Commentary

Meet the New Loopholes

By John Samples and Patrick Basham
This article originally appeared in The New York Times on November 5, 2002.

WASHINGTON—Tomorrow the Bipartisan Campaign Reform Act, otherwise known as McCain-Feingold, will go into effect. After years of debate, soft money, the unrestricted contributions raised and spent by political parties and interest groups, will finally be regulated.

But it won’t change much. People will find ways to get around the new law. Substantial sums will continue to rush into the American political system - the money will just enter through different routes. Incumbents, whose fund-raising advantage the law was meant to curtail, will likely do better than ever under the new rules. In short, the world of campaign finance will stay pretty much the same. Here’s why:

Soft money will stay in politics. Had the campaign reform act not become law, we estimate, based on past trends, that the political parties would have raised about $680 million in soft money in the next election cycle. That much money cannot be forced out of the political system. It will show up during the next election in new and different ways.

The new law will allow state and local party soft money fund-raising for purposes of generic voter registration and get-out-the-vote efforts. Federal officials may attend and speak at fund-raising events where state and local parties raise those funds. National political leaders may also raise money without limit for nonprofits if the money does not finance national political activities. Those permitted activities will allow a member of Congress, for example, to raise money for the general fund of a group, arguably freeing up other money for the nonprofit’s more overtly political work, like voter registration and political ads. Though it’s not clear how much money a group will be able to dip into for political purposes, the flow of money to campaigns will surely remain abundant.

Although the new law specifically forbids soft money fund-raising by party affiliates, partisan activists are setting up substitute party organizations to raise and spend soft money. The new organizations must be established before Nov. 6 and they must avoid all affiliation with the parties, but they don’t have to do much more than that. Democratic Party leaders expect one of these groups, the Democratic State Party Organization, to raise $40 million in soft money by the next election. Republican activists are following suit with groups like the Leadership Forum. Based on recent trends, the Republican groups might be expected to raise about $60 million in soft money in the next cycle.

Interest groups will grow richer and more powerful. McCain-Feingold allows interest groups to raise as much money as they wish. “The law actually will help us,” Stephen Moore, president of the Club for Growth, told The Washington Post, adding that people and corporations that used to give to the Republican Party will now give to his organization, which promotes free market economics. Kate Michelman, president of the National Abortion and Reproductive Rights Action League, has said that she expects to benefit similarly from those sympathetic to Democrats. Interest groups will try to use the funds raised to do what the political parties can no longer do: run advertising paid for by soft money that supports causes and, indirectly, candidates.

The person with the most lawyers wins. Interest groups will have to be careful when they jump into the fray. The government may regulate ads that are coordinated with election campaigns or ads that directly advocate the election or defeat of a candidate. In both cases, the money for the ad must be raised under federal contribution limits. In other words, no soft money can be used. Conversely, if a group running ads is independent of a campaign or if its ads comment on issues, the First Amendment frees it from government regulation. Interest groups promise that they will act independently when they run issue ads. Expect their virtue to be questioned. Also expect the terms “coordination” and “express advocacy” to emerge as full-blown buzzwords in the next election cycle.

Individuals will be dragged into court, accused of coordinating their work with a party or candidate. Lawyers and lawsuits will play an ever-larger role in our elections. Grass-roots groups that lack the money to purchase legal advice will be compelled to steer clear of elections.

Under the new law, ads that mention (or “expressly advocate”) a candidate and are paid for with soft money cannot be broadcast 60 days prior to an election. As a result, interest groups will try different strategies to get their ads on the air. The courts will be forced to define what it means to mention a candidate. A smart election lawyer will rise to fame by figuring out how to allude to candidates without mentioning them.

Strong incumbents get stronger. The world is already pretty good for incumbents. They enjoy a 98 percent re-election rate. Their districts have become ever safer, thanks to increasingly sophisticated gerrymandering. Absent soft money, their prospects of re-election will grow even brighter.

Whatever its disadvantages, soft money sometimes financed challengers and provided information through advertising to voters. Under the campaign finance law’s constraints, more resources will go to compliance and finding loopholes and fewer will go to challengers and the dissemination of information.

The Bipartisan Campaign Reform Act will certainly change American politics, but probably not for the better. Elections will be less competitive, interest groups will become wealthier and our political system will become increasingly tied up in the courts. That doesn’t sound like the world reformers aimed to create.

John Samples is director of the Center for Representative Government at the Cato Institute. Patrick Basham is a senior fellow at the center.