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Chamber and Democrats battle over the midterms and election spending

By Dan Eggen
Washington Post Staff Writer
Friday, October 8, 2010; 2:18 PM

The long-simmering feud between Democrats and the U.S. Chamber of Commerce has erupted into a full-scale war.

The chamber, one of Washington's most influential lobbying groups, emerged from the background of the midterm elections this week, spending millions of dollars on ads to help Republicans and fending off Democratic allegations that the effort may include money collected from foreign firms.

(WATCH: A collection of the Chamber's ad attacks)

The chamber told the Federal Election Commission that it spent $10.5 million in about 30 House and Senate races, an effort that primarily helps Republicans. The disclosure marks the opening of the floodgates for the business group, which has spent $25 million since the primaries and has vowed to spend up to three times that much by Election Day.

Democrats have responded by attacking the chamber as part of a shadowy coalition of conservative groups that is spending tens of millions on political ads without having to reveal its donors. The party and President Obama have also seized on allegations from a liberal think tank that money from overseas chamber affiliates may be polluting the U.S. election process - a charge the business group adamantly denies.

"Just this week, we learned that one of the largest groups paying for these ads regularly takes in money from foreign corporations," Obama said at a Thursday rally for Maryland Gov. Martin O'Malley. "So groups that receive foreign money are spending huge sums to influence American elections, and they won't tell you where the money for their ads comes from."

R. Bruce Josten, the chamber's executive vice president for government affairs, said in an interview Friday that the group "has never and will never" use dues collected from overseas business councils, known as "AmChams," for U.S. political activities. He said the chamber is the victim of "a smear campaign" orchestrated with the involvement of the White House.

"This is an outlandish act of desperation from people who are not able to run on their record," Josten said. "They have stooped to smear campaigns."

The developments mark a dramatic escalation of tensions between the business lobby and Democratic leaders, who have clashed with the chamber over health-care reform, Wall Street regulations and other policies opposed by many corporate leaders. The White House won several of the biggest policy votes but now faces determined midterm opposition from the chamber and other business groups, who are spending big in hopes of helping Republicans win control of Congress.

The chamber's ad buy this week is the group's largest so far and dwarfs the spending of any group other than the political parties. The spots include about two dozen House races and many key Senate contests.

Examples include $1 million against Democratic Senate candidate Paul Hodes in New Hampshire and $1 million against Florida Gov. Charlie Crist, a disaffected Republican running as an independent against Republican Marco Rubio and Democrat Kendrick Meek. The group is also targeting endangered Sen. Russell Feingold (D) in Wisconsin and Democratic candidate Richard Blumenthal in Connecticut, who is running in a tight Senate race with GOP candidate Linda McMahon, a former wrestling executive who is tapping her personal fortune for the campaign.

Josten noted that the chamber went on the air Thursday with ads that were supportive of 10 Democrats who had voted against Obama's health-care reform legislation. But Josten said overall party unity on such issues made it difficult for the chamber to endorse many Democrats in this cycle.

"This is an unusually heavy Republican cycle for us," he said.

Liberal groups and Democratic lawmakers have increasingly focused criticism on the chamber in recent weeks for its aggressive midterm elections effort, arguing that it's impossible to tell who is behind the campaign because of tax laws allowing nonprofits to keep their funding confidential. Obama and Democratic leaders failed in two attempts to pass legislation that would have required greater disclosure of political spending by corporations.

ThinkProgress, an arm of the liberal Center for American Progress think tank, issued a report this week raising questions about dues from AmChams and whether they allowed foreign corporations to effectively fund chamber election ads. The chamber refuted the report, saying that AmCham dues are not used for U.S. political efforts and noting long-standing prohibitions against the use of foreign money in U.S. elections.

Liberal groups and some Democrats have also attacked the chamber for accepting a $1 million contribution from News Corp., the owner of Fox News.

The developments come amid a growing effort by Democrats and liberal groups to focus on the rise in importance of secret donors in the midterm elections. A Washington Post analysis found that spending by outside groups such as American Crossroads and Americans for Job Security had increased fivefold since 2006, and that most of it was funded by donors who do not have to be disclosed by the groups involved.

Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, recently asked the Internal Revenue Service to investigate whether nonprofit groups, including advocacy organizations, unions and trade groups such as the chamber, were violating tax laws by engaging primarily in political activities. A group of labor unions also filed a separate complaint with the IRS alleging tax violations by the chamber.

Rep. Chris Van Hollen (D-Md.), chairman of the Democratic Congressional Campaign Committee, said that even if the chamber cordons off money from overseas donors, the funding gives the group the financial flexibility to spend more on political ads.

"The fact remains that if you can pay for some of your staff with money from Bahrain, it means you have more to spend on political attack ads," Van Hollen said.

Josten dismissed such attacks as political stunts and said total dues from AmChams amount to only about $100,000 annually.

"This is an orchestrated and deliberate attempt to push a non-story to make it appear to be a story," he said. "They want to put people that we support on defense and use the red meat of foreign money to do it."

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