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Why Did Democrats Cede So Much Ground on the IRS "Scandal"?

When news broke last month that the IRS had targeted for extra scrutiny conservative groups applying for 501(c)(4) tax-exempt status, politicians wasted no time in jumping on it. “These actions by the IRS are an outrageous abuse of power and a breach of the public’s trust,” said one. “The actions of the IRS are unacceptable and un-American,” said another. “There’s no excuse for ideological discrimination in our system,” said a third.

Republicans scoring easy political points? Nope. Those condemnations were all from Democrats (Max Baucus, Joe Manchin and Tim Kaine, respectively). And the senators were only following the lead of the guy at the top, President Obama, who declared the targeting of conservative groups—wait for it—“outrageous.”

Well, with each passing week that outrage is looking a little less outrage-y. Last week, Rep. Elijah Cummings, the top Democrat on the House committee overseeing the IRS inquiry, released the transcript of an interview that committee staff did with a staffer from the Cincinnati office that handled the 501(c)(4) applications, a self-described conservative Republican, who flatly denied that there was any politically-driven targeting going on. Earlier this week, newly released IRS documents showed that groups other than Tea Party-affiliated ones were also being flagged for extra scrutiny based on their profile: ones with the word “progressive” and “occupy” in their names and ones that promoted medical marijuana and the new health care law, among others.

The new revelations have raised serious questions about Treasury Department Inspector General, J. Russell George, a George W. Bush appointee and former House Republican staffer whose report describing the targeting of Tea Party groups sparked the firestorm. Why did George’s report not make clear that the Cincinnati office was holding up for extra scrutiny other groups as well in its effort to screen out groups that were too politically-focused to merit 501(c)(4) status? George first replied that he had focused on the Tea Party targeting because that’s what Darrell Issa, the chairman of the House committee, had asked him to look into. This was an unsatisfying explanation—how could George declare that Tea Party groups had been singled out for special treatment without examining the treatment of other applicants? Now, George is putting forward another explanation that conflicts conspicuously with his first one: that his report had emphasized the Tea Party targeting because it was simply on a different scale than what other groups faced.

But the revelations also bring to the fore a question that has been nagging at me from the moment this story broke: why were Obama, congressional Democrats and liberals more generally so quick to cede territory on the alleged scandal, thereby furthering the impression that something truly terrible had happened in Cincinnati? Not to be all “I told you so,” but I and a few others were warning from the outset that the scandal seemed far less likely to be Nixonian skullduggery than a hamhanded effort by overmatched back-office clerks to enforce the absurdly murky rules surrounding 501(c)(4)s. It was simply implausible to me that a cabal of civil servants had gotten it in their heads to go on an ideological crusade against a bevy of small-fry conservative activist groups—implausible not least because these same civil servants were at the same time leaving unscathed the big conservative groups, such as Karl Rove’s Crossroads GPS, that were having a big impact on elections and were most brazen about testing the boundaries for 501(c)(4) activity.

Yet the administration and their allies on Capitol Hill and in the media decided from the get-to cast off the Cincinnati crew as a rogue unit up to no good, and instead draw the defensive line around the White House. To be fair, it is not hard to see why they took this tack. The IRS was giving all sorts of vibes as if had in fact done something terribly wrong, with the clumsy admission of the impending IG report by administrator Lois Lerner, and with its inexplicable failure to quickly release details on the full scope of the Cincinnati office’s activities and thereby put the Tea Party scrutiny in context. And what was being put out there by the IG and Issa was obviously as incendiary as could be in its bare outlines: the IRS acting as a big-government hit squad tapped right into the darkest paranoia of the conservative psyche. “It was viewed as much more politically toxic than the other” scandals emerging at the same time, involving Benghazi and the collection of AP phone records, said Jim Manley, the former chief spokesman to Harry Reid, and now with QGA Public Affairs.

But, Manley added, the lack of a stronger defense was reflective of a general Democratic queasiness when it comes to standing up for the agency that collects the revenue on which the government depends. “Democrats have always been a little gun shy about defending the proper scope of the IRS," he said. "They’ve always been vulnerable to the charge that ‘you just want to use the IRS to take over government.’ They’ve always felt skittish about that despite fact that we need taxes to run government.”

And even the argument that the White House and other Democrats were left in the dark by the bumbling IRS doesn’t really hold up entirely. Just days after the story broke, there were deeply reported pieces like this one in the New York Times that left one with the strong impression that the scandal was being wildly overstated. Yet Democrats stood by as Issa’s staff selectively leaked incriminating-sounding tidbits, and were muted when George came to testify before the committee, failing to press him more on whether the Tea Party scrutiny was really all that singular.

Not helping matters, of course, was the hysterical coverage in some corners of the mainstream media—on the day after the story broke, Politico had more than a dozen pieces about it on its home page, and the national papers were running multiple stories above the fold on the front page. And when the news about the scrutiny of non-Tea Party groups emerged this week? It was buried deep inside, in short dispatches on pages A12 or A14. Even now, veteran conventional wisdom arbiter Ron Fournier is still demanding a special prosecutor to investigate the agency. Such coverage, together with the usual fulmination of Fox News et al, helps explain why the public has become more convinced of a White House-driven plot at the IRS even as evidence for it faded.

It’s tempting now to just laugh the whole thing off as a classic Beltway bubble episode that has left nothing in its wake except a whole bunch of hilariously overwrought Peggy Noonan columns. But this discounts the real toll the detour has taken—on Obama’s standing with the public, on Americans’ dwindling confidence in the IRS and government in general, and on our anemic efforts to deal with real issues that this distracted from.

Not to mention that the framing of the scandal as the work of a nefarious rogue unit diverted from the true substance at the heart of the story: that the rules around 501(c)(4)’s are an unworkable mess in need of reform—reform that would most logically forbid 501(c)(4)’s from spending on election campaigns and requiring those that do to take 527 status, which requires disclosure of donors. It was comically depressing this week to see the news of the IRS’s flagging of non-conservative groups reported as if it made the IRS’ behavior out to be even worse, when in fact it only adds to the evidence that the office was…doing its job in trying to screen out overly political applicants. “Yes, they’re using shortcuts, picking on groups on the basis of their names, and I wouldn’t recommend shortcuts—even if they’re bipartisan, shortcuts probably not the best approach,” said the Sunlight Foundation’s Lisa Rosenberg. “But the reason they were doing that is that they had all these applications they were looking at and trying to get through them as quickly as possible. Their job is to determine whether a group is entitled to 501(c)(4) status based on the level of political activity. There is no question that the real problem is the law.”

But of course that’s not a discussion we were having these past few weeks. Instead we were talking about the ghosts of Nixon and the need for special prosecutors. It was pretty clear to some of us from the outset that everyone needed to get a grip, but instead the story floated to stratospheric heights, and for that Democrats and liberal allies who ought to have known better—this was Darrell Issa, people!—deserve real blame.

Alec MacGillis is a senior editor at The New Republic. Follow him @AlecMacGillis