Social Studies May 2005

Here's a New Campaign Finance Reform Plan: Just Stop

Congress and the country are on the brink of deciding between unlimited contributions in politics and unlimited regulation of politics.
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Most Americans outside Washington, lucky souls, have no idea what a "527" group is. The country paid no attention last week when the Senate Rules Committee voted out a bill that would subject 527 groups to some of the same soft-money restrictions that apply to party committees. The change was portrayed by many of its advocates as little more than a technical adjustment to the existing campaign finance rules: "statutory coordination," as one expert said in Senate testimony. Asleep yet?

Wake up. This is no mere tweak. The 527 question brings campaign finance law face to face with a choice it hoped never to have to make. Congress and the country are on the brink of deciding between unlimited contributions in politics or unlimited regulation of politics.

The McCain-Feingold campaign finance reform law (officially, the Bipartisan Campaign Reform Act) was signed into law in March 2002. The Supreme Court upheld and unleashed it in December 2003, only 18 months ago. Only one election cycle has passed since then. Yet Congress is already working on new restrictions. This might reflect, as proponents of the new restrictions argue, that conditions change rapidly in the political world. Or it might suggest, as opponents retort, that the law itself is radically unstable. Unfortunately, both sides are right.

A 527 group is a private, tax-exempt political organization set up under Section 527 of the U.S. tax code. Such groups have been around for years but never took center stage until 2004, when they became major players. As soon as McCain-Feingold shut the door on unlimited contributions (so-called "soft money") to political parties, many of the big-dollar donations began flowing to 527 groups instead. Some of the groups were established by partisan operatives and acted as virtual proxies for the parties (mainly the Democrats). Others—notably Swift Boat Veterans for Truth, which attacked Sen. John Kerry's Vietnam War record—made lots of people hopping mad.

According to the Campaign Finance Institute, contributions to 527 groups more than doubled between 2002 and 2004, to $405 million. Most of the money came from individuals, often in eye-popping sums; 70 percent of the total came from just 52 people who gave between $1 million and $24 million. Democratic zillionaires Peter B. Lewis and George Soros gave $16 million and $12 million respectively. This was big money if the phrase means anything at all.

Fred Wertheimer, the president of Democracy 21 (an advocacy group that says it works "to eliminate the undue influence of big money in American politics"), argues that 2004 was just the beginning. In 2006, he says, 527 groups will begin pouring money into contested House and Senate races. "Given the opportunity, this will grow and grow in future elections, and it will create enormous inequities." He is probably right. Absent further change, 527 groups will become the outlet of choice for unlimited political contributions.

On the other hand, banning soft-money donations to 527 groups would confirm the campaign finance law's transformation into an engine of unlimited political regulation. Imagine a runaway lawnmower munching every flower bed and hillock in sight, and you have an idea of what the law is at risk of becoming.

Spending money to buy ads or turn out voters is a form of political expression. At least until recently, standard legal doctrine held that such political expression could be restricted only to prevent "corruption or the appearance of corruption," as the Supreme Court ruled in 1976. But what is corruption? It's easy to see why giving $1 million directly to a politician or party might smell of bribery or extortion, but McCain-Feingold put a stop to that. Harder to see is why giving $1 million to an independent group, such as the Sierra Club or the National Rifle Association, would corrupt anybody. After all, private groups are in no position to offer legislative favors or shake down constituents.

Ordinarily, one might suppose it to be a good thing when rich people finance political mobilization and discussion. Where, exactly, is the harm in George Soros's giving $12 million to an independent political outfit that seeks to defeat President Bush? In a recent fact sheet, Democracy 21 and the Campaign Legal Center reply this way:

"Large donations to 527 groups spending money to influence federal elections can buy influence with federal candidates, even if the 527 groups are operating independently. Since such 527 groups are spending money to elect federal candidates, and since the source and amounts of these unlimited contributions are readily available to the candidates, the contributions can buy influence with the federal candidates benefiting from the expenditures by the 527 groups."

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Jonathan Rauch is a contributing editor of The Atlantic and National Journal and a senior fellow at the Brookings Institution.

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