Campaign Finance Reform


Good morning, Mr. Chairman and members of the Committee. I amEdward H. Crane, president and founder of the Cato Institute and Ithank you for the opportunity to testify before you today. Irespectfully request Professor Lillian BeVier's recent Cato studyon the constitutionality of campaign finance proposals be submittedfor the record as part of my testimony.

I'd like to begin my testimony with a quote fromBuckley that I believe summarizes the case against much ofthe proposed campaign finance reform now before Congress.

"The mere growth in the cost of federal electioncampaigns in and of itself provides no basis for governmentalrestrictions on the quantity of campaign spending and the resultinglimitation on the scope of federal campaigns...In the free societyordained by our Constitution it is not the government, but thepeople - individually as citizens and candidates and collectivelyas associations and political committees - who must retain controlover the quantity and range of debate on public issues in apolitical campaign."

Well stated. This is an issue of who controls the politicalprocess in America - the government or the people. There is adisturbing theme in the pronouncements of self-described publicinterest groups that invariably chills political debate, reducesinformation available to the public, and protects the politicalclass from outside competition.

The initiative recently passed in California and supported byCommon Cause dealing with campaign finance would limit to $500 theamount of money one can contribute to a candidate for state-wideoffice and further limits the ability to raise money to six monthsprior to the election. Who benefits from such a system? Itcertainly is incumbents, who have name recognition, mailing lists,and an in-place organization to mobilize voters. It benefitsfull-time political activists such as "Nader's raiders") who areconstantly involved in influencing government behind the scenes andwho tend to resent the outside participation of those not in thepolitical class. And it benefits the media. The media is thegatekeeper of information to the American people on politics andother issues. To the extent that candidates can communicatedirectly with the public, the media's gatekeeping function isdiminished.

Why is it that Donald Graham, publisher of the WashingtonPost, Rush Limbaugh, the conservative radio talk show host, orGary Trudeau, the liberal cartoonist, can lavish virtually millionsof dollars of support toward a candidate they support or against acandidate they oppose? And is it bad that they can do so? Of coursenot. They are part of a healthy open democracy, whether one agreeswith them or not. If the answer is that it is because they are inthe media and are therefore protected by the First Amendment thatthey can employ massive resources for and against candidates, thenwe are misreading the First Amendment. The First Amendment appliesto everyone in this room and, indeed, everyone in this country. Themedia do not have rights that the rest of us don't have.

More importantly, the so-called solutions that are beingproposed by advocates of campaign finance reform addressessentially nonexistent problems. Yesterday USA Today, agreat champion (as is most of the major media) of campaign financereform, breathlessly reported that $260 million had been raisedthrough "soft dollar" contributions in 1996. Let's see, isn't thatabout $1 per American? For this we want to infringe our rights tospend money as we see fit to promote political views we hold?Americans spend about as much on Barbie dolls each election cycleas we do on federal elections. Who are the self-appointed arbitersof American politics to say what is too little, enough, or too muchto be spent on politics? Again, the above-referenced quote fromBuckley is germane.

Further, Common Cause and the other agitators for campaignfinance reform owe us an answer to the question, Who are the lawbreakers? It is, after all, against the law for congressmen toaccept contributions on a quid pro quo basis. Who are these people?Are they members of this committee? The undercurrent of criticismfrom the reformers is that there's some kind of endemic corruptiongoing on in Congress. If so, they owe it to us to tell us who thecriminals in Congress are. Does something in the form of quid proquo occur in Congress? Undoubtedly, but on a very limited scale,particularly in view of the larger issues faced by Congress. Afterall, the issues that affect the American people are issues liketerm limits, Social Security privatization, our civil liberties,defense policy, and so on. These are issues that are voted on onthe basis of three primary factors, according to Cato scholarBradley Smith. Those factors are ideology, party discipline, andvoter sentiment back home.

Indeed, former Senator Nancy Kassebaum, who has been a spokesmanfor the reformers, was quoted in the Wall Street Journalas saying that she was convinced her colleagues did not vote on thebasis of contribution. Her concern was that they had to spend somuch time raising money. It apparently did not occur to her thatthe 23-year-old limit of $1,000 per contribution was the reason somuch time had to be spent on fundraising. Nor, apparently, did sherecognize that challengers to an incumbent have to spend even moretime collecting these relatively small contributions. As WarrenBurger put it in his brilliant dissent in Buckley,maintaining a free society is not a costless undertaking. It maywell be that a certain amount of undue access is one of thosecosts, although a very small one relative to the importance ofmaintaining a free and open political process.

If we want to reform the system in a constructive way, repealthose aspects of the 1974 Amendments to the Federal ElectionCampaign Act that the Supreme Court left standing inBuckley is the best way to proceed. Most importantly, the$1,000 limit on contributions to federal candidates must berepealed. Such a limit is analogous to a company like WalMarthaving a law passed that says anyone can compete with WalMart, upto $1,000 in contributions. Limits on monetary expenditures limitspeech. Though controversial in some esoteric circles, for mostpeople this is such common sense that we tend not to even think ofit. We would all recognize that a law limiting newspapers tospending $1000 per year - or even $1000 per day - would force mostdaily newspapers to cease publication, and that this would be anunconscionable violation of the First Amendment. Similarly, a lawlimiting television networks to expenditures of just $1000 per daywould violate the First Amendment by effectively shutting offspeech. This is true even though - in fact, especially because -newspapers and television stations and networks routinelyeditorialize on political issues; endorse candidates for office;slant news coverage to promote issues and, implicitly, candidatesviewed as important; and give column space, or, in the case oftelevision stations, air time, worth literally hundreds ofthousands of dollars, to political parties, candidates, and issues.But even the most mundane political activities, such as publishinga flyer to distribute at a county fair; or purchasing a megaphoneto use at a public rally; or traveling somewhere to give a speech;require the expenditure of money. The link between the expenditureof money and speech is unassailable. Because of this link, theSupreme Court, in Buckley, made clear that anyrestrictions on the expenditure of funds - including limitations onissue advocacy - must be subject to the strictest judicial scrutinyfor First Amendment violations.

For a detailed review of specific proposals, I citeProf. Bradley A. Smith's, Cato scholar and law professor at CapitalUniversity, recent testimony:

Soft Money

An effort was made to ban soft money in the 1974 FECAAmendments, and the 1976 elections were conducted without softmoney. This created a shortage of cash for state and local parties,which caused a sharp decline in traditional political activity suchas rallies, printing of bumper stickers, buttons, and yard signs,and get-out-the-vote drives. Thus, FECA was specifically amended in1979 to allow for soft money contributions to the parties. Weneed to remember this when people talk about banning or limitingsoft money. What alleged evil are people after? Do we want todeprive local parties of funds to conduct voter registration drivesor get-out-the-vote drives? Stop local parties from printing slatecards, linking a party's candidates together? Or stop them fromprinting bumper stickers and yard signs, or providingtransportation to the polls for elderly voters, or holding rallies?I think not.

I suggest that the current emphasis on banning or sharplycurtailing soft money comes entirely from the extensive use of softmoney to fund party sponsored issue advocacy campaigns in the 1996elections. However, political parties have as much right as otherentities to run issue ads. See FEC v. ColoradoRepublican Federal Campaign Committee, 116 S. Ct. 2309(1996)(holding that political parties may engage in independentexpenditures). If party-sponsored issue ads are protected by theConstitution, what point is there in limiting soft money, unless wedo want to restrict funding for get-out-the-vote drives and thelike? May I suggest that there is none.

Furthermore, to the extent that candidates dislike issue ads andindependent expenditures because they cause the candidate to losecontrol of the campaign message, efforts to prevent party sponsoredissue ads by drying up the supply of soft money will make thesituation worse. Why? Because people who now give to the parties totake their message public will simply resort to running independentissue ad campaigns. These independent campaigns are, I think, morelikely to be negative or distorting than party run ads.

But it really doesn't matter, because efforts to ban orlimit soft money contributions for issue ads are probablyunconstitutional in any event. As Colorado RepublicanFederal Campaign Committee makes clear, political parties havethe same rights in the political arena as other groups. Thus, likeother groups, they have a right to raise unrestricted funds for thepurpose of airing issue ads. Limiting soft-money, then, if it isconstitutional at all, which I doubt, will only dry up funds foractivities that are arguably less speech related, such as the voterregistration drives, slate cards, and other activities that almostevery rational observer supports.

If you want to limit issue ads, the best, and perhaps onlyConstitutional approach, is to raise the limits on directcontributions to candidates. It is since those restrictions wereput on 23 years ago - and never adjusted even for inflation - thatgroups have turned increasingly to independent issue ads topersuade the public of their views. Raise the limits on directcontributions, and some donors may again decide that giving moneyto the candidate is a more effective means of spreading theirpolitical views. Or, to put it another way, perhaps we shouldreturn to the system of free elections under which this countrygrew into the world's greatest democracy, fought and won two worldwars, passed the great civil rights legislation of the 1950s and1960s, and generally prospered.

Issue Advocacy

So clear is the constitutional precedent in the area ofissue advocacy that the United States Court of Appeals for theFourth Circuit recently took the extraordinary step of ordering theFEC to pay the legal fees incurred by the Christian Action Network(C.A.N.) in defending itself from an FEC lawsuit. The FEC hadattempted to fine the C.A.N. for issue advertising, arguing thatthe C.A.N.'s ads constituted campaign ads even though they did notinclude words of "express advocacy." FEC v. Christian ActionNetwork, Inc. 1997 U.S. App. Lexis 6477 (April 7, 1997). In astinging rebuke to the FEC, the court concluded, "In the face ofthe unequivocal Supreme Court and other authority discussed, anargument such as that made by the FEC in this case, that 'no wordsof express advocacy are necessary to expressly advocate theelection of a candidate,' simply cannot be advanced in goodfaith... much less with 'substantial justification.'...The FirstAmendment forbids the regulation of our political speech under suchindeterminate standards." Express words of advocacy, the courtemphasized, "are the constitutional minima." Id.

What the regulators seem to have lost sight of is thefact that politics is about the discussion of issues, andcandidates' positions on issues. It is the heart of the FirstAmendment for individuals and groups to discuss issues andcriticize officials. It is all but impossible to talkpolitics for long in this country without mentioning theindividuals holding or seeking office. Or, as the Court said inBuckley, "Candidates, especially incumbents, areintimately tied to public issues..." We will not have a freesociety for long if government officials are empowered to prohibitsome from speaking on the rather bizarre ground that their speechconsists of "campaign endorsements or attacks," while determiningthat others can speak because their speech "genuinely debate[s]issues," to use the words of two prominent reformers writingrecently in the Washington Post. It is precisely that type ofdistinction and government censorship which the First Amendmentaims to prevent.

After all, thepurpose of politicalspeech is to influence public policy, which usually meansinfluencing the election of representatives. Thepurpose of campaignsis to discuss the positions of candidates on various issues. We donot want a federal bureaucracy determining who can say what, and inwhat amounts. Thus the bright line that Supreme Court has drawn,requiring words of express advocacy before regula0tion ispermissible, is a wise one, indeed.

Many are frustrated that the First Amendment limits our abilityto silence certain voices that they feel "distort" or "corrupt" ourpolitical campaigns. But the Constitutional limits on regulatingcandidate and independent expenditures, campaign and soft moneycontributions, and "issue advocacy," are no more "loopholes" thanthe Fourth Amendment prohibition on unreasonable searches andseizures is a "loophole" in the fight against crime. I have littledoubt that we could catch more criminals if we could dispense withsearch warrants, but we realize that that cannot be done consistentwith the Fourth Amendment and the protection of our liberties. Fewliberties can be more important than the right to engage inpolitical speech, and Congress must tread with great caution inthis area. Congress should stop trying to "get around" FirstAmendment limits on regulating political speech. Only by abandoningsuch unconstitutional schemes to police political speech, can wegain a new perspective on the issues, and begin to seriouslyaddress some of the problems in modern presidential campaigns.

Disclosure of Issue Advocacy

If it is clear that issue ads - or, we might say, politicaldiscussion - cannot be banned consistent with the First Amendment,some have suggested that at a minimum it could be forciblydisclosed. This is the approach taken by HR 2183, the so-called"freshman" proposal, and in the so-called "Blue Dog" proposalfloated this summer. Unfortunately for the sponsors of these bills,but fortunately for the political and speech rights of the Americanpeople, this approach also runs directly afoul of recent SupremeCourt precedent.

In McIntyre v. Ohio Elections Commission, 514 U.S. 334(1995), the Supreme Court affirmed that individuals have aconstitutional right to engage in anonymous political discussionand advertising. The reason should be so obvious as not to needexplication: people may feel chilled, if not prohibited, incriticizing their government if they feel that that government mayuse its power to retaliate against them. McIntyre tiestogether two long-standing strands of First Amendmentjurisprudence: the right to anonymous leafleting, seeTalley v. California, 362 U.S. 60 (1960)(the right toanonymous publication is necessary because "exposure of the namesof printers, writers, and distributors would lessen the circulationof literature critical of the government"); and the right oforganizations to protect members from disclosure that could lead topolitical retaliation and harassment, see NAACP v.Alabama, 357 U.S. 449 (1958).

If disclosure of spending on issue ads, i.e. politicaldiscourse, were required, how would it be enforced? It couldonly be enforced by requiring citizen groups to respond to thedemands of federal officials for information regarding the times,places, amount, and manner of speech. And it would have thesame chilling effect on speech that led the Supreme Court to strikedown limits on issue advocacy inBuckley. For in order to determine if acommunication was intended to "influence public opinion" (thestandard used in H.R. 2183) and therefore subject to disclosure, itwould be necessary for federal officials to examine thecommunication under much the same vague standards as those that HR1776 and 1777 would use to ban all issue ads. After all, mostspeech is, to some extent, intended to influence public opinion.The ensuing chilling effect on speech makes such forced disclosureunconstitutional. Nor can this approach get aroundMcIntyre, NAACP v. Alabama, and Buckleyby being called "lobbying disclosure." The effort is disingenuouson its face - communications to the public have never beenconsidered lobbying, and because they aren't directed to thelegislators, it is difficult to see how they could be. Furthermore,the disclosure would apply to speech that mentions candidates whoare not incumbents. One can hardly lobby someone who does not holdoffice.

It is, of course, frustrating for candidates to findtheir record and views attacked in ways that may seem distortingand unfair. Similarly, it may seem unfair to be locked in apolitical race only to have large expenditures made attacking one'spositions on an issue. But this is the nature of politics. And theFirst Amendment exists to prevent the government from attempting todetermine "legitimate" from "non-legitimate" commentary on publicissues. As one commentator has noted, no nation has ever succeededin creating a "benign political police."

Contribution Limits

Banning or limiting contributions is driven by a desire todecrease the amount of money spent in elections. But campaignspending is not out of control. More money was spent to syndicate"Seinfeld" than we spend on a presidential election. Total directcampaign spending for all congressional races averages out to $3per eligible voter. PAC spending adjusted for inflation decreasedin the '94 cycle. And all 1993-1994 PAC contributions forall races would barely have covered Kevin Costner'sproduction costs for "Waterworld."

More importantly, there is a very dangerous precedent set byacting on this hysterical desire to take money out of politics. Thepeople in this country have a constitutional right to petitiontheir government. If we succumb to this misinformed, misguidedhysteria, is the next step to take the media out of politics tostop all those obnoxious ads? To not let the press report onpolitics because we're sick of reading all the horse-racestories?

Money will remain in politics. Money must remain in politics. Asissues become more complicated and technology more complex, evenmore money will be needed to ensure an open political system.

Limiting contributions will distort the political debate.Driving money out of the campaign gives a powerful advantage tocandidates with powerful friends such as celebrities and unions.Further limits will similarly enhance the power of the media. Whencandidates cannot raise or spend the money needed to speakdirectly to the voters, political discourse will move awayfrom a direct conversation between candidate and voter, and we willsurrender to the institutional media's power to mediate politicaldebate.

Katharine Graham of the Washington Post caneditorialize in favor of certain candidates, or shape news coverageto reflect her philosophical perspective. Garry Trudeau can promoteBill Clinton by devoting his comic strip to bashing George Bush andDan Quayle. Talk show host Rush Limbaugh can do the same in favorof his candidates.

Historically, the most controversial First Amendment issues havecentered on whether certain types of speech, such as commercialspeech, licentious speech, and symbolic speech are protected by theamendment. What has been undisputed is that the First Amendmentprotects political speech.

Indeed, as the Supreme Court's Buckley v. Valeodecision made clear: "dollars are not stuffed in ballot boxes...themediating factor that turns money into votes is speech...Advocacycannot be proscribed because it's effective." Since a ban on softmoney and PAC contributions affects the intensity and frequency ofpolitical speech, the measure will infringe on our First Amendmentrights.

Additionally, no one would deny that journalists, editors, andpundits influence politics through their outlook and choice oftopics. But why should they have the opportunity to be importantfigures in the political debate while other Americans are excludedbecause they choose a career other than the media? Indeed, withoutPACs, how are Americans with limited time and resources to offsetthe editorial impact of the national media? What is more, thenotion that the government, through a ban on PAC giving, canexclude certain types of individuals or organizations fromcontributing in a meaningful way to the political debate shouldalarm everyone who believes that Congress shall make nolaw...abridging the freedom of speech."

Our Founders recognized that although there may be suboptimaloutcomes in a free society, they pale in comparison with theoutcomes associated with turning over to government jurisdictionjudgments independent citizens should properly make themselves. AsThomas Jefferson put it: "I know of no safe depository of theultimate powers of the society but the people themselves; and if wethink them not enlightened enough to exercise their control with awholesome discretion, the remedy is not to take it from them, butto inform them of their discretion by education."

Term limits are the best campaign finance reform of all.

Public Opinion

Finally, I would like to say a brief word about public opinionon this issue. Polls are frequently released allegedly showingbroad public support for such things as restrictions on soft moneyand issue advertising. Of course, as the members of thissubcommittee well know, one purpose of the Constitution is toprotect our fundamental rights from the ebbs and flows of publicpassion. But leaving that aside, I think that such polls areterribly flawed, and I would warn this Congress that if it were toactually pass the restrictions on issue advocacy underconsideration, it would unleash a firestorm of hostile publicreaction.

Consider, for example, one highly publicized poll released thissummer by the reform group the Center for Responsive Politics.Supposedly, 70% of respondents favored limiting how much acandidate could spend on his or her own campaign; 75% favoredlimiting soft money; 71% favored limiting TV ads; 85% favoredlimiting out-of-district contributions; and 61% favored banningPACs. Yet, oddly enough, in that same poll, 47% favored liftingall restrictions on campaign contributions. Clearly, then,the public is somewhat confused, as the total of those favoringmore restrictions and those favoring the abolition of allrestrictions substantially tops 100%. You cannot lift allrestrictions on contributions and still have restrictions. For morethan 25 years groups such as Common Cause, the Center forResponsive Politics, the League of Women Voters, Public Citizen,ACORN and PIRG, along with huge foundations such as the SchumanFoundation, the Pew Charitable Trust, and the Joyce Foundation,have spent millions, virtually unopposed, attempting to convincethe public of the merits of such regulation. Their efforts have hadvirtually unanimous support in the institutional press, which wouldnot have its speech limited by the proposed reforms. Given this,the fact roughly half the public favors scrapping all regulation ofthe system is truly remarkable.

In fact, when the heated rhetoric is stripped away, the publicremains strongly in favor of free political speech. For example,the aforementioned Center for Responsive Politics poll suggeststhat a substantial majority of Americans would like to ban PACcontributions. Similarly, a recent poll by the independent TarranceGroup found that roughly 60% favor a PAC ban. But when thelong-vilified term "PAC" was dropped, 64% believe that "a group ofpeople who have a common purpose or belief can pool smallcontributions to help elect political candidates who share theirviews," with just 29% disagreeing. That, of course, is thedefinition of a PAC. Why this difference? The Tarrance Poll gives aclue. Fewer than half of respondents considered themselves membersof a "special interest." Yet, when asked about their personalmemberships and affiliations, 75% stated that they were members ofgroups, such as unions, single-issue groups such as the NRA orHandgun Control, Inc., or broad ideological or membership groups ofthe type that engage in issue ads and political expenditures.

When the public understands what is at stake - i.e., that it istheir voices, and the voices of their neighbors, that will besilenced, their perception, I suggest to you, changes dramaticallyand radically. Just last week I was on a Florida radio phone-inshow along with the local Common Cause representative. I describedthe threat to the First Amendment posed by campaign financeregulation, and the gentleman from Common Cause stated that it wasnot their aim to reduce political speech. It would be perfectlyalright, he said, for individuals and groups to spend whatever theylike on advertisements discussing candidates and issues, but theyshould not be able to make contributions to candidates. This man, alocal representative for the reform movement, honestly believedthat HR 1776 and 1777, being promoted by his organization, wouldnot limit issue advertising, to the point that he suggested thatthis was why restrictions on contributions to candidates were notobjectionable. I pointed out that limiting independentadvertisements discussing candidates and issues was exactly whatthe reformers, including Common Cause, are seeking to do in thisCongress, through bills such as HR 1776 and 1777 and its Senatecounterpart, the "McCain-Feingold" bill. When callers to the showdiscovered that these efforts would limit advertisements andscorecards describing candidates views on issues, they becamelivid. When we talk about limiting issue ads, we are not talkingabout silencing the other guy: we are talking about silencingourselves, and the public doesn't like it.

In short, the notion being spread by reformers, of somebroad public support for these types of regulatory proposals, is abig con job. If the types of proposals being discussedhere today pass, when the public understands what has happenedthere will be a serious voter reaction. And one reason is becauseAmericans do treasure their First Amendment rights, and they dobelieve that their representatives should take seriously their oathto uphold the Constitution. In fact, in the Tarrance Group pollI've mentioned, 86% of respondents said that they would be lesslikely to vote a member of Congress or Senator who had voted forcampaign finance reforms which were unconstitutional. So the publicis hardly interested in reform at any price. And, as I have showntoday, efforts to ban or curtail issue advocacy, such asthose found in HR 1776-1777 and many other bills now before theHouse, are quite clearly unconstitutional.

Before Congress attempts to solve the problems of campaignfinance with more regulations burdening free speech rights, weshould take stock of the fact that the current regulatory system isresponsible for many of the evils we see in campaign finance. We donot need to plug "loopholes" in the system. Rather, we should scrapmost all of the present system of campaign finance regulation,remembering the admonition of the First Amendment to theConstitution, that Congress shall make no law abridging the rightsof free speech.

In closing, I encourage the members of this committee to examinethe evidence. The fervor to ban or limit soft money is based onimpressions created by those who have the most to gain from theirdemise. Further restrictions on soft money and PACs will onlyincrease the power of incumbents, millionaires, and the media,distort political debate and infringe on First Amendment rights.Millions of Americans will have their right of free associationtrampled and see valuable and irreplaceable sources of informationevaporate.

Edward H. Crane

Hearings on Campaign Finance Reform
Committee on Governmental Affairs
United States Senate