Scandals usually lead to reform. Maybe not this time.

May 24, 2013

Put aside the politics, and the question of who-knew-what-when. There are two policy problems highlighted by the controversies at the Internal Revenue Service and the Department of Justice. The first is the growth of 501(c)(4) groups into vehicles for anonymous and unlimited political spending. The second is the Obama administration’s overzealous prosecution of leaks.

Unfortunately, for those who would like to see these policy problems resolved, the wrong party is angry about them and the wrong party is complacent.

Republicans support unlimited, anonymous political spending by 501(c)(4) groups. Likewise, they support vigorous prosecution of national security leaks. But trumping such policy beliefs, for the moment, is an overriding political imperative: Republicans want a scandal to take down the White House, or at least to damage Obama’s standing.

Democrats, by contrast, loathe the growth of partisan 501(c)(4) groups. They’re also more skeptical of claims that national security concerns override the news media’s right to report. But rather than use the IRS scandal as an opportunity to reform the rules for political groups, or to propose legislation to protect journalists from the Justice Department’s overreach, there’s a real chance Democrats might rally around the White House and try to move past these scandals as quickly as possible.

As a result, we have a party eager to exploit scandal and one that has plausible (if dormant) solutions to the underlying problems. They’re just not the same party.

(Photo by Andrew Harrer/Bloomberg)
(Andrew Harrer/Bloomberg)

Bad Decisions

Take 501(c)(4)s. There’s little evidence that the IRS agents in Cincinnati saw themselves as foot soldiers in a political war. Rather, it looks like the war — in the form of groups seeking tax-exempt status for their political activities under Section 501(c)(4) of the tax code — came to their sleepy backwater. Overwhelmed, the staff began making bad decisions and applying ill-conceived filters that politicized the process.

The Supreme Court’s Citizens United decision enabled 501(c)(4) groups to be commandeered for unlimited political spending. Republican consultant Karl Rove, unions and other big players tested IRS rules restricting how politically engaged 501(c)(4) groups could be. They found they were able to use the groups almost exclusively for political purposes without inviting IRS scrutiny. Soon, the IRS’s Determinations Unit in Cincinnati, which processes 501(c)(4) applications, was inundated.

The emergence of so many 501(c)(4)s devoted to politics led to news reports suggesting — correctly — that the IRS wasn’t enforcing the rules restricting the groups’ political engagement. According to the IRS inspector general’s report, the news stories prompted agents in the Determinations Unit to begin filtering 501(c)(4) applications for political agendas. Those filters tilted — unfairly but not necessarily malevolently — against conservative groups using politically tinged words such as “tea party.”

For that, heads should roll at the Cincinnati office. The consequences for politicizing the agency’s reviews should be severe, even if the politicization turns out to have been inadvertent. Incompetence that leads to a national scandal and a severe drop of trust in your institution should be a firing offense.

The IRS is no longer targeting groups, but the underlying problem remains; as Sen. Max Baucus of Montana put it, “a Mack truck is being driven through the 501(c)(4) loophole.” Political groups are still streaming into a tax-exempt designation that was never intended for them, leaving the IRS to make subjective judgments about which groups are too political to warrant that status and which are not.


Sheldon Whitehouse (Charles Dharapak/AP)

Disclose Act

Although the dangers are obvious, the odds of reform are slim. Republicans like the status quo. In 2012, Democratic Sen. Sheldon Whitehouse of Rhode Island sponsored the Disclose Act, which would have required such groups to disclose donors who had contributed more than $10,000 and to list their top five donors in their campaign ads. By eliminating anonymity for donors, the legislation would have made these groups less attractive vehicles for partisan politics. The Disclose Act was killed by Republican filibuster.

Republicans want to prosecute the IRS scandal, but they’ve offered no remedies for the murky campaign finance rules at the root of it. Why? Because they’re not actually upset about the underlying problem; those rules helped Republicans raise hundreds of millions in 2012.

A similar sticking point emerges in the Justice Department’s aggressive pursuit of national security leaks. Before the outcry over the Obama administration’s leak investigations, Republicans complained that the administration wasn’t pursuing national security leaks vigorously enough. Last June, Republican Sens. John McCain, Saxby Chambliss, John Cornyn and Roger Wicker demanded the appointment of a special prosecutor to investigate leaks because, they said, Attorney General Eric Holder wasn’t aggressive enough. “Any other administration, in my memory, Democrat or Republican, would have been absolutely apoplectic looking for the culprits, trying to find out who were the people that actually committed these criminal leaks,” Wicker said.

Republicans have been consistent on this point. During the George W. Bush administration, congressional Democrats (and a handful of Republicans) proposed shield laws to protect journalists from leak investigations. The Bush administration fought back. Attorney General Michael Mukasey and Director of National Intelligence Michael McConnell wrote that such proposals were “both unwise and unnecessary.” The Bush Justice Department even produced a Web site (now defunct) to campaign against a shield. (A shield law died in the Senate, another victim of a Republican-led filibuster.)

Shield Law

The Obama White House has supported a limited shield law that includes a large national security exemption. Such a measure probably would have done little in this case. Perhaps the law could be strengthened if Republicans wanted to make an issue of it, but there’s little chance of that. And the partisan incentives here are unlikely to make congressional Democrats double down. Already, a Pew Research Center poll found that self-identified Democrats who are following the issue think the Obama administration acted appropriately. It is difficult to believe they would hold that position if a Republican was president.

None of this detracts from the gravity of the charge that the Obama administration is overzealous in pursuing leaks. It simply makes it less likely that the party seeking to profit politically from that situation will also offer a corrective policy.

Republicans are right to be outraged by scandals, but it would help if they were also outraged by the policy failures that produced the scandals. Democrats, meanwhile, have previously proposed policies that might have curtailed the IRS fiasco and the Justice Department’s overreach. But they will be tempted to bury such proposals in their haste to get beyond a patch of bad news. In Washington, scandals are often the strongest impetus for reform. Not this time.

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