Free Money

Campaign finance "loopholes" are the best part of the system.

James V. DeLong from the August/September 2000 issue

(Page 3 of 5)

Lifeblood of the Party

The second big alleged loophole is called "soft money." State and national political parties are allowed to collect funds for general "party building" activities without having these count against the donors' annual contribution limits. Perhaps more important, these contributions can come from unions and corporations, entities that cannot give directly to campaigns at all. The parties must report the money to the FEC, and they must not coordinate their spending with campaigns.

The current deluge of soft money stems from a 1978 FEC advisory opinion that expanded the extent to which the parties could use such funds for purposes such as registration and get-out-the-vote drives. Predictably, these activities are now given an expansive reading, encompassing major electioneering. In 1992, the major parties collected $86 million in soft money, but its utility was still thought to be limited because everyone assumed that if they tried to push much beyond registration and get-out-the-vote drives, they would cross the line into illegal coordination. The FEC took the view that party committees were too close to the candidates to be independent and thus could never meet the requirement that expenditures on advertising or materials not be coordinated with a campaign.

Two things happened in 1996 to change this. The Supreme Court decided that a Republican state committee in Colorado that ran ads against a Democratic senatorial candidate was in fact independent of the Republican candidate. More important, President Clinton boasted of raising millions of dollars for early issue ads and personally vetting the campaign. The Republicans countered with their own spending spree, though they were slow off the mark, and soft money given to the parties reached $260 million that year.

Despite his boasts, the enforcers did nothing about Clinton, which had to mean they did not regard his actions as "coordination" that destroyed the "independence" of the expenditures. But if these actions were not "coordination," then nothing is, which means that the noncoordination requirement is dead. The FEC is now conducting a rulemaking proceeding to define coordination.

By 2000, Hillary Rodham Clinton's Senate campaign was telling people to make a big contribution and let the campaign staff break it down into hard money for the campaign, hard money for her related campaign committee, and soft money to be used by other committees for "party building." The president was equally overt, crisscrossing the nation to raise money from corporations and wealthy individuals, and the Republicans responded in kind, pulling out their own gate attractions, such as they are, and tapping into business executives and conservative entrepreneurs.

Celebrity Skin

The third gap in the law, though no reformer would dream of calling this a loophole, is voluntary activity by individuals, which is not covered by contribution limits. This exemption is an important reason for the rising political power of celebrities. The most conspicuous recent example of celebrity volunteering was Robin Williams' performance at the Democratic National Committee's record-breaking "barbecue bash" in late May, which raised $26.5 million. On a more modest but still impressive scale, an entertainer can contribute her time for a fundraiser; draw, say, 10,000 people at $100 a pop; and net a cool $1 million for the campaign. The presumptively corrupting industrialist can contribute a mere $5,000. Politicians spend a lot of time in Hollywood these days.

Another important effect of allowing unlimited voluntary activity is to give power to unions and to big government, categories that are increasingly overlapping. About 1.7 million civilians work for the federal government, and almost 13 million more earn a living producing goods and services for the feds, not counting state and local workers paid with federal dollars. State and local governments employ 17 million people. Add it up, and 22 percent of the civilian labor force of 138 million people works for governments. Public sector employees are much more likely to be unionized than are private sector employees: Unions cover 60 percent of the direct federal work force and 38 percent of state and local employees, compared to less than 10 percent of the private sector work force. All told, about 40 percent of the nation's 16.2 million union members are public employees.

Wall Street Journal columnist Paul Gigot notes that "government has become the ultimate special-interest lobby, always arguing for more government and always in apocalyptic terms." The numbers bear him out. In the 1997-98 election cycle, the American Federation of State, County, and Municipal Employees (AFSCME) was number three on the list of PAC contributions, with $2.4 million, all to the Democrats. (Numbers one and two were the realtors and the trial lawyers.) Media references to the role of "unions" in campaigns are largely references to public employees, and under the current laws their power is considerable. Unions can establish PACs to give hard money, and they can use dues for soft money and issue advocacy. In theory, a worker has a right to object and get back the portion of his dues used for politics, but this right has been gutted by administrative and judicial actions.

Unions are also the infantry of elections. They get out the vote, go door-to-door, and stuff envelopes. In this year's New Hampshire primary, more than 2,000 federal employees worked for Al Gore. In New York, union members distributed 1 million Gore fliers at 10,000 workplaces just before the March primary.

Current discussions of "reform" focus primarily on soft money, but many reformers also want to control issue advocacy, since they regard it as unseemly for those with an interest in the outcome of elections to interfere. No one talks of tightening the rules governing voluntary activity.

Access Fees

A fair amount of support for control of soft money comes from businesses. Business gets a load of grief from the media for financing politicians, but from the perspective of the givers the system looks like extortion rather than bribery. They fear that failing to pony up means that telephone calls will be unanswered, submissions unread, and representatives left standing out in the hallway while deals are cut in the conference room. So, they think, why not go with the flow, join the public indignation, and encourage Congress to outlaw soft money?

Incumbents could easily be persuaded because soft money tends to go to the parties themselves, where the leadership can use it as a tool of party discipline. The parties could also use soft money to fund challenges to incumbents of the other party, or even to fund primary challenges to some of their own members. Democratic and Republican incumbents alike can agree on the urgent need to avoid such an outrage. Since a nonincumbent finds it impossible to raise significant hard money, soft money is the only real threat to permanent tenure.