By Alexander Bolton - 02/19/13 10:00 AM EST
Government watchdog groups once allied with President Obama warn he could become embroiled in a second-term scandal because of ties to a group set up to collect unlimited donations.
The creation of this group by Obama’s inner political circle combined with the president’s silence on campaign finance reform during Tuesday’s State of the Union address has alarmed government watchdog groups such as Common Cause and Public Citizen.
"We’re concerned by his Organizing for Action group that’s being set up because it creates a huge potential for government corruption where basically corporations and other wealthy donors can fund this new group that can be a partner organization that is basically working on Obama’s agenda,” said Karen Hobert Flynn, senior vice president for policy and program at Common Cause.
“It invites through a back door special interest influence and access and it’s a step in the wrong direction," she added.
One Democratic senator, Ron Wyden of Oregon, says at the very least the Obama administration should not allow political advocacy groups such as OFA to benefit from a tax exemption intended for social welfare organizations.
Wyden pressed Jack Lew, Obama’s nominee to head the Treasury Department, on the subject during a hearing Wednesday.
“They’re really ripping off the tax code because they’re not social welfare organizations. They’re doing politics,” Wyden told Lew.
White House spokesman Eric Schultz defended Obama’s efforts to limit the influence of special interests within his administration.
“The president has outlined new steps Congress should take to eliminate the corrosive influence of money in politics like holding Congress to the same conflict-of-interest standards as the executive branch, and prohibiting lobbyists from bundling and bundlers from lobbying,” said Schultz.
“But we have not waited for Congress to act,” he added. “On his first day in office, the President issued an executive order designed to reign in the influence of lobbyists and shut down the ‘revolving door’ that carries special interest influence in and out of government.”
Schultz noted the administration backs the closure of loopholes in government ethics rules and increased disclosure of corporate efforts to gather political intelligence.
Organizing for Action did not respond to a request for comment.
Liberal-leaning good-government groups once considered Obama an important ally. In the past, he touted an array of campaign finance regulations.
Over the summer, he called for a constitutional amendment to overturn Citizens United v. FEC, the controversial Supreme Court ruling that allowed corporations, unions and issue advocacy groups to spend unlimited funds on independent expenditures for or against candidates.
In 2011, he endorsed public financing for presidential candidates when House Republicans tried to end it.
In 2010, he urged Congress to pass legislation requiring outside advocacy groups to disclose their donors.
Obama won plaudits from good-government groups by setting up limits on lobbyist contacts with his administration.
He banned lobbyists from giving gifts to federal employees, directed agencies to stop appointing lobbyists to federal boards and commissions, and barred lobbyists from working in his administration on issues they lobbied for within the previous two years.
But the relationship with left-leaning watchdog groups has soured in recent months.
They were sorely disappointed by the president’s failure to mention campaign finance reform in the State of the Union address. Some thought it would be the perfect opportunity for the president to revive the reform debate after record-breaking political spending in the 2012 election.
Obama zeroed in on special-interest influence in his 2010 address when he criticized the Supreme Court’s decision in Citizens United, handed down weeks before, for opening the “floodgates for special interests.”
“It looks like he’s embracing Citizens United and the role of corporate money in politics,” said Craig Holman, the government affairs lobbyist at Public Citizen.
Organizing for Action will disclose its donors, but Holman said that would do little to dispel public suspicions that corporations who donate generously could receive special access.
“I think it’s definitely going to embroil the Obama administration in a scandal. Either it’s going to be a real scandal or a perceived scandal,” Holman said.
Holman warned that if a corporate special interest makes a publicly reported contribution to OFA and the president later makes a decision affecting that donor, it will cause problems for the president.
"We think it’s an unprecedented and dangerous vehicle for raising money from corporations and other special interests who may be seeking government decisions,” Fred Wertheimer, the president of Democracy 21, said about OFA.
“It appears to be very closely tied to the president. It shouldn’t exist. It’s going to cause problems for the president. The sooner he shuts it down, the better," he added.
Good government groups were also disappointed by Obama’s decision to allow the presidential inaugural committee to accept unlimited corporate donations. The Democratic National Convention in Charlotte accepted at least $5 million in corporate cash even though Democratic officials had said they would only raise money from individuals.
Wyden, who is working with Sen. Lisa Murkowski (R-Alaska) on bipartisan legislation to require outside groups to reveal their donors, said he hoped Obama would call for campaign finance reform in his address. Even without Obama’s explicit backing, Wyden’s hopeful the issue can gain political traction this year.
“This has to find its way back into a more visible part of the debate,” said Wyden. “Anytime he has the megaphone it helps.”
Sen. John McCain (R-Ariz.), who led an effort to pass comprehensive campaign finance reform in 2002, criticized Obama for backing away from the issue.
“I hope he would instruct some of his friends who are setting up an ongoing PAC to follow their agenda, which is obviously the same as all these other super-PACs,” said McCain. “You can judge for yourself whether there is a taint of hypocrisy in that.”
OFA is classified under section 501(c)4 of the tax code. Conservative groups with the same classification include Americans for Prosperity.
Obama opted out of the presidential public financing program in 2008 and vastly outspent McCain, his opponent.