A campaign-finance loophole or tool for a fair fight?

A campaign-finance loophole or tool for a fair fight?

A campaign-finance loophole or tool for a fair fight?

The law, lawyers, and the court.
Jan. 28 2004 6:48 PM

Level Paying Field

The law may allow ads attacking the Democratic presidential nominee to go unanswered.

Whoever ultimately emerges as the presumptive Democratic nominee from the front-loaded primary season can expect a pummeling from President Bush's re-election committee. That committee will have between $130 million and $200 million to spend on attack ads during Bush's own "primary season" (in which he is running unopposed by serious candidates) lasting up to the Republican convention—a convention slated later than usual to maximize the pummeling time. Bush's committee is borrowing from Bill Clinton's 1996 playbook when the Democrats used that period to run ads beating up on presumptive Republican nominee Bob Dole, though with only a fraction of the money raised by Bush's committee.

Whether supporters of the Democratic nominee will have the resources to fight back this spring and summer may depend a great deal on arcane administrative decisions to be made by the Federal Election Commission. At issue is whether pro-Democratic non-party organizations can raise large "soft money" donations to spend supporting the Democrats and pummeling Bush back. The fight to limit donations to these groups has created an odd alliance between campaign-finance-reform organizations and the Republican Party, and the coalition just may win before the FEC.

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Since Congress passed the McCain-Feingold law, which the Supreme Court substantially upheld late last year, parties have been put out of the business of raising six-figure soft money donations. A number of nonprofit political organizations, with names such as America Coming Together, are now poised to raise the massive sums that would be necessary to effectively counter the expected attack ads from the Bush committee. Because these are not party organizations but rather political groups organized under Section 527 (or other provisions) of the Internal Revenue Code, they are not subject to the McCain-Feingold soft money ban. Billionaire George Soros has been among the major supporters of some of these "527s" and has pledged $10 million to two of them.

Various campaign-finance-reform groups and the Republican Party have formed an unusual coalition to argue that these 527s should be treated as political committees under federal campaign finance law—meaning that Soros and other individual donors would be limited to a $5,000 contribution to each committee, and corporate and union contributions to 527s would be severely limited, if not outlawed entirely. According to a report in the Washington Post, Ed Gillespie, chairman of the Republican National Committee, asked Democratic National Committee Chairman Terry R. McAuliffe to co-sign a letter to the FEC, urging it "to not sanction the undermining and evasion" of the McCain-Feingold law through these 527s. The Republican chair of the House Administration Committee, Bob Ney, has threatened the leaders of Democratic-leaning 527s with subpoenas if they fail to appear before his committee, which is charged with investigating whether these organizations violate the law.

It is hard to believe that the Republican Party has now found religion on the importance of campaign-finance regulation. After all, the RNC was one of the plaintiffs challenging the constitutionality of the McCain-Feingold law in the Supreme Court. Now that the court has upheld virtually all the major provisions of the law, Republicans are doing what both they and Democrats have increasingly been doing for years: using election law as part of a political strategy. The strategy here is to maximize the extent to which Bush's committee can attack the presumptive Democratic nominee while preventing Democratic-leaning groups from mounting an effective response.

Whether or not the Republican Party approaches this question with pure motives, campaign-finance watchdog groups certainly do. The question of regulating individuals' contributions to 527s raises a difficult constitutional question (not to mention a host of thorny questions about the meaning of relevant federal statutes). The controversy should cause even supporters of campaign-finance reform to think more closely about what goals such laws should accomplish. To understand the constitutional question, we must go back to 1976, when the Supreme Court decided Buckley v. Valeo. In Buckley, the court upheld laws limiting the amount that people could contribute to candidates for federal office (contribution limits), but it struck down laws limiting the amount that people could spend independent of candidates to support or oppose those candidates (independent expenditure limits). The court said that contribution limits only marginally affected First Amendment speech and association rights and could be justified to prevent the corruption of federal candidates and the appearance of corruption. Expenditure limits more directly affected First Amendment rights, and, because they were independent, were less likely to cause the corruption of federal candidates.

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With few exceptions, the court has stuck with this contribution/expenditure limitation. In a 1981 case, California Medical Association v. FEC,the Supreme Court upheld a provision of federal campaign law that limited contributions to political committees to $5,000, on the grounds that without such a limitation people could contribute unlimited amounts to political committees who could then pass dollars through to candidates. The same potential for corruption existed as before. A crucial fifth vote in that case came from Justice Harry Blackmun, who said that he might have reached a different result if the political committee challenging the law had made no contributions to candidates but only spent independently supporting or opposing such candidates.

That 1981 case creates a pretty strong constitutional argument against preventing the George Soroses of the world from contributing unlimited sums to 527s that do not make contributions to federal candidates. Then, along came the Supreme Court's 5-4 decision in McConnell v. Federal Election Commission upholding most of McCain-Feingold. On the surface, the opinion appears a straightforward application of the old Buckley principles. But a closer reading of the opinion, particularly the footnotes, suggests some pretty radical departures from Buckley. One of those footnotes reinterprets the California Medical Association case to say that the challenged law was justified not only to prevent "pass-throughs" from committees to candidates but also to prevent such groups from spending independently on candidates.

That reinterpretation is consistent with the rest of McConnell. The court is very concerned that the old soft money system will re-emerge in an equally corrupt system of very large donors securing access to political officials through contributions to new conduits. The court was so concerned with the possibility of "circumvention" of existing campaign-finance law that it upheld substantial federalregulation of local political parties and candidates on the fear that they might someday be used to gain access to federal candidates.

The Federal Election Commission, reading McConnell, could well state that the same dangers of circumvention apply to these 527s. On the other hand, it could reject regulation by pointing to other language in McConnell stating that parties are "uniquely positioned to serve as conduits for corruption." This matter could well end up back in the courts.

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Should the FEC or courts interpret the Constitution to allow George Soros or other large donors to contribute substantial sums to 527s? Certainly large donations for ads that benefit a particular federal candidate will attract that candidate's attention and likely allow for easy access by the donor to the candidate. But so long as it is impermissible (under Buckley) to limit what individuals such as Soros can independently spend on an election, there is little justification for limiting the amounts they can contribute to other groups for the same spending if those groups are unaffiliated with, and do not contribute to, candidates or parties.

Given the Supreme Court's recent focus on access, it is worth considering how Bush's re-election committee has been able to raise such astronomical sums to spend in the primary season. It has done so through a network of campaign-finance bundlers who solicit their friends and business associates to make the maximum allowable $2,000 individual contributions to Bush's committee. (That maximum went up from $1,000 in the McCain-Feingold law.) Bundlers get credit for the people they solicit, and you can bet that the "Pioneers" (bundling $100,000 in contributions), "Rangers" (bundling $200,000 in contributions), and the as-yet-unamed bundlers who reach the $500,000 mark will get special access as well.

The wealthier donor base of the Republican Party, the fact that bundlers are raising money for a sitting president, and good organizational skills have all allowed Republicans to run circles around Democrats in raising these $2,000 contributions. (Democratic candidates who accept public financing may not even raise such sums.)

This imbalance raises the important policy questions: Should wealthy supporters of the Democrats be able to band together to run ads supporting the potential Democratic nominee with roughly equal resources to President Bush's, or should the public be concerned more with the potential for corruption that comes from these groups accepting large donations? And what about the fact that these groups may be more narrowly focused than broad-based political parties? Would the proliferation of such groups further polarize politics in this country?

After this election, the public should reconsider the rules of engagement for financing presidential elections and either beef up the public financing system for presidential campaigns to ensure adequate resources for a fair fight or scrap it altogether. In the meantime, the fate of the presidential election could rest with an appointed commission, which seems even worse than the last time, when it rested with the Supreme Court.