Updated August 21, 2004

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Finance Reform Hijacked, So-Called ‘527s’ Funnel Soft Money to Candidates

Finance Reform Hijacked, So-Called ‘527s’ Funnel Soft Money to Candidates

By Tony Mauro


For all the controversy and litigation over the McCain-Feingold Bipartisan Campaign Reform Act (BCRA) of 2002, little has changed in this year’s presidential campaigns.

Candidates are still amassing huge sums of money by getting it under “hard money” limits in smaller amounts at more and more campaign events. President George W. Bush’s re-election committee will have spent the guts of $200 million before this summer’s Republican convention is over.

In truth, the Supreme Court’s Dec. 10, 2003, ruling in McConnell v. Federal Election Commission did not in itself change much, because it upheld almost all of the BCRA, which had been allowed to take effect even while litigation was pending. So, many of the changes wrought by the law had already been absorbed by the campaign system.

Last December, Washington Post columnist David Broder warned of things to come when he wrote the following:

“The practical effect of McCain-Feingold, is likely to be to ‘rearrange the flows’ of money, not to reduce it. You can see that effect already, because parties and candidates have been operating under the terms of McCain-Feingold for the past 13 months while the legal challenge was being heard.”

Broder has been proved to be right on the issue. Political parties are learning to live without the “soft money” the BCRA banned because new organizations have sprung up outside the campaign system to amass independent monies to help parties and candidates. In addition, “Issue ads” have continued to run during the primary season, paid for by political action committees that live under contribution and disclosure limits yet the law banned corporations and unions from using their own treasury monies to pay for such ads. States are also running their own campaign-finance projects.

The most controversial development during the current season, and likely to be the next cause for campaign-finance litigation, has been the growth of so-called “527” organizations that operate as independent political groups allowed under Section 527 of the Internal Revenue Code. These organizations—America Coming Together (ACT) is one of the biggest—are receiving huge donations, which are disclosed but with no cap. For example, Billionaire George Soros, in his desire to unseat George Bush, has donated $5 million to ACT.

Most 527s have sprung up on the liberal end of the political spectrum which, may partly explain why the Republican Party has joined forces with campaign-finance groups to ask the Federal Election Commission to look into them, with an eye toward regulating them as political committees with $5,000 donation limits. The FEC is considering the issue and, if it fails to act, campaign-finance groups are sure to go to court, emboldened by Supreme Court language in the McConnell ruling that encourages efforts to stop “circumvention” of existing campaign laws.

The most obvious change in how campaigns are conducted may well be the political advertising that presidential candidates have run on the airwaves in the primary season. Kerry and Bush have been required to state at some point during such commercials that they approved their contents. The candidates’ statements in ads often sound awkward because they state the obvious. But the “I stand by my ad” requirement could, in the view of Loyola Law School professor Rick Hasen, have a subtle impact on the content of campaign ads over the course of the 2004 campaign, according to.

“The thinking is that it will reduce the number of negative ads, because candidates won’t want to associate themselves with negative messages. Of course, that creates a First Amendment problem because it involves government, directly or indirectly, in tinkering with candidates’ messages,” argues Hansen.


© American Free Press 2004