President Bill Clinton even tried to create one 20 years ago. In 1993, seeking to marshal grassroots support for his health-care reform effort, his team’s first impulse was to set up a standalone entity that could anonymously raise and spend large sums of money on polling, petition drives, phone banks and TV commercials.
Obama’s got big plans for OFA, and the group’s leaders are heavy on ambition for what they’ll be able to do to make the president’s agenda on issues like gun control and immigration a reality. But while campaign finance laws have changed over the years, some of the same problems — in both the law and public perception — that hounded previous White House-connected outside influence efforts could lay ahead for Obama. And, so far, neither the White House nor OFA is saying much about how they plan to avoid them.
By June 1993, “The National Health Care Campaign” to support Clinton’s health plan was up and running with 27 staffers in a downtown Washington office, funded by $100,000 in seed money from the Democratic National Committee, according to a Washington Post article at the time. The group’s goal: raise up to $37 million in large chunks from corporations, unions and wealthy individuals.
But the group came under attack over ethical questions about how an entity so closely connected to the White House would seek large sums of money from business interests that could be dramatically affected by health reform.
As with Obama’s new OFA, the Clinton effort immediately raised questions about what control White House officials would have over the new group’s activities and fundraising. Lawyers in the Clinton White House advised that officials could “pass paper” to the new organization, but could not coordinate with them, the Post reported.
However, the precautions didn’t squelch the critics.
“This is the smelliest ethical thing they’ve done so far,” Glen Bolger, a Republican pollster told Newhouse News at the time. “If you are a pharmaceutical company and you get a call to contribute, it’s kind of hard to say no.”
Critics also disputed the Clinton-era group’s claim to be independent of the DNC.
“We started out as a separate entity and that, itself, became an issue,” recalled Heather Booth, a top organizer for the National Health Care Campaign. “Those who didn’t want health care reform came after us. … It was such an issue that it was decided that it was easier to move it back into the DNC than to waste energy defending it.”
On the same day as the Post’s front-page article, the DNC announced it was reversing course, pulling the plug on the freestanding 501c4 lobbying group, and bringing its work back in house. The effort continued on at the DNC but was ultimately swamped by the insurance industry’s “Harry and Louise” ad campaign, which eventually spent $60 million to defeat Clinton’s plan.
“We didn’t have the money we really needed to do that sort of thing,” Clinton adviser Harold Ickes told POLITICO last week. “I’m not sure [we] moved one vote.”
“We tried to figure out different ways, figure out some external apparatus or support for health reform,” recalled Chris Jennings, one of Clinton’s top health care policy advisers. “It was very tough, as I recall. I don’t know if it was political or policy or legal or some combination.”
Now, Obama’s political team has settled on essentially the same structure the Clinton camp ultimately rejected: a 501c4 group. In many ways, the new “Organizing for Action” effort is linked even more closely to the president, who sent an e-mail announcing and endorsing the new group to the 20-million-plus addresses on the highly-coveted e-mail list developed by his campaign and the DNC.
Former Obama campaign manager Jim Messina, who’s serving as OFA’s national chairman, told Democratic donors on inauguration weekend that Obama will help direct the new group. “The president will be intimately involved,” Messina said.
The new OFA is already trying to wield its power. Messina emailed the massive list last week to start building support for the president’s immigration push, and they’ve sent out emails promoting gun control, too.
A 501c4 has a few distinct advantages over political parties and traditional political action committees: it can take corporate money, there’s no limit to how much it can raise from an individual or corporation, and donations do not have to be publicly disclosed.
Those putting together the new Obama-backed organization insist that they will disclose the identities of donors. However, the law doesn’t require such disclosures for a 501c4 group, so there would be no legal consequences for any omission. And it’s unclear whether the voluntary donor disclosure will provide the same detail as legally mandated reports and whether that detail will be as timely.
Because the new OFA is planning to be an “issue advocacy” organization, not a political one, the rules for government employees’ involvement in the group’s management, fundraising and activities are murky. The law regulating federal employees’ role in political fundraising, the Hatch Act, does not apply. And federal election law governing coordination among candidates, parties and outside groups doesn’t apply as long as OFA doesn’t get involved in elections (and possibly because Obama isn’t running for anything any more).
Some rules do apply to administration officials’ involvement with the new group: ethics regulations that limit the use of public office for private gain, including fundraising for non-profit groups, like charities and the new OFA. (The president and vice president aren’t covered by the rules, but all other White House employees are.)
“Government ethics regulations make it very clear: In an official capacity, you may not endorse any private organization,” said Richard Painter, an ethics counsel in President George W. Bush’s White House. “You can give an official speech at a fundraiser for the Boy Scouts, but you can’t endorse the Boy Scouts or ask for money in your official capacity. … That goes down to the point of people trying to auction off a lunch in the White House mess for their preschool. You can’t auction off access to government property.”
“Any fundraising at all by any government officials would be an unacceptable conflict of interest. … You’re getting really close to soliciting a bribe,” Painter said.
The Obama White House directed questions on how it would handle these questions to OFA, which did not respond to several requests for comment for this story.
Already, campaign finance reform advocates are apoplectic about the new OFA.
“This is unprecedented as far as I know,” said Democracy 21’s Fred Wertheimer, a longtime advocate of tighter campaign finance laws. “It’s directly tied to the president and they have said the president could raise money for it. … It’s a vehicle for people looking to buy influence to provide direct financial benefits to support the president’s interests.”
“It has all the earmarks of an institutionalized disaster,” Wertheimer said. “They ought to shut this down and they ought to shut it down quickly because, regardless of what their intentions were or are, this is nothing but trouble and will be extremely damaging to the administration and to the president over time.”
“The notion that Obama would be involved with OFA’s fundraising is very troubling and amounts largely to a retreat from the position President Obama has taken throughout the entirety of his public life. … to reduce the influence of money in politics,” said Paul Ryan of the Campaign Legal Center.
“Unless the group discloses in the same way disclosure is required of super PACs for purposes of federal election-related activity, it would not only be hypocritical of the president, it would be damaging,” said Rick Hasen, a professor of election law at the University of California-Irvine.
Hasen said the Obama effort isn’t substantively different from groups like former George W. Bush adviser Karl Rove’s Crossroads GPS super PAC, but that Obama’s past calls for reform make the new organization an awkward fit. “What’s different here is that the president railed against this, while Republicans, if not celebrating it, were quietly enjoying the benefits,” Hasen said.
When Reagan came into office in 1981, his aides also considered setting up a 501c4 group to promote his agenda but abandoned the idea.
Ed Rollins, Reagan’s political director, said they decided instead to reinvigorate a political action committee subject to federal donation limits, Citizens for the Republic.
“It was pretty effective,” Rollins said. “We made people know Reagan’s supporters were still out there.”
In 2001, political consultants close to President George W. Bush’s White House created Progress for America, a 501c4 group that supported Bush’s policy agenda on issues like tax cuts and energy legislation. The group aimed to raise $40-60 million. It continued operating in Bush’s second term, backing his drive for Social Security privatization, as well as his Supreme Court nominations. PFA shut down in 2007 after its sister 527 admitted illegally spending funds on election-related advertising in 2004.
In 2009, aides to Obama didn’t set up their own lobbying group but they worked closely with outsiders to boost support for health care reform. Messina, then a deputy White House chief of staff, was deeply involved in legislative tradeoffs with the pharmaceutical industry at the same time the drug companies were being encouraged to donate millions to groups advertising in favor of health care legislation.
There seems little doubt that Obama critics and ethics watchdogs will hound the new OFA, complaining about any activity open to legal challenge. The legal history of similar efforts doesn’t offer a clear message.
In 1997, the IRS denied 501c4 status to the National Policy Forum — an organization closely connected to the Republican National Committee.
However, back in 1986, the IRS awarded such status to the Democratic Leadership Council, even though its Democratic Party ties were evident. In 2002, the IRS tried to strip the DLC’s tax exemption, but a judge ultimately ruled that the agency couldn’t do so retroactively. (The DLC closed its doors in 2011.)
And in the 2012 election cycle, a bevy of super PACs arose to back various candidates in the wake of Citizens United and other court rulings that appeared to clear the way for groups to raise and spend unlimited sums on politics as long as they were not controlled by candidates or their campaigns. Most, including the pro-Obama super PAC Priorities USA, had a 501c4 arm to raise money anonymously and a 527 arm with more traceable support.
The proliferation of super PACs may have produced a kind of anything-goes atmosphere that makes the OFA-style arrangement more politically palatable, despite the ethical risks it carries.
One option the Obama team had after their victory in November was to leave the grassroots organizing effort at the DNC. However, Obama advisers have sometimes chafed at giving up control to Democratic party leaders.
But the biggest downside to keeping OFA at the DNC would have been money. Under the so-called McCain-Feingold law, national party committees can’t take corporate or union cash and individuals can’t give more than $32,400. And money used for organizing on gun control and immigration would come at the expense of the DNC’s more traditional efforts for the 2014 midterms.
Ickes, who was involved in sorting out the questions under Clinton and said he applauds OFA’s new effort, added that raising so-called hard money at this point to support organizing and issue advertising campaign on the scale OFA foresees would be impossible.
“You can not do it. You cannot finance it,” he said.
However, critics note that Obama is the most successful small-donation fundraiser in U.S. history and could have stuck with that model.
Jennings said he supports the new Obama organizing drive, which he considers far more sophisticated than anything Clinton’s backers attempted. However, the former health care adviser cautioned that any effort dependent on deep-pocketed donors eventually faces pressure to trim its sails to accommodate its financial backers.
“The challenge is getting outside players to play,” Jennings said. “If they have any interest in what you’re doing, they say, ’What about the policy I care about? What about the message I care about?’ They don’t want to be taken for granted.”
Byron Tau contributed to this report.