Commentary

Fifty Shades Of Dark Money

This week, The New York Timespublished an analysis estimating roughly $1 billion in so-called dark money was added to U.S. political ad spending this year. 

The Times report noted the estimate is probably on the low-end of what was actually donated and goes on to say “both parties are looking for new ways to conceal who is contributing to this candidate or that one.” 

The story also asserts “still more money goes to secretly funded ‘policy ads’ that look, as far as you and I can tell, like campaign commercials.”

One of the paper’s sources said, “It’s almost like the people inside the Beltway live in a drug den, and this is just the newest drug that’s circulating.” They go on to call it “poison in the blood of the American political system.”

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While dark money is a big problem, statements like these are meant to enflame.

The Times did a great job on its reporting, but this type of editorializing gives readers the impression that our entire political system is flawed and that you can’t trust elections anymore. The truth is more nuanced.

What exactly is dark money?

Dark money is any political funding where the donors’ identity is not disclosed. It’s used the same way as any regular campaign funding, including things like email campaigns, calling potential voters by phone, door knocking, advertising creation, advertising time, data for data-driven advertising, polling research and to pay campaign staff.

The Times identified three main paths for dark money to enter our political system:

  • Money donated to non-profits that don’t have to disclose their contributors if they only run commercials about issues facing the electorate. The problem is that they can promote or disparage a candidate at the same time.

  • Super PACs are required to disclose their donors, but not their donors’ donors. Meaning, they don’t have to disclose who gave the money to the organization donating directly to the super PAC.

  • If super PACs start up within three weeks of an election, they don’t have to report the donors until after it’s over.

Open Secrets, a nonpartisan nonprofit organization, specializing in campaign finance tracking, explains it differently.

In an infographic called “Dark Money Alchemy” the group says nonprofits are required to spend more than half of their budget on non-political activity and that they avoid this rule by passing money back-and-forth to create the illusion of larger budgets.

Through this process large sums of money that should go to non-political spending goes toward swaying elections.

One of the scarier scenarios related to dark money is when it comes from another country that’s trying to influence U.S. elections, like what happened with Russia in the 2016 presidential election.

The good news was that it was found to be a small amount of paid advertising relative to total election spending. Its effect was likely nil.

It’s important to remember that publicly disclosed sources of funding can also be used to upset or promote any campaign the same way dark money can.

Either has the potential to overwhelm elections in smaller markets to great effect for or against a candidate.

The real issue with dark money is the same issue many people have with unlimited funding from publicly disclosed super PACs – they give wealthy donors disproportionate power to influence the outcome of elections. It damages democracy.

At the end of the day, the average voter doesn’t know much, if anything, about who donates how much to what campaign. They don’t know who is paying for the ads they see and whether it’s from a known donor or an anonymous dark money source.

It’s also important to remember that regardless of the source and amount of campaign advertising funding, political ads are not always whas causes a candidate to win – or in the case of negative advertising – lose an election.

There are some very smart people who have analyzed elections going back to the 1800s and their conclusion is that ad spending is low on the list of most important variables causing one candidate to win vs. another.

Most notably, I’m talking about Professor Allan Lichtman of American University who came up with the “13 Keys to the White House.”

His keys don’t even include donations or advertising as variables. According to Lichtman, the performance of the incumbent party in office is the most important variable influencing who will be elected or reelected.

If advertising funded by dark money isn’t that important to election outcomes, how is it “poisoning” our political system?

This is where I part with Lichtman’s thesis, because I find it difficult to believe that advertising has little or no effect.

Companies like Comcast, Proctor & Gamble and Unilever aren’t spending billions of dollars on advertising for nothing. They know, without a doubt, that when they reduce their ad spending profits decrease and when they increase their spending they go up.

Back when I worked for TiVo Research, I had an opportunity to see firsthand some of the best new TV advertising research using recently available TV set-top box data directly matched to supermarket (CPG) loyalty card information. There was no modeling, all the data were directly matched.

TiVo could report on which homes were exposed to TV ads for products, and which made purchases of the same products advertised. These studies additionally contained tagged digital advertising also matched to CPG data.  The impact of advertising was obvious. It works.

I understand Lichtman’s findings and why he came to his conclusion on advertising, but I think he underestimates its influence.

The problem is there isn’t the same kind of high-quality research on political outcomes that we have for commercial campaigns.

Voter information is anonymous and isn’t available to match to advertising. As a result, it’s difficult to prove causation. There may be some good research out there, but if there is I haven’t seen it.

When I was at Cambridge Analytica, we did a ton of work on Trump’s 2016 presidential election campaign and his victory was attributed to the company’s work. Whether provable or not, that’s how it is when you work in politics.

The other thing about political campaigns that people forget is that these are competitive undertakings. Dark money isn’t a Republican or a Democratic tool. It’s a source of funding available to either side of the aisle.

This isn’t to downplay the influence of dark money in political campaigns. It’s unfair and shouldn’t be allowed. However, it’s also important to keep it in context.

Unlimited publicly disclosed campaign donations can be just as damaging to a candidate or campaign as dark money donations. Most voters don’t know the difference.

The fact that both sides – Republican and Democrat – are using dark money to compete against each other levels the playing field to some extent.

But dark money threatens democracy and the rules need to be changed.

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