and their impact. But how are traditional PACs responding to the flow of new money? In a new article on interest groups and advocacy, “Are Federal PACs Obsolete?” Anne Baker of Santa Clara University finds they’re holding up surprisingly well. I also talk to her about why candidates still need traditional PAC money and how their money can improve non-incumbent standings in their uphill battles.

Political scientists have been skeptical of the media narrative that well financed outside donors are taking over our politics and contributing to polarization. But Oklobdzija says there is evidence that dark money is changing our parties.

Oklobdzija: The rise of dark money in American elections since 2010 has created sort of an Australian ballot for political money. And what I’m arguing is this anonymity has enabled new pathways for ideological money to flow into American elections.

Grossmann: What’s changed is the plethora of choices donors have, including anonymity.

Oklobdzija: Post Citizens United, a politically minded person has a plethora of options in deciding where they best want to put their donation, right? Before there were fewer. You could donate to a party or a PAC or directly to a candidate, broadly speaking. But now the shopping experience is sort of boutique, right? Meaning there exists an organization set up to promote almost every conceivable ideological platform or policy goal.

But more importantly, there now exists this option to give anonymously. And it gives a donor who might be reticent about having their name attached to an ideological interest group kind of free reign to vote their preference with their money.

Grossmann: Oklobdzija uses network analysis to show the ties among those often hidden groups based on their shared organizational donors. He finds a new party-like funding system.

Oklobdzija: In this paper, I’m showing that dark money organizations are best studied, not as single tents, but as constituent pieces of larger networks. When linked together via financial contributions to one another, a bit of data that has to be disclosed to the public, unlike the names of those who gave money to these groups, I show that many of the most active dark money organizations don’t function autonomously, but are linked by common nonprofits who finance many politically active nonprofits. And those groups form the types of dense networks structures that in the past scholars have associated with formal party organizations. And it gives rise to a phenomenon that I’m calling dark parties.

When you link these politically active nonprofits by financial ties and run completely agnostic community detection algorithms on them, you find subnetworks that correspond with known groups with affiliated dark money organizations and super PACs. For instance, using this technique, I can create a diagram of the Koch Bothers’ networks of dark money groups in the 2012 election that’s almost identical to one that an entire team of researchers from the Center for Responsive Politics and the Washington Post put together.

Grossmann: And these dark parties prefer extreme candidates.

Oklobdzija: When you look at the types of candidates that these dark parties are supporting in congressional races, you see they behave almost identically to ideological interest groups. They prefer more extreme candidates than formal party organizations in both general elections and in primaries. And when there’s an open seat in the party primary, dark parties will almost invariably support the more extreme candidate. So when you look at the rise of extremism in Congress, you can take the words of the defenders of the decision like Bradley Smith, the former FEC commissioner, at their word. The decision did make it easier for people to challenge the “establishment” and keepers of the old order. And this has important consequences for extremism in the American Congress.

Grossmann: Some groups that look moderate based on their donations are actually tied to broader, more extreme networks.

Oklobdzija: The Kochs have this group called the Libre Initiative, which is designed to appeal to Latino voters. And if you look at the kinds of candidates that groups supports, you’ll find a more moderate brand of Republican than if you look at the kinds of candidates that groups like Americans for Prosperity support. But what does this distinction matter if both of them are receiving the majority of their money from the same three central nonprofits, as everyone in the Koch network is?

In the absence of these inter-organizational cash transfers, you’re missing the entirety of the organism. One misses the deeper layers of coordination present in these groups, and thus any subsequent analysis is lacking this crucial bit of information.

Grossmann: The new evidence contributes to an ongoing debate about how interest groups are changing the parties.

Oklobdzija: There is kind of a debate going on amongst academics about where interest groups fit into the party network. So you have people like Ray La Raja and Brian Schaffner who theorize that ideologues have divergent goal from parties. That are basically just seeking to grow their coalition, parties just looking to expand their membership so they have a larger influence within a legislative body. But others, typified by folks coming from the UCLA school, tend to think of interest groups at the center of the party coalition, and the source of the policy stances that a party adopts.

So what my research is showing is it appears there is something to LaRaja and Schaffner’s theory about divergent preferences. In primaries, there is a clear distinction between the kind of candidates a party organization will throw their resources behind and who dark parties and ideological groups choose to back.

Grossmann: And it updates our sense of the impact of the Citizens United decision, which didn’t change all the rules, but seems to have had an impact.

Oklobdzija: It removed the ban on express advocacy from corporations, of which a nonprofit is. A nonprofit incorporates under section 501, or a political nonprofit I should say, incorporates under section 501 (C4) of the IRS code. So now these organizations can do the kinds of things that politicians do with their ads, and furthermore, what Citizens United did was clarify a sort of murky legal area that hung over independent expenditures. In this era following the passage of BICRA, the Bipartisan Campaign Reform Act, in 2002, and before Citizens United in 2010.

Grossmann: The dark money groups are more established on the right than the left.

Oklobdzija: In the cycles that I study, which are the 2012 election cycle and the 2014 election cycle, the difference isn’t exactly how these groups participate in Democratic versus GOP primaries, but the extent of their involvement. Dark parties and ideological groups prefer more ideologically extreme candidates in both primaries, but these groups are far more active in GOP races than in Dem races. On the GOP side, these networks are a lot more firmly established. A lot of these groups go back decades. And what you see on the Dem side is a lot of catch up being played.

Grossmann: Most famously, the Koch Brothers network is extensive and secretive, but other groups are copying their model.

Oklobdzija: The Koch Brothers network is one of the larges and the most active, but it’s by no means alone. And the Koch network is kind of the obvious example because they’re one of the pioneers of this strategy. The Koch’s have a history of advocacy going back 30 years. So similar networks form when you look at environmental organizations and groups on both sides of the abortion issue.

Definitely the Koch success in getting candidates elected into Congress since the Tea Party revolution of 2010 has definitely given groups seeking to emulate those sort of legislative victories a roadmap to do so. So I think definitely that example served as something instructional for other groups looking to follow in their footsteps.

Grossmann: And Oklobdzija’s preliminary look at 2016 suggests both mroderate Republicans and liberal Democrats are trying to catch up.

Oklobdzija: There is sort of a moderate dark party forming around groups like Americans for Tax Reform, headed by Grover Norquist, sort of a really establishment figure within Republican politics, and Karl Rove’s Crossroads GPS, which is the dark money offshoot of American Crossroads, the really influential and high spending super PAC devoted to protecting Republican incumbents.

But I think more interesting than this is the emergence of Tom Steyer’s NextGen initiative. So if you look at what’s probably the most powerful network of nonprofits on the left, that’s what you’re seeing. And what this group, or this network of groups, does in 2018 could have huge implications for the Democratic party going forward.

Grossmann: But Anne Baker says despite all the new forms of money in politics, the old PACs are still chugging along and are now more important than ever.

Baker: Congressional campaigns need hard dollars. Hard dollars, it’s a term for regulated money, and it’s the only money that candidates can legally accept. And they need it in order to compete effectively.

And they need it more so than in the past because so many new interest groups are trying to influence elections, spending money on advertising, clamoring for the public’s attention. And PACs have become important suppliers for that money, as parties have turned more frequently to other methods of supporting candidates than giving them money directly to the campaigns. I mean they still give money to the campaigns, but they just do it less often, and they tend to do it a lot later in the election cycle. And candidates need the money during the whole course of the election.

Grossmann: Political Action Committees have been around for decades.

Baker: PACs are sort of the original interest group financing vehicle in elections. PACs collect money in limited amounts that are federally regulated. All of that money is reported to the Federal Election Commission, and PACs, because the money is regulated, have the ability to then transfer that money and give that money directly to candidate campaigns.

Grossmann: Despite the hype surrounding new forms of campaign money, Baker finds that PACs still matter.

Baker: Especially in the media, right? They’ve been focusing on the rise of many of these new sort of big money interest groups, specifically super PACs and 501(c)(4) organizations that have been called dark money organizations. And the media are focusing on their ability to raise and spend unlimited amounts of money in federal elections. And that’s very important, but very little attention has been paid to the traditional old-school Political Action Committees or PACs because they’re regulated. They can only raise money in limited amounts from donors. And so as a consequence, they’re always going to be outspent by these sort of big money groups.

The idea that they would still have a major impact on elections is suspect from both a fundraising standpoint and a spending standpoint. But what my results show is that even though PAC money is limited in terms of amount, its impact is still significant. The money helps improve the competitive position of the house candidates who receive it. So it’s very important.

Grossmann: It’s not that super PACs and dark money nonprofits haven’t changed our politics, but that they have made traditional hard money more important for candidates to compete.

Baker: A lot has changed. Candidate campaigns, parties, and PACs are still heavily regulated. And in some instances, super PACs and most especially, though, various types of 501(c) organizations, particularly social welfare groups, are hardly regulated at all. So big money interest groups have been given just extraordinary advantages and influence over federal elections to a point that my research suggests makes it difficult for candidates and parties to get their messages out and to connect with voters and also creates certain fundraising challenges for them.

Grossmann: PACs can be more effective than organizations that try to spend on their own to support candidates.

Baker: You can give unlimited amounts of money to super PACs and 501(c) organizations, but there’s reason to believe that your usage of that money by those organizations is not as likely to help the campaign as money that the campaign can receive directly and spend on its own would. First the campaign doesn’t get a say in how the money gets spent. Because super PACs and 501(c) organizations have to spend the money independent of the campaign. None of that money is going directly to the candidate’s campaign. And there’s also good reason to believe that independent spending by these organizations is not as helpful to campaigns, even when it’s intended to be, because the money tends to get spent, particularly by dark money organizations, 501(c) groups, that air very early in the election cycle.

Grossmann: PACs are facing some pressures on fundraising, but the overall pie of campaign money is growing much bigger.

Baker: There are signs that they’re facing some new competition and pressure, but they’re rising to the occasion. They’re doing very well in terms of their fundraising. I don’t think it’s the case that everyone is fighting over this same pool of money, that all these organizations are just competing, because the pool of money has actually expanded, thanks to changes in the law and a number of Supreme Court cases and other federal court cases.

I think it’s significant that a few years ago the global contribution limit on donors were lifted. These limits made it so that donors could only contribute roughly $100,000, $110,000 to PACs, parties, and campaigns in just a given election cycle. And now wealthy donors are no longer constrained by such limits. That means that they can spend as much money as they want, up to the limit, for each organization. So they can support a host of PACs, all the candidates they want, up to the legal limit, the party organizations.

And for PACs, this means there’s more money out there, although they can only collect that money in legally limited increments from individuals. There is, in effect, I think for all groups in a sense, more money out there to be fundraised.

Grossmann: But they are losing media attention, and prominence now matters less to their success.

Baker: The media attention that an organization receives used to be much more significant than in our current era. I think that’s an indication that there are just a larger number of groups competing for attention in the electoral space. And PACs are having a harder time, in that sense, maintaining their own kind of branding and catching the media’s attention.

Grossmann: Baker looks at the influence of PACs on congressional candidates’ vote shares, finding they help non-incumbents more, and are increasing in their impact.

Baker: Non-incumbents rarely win. Only around two or three percent of them win their races in any given election cycle general election. So what I’m examining is just the marginal impact of PAC support. You know, how much does it sort of increase their overall competitiveness? They’re still likely to lose, but is this money actually helping them in any way?

And I do that by comparing the impact of PAC support that the candidate receives during a time when PACs were pretty much the only game in town. They were the only interest groups that were really involved in elections, giving money to candidates for the most part. And then I compare the impact of support during that time period with our current time period where PACs are facing lots of competition from other groups that are spending large amounts of money to influence these elections. In particular, I’m looking at House elections.

And I find that the hard money they give to House candidates is more than important than ever. That the marginal returns, the marginal impact on the candidates, vote margin is higher in our current era than it was before. So it suggests that this money is more impactful, and it’s probably more needed by the House candidates that are trying to compete effectively.

Grossmann: Of course, it’s hard to show how much money matters compared to other factors, but Baker tries to compare the most comparable cases.

Baker: Isolating the effect of money is very challenging in all research projects, and I think the best way to do it is to sort of try to not over inflate your estimates. And the best way to not over inflate or exaggerate what you’re doing … in this case, I chose to do a matching analysis. It doesn’t completely solve the problem that you mentioned, but what you do is you take comparable groups of candidates who are similar to one another, and you treat it almost like an experimental situation where you have a treatment, a control group, and you do that to kind of isolate the impact of the treatment, which in this case would be the money that candidates receive from PACs. For example, I would compare non-incumbents who are facing similar degrees of competitiveness in their race, who are receiving similar amounts of party money.

Grossmann: And Baker says PACs may be more influential, not just for their money, but also for their credibility and membership support that they bring to candidates.

Baker: I’ve done a study on interest group endorsements and I find the endorsements provide a lot of return for their buck, kind of bang for their buck. These groups with sort of longer, established reputations that are recognizable to voters. when they endorse candidates, when they provide communications to their members about various candidates that align with the organization’s interests, those activities have a great impact on not only the candidate’s fundraising, but arguably also the candidate’s overall competitiveness.

Grossmann: Stan Oklobdzija would like to see dark money groups follow the same transparent public practices.

Oklobdzija: I think for reformers disclosure and pushing disclosure is huge. There’s been a movement for a disclose act in Congress for several years now. But for various reasons, it hasn’t taken off. But being able to link the names of donors to these groups would be essential, I think, in removing the entire incentive that dark money offers.

Grossmann: And Baker agrees that transparency is important, but says interest group success means we need to empower the traditional political parties as well.

Baker: Their success to me would also be an indication that the party organizations are struggling. And thus, I think, one of the reform efforts I would support would be eliminating the contribution limits for parties.

I think that’s one of the only ways to reduce the increasing influence of sort of polarized interest groups and donors in elections without constraining anyone’s freedom of expression rights. But I also think transparency is important and super PACs and dark money groups should have to report the sources of their revenue.

Grossmann: Since reform is unlikely, Oklobdzija expects continued transformations of both campaigns and governing.

Oklobdzija: A little under half of all independent expenditures were made by dark money groups, so this avenue to place money into elections anonymously has tremendous implications for both what people can learn from political donations, how voters can help attune their preferences to a candidate or to an initiative based on who’s giving money to it. And also how we study the link between a campaign donation and a actor’s future behavior once in office.

Grossmann: But Baker doesn’t think either set of interest groups can or should ultimately replace the parties.

Baker: PACs and other interest groups, including dark money organizations, are sort of a poor replacement for party organizations. Although many of the interest groups are part of party networks, and although of course, the parties have set up their own super PACs, it’s just hard to imagine a single interest group coordinating the flow of resources, both financial and otherwise, to candidates in federal elections the way that the traditional party organizations do. I think that party organizations tend to also support more moderate candidates than interest groups, including PACs. And I think one possible reason why our politics is getting more polarized is that interest groups are dominating.

Grossmann: There’s a lot more to learn. Political Research Digest is available biweekly from the Niskanen Center and on iTunes. I’m you’re host Matt Grossmann. Thanks to Anne Baker and Stan Oklobdzija for joining me. Join us next time to find out how citizens match their policy views to candidates and interest groups.

Photo Credit: Gage Skidmore Under CC BY SA 2.0