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February 26, 2020

Political Spending from Foreign Entities Threatens American Democracy

Political Spending from Foreign Entities Threatens American Democracy

February 26, 2020
Published By American Promise

As the 2020 presidential campaign ramps up, there have been reports of continued foreign interference in the election. An FBI official said Russia is working to sow discord and division this election cycle. Americans across the political spectrum want to protect our elections, but our campaign finance laws and the inability of the Federal Election Commission to oversee election security are putting our democracy at risk.

Since the 2016 U.S. presidential campaign, numerous reports of election meddling by Russia and other foreign actors have surfaced. While some foreign entities have indeed launched recent massive campaigns aimed at influencing American politics, foreign actors have been influencing U.S. elections and policy in less-publicized ways for years. Foreign interference in U.S. elections poses a national security issue, undermining faith in the American democratic process, influencing policy and election outcomes in ways that may be counter to the interest of U.S. citizens, and threatening the nation’s global status.

Several Supreme Court decisions and lax campaign finance laws have made the U.S. vulnerable to foreign influence via unchecked political spending. Although political spending from foreign nationals is prohibited by federal law, foreign actors have several legal avenues for lobbying and financially influencing U.S. elections, including funneling money through a nonprofit, buying advertisements online and exploiting lobbying loopholes.

Corporate Spending

Since the 2010 Citizens United v. FEC Supreme Court ruling, corporations, special interests and dark money groups have been allowed to spend unlimited amounts of money influencing elections. While this is troubling on its own, the ruling also opened the door to political spending by foreign-based corporations and governments. If a foreign-owned corporation has American subsidiaries, it can spend vast sums of money on elections.

The American subsidiaries of foreign-owned corporations can form political action committees (PACs). According to the Center for Responsive Politics, foreign-connected PACs spent more than $23.5 million in the 2018 midterm elections, surpassing the $23.2 million they spent in the 2016 elections.

The top-spending foreign-connected PAC in 2018 was UBS Americas, a PAC created by the U.S. subsidiary of UBS Wealth Management, a Swiss-based investment bank and financial services company. UBS Americas spent more than $1.4 million on the midterm elections, with 46% going to Democratic candidates and 53% to Republicans. The next highest spending foreign-connected PAC was Toyota Motor North America, which spent nearly $900,000, giving 43% to Democrats and 57% to Republicans.

The political power afforded to American subsidiaries has been used to obscure illegal foreign political spending. In 2016, a Chinese-owned company illegally funnelled money from Chinese nationals into the Right to Rise PAC through its American subsidiary, American Pacific International Capital. The Federal Election Commission (FEC) discovered this illegal spending and issued its third-largest fine ever on the PAC.

Dark Money

Because of their legal designation as “social welfare” organizations, dark money groups are not required to publicly disclose the identities of their donors. While there are agencies tasked with policing spending in U.S. elections, specifically the FEC and the Internal Revenue System, these organizations have been stripped of crucial powers and rendered ineffective at truly safeguarding American democracy.

The lack of public disclosure and oversight means there is no way to know exactly who funds dark money groups.

In September, the Supreme Court let stand a District Court ruling requiring dark money groups to disclose their donors, giving many hope that transparency was on its way. Those hopes were quickly dashed when practically no dark money groups complied and no groups faced any penalties for failing to abide by the ruling.

Foreign Lobbying

The Center for Responsive Politics created a tool last year called Foreign Lobby Watch to track foreign lobbying. It shows that since January 1, 2017, foreign agents and lobbyists have spent more than $1.4 billion on U.S. lobbying efforts to influence policy and public opinion.

South Korean interests have led the lobbying efforts since 2017, spending more than $122 million. Japan comes in second, spending more than $111 million, and Israel is third, spending more than $89 million.

Special Counsel Robert Mueller’s investigation brought greater attention to foreign lobbying and led to bipartisan calls for reducing the influence of foreign lobbyists, including by tightening loopholes in the Foreign Agents Registration Act. The loopholes allow lobbyists to obscure their work for foreign entities.

The 28th Amendment

American Promise is leading the cross-partisan movement for a 28th Amendment to get big money out of politics. The amendment will lay the necessary groundwork for combating the influence of foreign-connected political spending.

Because the right of big money and dark money groups to spend unlimited amounts of money to influence our elections has been upheld by Supreme Court decisions, an amendment is needed to protect campaign finance legislation and American democracy from the overwhelming and unchecked influence of big money, including the influence of foreign agents.

As citizens of a sovereign nation, Americans deserve to know what foreign actors are attempting to influence our government and elected officials, and to equip ourselves with the tools to stop them from doing so. Our lawmakers should be serving their constituents and the American people, not foreign powers or foreign interests. The 28th Amendment will help secure the U.S. from outside influence.

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