Why everyone was wrong about McCain-Feingold. ...

Political commentary and more.
April 25 2002 3:44 AM

Everyone Was Wrong About McCain-Feingold!

We all missed a giant loophole in the law.

(Continued from Page 1)

The New York Times was wrong to say, "The only thing the campaign finance reform law prohibits is spending in excess of federal campaign limits to pay for a campaign ad masquerading as something else." In fact, the campaign finance reform law doesn't prohibit that—as long as you don't incorporate, you can spend as much as you want for a campaign ad masquerading as something else, even in the last 60 days!


Beinart and Dionne were wrong to defend the requirement "that organizations pay for such ads with hard money—that is, through a political action committee (PAC)," as Beinart put it. There is no such requirement for non-corporations.

Kausfiles was just as wrong to complain that, under McCain-Feingold, if "two or three, or 20 [semi-rich] people want to get together and form a nonprofit group to pay for an "issue ad" attacking George Bush, they are prohibited from spending more than $5G's apiece." They are only prohibited if they incorporate.

Does all this mean McCain-Feingold is constitutional because anyone can get around its most onerous provisions by simply not incorporating?

I don't think so. The central issue, remember, is whether American citizens can get together to spend their own money on political ads, independent of the candidates' campaigns, before an election. If this is speech—as it clearly is and as the Supreme Court seems to think it is—what's the rationale for denying these citizens the ability to incorporate? Mainly the corporate form provides liability protection for the corporation's principals—a handy thing to have if you're starting a group designed to last a long time, which is why most big, influential nonprofits choose to incorporate. Telling them they can't incorporate if they want to participate in pre-election debate seems an arbitrary penalty, like telling them they have to pay three times as much for postage or Xeroxing.

Another way to put the issue is this: Do the defenders of McCain-Feingold simply want to restrict political ads financed by for-profit corporations, as they tend to argue when it's time to file briefs in court? Or do they really want to limit the speech of individual citizens who may be rich, as their rhetoric about leveling playing fields and "curbing the influence of money" suggests?

The latter sort of restriction runs head on into the First Amendment, as (rightly!) interpreted by the court in Buckley. The former restriction—on spending by profit-making corporations—is much more defensible. For-profit corporations typically don't get their money by soliciting donations from like-minded citizens. They get their money from commerce with citizens who may disagree with them, the profits from which are then protected by the limited liability law. There's an element of involuntary contribution when for-profit corporations are allowed to use their treasuries to interfere in elections.

But then why not limit the McCain-Feingold-Wellstone ban to for-profit corporations, and let ordinary citizens (even the slippery Wylys) form political nonprofits and enjoy the benefits of incorporating?

That may be where the law ends up. This is because there's a key Supreme Court case (the Massachusetts Citizens for Life, or MCFLdecision) that seems to say just that—that citizens who formed a nonprofit corporation to distribute pro-life propaganda, and who didn't take for-profit corporate money, not only didn't have to limit the size of the individual donations they'd accept, they also didn't have to abandon the corporate form.

 McCain-Feingold lawyers may try to sell the court on a narrow reading of MCFL that would restrict it to "small grassroots organizations" of the sort that raise money at bake sales—like the pro-life group involved in the MCFL case itself. (There's some dumb language in the MCFL opinion that supports this reading.)  But why should citizens in "small" environmental or anti-abortion organizations have rights but citizens in larger organizations—i.e., organizations that might actually be effective in advocating the same things—not have those rights?

If the Supreme Court doesn't whittle MCFL down to bake-sale nothingness, then Wyly and all the Wyly wannabes will also be able to incorporate before they spend millions from their personal fortunes on last-minute ads. If MCFLdoes get narrowed, then the Wylys of the world will just have to avoid incorporating before spending millions on last-minute ads. But, one way or another—incorporated or unincorporated—they will be able to spend what they want to say their piece.



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