McConnell Bipartisan Campaign Reform Act - The Campaign Finance ...

ELECTION LAW JOURNAL Volume 3, Number 2, 2004 © Mary Ann Liebert, Inc.

Political Parties Under the Post-McConnell Bipartisan Campaign Reform Act MICHAEL J. MALBIN

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considers some implications for the political system of the federal soft money ban passed by Congress and interpreted by the Supreme Court in McConnell v. FEC (124 S. Ct. 619 [2003]). Political scientists for several years have been debating whether and how a ban on soft money might hurt the political parties. These debates were reflected on the floor of Congress and in briefs filed with the courts in McConnell v. FEC. By upholding most of the Bipartisan Campaign Reform Act (BCRA) the Supreme Court assured the debate would continue. But by overturning the law’s attempt to force parties to choose between independent and coordinated spending, and by suggesting that the legal path might not be completely clear for non-party political committees to accept soft money, the Court gave party optimists even more reason to be hopeful. This article argues that parties may well be able to raise and spend enough hard money to make up for the loss of soft money, and non-party groups may face significant obstacles to becoming major funding rivals to the parties. The analysis concludes with implications of the Court’s decision for presidential public funding and spending limits. To clear away some easy debater’s points, let us begin by acknowledging the obvious. The six major party national committees raised alHIS ARTICLE

Michael J. Malbin is Executive Director of The Campaign Finance Institute, a nonpartisan 501[c][3] institute in Washington D.C., and a Professor of Political Science, University at Albany, SUNY. Neither the author nor CFI took any part in McConnell v. FEC.

most $500 million in soft money in 2001–2002. This was more than 40% of their total receipts. If they cannot replace what they lose, having less money is bound to hurt. With that out of the way we can get to more interesting questions: 1. Will the parties in fact replace at least a significant part of the forbidden soft money with hard money? Do they have the incentive, means and potential donor base to do so? How difficult will it be and how long might it take? 2. If the parties do raise the money can they— and will they—continue to pay for the same kinds of party activities as they did during the soft money years, heavily concentrating their efforts on a few marginal states or districts? If they shift to different activities—for example, from television advertising to voter mobilization—will BCRA in fact be responsible for the shift? Conversely, if they do not replace all of the lost money, how important will be the loss of activities they can no longer afford? 3. Will pre-BCRA activities and funding sources simply be displaced from the parties to nonparty organizations? 4. Will the new mix of activities and organizations be good for the parties? 5. Will the new mix of activities and organizations, if there is one, be better or worse than the pre-BCRA mix for the country? This article will focus on the first three sets of questions. Readers may judge the last two for themselves after they see the answers to the

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first three. The analysis is based on the framework in the pre-decision Campaign Finance Institute book, Life After Reform: When the Bipartisan Campaign Reform Act Meets Politics.1

INCENTIVES AND MONEY The first question in our first group is about incentives. How strong will be the impulse to replace soft money (which is comparatively easy to raise) with hard money? We approach that subject indirectly by asking first about the incentives that led to the parties’ strength before BCRA. One assumption sometimes made in political circles is that the national parties became stronger in recent years because they raised money. While that assumption is partly correct it also in some ways has the causal sequence confused. The national party committees have become more important over the past twenty-five years because the public and party officials who control them have had a strong motivation to build them up. Contrary to some accounts, that incentive had little to do with the public officials’ own reelection: the personalized advantage that comes with incumbency can be and was quite strong in a system with weak parties. Parties have become stronger because most incumbents want something more from their careers than a permanent sinecure: most put in the long hours and do the hard work of politics because they want to wield meaningful power in institutions whose policy outcomes matter to them. The difference between majority and minority control is enormously important for achieving those goals. Nothing focuses a politician’s mind more clearly than being on the edge of control—whether he or she is out of power looking up, or in power and feeling threatened. The Republicans strengthened their national party committees in the late1970s, after suffering through the post-Watergate elections of 1974 and 1976. House Democrats followed suit in the early 1980s. Against some opposition, Speaker Tip O’Neill supported Democratic Congressional Campaign Committee (DCCC) Chairman Tony Coelho’s plan to reinvest a substantial portion of the committee’s fundraising receipts to build the

DCCC’s mailing lists, instead of handing the money out to safe incumbents to use for their reelection. 2 Democrats were willing to swallow that pill because they had just lost the White House and Senate. They were feeling threatened. Not coincidentally, as David Rohde has argued, the individual officeholders also were more willing to act together as a team because they and their supportive electorates were becoming more like each other within the parties, and more different across them. Northeastern constituencies once won by liberal Republicans were now Democratic; the “solid Democratic” South once home to conservative Democrats was now made up of conservative Republican districts and districts won by Democrats who were just as liberal as anywhere else. As a result, Republicans and Democrats from anywhere were more like their co-partisans and less like the opposition.3 The point is made more clearly in Table 1. The first entry shows an increase in districts with split election results (voting one party for the presidency and the other for the House) from the 1950s into the middle period, followed by a decline since 1992. Whether because of a change in voters, district lines, or candidates, the voters are lining up their results more consistently across offices.4

1

Malbin, Michael J. ed. 2003. Life After Reform: When the Bipartisan Campaign Reform Act Meets Politics. Lanham, MD: Rowman & Littlefield. 2 Herrnson, Paul S. 1988. Party Campaigning in the 1980s. Cambridge MA: Harvard University Press. Kolodny, Robin. 1998. Pursuing Majorities. Norman: University of Oklahoma Press. Menefee-Libey, David. 2000. The Triumph of Campaign-Centered Politics. New York: Chatham House. 3 Rohde, David W. 1991. Parties and Leaders in the Postreform House. Chicago, IL: University of Chicago Press. 4 For the argument that voters are becoming more partisan, see Jacobson, Gary C. 2000. “Party Polarization in National Politics: The Electoral Connection.” In Polarized Politics: Congress and the President in a Partisan Era, edited by Jon R. Bond and Richard Fleisher. Washington DC: CQ Press. 9–30. Also see Weisberg, Herbert F. 2002. “The Party in the Electorate as a Basis for More Responsible Parties.” In Responsible Partisanship: The Evolution of American Political Parties Since 1950, edited by John C. Green and Paul Herrnson. Lawrence KS: University Press of Kansas. 161–79.

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POLITICAL PARTIES POST-MC CONNELL BCRA TABLE 1. PARTY UNITY

IN

CONGRESS

Split tickets in elections Percentage of districts with split results for President/House in presidential election years

1956–1960 28

1964–1988 36

1992–2000 23

Partisan roll call voting in Congress Percentage of votes on which 50% of one party opposed 50% of the other House Senate Average party unity scores on partisan roll calls House Republicans House Democrats Senate Republicans Senate Democrats

1953–1962

1963–1972

1973–1982

1983–1992

1993–2003

48 45

39 39

39 44

36 46

54 58

68 64 63 60

70 68 66 67

74 79 76 76

88 83 87 86

Sources: Split Ticket Voting: N. Ornstein, T. Mann and M. Malbin, Vital Statistics on Congress 2001–2002 (AEI, 2002), p. 78. Partisan Roll Call Voting: “Party Unity History” in CQ Weekly, January 3, 2004, p. 49.

Within Congress, fewer than 40% of the roll call votes from 1963 through 1993 had a majority of one party voting against a majority from the other party. (This is Congressional Quarterly’s definition of a “partisan vote.”) Since 1993 more than half of the votes fit this description. In 2003 the percentage of partisan votes was 52% in the House and a record high of 67% in the Senate. Party Unity scores measure the number of times a Representative or Senator votes with his or her party on partisan votes. Not only did the percentage of partisan votes go up, as we just saw, but the Members were more unified in their voting. From 1963 through 1983, the typical Member voted with his or her party on partisan votes less than 70% of the time. The score went into the 70s during the Reagan years. Since 1993 they have typically been in the middle to high 80s. In 2003, Party Unity scores averaged 85% for the Senate Democrats, 87% for House Democrats, 91% for House Republicans, and a remarkable 94% for Senate Republicans. The House Republican, Senate Republican and House Democratic scores were record highs for their parties; the only higher Senate Democratic scores have all been since 1997.5 There can be no question therefore, that the parties in Congress are becoming more unified and more distinct. This movement began before soft money. Roll calls comprise only one piece of the story about the parties in Congress. Barbara Sinclair has shown in much of her writing that a key

element has been the Members’ willingness to strengthen their leaders’ role at every stage of the process.6 The view in this article is that the same motives that persuaded followers to strengthen their legislative leaders in the 1980s were the ones that led them to support more active party campaign committees. As strong as these motives were during the 1980s, they became even stronger a decade later. One clear way to test Members’ motivations is to see what they will give of their own time or money to help the party. There were slight stirrings of this during the 1980s in the House. (Member contributions have never been much of a factor in the Senate.) The importance of Members as donors took off in the House during the 1990s. The following figure includes contributions from Members’ principal campaign committees, as well as from PACs they control, to other House candidates.

5

Congressional Quarterly Weekly. 2004. “Party Unity History.” January 7: 11,49. 6 Sinclair, Barbara. 1995. Legislators, Leaders and Lawmaking: The U.S. House of Representative in the Postreform Era. Baltimore: John Hopkins. Sinclair, Barbara. 2000. “Hostile Partners: The President, Congress and Lawmaking in the Partisan 1990s.” In Polarized Politics: Congress and the President in a Partisan Era, edited by Jon R. Bond and Richard Fleisher. Washington DC: CQ Press. 134–53. Sinclair, Barbara. 2002. “The Dream Fulfilled? Party Development in Congress, 1950–2000.” In Responsible Partisanship: The Evolution of American Political Parties Since 1950, edited by John C. Green and Paul Herrnson. Lawrence KS: University Press of Kansas. 121–40.

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FIG. 1. Contributions from House Members’ campaign committees and PACs to candidates, 1990–2002. Source: Bedlington, Anne H. and Michael J. Malbin. 2003. “The Party as an Extended Network: Members Giving to Each Other and to Their Parties.” In Life After Reform: When the Bipartisan Campaign Reform Act Meets Politics, edited by Michael J. Malbin. Lanham, MD: Rowman & Littlefield, p. 127.

As Figure 1 shows, Democratic giving was higher than Republican giving in 1990 and 1992. It was also directed toward incumbents. In 1993 and 1994, however, House Republican Whip Newt Gingrich and NRCC chairman Bill Paxon persuaded colleagues they had a real chance to become a majority. (At the beginning of the year, no one expected that to happen as quickly as 1994.) To help get to a majority they persuaded Republican members to triple their giving to other candidates between 1992 and 1994, directing the money almost entirely toward challengers and open seat candidates. The House Republicans then redoubled their giving to candidates between 1994 and 1996, using most of the money this time to protect vulnerable freshman. Democrats were slower to respond, although they did shift toward giving more to non-incumbents in 1996 and 1998. By 2000, Democratic giving also accelerated, almost catching up to the Republicans. By 2002 the Members in both parties were giving almost nine times as much to other House candidates as the Members had 10 years before. The Members were not only giving to other House candidates. They also were giving large contributions directly to their congressional campaign committees. (The Federal Election Campaign Act permits candidate committees to make unlimited contributions to party committees.) Figure 2 shows these Republican and Democratic contributions from 1990 through 2002, in millions of dollars. These contributions increased from practically nothing in the early 1990s to more than $24 million in 2002. Equally

impressive has been the importance of these contributions as a percentage of the party committees’ total hard money fundraising. In 2002, House Members’ own campaign committees and leadership PACs accounted for 13% of the NRCC’s hard money as well as a stunning 24% of the hard money raised by the DCCC. Thus, the total amount of House Member giving to other candidates and to their parties approached $50 million, compared to less than $3 million the decade before. While this still represents only a small part of the combined hard and soft money the parties raised in 2002, the sharp growth in Members’ giving speaks volumes about their motivations. They became more motivated when control of the chamber was understood to be at stake, and their motivation has remained intense since. And while it is true that Member also give to advance their positions within the chamber, the more interesting fact is that the Members support a leadership system that rewards contributing Members to support collective party goals. This is quite different from the situation of 20 years ago when subcommittee and committee chairs owed their leadership positions to the votes of a more diffuse group of colleagues, and Members gave to other incumbents to further their own ends directly. The growth in the larger combined pool of hard and soft party money for all of the national committees tracks the timing of the story we have been telling so far (Table 2). Party soft money appears to have grown slowly in 1980 and 1984, taken a significant step forward in

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POLITICAL PARTIES POST-MC CONNELL BCRA

FIG. 2. Contributions from House Members’ campaign committees and PACs to congressional party campaign committees, 1990–2002. Source: Bedlington, Anne H. and Michael J. Malbin. 2003. “The Party as an Extended Network: Members Giving to Each Other and to Their Parties.” In Life After Reform: When the Bipartisan Campaign Reform Act Meets Politics, edited by Michael J. Malbin. Lanham, MD: Rowman & Littlefield, p. 134.

1988 and 1992 (when FEC disclosure of soft money began) and then exploded in 1996. As was the case with Members’ hard money contributions, soft money exploded because a public official felt threatened by the opposition. AfTABLE 2. H ARD

Democrats Hard Soft Total Republicans Hard Soft Total Grand total

AND

SOFT MONEY RECEIPTS

ter the Republicans won a majority in the House and Senate in 1994, President Clinton wanted to use advertising to regain control of the political agenda so he could run his 1996 reelection campaign on his issues. As is well

OF THE

NATIO NAL PARTY COMMITTEES , 1992–2002

1992

1994

1996

1998

2000

2002

$163.3 $36.3 $199.6

$132.8 $49.1 $181.9

$221.6 $123.9 $345.5

$160.0 $92.8 $252.8

$275.2 $245.2 $520.4

$217.2 $246.1 $463.3

$264.9 $49.8 $314.7 $514.3

$244.1 $52.5 $296.6 $478.5

$416.5 $138.2 $554.7 $900.2

$285.0 $131.6 $416.6 $669.4

$465.8 $249.9 $715.7 $1,236.1

$441.6 $250.0 $691.6 $1,154.9

Source: Federal Election Commission, Press Release, March 20, 2003.

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known, soft money issue ads were the result— written cooperatively (we are told by presidential consultant Dick Morris) by the DNC and White House.7 And just as the Democratic Congressional Campaign Committee imitated the Republicans’ innovations in the 1980s, the situation was reversed over soft money. This time the President innovated and the Republicans followed. But in both cases, the relationship between incentive, innovation, success and imitation was the same: a strong political incentive led to a search for innovation. Successful fundraising innovations produced money. And as with all political innovations that face market tests every election, successes were copied and soon became normal. BCRA essentially is telling the parties to discard one set of innovations, but it does not (and cannot) change the motives that led to those innovations. We have every reason, therefore, to expect the parties to look intensively for replacements.

FINDING NEW HARD MONEY We have established the motive; the question now turns to means. How difficult will it be for parties to replace the soft money they are losing? Table 3 shows they are well on their way. According to financial reports filed with the Federal Election Commission, the six major national party committees raised more hard money 2003 than they raised in hard and soft money combined during all of 1999. While they are not up to the combined hard and soft money levels of 2001, this is an impressive start. The Republicans, as expected, are ahead of the Democrats, whose small donor base has weakened, partly through inattention. Republicans have increased their hard money by one-third over the level of 2001 and have almost doubled their hard money funds from 1999. The Republicans thus are well ahead of their combined hard and soft money pace of 4 years ago. The Democrats are moving more slowly, but their hard money is up 59 percent from 2001 and 72 percent from 1999, making up threefourths of the 1999 soft money. Moreover, the early indications show that the DCCC has re-

vived the direct mail program that in the past was crucial to tapping small donors. According to one account, it received money from 170,000 new donors in 2003, more than three times as many as in 2001.8 It is too early to be sanguine about the outcome, however, because the off-year is not when the parties raise most of their money. The parties raised 68% of their 2001–2002 funds during 2002; they raised 78% of their 1999–2000 funds during 2000. This still leaves each party with a hill to climb in 2004. Using hard money alone, they should readily be able to surpass their combined hard and soft money totals for 1998, but it remains to be seen whether they can immediately equal 1996, 2000, or 2002. This is particularly true of the Democrats, who are starting with fewer small donors than the Republicans. In the long run, what may be most needed for the financial health of American politics is to expand the donor base beyond the small pool of those who now give. According to a Campaign Finance Institute study of presidential elections, only about 775,000 donors gave to all presidential candidates combined in the 2000 election. About 175,000 of these gave $200 or more; about 110,000 of these gave $1000 or more. More than 500,000 gave $100 or less (averaging $52) to any one candidate.9 There has been no similar count of the number of small donors to congressional candidates, parties or PACs. (Contributions of less than $200 do not normally have to be reported; presidential data are available from the candidates’ matching fund submissions.) According to the Center for Responsive Politics, fewer than 800,000 donors

7

Morris, Dick. 1999. Behind the Oval Office: Getting Reelected Against All Odds. Los Angeles CA: Renaissance Books. 8 Bolton, Alexander and Klaus Marre. 2004. “House Dems Unfazed by Loss of Soft Money.” The Hill. January 14. www.thehill.com/news/011404/dems.aspx. Accessed January 14, 2004. 9 Campaign Finance Institute. 2003. Participation, Competition, Engagement: How to Revive and Improve Public Funding for Presidential Nomination Politics. Report of the Campaign Finance Institute Task Force on Presidential Nomination Financing. Washington DC: Campaign Finance Institute. 121pp. Available: www.Campaign FinanceInstitute.org. See Chapter 3.

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POLITICAL PARTIES POST-MC CONNELL BCRA TABLE 3. PARTY FUNDRAISING

IN

Republicans RNC Hard Soft Total NRCC Hard Soft Total NRSC Hard Soft Total Jt S/H (Soft) Combined Republican Hard Soft R Total

ODD -NUMBERED YEARS, 1999–2003 1999

2001

2003

44.0 29.2 73.2

67.3 48.1 115.4

107.9 ** 107.9

34.9 17.5 52.4

41.6 28.2 69.8

72.4 ** 72.4

16.4 13.5 29.9

25.0 23.8 48.8

26.4 ** 26.4

95.3 60.2 155.5

133.9 100.1 234.0

206.6 ** 206.6

26.4 23.1 49.5

28.5 29.8 58.3

43.8 ** 43.8

15.2 18.4 33.6

16.7 18.1 34.8

28.6 ** 28.6

Democrats DNC Hard Soft Total DCCC Hard Soft Total DSCC Hard Soft Total Combined Democratic Hard Soft D Total

13.9 13.0 26.9

14.5 20.7 35.2

22.8 ** 22.8

55.5 54.5 110.0

59.7 68.6 128.3

95.2 ** 95.2

Combined two-party total Hard Soft Grand total

150.8 114.7 265.5

193.6 168.7 362.3

301.8 ** 301.8

Source: Federal Election Commission.

contributed $200 or more for any federal purpose—candidate, PAC, or party—in 1999– 2000.10 In other words, about one-quarter of one percent of the public gave $200 or more to any federal political committee. If we assume that there are four or five small donors for every $200 donor—as was true for the presidential race—it would mean that about 1% of the population gave any money at all to a federal candidate, party or PAC. This number is lower than those who say in a sample survey that they give, but a similar disparity—between

the number of self-reported contributors in surveys and the smaller number that turn up in official disclosure reports—has shown up elsewhere in our work to date.11

10

Makinson, Larry. 2001. “The Bottom Line in 2000.” Capital Secrets Vol. VIII, No. 3, Summer 2001. www.opensecrets. org/newsletter/ce76/btmline.asp. Accessed January 18, 2004. 11 Boatright, Robert and Michael J. Malbin. 2003. “Political Contribution Tax Credits and Citizen Participation.” A paper presented at the Annual Meeting of the American Political Science Association, August 28–31.

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In fact, the participation rate is so small that there is substantial room for growth even at the higher end of the income scale, where the fundraising comes more easily. About 90% of people who earn $100,000 or more appear not to give now, along with perhaps 98% or 99% of those who earn less. And even though higher income people are somewhat more likely to be Republican than Democratic, there also are more than enough untapped Democrats to multiply the current Democratic donor pool many times over.12 This all suggests that the parties should— with work—make up the money they have lost under BCRA. They will have to find new donors, but they have a strong incentive to do so. And the means are now being developed to make fundraising from small donors easier. Howard Dean and George W. Bush have brought impressive numbers of new donors into the system. It may be harder for the parties to tap first-time donors, who are more likely to respond to personalities or issues than institutions. But once a new donor gives money to a candidate, can fundraising appeals from the party be far behind? SPENDING—INDEPENDENT AND OTHERWISE Several House Members and Senators who supported BCRA said they did not like to see parties and interest groups spending so much on negative advertising in the most hotly contested races. (The more cynical view was that incumbents did not like to see the ads run against themselves.) The assumption seemed to be that a law would change the content of campaigning by doing two things: first, by reducing the amount of money available for advertising by cutting out soft money and, second, by forcing the national parties to make a choice between coordinated and independent spending. In some optimistic predictions, it was argued that the resulting situation would be good for political competition and for grassroots political organizing. The reasoning was as follows: Before soft money, parties could give or spend only a fixed amount of hard money per district or state in the form of direct contributions or coordinated spending. Because the par-

ties were able to raise more money than they could use within these spending limits in the most hotly contested races, they used the extra money to support slightly less competitive non-incumbents. Studies, including one by this author, have shown that political party hard money has been the most pro-competitive, least pro-incumbent source of private funds in the system. 13 Under the soft money system, however, the spending limits effectively were removed and it made strategic sense in a closely divided country for the parties to save their money for the few races whose outcomes could determine majority control in the chambers. Virtually none of the soft money and none of the party funded issue advertising helped support or create competition because the soft money and issue ads went to races in which two viable candidates were already competitive.14 Without soft money, and with BCRA creating a strong disincentive for unlimited independent spending by the parties, it was said that the parties would probably go back to giving more support to potentially viable candidates by spreading their money around to more districts and states. These assumptions no longer seem plausible. As we have just seen, the parties within one or two elections should be able to replace most of their lost soft money with hard money. If they do, and if they are allowed to make unlimited independent expenditures, there is no reason to believe their spending choices will be different than they have been for the past several years. They may shift some resources into grassroots voter mobilization, as the Republicans did in 2002. That will not be because of BCRA but because mobilization is an efficient way to win a 12

Campaign Finance Institute. 2003. As cited in footnote 9, at p. 106. The low rate of participation by people with average incomes is an argument for expanding the donor base through an income-limited tax credit for small donors, as well as for presidential public funding system for the primaries that includes a multiple match for the first $100 from each contributor. Ibid, ch. 3 and 7. 13 Malbin, Michael J. and Thomas L. Gais. 1998. The Day After Reform: Sobering Campaign Finance Lessons from the American States. Albany NY: Rockefeller Institute Press, distributed by The Brookings Institution. 14 Dwyre, Diana, and Robin Kolodny. 2002. “Throwing Out the Rule Book: Party Financing of the 2000 Election.” In Financing the 2000 Elections, edited by David B. Magleby. Washington, D.C.: Brookings Institution.

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closely contested low turnout election.15 But if party officials think expensive media buys are the best ways to help candidates in key races, the parties will use as much independent spending as they can afford in 2004 to serve the same political purposes as soft money issue ads served between 1996 and 2002. Some legal issues relating to independent party spending have not been fully resolved. The Supreme Court held in the 1996 case of Colorado Republican Federal Campaign Committee et al. v. Federal Election Commission, 518 U.S. 604 (1996), that political have the same rights as other organizations to make independent expenditures. The case is often referred to as “Colorado I,” to distinguish it from the successor case, Colorado II, in which the Court upheld limits on contributions and coordinated spending by the parties (533 U.S. 431 [2001]). In Colorado I, the Court rejected the idea that all party expenditures expressly advocating the election or defeat of a candidate must automatically be treated as coordinated expenditures as a matter of law. Instead, the plurality opinion written by Justice Breyer (joined by Justices O’Connor and Souter) said that any finding of coordination must be based on the empirical facts of a particular case. In Colorado I, the party had not yet selected a nominee and the evidence showed the party to have developed the advertising without “any general or particular understanding with a candidate” (518 U.S. at 614). The Court was silent about elections with other fact situations, such as post-nomination spending. It also specifically limited the holding to Senate and House elections: A different provision, not at issue in this case, §441a(d)(2), limits party expenditures in connection with presidential campaigns. Since this case involves only the provision concerning congressional races, we do not address issues that might grow out of the public funding of Presidential campaigns (518 U.S. at 611). While the case did not decide anything about post-nomination independent expenditures, political parties acted as if the fact-based method used in the case would allow them to make postnomination expenditures so long as they main-

tained their independence. To accomplish this task, while preserving their ability to make coordinated expenditures, the National Republican Senatorial Committee in 1996 transferred funds to a separate staff that it in effect “walled off” from the rest of the committee—putting it in a different location, using separate vendors, and not discussing advertising decisions with it. According to Anthony Corrado: Because this new office was a separate legal entity that had not spent money in coordination with the candidates, it could legally spend unlimited amounts of money. More important, since it was spending money independently, the new operation could broadcast ads that expressly advocated the election or defeat of a particular candidate . . . . By the end of August they had spent at least $700,000 to air independent television ads in Rhode Island, Louisiana and Wyoming. By mid-October, partial reports filed with the FEC revealed that the committee had already funneled at least $2.8 million into open Senate races.16 In the end, the NRSC put $9.7 million into independent spending in 1996. The Democrats did not use the same tactics, choosing to file a preelection lawsuit that was dismissed, as well as an unsuccessful FEC challenge. Democrats did use independent spending in later years: the DCCC spent about $2 million in 2000 on phone

15

For a parallel argument with respect to interest groups, see Boatright, Robert, Michael J. Malbin, Mark J. Rozell, Richard M. Skinner, and Clyde Wilcox. 2003. “BCRA’s Impact on Interest Groups and Advocacy Organizations.” In Life After Reform: When the Bipartisan Campaign Reform Act Meets Politics, edited by Michael J. Malbin. Lanham, MD: Rowman & Littlefield, pp 43–60: 54–56. See also Malbin, Michael J., Clyde Wilcox, Mark J. Rozell, and Richard Skinner. 2002. New Interest Group Strategies – A Preview of Post McCain-Feingold Politics? Washington, D.C.: The Campaign Finance Institute. Available: www. CampaignFinanceInstitute.org. A round table on this paper was published in Election Law Journal, Vol. 1, No. 4 (2002), pp. 541–56. 16 Corrado, Anthony. 1997. “Financing the 1996 Elections.” In The Election of 1996: Reports and Interpretations by Gerald M. Pomper, Walter Dean Burnham, Anthony Corrado, Marjorie Randon Hershey, Scott Keeter, Wilson Carey McWilliams and William G. Mayer. Chatham NJ: Chatham House. 135–71, 158.

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banks and another $1.3 million in 2002. For most years, however, most party committees let this tool lie unused, as soft money issue advertising became the unlimited spending of choice. The issue of post-nomination spending thus did not face a direct legal test before 2002. BCRA then made the timing issue moot. In the section prohibiting parties from making coordinated and independent expenditures in the same election, the new law explicitly applied the choice to the post-nomination time frame, making it clear that the statute recognized post-nomination independent spending as potentially valid. However, there remains the question of defining what constitutes an independent versus a coordinated expenditure. The FEC’s post-BCRA regulations use the same definition of “coordination” for a party and non-party committee, but the term “independent expenditure” is not simply the opposite of a coordinated one. An “independent” expenditure was defined by the Court in McConnell as an uncoordinated communication using words of express advocacy, such as “vote for” or “vote against” a candidate, communicated through any medium at any time. After defining “independent expenditure” to include only express advocacy, and noting that the evidence shows express advocacy rarely to be used in political communication by parties or candidates, the Court said that the government could not possibly have had a substantial interest in restraining this form of speech because effective uncoordinated speech need not advocate the election or defeat of a candidate expressly. After all, the Court noted, that is why Congress reached out to define “electioneering” by non-party groups in Title II of BCRA. The space left in the law for uncoordinated, non-express, politically relevant speech, may be more important for non-party than party actors because that space might conceivably still leave some with a sphere for unregulated activity. The statute seems to regulate four categories of speech or activity in addition to its regulation of contributions. First, coordinated expenditures are the equivalent of contributions. Second, independent expenditures—uncoordinated express advocacy at any time and through any medium—may not be limited but disclosure is required.

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Third, electioneering (uncoordinated, targeted, candidate-specific broadcast advertising that does not contain words of express advocacy, and that appears within 60 days of a general election and 30 days of a primary) must be disclosed and may not be financed directly or indirectly from corporate or labor treasury money. Fourth, receipts or expenditures for any purpose by a political committee covered by the Federal Election Campaign Act (FECA) must be disclosed, and all of the committee’s receipts must satisfy FECA’s contribution limits. It is quite conceivable after BCRA that a nonparty activity might still be able to slide past these tests to permit unregulated expenditures. That is, one can imagine an organization—other than a political committee regulated by FECA— spending money for speech or an activity that is not express advocacy (because it contains none of the defining words) and not electioneering (because it is not a broadcast advertisement or because it appears before the statutory time period). We shall return to this point later, when we discuss non-party activities. In the immediate context, however, the national parties clearly are political committees, all their contributions are now limited and all their disbursements must be disclosed. The remaining question is whether they can engage in uncoordinated and therefore unlimited expenditures. To be considered coordinated an expenditure must meet any one of several content definitions for election-relation communications (express advocacy, electioneering and two others) and must also involve any one of the following five forms of conduct. The following bulleted items are derived from the Campaign Finance Institute’s online “Coordination eGuide” (www.cfinst.org/eguide/index. html), which in turn was based on the Code of Federal Regulations, 11 CFR §109.21. An election-related communication will be considered coordinated if it meets the content standard and any one of the following conduct tests: It is created or delivered at the request or suggestion of a candidate, party or agent or at the suggestion of a person paying for


the communication with the assent of the candidate, party or agent; or It reflects “material involvement” by a candidate, party or agent in decisions regarding the communication’s content, audience, method, outlet, timing, frequency or duration (note that general political discussions do not trigger the definition); or It is created, produced or distributed after one or more “substantial discussions” about the communication between the person or agent paying for it and the candidate (or his party or agent) in which information material to the communication (not general information) is conveyed about the candidate’s plans, projects, activities or needs; or It is paid for by a person who during the same election cycle was an employee or independent contractor of the candidate (or opponent, party or agent) and if that person also conveys or makes use of material information about campaign projects, plans, activities or needs; or It is created, produced or distributed by a commercial vendor after that vendor during the same election cycle has provided one or more listed services to the candidate (or opponent, party or agent) and if the vendor conveys material information about campaign plans, projects, activities or needs.

These definitions can be difficult to apply in real fact situations but nevertheless seem understandable. The standards reach more activity than the rules the FEC adopted in 2000, which BCRA rejected. Under the abandoned rule nothing was considered coordination unless the person paying acted in “cooperation, consultation or in concert with” the affected candidate, party or agent. The new standards reach a broader range of activities by incorporating tests of specific conduct, but they are not so broad as to capture every political discussion about general campaign strategy or issues that a party official might hold with a candidate. The new rules would not seem to prohibit the kinds of organizational steps the National Republican Senatorial Committee took to “wall off” its independent spending staff from the rest of the committee and its candidates. The party committee could continue to raise money

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and transfer it to the independent spending staff. Party leaders might also be permitted to give the staff broad strategic guidance, although this could be tricky because of the need to maintain a distance between general (and permissible) political discussions and specific discussions about tactics and communications. There will be other practical difficulties as well. For example, a shortage of top quality vendors in some campaign specialties could create some problems for party staffers who need their work to stay on the right side of legality. Such issues should send up a caution flag: party staff may have to make less than ideal political choices to preserve legal independence. But the problems are not unmanageable. Presidential races may present additional problems, as Justice Breyer suggested in Colorado I. The FEC explicitly refused to rule out independent spending by a party during the general election campaign in a presidential race, except if the party’s national committee is formally the candidate’s principal campaign committee (11 CFR §109.36). But the Commission also cautioned that there could be difficulties. In its published “Explanation and Justification” for the new rules the FEC noted that its pre-BCRA regulations “prohibited a national committee of a political party from making independent expenditures in connection with the general election campaign of a candidate for President.” The Commission backed away from this position in 2003 because such a “conclusive presumption” seemed inconsistent with Colorado I and BCRA. Nevertheless, the Commission included the following unusual comment in its published explanation: The Commission notes that if coordination occurs between a national committee and its Presidential candidate, it would negate the actual independence. . . . The Commission recognizes that the ability of a national party committee to make such independent expenditures may be unlikely in practice, but the Commission’s rules must allow for such a possibility. (Federal Register 68:448, January 3, 2003) The concern underlying this unusual comment (as well as the public statements filed be-

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fore the FEC during the period for comment on its draft regulations) seems to be that Presidents and presidential nominees exercise too strong a control over the national party committees to permit real independence. This author would be prepared for the sake of argument to suggest that it should be possible for a national committee to “wall off” staff in the same manner as the Senate campaign committee did in 1996. If such “walling off” were to occur, perhaps there could be unlimited independent party spending in the presidential campaign. But on the other side of the argument is the fact that no candidate is so identified with the work of the congressional committees, and none so completely controls whom those committees hire, as the President does with the national committee. A negative finding for national committee independent spending in a presidential race would still permit state, local and other party committees to raise and spend federal hard money for this purpose, but we do not expect much of this to occur. Without the national committee to help raise and steer the funds, most state parties will be too focused on their own races to make up the difference. We therefore conclude this section of the article with the following prediction: unlimited independent spending should replace soft money issue ads in closely contested House and Senate races, but the prospects for similar spending in the presidential elections are much less clear. We return to alternatives and consequences in the conclusion.

NON-PARTY COMMITTEES If the parties cannot spend unlimited funds for independent expenditures in the presidential race, pressure that was visible before McConnell for non-party committees to pursue a similar goal with funds from former party soft money donors will continue. Several such committees have already been formed and registered as political committees under Section 527 of the Internal Revenue code, or as non-profit social welfare advocacy organizations under Section 501(c)(4). In some cases, a “527” committee is affiliated with a 501(c), federal PAC,

or both. At least a half dozen prominent organizations that each talk about having multi-million dollar budgets have formed since BCRA took effect in November 2002. So far ones with Democratic leanings have been more visible than pro-Republican ones—partly, we suspect, because the Republican Party is doing better with their fundraising, partly because the contested Democratic presidential nomination (in a year when the Republican incumbent is unopposed for the nomination) makes it important for that side to become visible earlier, and partly because it was known early that President Bush would forego public funding and thereby avoid pre-nomination spending limits. President Bush’s decision would create particular problems for Democrats if their eventual nominee has accepted public funds because most publicly funded nominees in the past have spent almost their full spending limits to win the nomination. Such a candidate would have virtually no funds to use for campaigning between the effective end of the nomination contest and the convention, when general election funds become available. This is the period when parties spent some of their now prohibited soft money in 1996 and 2000. One of the better known new liberal organizations that has been trying to get ready for 2004 is America Coming Together (ACT), which describes itself on its website this way: “America Coming Together (ACT) will conduct a massive voter contact program, mobilizing voters to defeat George W. Bush and elect progressive candidates all across America” (www.amercacomingtogether.com/about). The President of ACT is Ellen Malcolm, the founder of EMILY’s List; the Chief Executive Officer is Steve Rosenthal, past political director of the AFL-CIO. Others prominently listed on the website include Carl Pope, Executive Director of the Sierra Club, and Andy Stern, President of the Service Employees International Union. Major donors reportedly have included financier George Soros and Peter Lewis, chairman of the auto insurance company Progressive Corporation, each of whom pledged $10 million. Americans for a Better Country (ABC), a proRepublican organization, filed its statement of organization with the IRS on September 4, 2003.

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On November 18, 2003 ABC filed an Advisory Opinion request with the FEC, describing its intended activities in terms that seemed directly to parallel ACT’s (AOR 2003–37). As of this writing, it appears likely that the FEC will respond to this advisory opinion while this article is in press. It is also likely to announce a new rulemaking on January 15 with the goal of publishing a regulation by Memorial Day.17 The outcome of the expected rulemaking is by no means obvious. In the past, “527” committees could avoid being regulated under the Federal Election Campaign Act if they did not engage in express advocacy. This was considered by many to be an anomaly because the organizations registered under Section 527 have to declare themselves to be political committees in terms that closely track the language in FECA. However, because the Supreme Court had defined the relevant terms in FECA narrowly in Buckley v. Valeo (424 U.S. 1 [1976]) to include only express advocacy, committees were able to claim the tax advantages of “527” status while avoiding FECA’s restrictions. After McConnell, FECA as amended by BCRA clearly contemplates a broader sphere of activities. Some of the new organizations seem to be operating under the assumption that the new reach extends as far as electioneering, but no further. One serious and plausible article by Edward B. Foley and Donald Tobin reaches a different conclusion. These authors urge looking at the character of the entity making the expenditure and not only the expenditure itself. They would ask two questions of the spending organization: First, is it a political committee? They would consider this question to be settled by an organization’s self-declaration as a “527” committee. Second, to determine whether a committee is a “federal” committee governed by FECA (as amended by BCRA), Foley and Tobin would ask whether a majority of its effort is devoted toward federal elections, as opposed to state or local elections. For that, they say the governing test should be BCRA’s definition of “federal election activity,” which includes registration and voter mobilization within 120 days of an election. If a “527” committee devotes a majority of its effort to such a federal election activity it should be considered

not only to be a political committee but a federal one, subject to all of FECA’s contribution limitations for a PAC: no corporate or labor contributions and no more than $5000 from any individual or other entity permitted to give money under the law.18 Three reform organizations—Democracy 21, the Campaign Legal Center and the Center for Responsive Politics—followed the essential outlines of this argument in a complaint filed on January 15 with the FEC against ACT, the Media Fund (an allied organization headed by former Clinton White House attorney Harold Ickes) and the Leadership Forum (an organization whose startup funds came from a contribution from the National Republican Congressional Committee, which was later returned).19 Obviously, the named organizations do not see the issues in the same way as the complaint. For one thing, the Court has never ruled on the constitutionality of limiting contributions—especially individual contributions—to an organization that neither contributes to nor coordinates with a candidate or party. For another, the statutory phrase “federal election activity” is used in BCRA primarily to define state and local party activities, all of which are presumptively assumed to aim at a political end. Finally, we do not yet know exactly what form ACT’s voter mobilization will take, or whether it will be carried out directly by the “527” political committee or some other legal entity such as an affiliated 501(c)(4) nonprofit committee. As a result, we will not know what ABC, ACT and others may do under the law until the facts have been clarified and the FEC makes a decision. However, until the FEC and courts resolve the issue it would be premature to as-

17

Doyle, Kenneth P. 2004. “FEC To Begin Writing New Rule That May Limit Tax-Exempt Groups.” BNA Money & Politics Report. January 14. 18 Foley, Edward B. and Donald Tobin. 2004. “The New Loopole?: 527s, Political Committees, and McCain-Feingold.” Money & Politics Report. January 7, 2004. Washington DC: BNA. Available: www.bna.com/moneyandpolitics/ loophole.htm 19 Wertheimer, Fred. 2004. “FEC Complaint Filed by Three Campaign Finance Groups Against ‘527 Organizations’.” Democracy 21 Press Release. January 15, 2004. Washington DC. www.democracy21.org

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sume that corporate and labor treasury funds, or large donations from individuals, will flow readily to underwrite political committees whose purpose is to influence federal elections. As these comments indicate, some people have suggested that non-profit 501(c)(4) advocacy organizations may carry out some relevant functions instead of a “527” committee. 501(c)(4) entities are permitted to use their treasury funds, which may include corporate or labor contributions, to engage in political advocacy but not electioneering or express advocacy. However, money spent for political activities may be taxed and the activities cannot become the organization’s primary purpose without threatening the entire organization’s tax status. Hence, if a donor’s primary purpose is political, that donor must be aware that at least half of the organization’s efforts must not be used for political advocacy. Influencing an election therefore would seem to make the most sense for an ongoing organization that does in fact have another real purpose. But this approach also has problems. To take a concrete case and turn it into a purely hypothetical one: Planned Parenthood created a “527” committee that accepted a multi-million dollar contribution in 2000 for television electioneering from Jane Fonda’s Pro-Choice Vote. If Planned Parenthood wanted to accept a similar check in the future, it (or a similar organization) could conceivably do so directly into its 501(c)(4) and then use the funds for voter mobilization. However, the hypothetical example illustrates the constraints. If a political activity becomes too large a share of its activities, the organization’s tax-exempt status would be threatened. There are also internal non-legal constraints. Planned Parenthood is an organization that provides direct service to clients. Its political activities in 2000 already had made some of its supportive health professionals uncomfortable 20 and this would add an additional layer of discomfort for people who are crucial to the organization’s mission. Moreover, even if the political activity represents a minor portion of the organization’s work, the money spent for politics could be taxed at an amount up to the ordinary corporate income tax rate. Whether a tax would be

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due would turn on whether the voter mobilization meets the IRS’s standards for being nonpartisan. Thus, even though there will be a temptation to use existing organizations in the nonprofit sector for political ends, these may lead to strains within the nonprofit sector. It also may be highly inefficient for an organization whose primary purposes are political. And in any case we know from the experience of the Christian Coalition and GOPAC that this path could involve legal risks.

CONCLUSION The Supreme Court’s changes to BCRA were even smaller than most of the law’s supporters predicted. But one significant change potentially will matter a great deal. By freeing the parties to spend unlimited amounts independently, the Court permits parties to return to their pre-BCRA importance in congressional elections as soon as they can find hard money to replace soft. Ironically, the Republicans who opposed the law are likely to reach that point more quickly than the Democrats who supported it. Presidential elections present a more complicated picture for independent spending by the parties. This would seem to create opportunities for outside soft money spending groups to flourish but, as we have seen, these groups face uncertainties that complicate their takeoff. It is possible that neither of these presidential avenues will work: the parties may not be able to spend independently and the outside groups could be forced to adhere to a PAC’s contribution limits. If so, that will add to the arguments in favor of reforming the public funding system for presidential nominations. The spending limits in the current system are too low for a frontloaded primary calendar. They also leave participating candidates trapped by a fixed limit, with no escape hatch,

20

Boatright et al. 2003. “BCRA’s Impact on Interest Groups and Advocacy Organizations,” as cited in footnote 15, p. 53.

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if one of their opponents should refuse matching funds to get out of the limits. Under the current system, one person dropping out creates pressures for others to follow. When Steve Forbes ran a competitive self-financed campaign for the Republican nomination in 1996, Bob Dole spent every dollar he could within the limit to defeat Forbes in the primaries. When Dole in effect captured the nomination by late March, he could not spend any more money while his general election opponent, President Clinton, was unopposed in the primaries and free to pay for advertising to define his case against Dole. Any Republican response before the convention came from soft money issue ads. Four years later George W. Bush, who was running against the same Forbes among others, cited Dole’s example as his reason for not adhering to spending limits. In 2004 Howard Dean cited Bush and John Kerry cited Dean. To the extent that the concern is about the period after the nomination is sewn up and before the conventions, independent spending by the parties could conceivably replace soft money issue ads if it can pass the relevant legal tests. Alternatively, the matching-fund/spending-limit package the Campaign Finance Institute’s Task Force recommended would increase the spending limit and also let a candidate who stays in the system spend as much as an opponent who opts out. 21 If none of this works—if the national committees cannot use independent spending and Congress fails to change the presidential funding system—the parties should still be able to react, although perhaps not as effectively. By the time the nominees have been chosen, the presi-

dential race is the one race in the country that least depends on paid advertising for candidates to become known. Generic party advertising that emphasizes presidential issue themes without mentioning the candidates could therefore be effective, especially if run during the same general time period as candidate advertising. It certainly would be more effective than a similar strategy would be for less visible House candidates. There is some question about just how effective, however, if it were the only advertising on air for a candidate who is squeezed by a spending limit in the months before the convention. With this one significant caveat, the bottom line for the parties about BCRA after the decision is that there is no limit on what they may spend to advertise the parties’ issues and mobilize their voters, probably no limit on independent expenditures for congressional candidates, and possibly none for presidential candidates. The parties will have to raise hard money, but they are well on their way to doing so. With money in hand, the post-BCRA parties will continue to be forces to reckon with. Address reprint requests to: Michael J. Malbin The Campaign Finance Institute 1990 M Street NW Washington, DC 20036

E-mail: [email protected]

21

Campaign Finance Institute. 2003. Participation, Competition, Engagement. Op cit. (See footnote 9).