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Issue No. 23 (April 2001) -- Mark Satin, Editor

Real "campaign finance reform"
is more about process than money

Real campaign finance reform means keeping the needs of all these Americans in mind:

-- Amy is an attorney at a large nonprofit, Ben at a large law firm; they’re also raising three kids (one adopted). They have no time for political activism, but they do have money and they like making contributions to candidates they admire;

-- Cass was a promising young international affairs analyst in Washington, D.C. until she -- in her own words -- “refused to spend one more day thinking about military strategy.” Now she lives in Seattle, where she works at a pleasant job that taxes about one-tenth of her brain. She has little money, but plenty of time to devote to candidates she admires;

-- Derrick works as a janitor at a large apartment building in Washington, D.C. He works at another job, too; he has to; he’s fathered nine kids by four different women, and they need every penny he can send them. He has no money or time for politics, but he suspects he’s been “shafted,” and when he isn’t drinking himself into a stupor at the end of the day he’s cruising cable TV, looking for answers;

-- Erin teaches world literature at a state university in a small Southern town; her husband manages a franchise restaurant there. She’s smart and imaginative and personable, and has some money and connections, but none remotely like those of the incumbent Congressman -- which is a shame, because she’d like to run against him.


Although the campaign finance reform issue is often seen as dry and abstract, it’s really one of the most compelling human issues of our time. It boils down to this: How can we conduct elections so that the needs of ALL the representative Americans above are fairly met?

Once you start looking at people’s needs rather than abstractions, the ground shifts. The vaunted McCain-Feingold reform bill loses its allure; so do the principal ideological alternatives to McCain-Feingold. It’s only when you focus less on money than on PROCESS that a truly fair-minded campaign reform program -- one equally useful to Amy and Ben, Cass, Derrick, and Erin -- comes into view.

The McCain-Feingold charade

For the last several years, the reformers’ favorite bill has been McCain-Feingold, which has two principal goals: Banning “soft money” and regulating “phony issue ads.”

Both goals sound wonderful in the abstract. Accomplishing them would enhance the resumes of many mid-level Washington, D.C. operatives. But accomplishing them wouldn’t help empower Amy and Ben, Cass, Derrick, or Erin in the least. Here’s why:

Hard money is the money people and PACs give to federal (presidential or Congressional) candidates, or to political parties for use in federal elections. The amount of hard money people and PACs can give is limited by law (e.g., you can give up to $1,000 to individual Congressional candidates during a general election).

Soft money, by contrast, is the money people, corporations, and labor unions give to so-called “nonfederal accounts” at the political parties. These accounts are NOT supposed to be used to support individual candidates. Instead, they’re supposed to be used for “party building” at the state and local levels -- voter education and registration, issue advocacy, etc.

Because party building is a mom-and-apple-pie endeavor, people, corporations, and unions can legally contribute as much money to the parties’ nonfederal accounts as they like.

You can guess what happened. By the 1990s, the parties had figured out a variety of “arguably legal” ways to use their nonfederal accounts to support individual candidates -- and the race for soft money was on. Some donors contributed hundreds of thousands of dollars (and got God knows what in return). During 1999-2000, the Republicans spent $244 million in soft money; the Democrats, $243 million.

The most clever use of soft money during the 2000 election was on so-called phony issue ads. The ads displayed visual images of candidates -- but because the ads didn’t use certain forbidden words like “vote for” or “elect,” the parties used soft money on them, claiming they were issue ads, not ads for individual candidates.

McCain-Feingold is meant to Stop All That. It would prohibit all soft money contributions to the national political parties from corporations, unions, and individuals. And it would prohibit for-profit corporations and labor unions from spending funds on ads referring to “clearly defined” candidates within 30 days of a primary or 60 days of a general election.

Big deal.

If McCain-Feingold is passed intact tomorrow, media consultants will figure out new ways to let voters know which “issue ads” are supportive of which candidates. And the Money Formerly Known as Soft Money will not dry up, it will simply be redirected -- “first in a trickle, then a creek, and finally a flood,” as Nick Nyhart of Public Campaign recently put it.

Larry Makinson of the Center for Responsive Politics agrees, noting that many entities have political contribution line items in their budgets now.

It’s no secret in this town that most of the big, unlimited contributions would be redirected to two kinds of entities, both of them well shielded under the First Amendment:

1. Many advocacy groups and professional organizations are either organized as 501(c)(4)s under the Internal Revenue Code, or have 501(c)(4) “arms.” 501(c)(4)s are particularly attractive to some big contributors since they’re not required to detail their contributions and expenses on campaign-related activities (including ads).

2. Anyone can start a section 527 organization -- and unlike 501(c)(4)s, 527s don’t have to engage primarily in nonpolitical activities. Nor are they subject to a special excise tax that the IRS can assess on political activities conducted by 501(c) (4)s. True, 527s must now disclose their contributions and expenditures, but few Americans are publicity-shy anymore.

Probably the best-known 527 during the 2000 election was “Republicans for Clean Air,” set up by two arch-conservative Texans to attack McCain’s environmental record during the New York primary. But even the Sierra Club and Peace Action (formerly SANE/Freeze) have 527s now and are hoping you’ll call.

Here’s the real bottom line:

Under McCain-Feingold, Amy, Ben and Cass won’t be any more influential vis-a-vis large donors than they were before. Derrick won’t be any better informed. And Erin won’t have any better shot against her incumbent Congressman. (Plus Amy and Ben may have to work weekends setting up 501(c)(4)s and 527s for clients!)

Three flawed alternatives

McCain-Feingold isn’t the only proposal out there. It’s just the only one that might pass. Liberals, conservatives and populists have spent the last 20 years touting their own favorite measures.

Liberals such as Ellen Miller of Public Campaign have argued for full public financing of elections. Conservatives such as Doug Bandow of the Cato Institute have argued for doing away with all limits on campaign contributions. And populists such as Zach Polett of ACORN have argued for imposing radically lower hard money contribution limits, such as $100 or $300 per person per candidate.

Each approach has its strengths. But each has fatal weaknesses, too. Full public financing -- which requires candidates to voluntarily forego all private funds -- could not only cost taxpayers $10 billion a year (Cass and Derrick say thanks), it would do nothing to counteract big money backing of candidates through 501(c)(4)s, 527s, or whatever (a point Fred Wertheimer of Democracy 21 repeatedly stresses).

No limits on contributions would privilege rich donors over Cass (and everyone else). And radically lower limits on hard money contributions would privilege Cass over Amy and Ben.

"It's the process, stupid!"

A new approach to campaign finance reform is quietly arising among some thinkers and activists. Let’s call them the Process Reformers.

Process Reformers can be found in the McCain, liberal, conservative, and populist camps. Process Reform isn’t necessarily opposed to -- and can even be seen as complementary to -- aspects of the more traditional approaches.

What sets Process Reformers apart is their conviction that the influence of big money can best be tamed not by frontally assaulting big money, but by changing the processes by which our elections are conducted. It’s the ju-jitsu approach to campaign finance reform.

And the wholistic approach. There’s no silver bullet in the Process Reformers’ arsenal, just a wide variety of arrows to be used in combination with each other. These are representative:

Restrict active campaigning to the 60 days prior to election day. “That would reduce the amount of money candidates need to raise and spend,” says Jeffrey Birnbaum, author of The Money Men (2000). It would also increase the importance of principled volunteers like Cass, who’d be willing to put in long, concentrated hours for the “right” candidate.

“It’s doubtful [this] could be legislated,” Birnbaum adds. “[It] would probably take a formal agreement [among] the candidates and parties.”

Force media outlets to provide free TV and radio time to all candidates within 30 days of primaries and 60 days of general elections. “Most major democracies . . . provide candidates with some form of subsidized air time,” says Joan Claybrook, president of Public Citizen. “Free or discounted time would enable voters to hear more equally from all sides, not overwhelmingly from [incumbents] or those with the largest financing. . . . Allegations that the FCC has no legal authority to act on ‘free TV’ . . . are completely unjustified.”

Tony Corrado, co-editor of the definitive anthology Campaign Finance Reform (2001 edition forthcoming), thinks free TV can “help reduce the cost of campaigns, and enhance the quality of political communication by inducing candidates to . . . speak directly with voters in longer segments, thus encouraging a move away from short spots and attack ads. [It] should especially benefit challengers, who are traditionally underfunded.”

Thus it would surely benefit Erin. And it would benefit Derrick, too, who hungers for straight talk from pols.

Provide tax credits for the first $100 that lower-income taxpayers contribute to political candidates. Stanley Brubaker, head of Colgate University’s Washington Study Group Program, would “extend the universe of contributors by restoring tax credits or deductions (eliminated in 1986) for political contributions.”

Brubaker is onto something -- with more contributors, politicians might listen more to ordinary people -- but his plan isn’t targeted enough. We need to take a page from Zach Polett of ACORN, who’d “empower citizens” by giving each of us a $50 tax credit that we could allocate -- to candidates, parties, or political committees -- as we saw fit.

I suggest giving each person who grosses under $40,000 a $100 tax credit to be used for contributions to candidates or political parties.

If a couple of million taxpayers regularly took advantage of the credit, politicians would know that a substantial portion of their funding was coming from people of modest means (approx. $1.2 billion was spent on the 2000 election; $100 times six million is half that). Maybe then they’d be more inclined to make Derrick’s life feel worthwhile -- e.g., by making sure his kids got a good education.

Have the government grant every qualifying Congressional candidate a mimimum sum needed to mount a competitive race. Process Reformers in the public-finance camp are less concerned about driving Big Money out of the temple than giving federal candidates a fair shot at the ring. “[They] would not put ceilings on spending but instead guarantee to every credible candidate the minimum sum needed to mount a competitive race,” explains the Benton Foundation (on its fine website, www.destinationde- mocracy.org). “Candidates could ‘add stories’ to this first floor of public money with their own wealth and fund-raising. . . .

“[The idea is that] candidates who outspend their opponents tend to win not because they spend more money but because their opponents spend too little, usually because they have trouble raising it.”

Obviously, this proposal would give Erin a huge boost.

Alternately, set no contribution limits on the first $200,000 raised by Congressional candidates. This is a sort of free-market alternative to the proposal immediately above. Its most prominent champion is Tom Mann of the Brookings Institution. He assumes that most viable federal candidates would be able to raise $200,000 -- the putative minimum needed to run a credible race -- IF they weren’t hamstrung by legal limits on contributions (currently $1,000 for individuals, $5,000 for PACs).

“[L]arge contributions [do not] work against the poor and the middle class,” adds Nadine Strossen, president of the ACLU. “[M]ost challenges to the status quo [have historically] been financed by wealthy donors.”

A candidate like Erin -- with connections to the local academic and small-business communities -- would probably benefit from this measure.

Raise contribution limits from $1,000 to $3,000 on all federal candidates. “Candidates need the opportunity to raise the funds necessary to communicate their positions . . . without spending excessive time fundraising,” say the concerned business executives and university presidents at the Committee for Economic Development. “To achieve this, we propose increasing the limit on individual contributions to federal candidates from $1,000 to $3,000 per candidate per election.”

“Contribution limits have been frozen for a quarter century,” adds Tom Mann, “[and] prices have tripled since 1974.”

Note that this measure would empower Amy and Ben. As it is now, they can only contribute $1,000 each to their local Congressional candidate. If she’s as good as Erin, they’d want to contribute more.

Insist on faster and more complete disclosure of political contributions.  "[Information] is a prerequisite to good decision making," says Birnbaum.  "So let's disclose as much as possible and right away.

"[D]isclosure [by federal candidates] should be made within 24 hours of [each] donation. Why wait? And that information should be published in whatever way the public can best and most easily get to it. . . .

"I would also push as far as the Supreme Court will allow disclosure of so-called independent expenditures.  [S]urely [all election expenditures independent of campaigns should be revealed] within 24 hours in the 30 days prior to election day.  That might reduce the number of sneak attacks that often distort the end of campaigns."

Impose much stiffer penalties for campaign finance law violations.  The Benton Foundation raises the intriguing possibility of "punishing violators of campaign finance law by removing incumbent violators from office or disqualifying challengers who break the law from appearing on the ballot."  A bit of insurance for Erin if the going gets rough!

Hyperbole vs. democracy

With these process reforms (and others like them), big money will not be “vanquished.” Unlike the McCain-Feingold and public-finance supporters, Process Reformers acknowledge that big money will always be part of campaigns (since it’s part of America itself).

But Amy, Ben and Cass will be more empowered vis-a-vis big donors. Derrick will have access to better information and be catered to by more candidates. And Erin will have a fighting chance in her race against the incumbent . . . especially if she appeals to enough Amys, Bens, Casses, and Derricks.

Big money will still speak. But democracy will speak louder.


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