The Pursuit to Reduce the Influence of Special Interest in Politics: A Study of the Effects of the Bipartisan Campaign Reform Act on the 2004 Election
By Douglas T. Paris Jr.
A Thesis submitted to the faculty
of the
in partial fulfillment of the require-
ments of a degree with Honors
in Political Science.
2005
Approved by
______________________________
Adviser
______________________________
______________________________
Table of Contents
Chapter 1: Allegations and Reform ...................................................................... 3
Chapter 2: Literature Review .............................................................................. 10
Chapter 3: The Bipartisan Campaign Reform Act: History & Provisions ......... 18
Chapter 4: Proponents and Opponents of Reform .............................................. 25
Chapter 5: Research Design and Analysis .......................................................... 39
Chapter 6: The Emergence of the 527 Group ..................................................... 44
Chapter 7: 2004 Data Analysis and Comparison ................................................ 67
Chapter 8: Conclusion and the Need for Further Research ................................ 74
Works Cited: ........................................................................................................ 78
Chapter 1: Allegations and
Reform
The amount of
money needed to be competitive in a federal election these days is enormous to
say the least. It takes money to run a
campaign, it takes more to be considered a serious candidate by the press, it
takes an unbelievable amount to run campaign ads, and most ironic it takes
money to raise more money. This is especially
true in the most important federal race in our country, the race to be the
nation’s leader. In his race for the
2000 presidential seat, George W. Bush raised a colossal $193,088,650 and spent $185,921,855. His opponent Al Gore raised $132,804,039 and
spent $120,031,205. Even third party
candidates Pat Buchanan and Ralph Nader spent $39,162,976 and $7,771,117
respectively in their bid for the most prestigious office in the country. Therefore it became money which,
arguably, determined the very basics of our democracy: Who can run, and who can
win.
The increased necessity of money in
politics has caused the idea that wealthy special interests or wealthy
individuals can substantially alter the outcome of elections. It further spawned the idea that wealthy
individuals, corporations, or interest groups could alter the one man one vote
ideal, as money was conceived of being able to buy campaign advertising which
returned votes. Corporations, wealthy
individuals, and interest groups could give millions in advertising to a
candidate for advertising means, while the common American voter could
not. Yet this was not a new discovery,
the seeds of the idea of powerful interest groups altering elections were sown
over a century ago in a statement made before the Constitutional Convention of
the State of
The Federal Election Campaign Act of 1971 and the 1974 amendments sought to remedy these problems by restricting donations made from wealthy individuals through contribution limits. Yet the legislation opened up the “soft money” loophole. Soft money was originally intended as unlimited donations given to parties for “party building activities” but later enabled interests to give unrecorded and unlimited amounts of money to influence elections. Soft money or non-federal funds are terms used to refer to unregulated donations given to political parties from sources and in amounts that the Federal Election Campaign Act otherwise prohibited. This is opposite of hard money which is contributions given in accordance with the guidelines and limits set by the Federal Election Campaign Act.
This loophole emerged as the parties' primary means of raising millions of dollars from wealthy contributors and interests during the fall presidential campaigns, when direct contributions to candidates were restricted by limits or prohibited. National party committees were able to use soft money to finance candidate advertising as long as they did not explicitly advocate the election or defeat of the federal candidate. The advantage was enormous as candidates did not have to pay for such ads out of their own campaigns. According to Raymond Joseph La Raja (2001), the accelerated rise in soft money spawned from the 1996 election when Dick Morris, Bill Clinton’s political consultant, devised this legal strategy for campaign advertising. From 1996, this approach for political advertising continued into future congressional and presidential races.
The scale of the money flowing through this loophole cannot be denied, and definitely would be considered by some as beyond the legitimate need of party building. In 2002, both parties had raised a combined amount of $495.1 million dollars, a large proportion of that suspected of being funneled to the presidential race and congressional races. According to the Federal Election Commission, there was a threefold increase in national party soft money from 1992 to 1996, and during that time soft money grew from 16% of the total national party spending to 30%. The midterm presidential year of 1998 raised $222.5 million in soft money, which was more than double the previous midterm election, and caused soft money to reach 34% of total national party spending. The Federal Election Commission reported that in 2000, national parties raised $487.5 million in soft money, while all soft money raised by all party committees reached $498 million. In 2000, soft money was now 42% of the parties total spending. In the presidential midterm election of 2002, the amount of soft money did not decrease from the previous presidential election year as it did in 1998, but rather the level of soft money spending was maintained. In a September 19, 2002 press release, the Federal Election Commission stated that the 2002 level was “all the more significant given that typically parties raise more in Presidential campaign cycles than in non-presidential campaigns. The growing influence of soft money over the years is shown in graph 1 (FEC, 2002).
Graph 1: Total Increase in Soft money – Corrected for Inflation – in 2004 Dollars
Reform:
The Solution to all Problems
In the election year 2002, a record amount of soft money was raised. Over 495 million dollars in soft money reached both political parties. The soft money funded numerous attack ads during the election that fueled a political atmosphere that called for reform. Senator Fred Thompson, in a March 27, 2001 statement summed up the atmosphere when he declared, “We have gone from basically a small donor system in this country where the average person believed they had a stake, believed they had a voice, to one of extremely large amounts of money, where you are not a player unless you are in the $100,000 to $200,000 range.... the $500,000 range...occasionally $1 million” (Congressional Record, 2001).
By
the end of 2000, the soft money loophole led many scholars and politicians to
believe that the restrictions held under the Federal Election Campaign Act were
largely ineffectual and needed to be modernized according to modern spending
practices. A bill proposed in the Senate
by John McCain and Russell Feingold directly addressed this growing problem and
offered to reform the campaign finance system and seek to reduce the influence
of money in the electoral process. This
piece of legislation became known as the Bipartisan Campaign Reform Act and was
signed into law by President Bush on
The goal of the bill was to reduce the power of wealthy special interests by closing the soft money loophole in an attempt to return electoral influence back to the broad electorate by decreasing political parties and candidate’s reliance on soft money. According to the New York Times, “McCain-Feingold is an effort to address deep and growing problems in the political system. Our democratic ideals about ‘one person one vote’ are fast being buried under a mountain of special-interest money.”
The 2004 elections will show the effects of the new legislation. This thesis is not for the purpose of detailing whether the “special interest threat” in politics is real or false, but rather it will study whether the Bipartisan Campaign Reform Act will be successful in eliminating these large unregistered contributions, which is the source of where the “special interest threat” is thought to spawn. Will the 2004 election see the end of unlimited non-federal soft money expenditure, or will a new loophole emerge? Chapter 2 will review the previous studies in the field on the need for reform and national level simulations. Chapter 3 is a case study of the legislation in Congress and also covers the main provisions of the Bipartisan Campaign Reform Act. Chapter 4 will go more in-depth into the theory behind campaign finance reform, outlining the proponents and the opponent’s argument. Chapter 5 will describe the research design used to study the effects of the Bipartisan Campaign Reform Act on the 2004 election using the 2000 election as a control. Chapter 6 covers a new proposed loophole to the Bipartisan Campaign Reform Act – the 527 group, and outlines their history since their conception through the 2004 election. Chapter 7 covers the data analysis of the thesis. Chapter 8 concludes and states the need for further research on 527 groups.
Chapter 2: Literature Review
Literature on
the Need for Reform
Wilcox and Joe’s (1998) study of the 1996 House elections finds that the House election financing system was “broken” and “out of control (Wilcox Joe 1998, pg 14).” They describe the cycle as characterized by party officials raising unlimited amounts of soft money funneled to campaigns, coalitions of special interest groups spending millions of dollars attacking candidates in ads, and no disclosure of the majority of funds to the Federal Election Commission. They claim that this election undermines the representativeness of the House.
First they claim that the new high costs of House election campaigns limits the diversity of candidates who run because of the need to raise substantial amounts of money to challenge an incumbent’s war chest of soft money. They quote that the cost of beating an incumbent has risen from $400,000 in 1992 to over a million dollars in 1996, well over the inflation rate of money. The result of this is that the "representativeness" of the House is undermined.
Second Wilcox and Joe (1998) state that interest groups who give massive amounts of donations to candidates have an additional advantage in policy decisions as compared to individuals that give small hard money donations. This is the idea that the 1996 system allowed special interest to dominate campaigns and later policy decisions at the expenditure of normal citizens.
Wilcox and Joe (1998) also state that the most important aspect is that this new system threatens public confidence in Congressional representativeness. The fact that soft money is taking over electoral politics coupled with the fact that the source and amount of the soft money is not disclosed to the public, threatens to decrease the public’s trust in congressmen. This idea fosters the suspicion by the public that special interests have hijacked electoral politics.
The solution to the problem is hard to find according to Wilcox and Joe (1998). They state that many political scientists have proposed various reforms but there is no consensus in politics about the nature of the problems or the merit of the proposed solutions. They provide the example that a study on campaign finance reform by Herbert Alexander produced three separate dissenting opinions from the nine leading scholars in the field. Wilcox and Joe do state that whatever reforms are proposed, it is essential to strengthen the disclosure system in order to regain public legitimacy.
Alexander (1997) was the chair of a task force on campaign finance reform sponsored by the Citizen’s Research Foundation and accompanied by 8 other prominent scholars. Alexander states that since the last generation, campaign fundraising is characterized by a whole new set of players and a whole new set of categories of money that undermined existing campaign finance laws. He states that these new realities pose new problems and require new thinking to propose legislation that will work in today’s environment.
Alexander’s (1997) study finds three problems with the current system: accountability, competitiveness, and sources of funding. The problem of accountability emerges as special interests and covert money routes such as soft money undermine traditional sense of the fact that the ballot provides accountability. Alexander’s solution to this is that disclosure requirements must be broadened and strengthened, and election agencies must be provided with enough funding so that they can perform needed enforcement of disclosure of campaign spending. Second Alexander proposes a complete ban on soft money because this type of money is unlimited and not subject to disclosure to the FEC.
The second problem Alexander (1997) addresses is the level of competition in elections. He states that the current system has highly advantaged incumbents and discouraged candidates from running. As a solution Alexander proposes public financing and the raising of the limit on money a party can give to nominees. Both of these acts would better enable a candidate to face off with an incumbent with a greater chance of success. Alexander claims that any lowering of limits that would make it harder for candidates to raise money would give the incumbent a great advantage.
Alexander (1997) addresses the third problem about the amounts and sources of money by first stating that money in politics is not evil but is necessary to inform the electorate about who they are voting for. He claims that legitimate channels for disclosed amounts of money must be opened enough to allow adequate amounts of campaign donations so that groups and individuals have no need to funnel money through covert routes and sources. All of these recommendations came from a majority of the nine scholars lead by Alexander, while on certain issues a minority of the members dissented. This further shows that it is hard even among scholars to come to consensus about campaign finance reform proposals.
Soft Money in
House Elections
Diana Dwyre (1996) studies how the Republican and Democratic House congressional committees used soft money in the 1992 elections and describes how each party had different spending strategies. She finds that the opportunities and constraints of federalism, along with each party’s financial circumstance lead to how they spend soft money in elections. She states that although both parties differed in their needs and strategies, both parties were able to “spin soft-money straw into hard-money gold” through indirectly helping House candidates with the funds (Dwyre 1996 pg 420).
She finds that opportunities of federalism enable the House committees to side-step FECA rules by giving soft money to state parties that then funnel the funds to the state candidates. Also, she states that the different strategies in soft-money use are caused by each party’s hard money wealth. She describes the Republican committee as wealthy because they have enough hard money donations to pay all their bills and give the maximum amount of hard money to candidates, so they look for ways to funnel the extra soft money to the candidates’ campaigns. She describes the 1992 Democratic committee as weaker because it has less hard money, giving all of it to candidates and using soft money to pay the bills. This study was the first pioneer in providing empirical analysis of how parties were able to funnel soft money to candidates in this newly discovered loophole. In 1992 data, Dwyre discovers the tip of the “soft money” iceberg that was about to explode to take over future elections.
National Level Simulations
Goidel and Gross (1996) use simulations to explore the likely effect of campaign finance reform on electoral outcomes and competitiveness. They use campaign finance data from the 1988 and 1990 House elections, a broad array of campaign finance scenarios, and four econometric models to test the outcomes. The tested campaign scenarios are the independent variable and include: spending limits, matching funds, full public financing, and a package of campaign finance reform considered by the 103rd Congress. They find that spending limits either depress or have marginal effects on electoral competition in all four models. Matching funds provides a more desired outcome on electoral competitiveness, but all three models disagree on the optimum level of matching funds. Simulations on public funding in all four models find that it will increase electoral competitiveness both in number of incumbents defeated and average percent of the vote incumbents receive. Another finding supports that higher levels of public funding are preferred to lower levels of public funding in order to achieve the maximum effect on electoral competition. The proposed legislation by the 103rd Congress, once tested, is revealed to have no effect on the current level of electoral competition.
Goidel, Gross, and Shields (1999) complete a second study that tests the effectiveness of different campaign finance reform scenarios on the 1994 and 1996 U.S. House elections. They use a regression simulation in order to test the effect of spending limits and public funding of elections on electoral competition and voter turnout. Goidel, Gross, Shields (1999) find like in their previous study that spending limits would depress electoral competition while public funding would enhance competition. They also find the same effects on voter turnout. Spending limits decreased voter turnout, while public funding at higher levels increases voter turnout. They also test a variety of proposals being considered by Congress or that have a realistic chance of being considered by Congress, and find that these scenarios have no effect on electoral competition or voter turnout. The importance of both studies is the finding that proves public funding’s superiority, and spending limits inferiority. Also, it is important to realize that the legislation being considered by Congress has little effect on electoral competition and voter turnout, a pre-cursor to whether the legislation will be successful.
Deficiencies in Current Research Findings
Many
scholars have recognized the need for campaign finance reform, and recently
this was coupled with passionate politicians so that a solution could be
formed. Senator Russell Feingold
addressed the Senate on
There exist many simulations on the effects of various campaign finance reforms that can give us some insight into the BPCRA’s chance of success. Goidel and Gross (1996) give us insight into the fact that proposals thought to be acceptable by Congress have no effect on electoral competition. These simulations give us insight but only insight because researchers have not been able to study the actual effects of such reforms in real life because of the lack of legislation, until now. State level studies have been completed, but the variation in the environment and factors between state level reforms and possible national level reforms do not make the likely outcomes of campaign finance reform studies at the state level probable outcomes at the national level. The only true consensus on campaign finance reform is that something must be done.
The first elections under the new rules of the Bipartisan Campaign Reform Act are the 2004 elections, and this will be the first chance to study the actual outcomes of campaign finance reform at the national level, and in real life not in simulations. This is the first chance to study the real effects of campaign finance reform on real elections at the national level. These results will be pivotal in proving whether the outcome of Goidel and Gross’ simulations are correct, and whether the suggestions of the Alexander task force on campaign finance reform will be successful and enforceable. Not only is it necessary to study whether the Bipartisan Campaign Reform Act will be successful in order to verify the findings of these past studies, but it is necessary to study the effects of the new law as a pure sense of oversight; that is to make sure the new law is successful in its goals and is not a victim of the law of unintended consequences.
Chapter 3: The Bipartisan
Campaign Reform Act: History and
Provisions
Case Study: Bipartisan Campaign Reform Act
Debate on campaign finance reform was not a new topic but rather an ongoing consideration since 1980 in Congress. During the mid nineties, serious consideration began to take place with the escalating costs of campaigns and emergence of soft money. In 1997, Senators McCain and Feingold introduced a bill to ban soft money, offer discounted television ads and postage for candidates who would adhere to voluntary spending limits, and measures to clear the blurry line between spending for a candidate and spending for an issue. In the House, Representatives Shays and Meehan introduced a complementary bill (Congressional Quarterly Almanac, 1997, 1-26, hereafter CQA). The Shays and Meehan Bill was passed twice in 1997 and 1998 after the threat to use a discharge petition to force votes on their version of the bill (CQA, 1998, 18-3). In 1998, House Speaker Newt Gingrich placed the legislation on the House floor and the measure passed in a 252-179 vote (Congressional Quarterly Weekly, 2002, 803). The proposed legislation in the Senate was blocked by constant filibusters by Senator McConnell. In 1999, the House passed an identical Shays-Meehan measure by a 252-177 vote, but again the measure was blocked in the Senate by filibuster.
The highly publicized Enron scandal resulted in the national debate on campaign finance reform as Enron’s past network campaign giving and influence were revealed. Turnover in the Senate caused by the 2000 Election brought an influx of freshmen Senators willing to back Senators McCain and Feingold. The proposed legislation passed the Senate in April of 2001 by a 59-41 vote and after two long weeks of debate.
In July of 2001, the Shays-Meehan measure was stalled again as Republican House leaders crafted a rule that would have made the measure hard to alter on the floor in order to make the parts identical to the Senate passed measure in an attempt to avoid sending the measure back to debate in the Senate. Shays and Meehan were required to raise the third discharge petition to force the measure back on the floor under rules acceptable to the supporters. By the end of 2001, 215 of the 218 signatures were collected for the petition (CQA, 2001, 6-3)
In 2002, the necessary number of signatures needed for a discharge petition was gained and the measure moved back to the floor. The proponents of the bill faced a tough battle from all sides. Past democratic supporters of reform began to think of their own future. Democrats said that the measure increased hard money donations from $1,000 to $2,000, and that Republicans were traditionally much efficient at raising hard money. Democrats also began to realize how much their elections seemed to depend on soft-money to neutralize the Republican hard money advantage. Some Democrats believed the legislation would place “their party at a competitive disadvantage” (CQA, 2002, 14-9). There was great fear among the proponents of the legislation that the 218 signatures on the discharge petition did not currently correlate to votes for the measure.
Republicans
again tried to prevent the enactment of the bill by proposing amendments that
they knew the Senate would not accept or by changing the measure enough to
force it into a conference committee where the bill would have a greater chance
of dying. Republican Bob Ney of
The
measure moved to the Senate where Senator McConnell filibustered any action for
over a month. McConnell’s actions forced
a vote to end filibuster which was passed by 68-32 on
Main
Provisions of the Bipartisan Campaign Reform Act
Soft Money
The key provision to the Bipartisan Campaign Reform Act is the ban on soft money in national party committees. Soft money cannot be raised by national party committees or used in any way in a federal race. State and local party committees are allowed to spend soft money in voter registration for federal elections and get out the vote drives for federal races as long as they don’t mention a specific candidate. Donors to state and local party committees are limited to $10,000 per year, and state law determines who is eligible to be a donor: individuals only, businesses, unions, corporations. State and local party committees are allowed to spend soft money in broadcast advertising only for state and local candidates. Also, state and local party committees are not allowed to transfer soft money to national parties or candidate committees. The result is that state party committees will play a much more important role in state elections and not be overshadowed by large donations from national party committees in closely contested races (Congressional Quarterly Weekly, 2002, 800). The result of this legislation is that political parties lose an enormous funding source. In 2000, the Democrats raised $245 million and the Republicans raised $250 million in soft money. Soft money raised and spent by single issue groups are not limited unless the activity the money is being spent on direct federal candidate support.
Hard
Money
The limit on hard money or donations regulated by the FEC guidelines was increased to double the original amount and is indexed to increase with inflation over the years. Individuals can give $2,000 per election to candidates and $25,000 per year to national parties. Individuals can also give $10,000 to any political action committee. Table two gives a comprehensive overview of all hard money changes (Center for Responsive Politics, hereafter CRP). Including an increase in hard money was a necessary provision that campaign finance reform champions in Congress needed to sway enough Republican votes to pass the legislation. Increasing hard money limits to national, state, and local parties also quelled fears that parties would not be able to pay their normal bills with soft money removed from the system.
Table 1: Change in Hard Money Limits
|
|
To any
candidate committee (per election) |
To any
national party committee (per year) |
To any
PAC, state/local party, or other political committee (per year) |
Aggregate
total |
|
Individual can give: |
Old law: |
$20,000 |
$5,000 |
$25,000 per year |
|
New law: |
$25,000 per party committee, subject to
aggregate limit |
$10,000 to each
state or local party committee (Levin funds)4 |
$95,000 per
two-year election cycle as follows: |
|
|
Multicandidate committee can give: |
Old law: |
$15,000 |
$5,000 |
No limit |
|
New law: |
Same |
Same |
Same |
|
|
Other political committee can give: |
Old law: |
$20,000 |
$5,000 |
No limit |
|
New law: |
Same |
Same |
Same |
Television
Advertising
Issue ads that run within 30 days of a primary or 60 days within a general election that refer to a specific candidate in the area of his or her electorate must be paid for by hard money and the names of the contributors must be disclosed. This restriction does not apply to groups running pure issue ads that refrain from mentioning a specific candidate.
Independent
Expenditures
The new legislation requires that independent expenditures of $10,000 or more made for a specific candidate be reported to the Federal Election Commission within 48 hours. Also, independent expenditures made within 20 days of an election and of $1,000 or more dollars must be reported to the Federal Election Commission within 24 hours. Political parties are required to either coordinate with a candidate in a race or work independently with a candidate but cannot do both. Coordinated expenditures are limited by the law through party-candidate limits, while independent expenditures are not regulated.
Self-Financed
Candidates
The law raises the hard-money contribution limits for congressional candidates running against candidates who are wealthy and are self-financing their election race. The law also allows these candidates to receive above the limit support from political parties.
Candidate Fundraising
The law bans federal candidates and those currently in office from spending soft money on federal election activities such as fundraising. This section of the law targets leadership political action committees (PACs) of federal candidates. An exception is made for current federal candidates who are running for state offices such as governor.
National
Political Committees and Tax-exempt Groups
The law prohibits national party committees or their agents and associates from raising funds for or making donations to tax exempt organizations with a political purpose that conduct political activity during a federal election (Federal Election Commission Register, 2002, 100). This section of the law prevents national committees from creating and controlling their own tax-exempt political committee to raise soft money in unlimited amounts as an independent expenditure group.
Chapter 4: Proponents and Opponents of Reform
The Interest
Group Perspective
The research question being studied is whether the Bipartisan Campaign Reform Act will be successful in stopping the flow of these large special interest contributions into American Politics. This research is not to study or make a judgment on the morality of such contributions, but it is necessary to outline these views because they are tied deeply with views on whether the proposed legislation will be successful
Opponents of the act claim that the act will not be successful, as Todd F. Gaziano of the Heritage Foundation states, “Enacting convoluted campaign regulations, constitutional or not, is like trying to dam a stream with a pile of sticks.” Opponents look at the history of campaign finance reform for proof of this assertion. The FECA laws inherently stopped large individual donations but opened the loophole for PAC’s and soft money donations in electoral politics. Opponents claim that history has proven campaign finance reform such as the Bipartisan Campaign Reform Act is useless. Further, opponents predict the BCRA will fall victim to the “Law of Unintended Consequences,” in which the original goals of the legislation are overtaken by effects not anticipated by the legislators, such as new loopholes.
Second, opponents claim that the act limits the amount of campaign speech and spending, which would be a violation of the First Amendment because it is essentially a limitation of political discourse. Bopp and Coleson (2002) claim that the Bipartisan Campaign Reform Act assaults the rights of free association and expression which is vital to democracy and protected by the First Amendment. They claim that the act is unconstitutional because it restricts the rights of groups to express their views in issue adds and restricts an individual’s right to associate by restricting the amount of the individual’s donations.
There is also the claim that the act will hurt challengers and protect incumbents under the assumption that politicians would not pass a bill that would disadvantage their incumbent status. Also opponents claim that the new act will serve as an incumbency protection act because it takes much more money to unseat an incumbent, and studies have shown challenger spending is more important than incumbent spending. Opponents also claim that political parties would not be able to finance “party building activities” and “get out the vote drives” because there source of funding for those activities – soft money- is eliminated.
Finally opponents claim the act will weaken the influence of the common citizen. Opponents claim that the influence of lower and middle class views through organized interest will not be represented because their main forms of campaign advocacy, soft money and issue advocacy are restricted. Bopp and Coleson (2002) claim that in America average citizens associate in groups, labor unions, and political parties “to participate effectively in the political process by pooling resources to amplify their voices to advocate issues of public concern, lobby for legislation, and directly promote the election of candidates (Bopp Coleson 2002 pg 2).” Therefore, by taking away the ability to pool resources, these citizen groups will loose their voice in politics.
Proponents of the legislation assert nearly the exact opposite. Thomas E. Mann, Senior Fellow of Governmental Studies of the Brookings Institute claims that the opponents’ view on the Bipartisan Reform Act is purely myth. First he claims that new law will not be a victim of the “Law of Unintended Consequences” even though it is hard to make policies that regulate money that are sustainable in the future. The key is that the legislation will need ongoing revision to maintain its status with the times and close unintended consequences, something past campaign finance laws never had.
Mann’s myth number two is that the new law is a violation of the freedom of speech and association. Mann claims that the law only reinstates politics of a decade ago when there was no soft money or attacking issue adds close to elections, and claims that no speech is banned by the new law. Mann states that only the source of funding is touched by the law, and political discourse is not limited.
Mann claims that the idea the new law is an incumbency protection act is also a myth. He states that issue advocacy and soft money is the direct cause of the increasing incumbency re-election rates from the late 1970’s until 2000. The Bipartisan Campaign Reform Act should return the incumbency re-election rates back to a lower level by decreasing the chance for incumbents to raise large levels or soft money, and by decreasing the need for challengers to seek expensive issue advocacy. Also the increase in hard money limits should greatly benefit challengers, something proven by a recent study by the Campaign Finance Institute, asserts Mann.
Finally, Mann debunks the idea that the new legislation will hurt citizen groups and political parties. Mann states that soft money contributions are not necessary for parties, and it is a myth that soft money has strengthened parties at all. He claims that the majority of soft money was funneled to election campaigns and disguised issue ads. He claims that parties can survive on normal hard money contributions and that national parties have raised over $700 million in hard money in the 2000 election cycle. Mann argues that any loss in soft money can be made up by parties since the hard money limits were doubled by the new legislation.
Also proponents of the new legislation are quite critical of the idea that the new law will restrict lower and middle class citizens influence on politics through collective action and pooling of resources. They claim that the new legislation does not at all prevent groups from organizing and influencing politics. These groups can still give donations and have unlimited spending on issue adds, as long as it is not soft money contributions to political parties, or issue adds within 60 days of an election.
Over the next couple of elections, each side of the argument will either be denied or supported by hard evidence. I propose that the Bipartisan Campaign Reform Act will be successful in stopping the main flow of unregulated money through the parties to the candidates which is called soft money. I propose however, that the Bipartisan Campaign Reform Act will not be successful in stopping the flow of huge unregulated contributions from effecting political campaigns on the whole, the main goal of the act. The distinction is the belief that reform legislation can alter or reroute the flow or contributions, but they cannot stop the flow altogether. Special Interests are determined to assert their influence on political elections, because their outcome can determine whether the special interest can obtain their goals, whether pork, ideological, monetary, or policy influence. Most important is that history has shown that restricting the flow of large sums of money in politics is very difficult. The Federal Election Campaign Act of 1971 is the first evidence. This act was to limit large individual contributions to campaigns that were seen to have a corrupting influence, yet these interests found a loophole in soft money. I propose that special interests will find a new loophole in the Bipartisan Campaign Reform Act. Whether this new loophole will be independent expenditure campaigns or the IRS denotated 527 groups is remained to be seen.
The
Congressional Perspective: Senate Debate
on Bipartisan Campaign Reform Act
The opening statements in the Senate debate identified the views of the proponents and opponents of the bill, and their perceived effect of the legislation. Debate began on March 19th and ended on April 2nd with Congress passing the Bipartisan Campaign Reform Act. Much of the debate after March 19th centered on proposed amendments to the legislation and included debate on such amendments. Therefore, the opening statements on March 19th provide the clearest insight into the views of the proponents and opponents of the legislation.
In 2002, the House of Representatives discharged the companion bill, Shays-Meehan, from the committee to the House floor for debate. Debate in the House did not outline the merits and shortcomings of the proposed bill because the main strategy of the opponents of the bill was tactical in nature, and was not to fight the bill based on its merits. Rather the opponent strategy was to vote a substitute bill in its place or add an amendment to Shays-Meehan with the goal of sending a bill to the Senate that would not be acceptable or was too different from the McCain-Feingold bill in order to force a conference report in which the bill could be killed. The proponents in the House debate defended against substitute bills and amendments that would result in the bill going to the conference committee. Therefore, the House debate does not provide the purest discussion between the proponents and opponents of the Bipartisan Campaign Reform Act.
Proponents
On March 19th, the clerk reported the bill by title under the previous order that discharged it from the committee. The Senate began debate with opening statements. Senator McCain in his opening statement stated the purpose of the Bipartisan Campaign Reform Act, “to enact fair, bipartisan campaign finance reform that seeks no special advantage for one party or another, but that helps change the public's widespread belief that politicians have no greater purpose than our own reelection” (Congressional Record, 2001, S2435; hereafter CR). McCain stated that most Americans distrusted politicians “as long as the wealthiest Americans and richest organized interests can make the six and seven figure donations to political parties and gain the special access to power that such generosity confers on the donor.” To that end McCain made the generalization that, “Why can't we all agree to this very simple, very obvious truth: that campaign contributions from a single source that run into the hundreds of thousands or millions of dollars are not healthy to a democracy?”
McCain immediately identified one of the main arguments of the opponents to the Bipartisan Campaign Reform Act: “They will argue that soft money, the huge, unregulated revenue stream into political party coffers, is necessary to ensure the strength of the two-party system. I find this last point hard to understand considering that in the 15 years or so that soft money has become the dominant force in our elections the parties have grown appreciably weaker as independents become the fast growing voter registration group in the country” (CR, 2001, S2435). McCain further identified why the Federal Election Campaign Act needed to be amended, “they have simply been circumvented by the rather recent exploitation of the so-called soft money loophole” (CR, 2001, S2436). He blamed this on his own kind, politicians’ ingenuity to get around restrictions for their own benefit. McCain stated the most prevalent argument of the opponents of campaign finance reform in, “Ah, say the opponents, if politicians will always find a way of circumventing campaign finance laws, what is the point of passing new laws?” This position is held by many and is proven by history. McCain countered that he recognized this truth yet it is their job to stop corruption of regulations that cause the alienation of the public. McCain stated that in the future, his act if passed will have to be reconsidered and amended to stop any new circumvention of the law. McCain believed persistent re-evaluation of the system is necessary. Senator Dodd from Connecticut continued the opening statement and claimed soft money was one of the most pressing deficiencies in the system of campaign finance that, “threatens to drown out the voice of the average voter of average means...that creates the appearance that a wealthy few have a disproportionate say over public policy; and money that places extensive demands on the time of candidates--time that they and the voters believe is better spent discussing and debating the issues of the day” (CR, 2001, S2437). Senator Dodd next identified another main argument of the opponents of campaign finance reform: that money is speech and speech should be unlimited. Yet Senator Dodd denied this belief. He stated that it is a dangerous belief to democracy when the speech is paid by a wealthy few individuals or special interests and is unable to be countered by those who believe differently and lack resources to counter it. Senator Dodd addressed the claim of opponents of reform that soft money is used by groups to advocate free speech of the issues and promote public debate of the issues. He clearly denied this claim and cited the Supreme Court in stating that when unlimited contributions are given, it results in an undue influence. Dodd stated that soft money is not given without expectations and considerations of something that it will get or gain in return (CR, 2001, S2437). Senator Feingold, the co-author to the bill with Senator McCain, added his own opening statement in support for the bill. Feingold opened with citing that in the public’s eyes, large donations from special interests as soft money is nothing more than corruption (CR, 2001, S2444). Senator Feingold stated that soft money is given with a purpose, to buy influence in government, whether perceived or real. Feingold stated even if soft money is not corrupt as the opponents of the bill claim, that the appearance alone that it is corruption in the American public’s eyes is enough to bring soft money to an end. Feingold brings up the argument that the legislation is necessary in re-gaining the publics trust. Senator Feingold cited an article that was written by Senator Miller from Georgia Senator Boxer of California Senator Levin of Michigan Further Levin pointed to the access that money brings to donors. He cited many cases in which large donations gave donors access to a lunch with a committee chairman, access to insider strategy meetings, or a meeting with the president. Levin pointed out that the public knows of the practices and are deeply offended. Change is simply needed. Senator Collins of Maine Opponents
Senator Hagel from Nebraska Hagel also identified the view that a ban on soft money would weaken political parties financially. Hagel also identified that the same limit of $1,000 enacted in 1974 is worth less than one third of that value today due to inflation (CR, 2001, S2439). Therefore a ban on soft money would under fund political parties and candidates as compared to 1974. Soft money is needed and used to make up for this devaluation. Further Hagel identified that a ban on soft money would led ads previously paid by parties for candidates with some candidate control on the content, into an area outside the candidate’s control. Hagel identifies that groups seeking to help a candidate in an advertisement could actually damage his election chances since under the proposed legislation, there could be no contact or collaborating on ads. Senator McConnell then added to the Nebraska Senator’s opening statement. McConnell blatantly informed Congress of the American citizen’s disinterest in campaign finance reform. He cited Japan McConnell then attacked the proposed legislation by saying it wished to “ban the entire universe of political participation” (CR, 2001, S2440). McConnell was acknowledging the argument that making a donation or expenditure is essentially a form of political participation much like speech, something that should be protected and is every man’s right. Limiting or banning certain spending activities is therefore attune to limiting political participation and restricts the voices of groups in politics, and undemocratic act in nature. McConnell stated the activities the legislation is trying to limit or ban are, “constitutional as apple pie and ought not to be restricted.” McConnell further stated that to get at the nub of the problem that the proponents of the legislation claim is plaguing the system, one would have to alter the First Amendment and enable governments to limit political speech. Clearly, McConnell argued the only solution to the perceived problem is worse than the problem itself. McConnell echoed Senator Hagel’s sentiments that the spending limits enacted by the Federal Election Campaign Act are outdated and too low, stating that candidates must rely on soft money from parties to run a competitive election as they cannot possibly raise enough money from $1,000 contributions to challenge an incumbent or defend them self against a very wealthy challenger. This is the view that the legislation in banning soft money would have the unintended consequences of being an incumbency protection act. McConnell stated that this mismatch is the single biggest problem that needs to be solved. There is not enough hard money in politics, which causes a reliance on soft money, often for challengers. McConnell advocated raising hard money limits. He argues that soft money is very necessary and not the evil others claim. McConnell further argued along with Senator Hagel that taking soft money away from parties would not take the money out of politics, but would take the political party out of politics, or at least take the majority of monetary influence from them. McConnell counters the claim of proponents that if soft money is banned, then that money will be taken out of politics. This statement is the belief that you cannot stop money in politics, but you can change the routing. McConnell believes independent groups and persons will still spend this money in political activities, just not with the parties. The legislation would weaken parties and shift monetary power back to the donors: special interests and PACs who would act in substitute for the parties. This shift in power outside of the parties back to the donors cannot be regulated and often are not disclosed. McConnell stated, “Each of those interests who care about what we are doing here, who believe that it may have an impact on their business or their interest, cannot be constitutionally restricted from speaking” (CR, 2001, S2441). This mirrors the opponent’s argument that the money will just move to independent expenditure groups who will run ads and voter mobilization efforts with soft money and will hide rightfully under the protection of freedom of speech. McConnell cited the work of James Madison and several opinion articles by journalist George F. Will to argue that opposing factions are necessary for government to prevent the tyranny of the majority, that special interests who give soft money are those factions - therefore not evils, and essentially what is there to represent in government if factions did not exist? McConnell cited the argument that the soft money influence is simply a part of democracy.
Chapter 5: Research Design and Analysis
This study will compare campaign spending data from the 2004 elections against the campaign spending data from the 2000 elections. The study is comparing two presidential year elections because campaign spending and electoral activity is typically decreased in presidential midterm elections. Therefore, by comparing a midterm election to a presidential year election, the variation in the level of campaign spending and soft money donations could be simply caused by the admission or absence of the presidential aspect of the election and not the effect of the Bipartisan Campaign Reform Act. Also, another purpose of comparing the 2000 to 2004 election is that their proximity in time will minimize any monetary inflation of campaign donations. The independent variable will be the presence of the Bipartisan Campaign Reform Act. Therefore the 2000 presidential data will be used solely as a control and for comparison. The dependent variable will be the amount of unregulated donations made in each election, measured as soft money in the 2000 election, and will be measured by a titled determined during or after the 2004 election. The unit of analysis will be interest groups, specifically those giving substantial soft money donations in 2000. A substantial soft money donation will be conceptualized by any group giving near or above one million dollars in unregulated campaign contributions. The study will be accomplished by tracing the campaign donation activity of the 2000 election’s top soft money donators in the 2004 election. These top donators are considered to the top special interest groups that dump huge sums of unregulated money into the democratic process of elections thus undermining the common man’s donation and influence. A list is provided in table 2.
Table 2: Top Soft Money donators in the 2000 Election
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(http://www.opensecrets.org/softmoney/softtop.asp?txtCycle=2000&txtSort=amnt)
The campaign spending actions of these fifty groups will be closely watched and traced throughout the 2004 election as the spending data becomes available. The source of this data will be from the Center for Responsive Politics website or directly from the Center’s researchers. The Center for Responsive Politics is a reliable and trustable source; therefore the accuracy of the data will not be tainted. The data on the 2000 election is already present in its entirety, while the data for the 2004 presidential election will become progressively available throughout the election, with all the data becoming available late February, 2005.
Since the route of soft-money influence into politics is closed, these fifty groups will have to choose one out of a set of possible alternatives that will determine whether the Bipartisan Campaign Reform Act is successful in stopping the flow of mass unregulated donations in elections.
Alternative 1:
The first alternative for these groups is to play by the new rules. This can be accomplished two ways. First, through giving regulated hard money contributions either through individual donations by the group’s members to candidates or parties of their choice. Second, by forming their own interest group political action committee (PAC) and giving regulated donations to candidates or political parties through this path. The maximum amount of money able to be given through regulated means will be very minute compared to the amount given in 2000 as soft money. Therefore we will see a drastic decline in these groups’ campaign contributions in 2004. If the fifty soft-money top donators choose this route we can say the legislation is successful as these groups would have a “monetarily equal chance” to influence elections as any other group or citizen.
Alternative 2
The second alternative open to these groups is to quit electoral politics altogether. Interest groups or other special interests may decide since they cannot have a disproportionate share of influence through soft-money donations, they should use their money to have a disproportionate influence through other means such as lobbying those already in office. Therefore, if any of the above fifty groups choose this route it can be measured by the fact that the 2004 campaign data would register a zero for their campaign contributions. If these actions are taken by the fifty top soft-money donors we can say the Bipartisan Reform Act was successful in eliminating unregulated donations into politics, although at the price of another activity which is thought of as corrupt.
Alternative 3
The third alternative will be driven by groups who refuse to give up their perceived influence on elections through giving massive unregulated contributions. These groups will not play by the new rules, and they will not drop out of electoral politics. These groups will rapidly seek out a new loophole to exert their past soft-money influence in the 2004 election. Therefore, their contribution levels in 2004 will not drop but be sustained or even increased. Since the data is not available and since we are talking in the future tense on this issue, it can not be determined with certainty what kind of loopholes will emerge.
Chapter 6:
The 527 Group
What
Exactly is a 527 Group?
527 groups have not been major players in campaign finance and election spending until the 2004 election. This has left many observers asking the question, “What exactly is a 527 group?”
527 groups are named after their tax-exempt status under the Internal Revenue Code. They include parties, committees, associations, funds, or other organizations that are operated “primarily for the purpose of directly or indirectly accepting contributions or making expenditures for the purpose of influencing the selection, nomination, election, or appointment of any individual to Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual electors are selected, nominated, elected or appointed (26 U.S.C §527e, 1-2). In politics, 527 groups have tax advantages including contributions to them are considered exempt under the gift tax and the 527 organization itself is not required to pay taxes on contributions and dues because of its exempt status (Federal Election Commission Record, 8/2000, 16).
The Internal Revenue service in 1996, gave a series of rulings which widened groups that could be considered 527s. The IRS allows groups that circulate voting records, voter guides, and who are engaged in “issue advocacy communications” to fall within the exempt 527 label despite the fact that they may not advocate a certain election or certain candidate (Federal Election Commission Private Rulings, 1996, 1997, 1999). These rulings are crucial in 527 groups’ ability to evade soft money limits and raise unlimited soft money to spend on issue advocacy, while being tax exempt. The key here is that the 527 group cannot spend soft money on ads which express the election or defeat of a specific candidate, as that is illegal under the Bipartisan Campaign Reform Act, but if the 527 group sticks to pure issue ads, it can raise and spend soft money on the issue ads as a 527 because of the IRS rulings. According to the Federal Election Commission, as soon as these private rulings were passed, the number of 527 groups increased substantially (Federal Election Commission Register, 3/2001). The result for the 1998 election was the appearance of mystery ads that attacked one candidate without saying “vote for” or “support” the other candidate. Many of the ads were by 527 groups that were untraceable (Brookings Institute, 2001, 1).
Until
Second, the amendment also required periodic reports of contributions and expenditures if the 527 accepts contributions over $200 in aggregate from one person or makes expenditures that exceed $500 in the aggregate to one person, per calendar year. The disclosure requirement does not apply to 527s registered with the Federal Election Commission, state and local committees for local candidates, with respect to independent expenditures made in support or opposition to federal candidates, 501(c) groups, and 527s with annual gross receipts of less than $25,000. The IRS requires the 527 group to disclose the name, employer, and occupation of the contributors to the 527 group. The IRS then makes these reports public. Third, the amendment requires all 527 groups, including those registered with the FEC, to file an annual Return with the Internal Revenue Service.
The result is that the contributions to and expenditures from 527 groups in the 2004 election are highly disclosed and traceable through the Federal Election Commission and Internal Revenue Service. Therefore, 527 groups have a highly disclosed niche in politics. 527 groups can be tax exempt while raising unlimited amounts of soft money to spend only on issue advocacy as long as they don’t associate or are directed by national political committees or their agents. The fact that millions of dollars of non-federal funds are now flowing to these groups make them significant players in the 2004 election and future elections. Before 2004, 527 groups did not have this significant of a presence, but they did exist.
Pre
–Bipartisan Campaign Reform Act - History of 527 Groups
Not much
was known about 527 groups until opponents of the Bipartisan Campaign Reform
Act challenged the validity of the new law in the courts. Plaintiffs including Senator Mitch McConnell
sued the Federal Election Commission, and while they did not win, the expert
testimony in the trial exposed past 527 group actions. The May 1, 2003, Memorandum Opinion of
Colleen Kollar-Kotelly, a Washington D.C District Court Judge, outlined past
527 actions. In summary, Judge
Kollar-Kotelly found that, “Political parties and federal candidates work with nonprofit
groups on campaign activities, and they have raised nonfederal money for, and
directed and transferred
non-federal money to nonprofit groups for use in activities that
affect federal elections” (U.S. District Court, Kollar Opinion, 2003, 192;
hereafter Kollar). She further found
that, “The national party committees direct donors to donate nonfederal money
to certain interest groups that then use such funds for broadcast issue
advertisements and other activities that influence federal elections. For
example, Steve Kirsch testifies that the national Democratic Party played an
important role in his decision to donate soft money to “certain interest groups
that were running effective ads in the effort to elect Vice-President Gore,
such as NARAL.” 527 groups were found to
be included in instances and of such election financial behavior by Judge
Kollar-Kotelly.
The Defendant’s expert Thomas Mann stated that campaign finance research has mainly focused on PAC contributions and votes in the House and Senate but this is only one way in which “interest money” reaches politics (Kollar, 2003, 192). Mann states that, “currency in campaign contributions extends well beyond PAC contributions to members’ campaign committees. These include brokered if not bundled campaign contributions, contributions to leadership PACs controlled by members, contributes to parties and candidates in targeted races and informally credited to members, soft money contributions to parties and section 527 committees connected to members, and direct expenditures on issue ad campaigns” (Kollar, 2003, 178). Before the Bipartisan Campaign Reform Act, 527 groups were set up through informal connections to parties and members and served to spend money on campaigns without taxes and without disclosure before 2001.
Prior to
the Bipartisan Campaign Reform Act taking place, Public Citizen found that 63 current members of Congress had their
own 527 group, 38 members of Congress had a stake in the Congressional Black Caucus
527, that 527 groups were popular with influential congressional committee
chairmen, and 527s were increasingly popular with other members of Congress who
wanted to be more influential (Public Citizen Congress Watch, 2002, 6). These became known as “politician 527s.” According to Judge Colleen Kollar-Kotelly’s
memorandum, “for congressional leaders, 527 groups appear to collect
about as much money as their campaign committees and often as much as their
leadership PACs” (Kollar, 2003, 196).
The court
case found many instances in which 527 groups were related to specific races
and candidates before the Bipartisan Campaign Reform Act. Judge Kollar-Kotelly found that many
donors to 527 groups had the intent of influencing federal elections. Peter
Buttenwieser testified in 2002 that he donated $50,000 to the 527 Daschle
Democrats, which then ran broadcast ads in
Judge
Kollar-Kotelly found that twenty-seven industries or executives contributed
$100,000 or more in just a single year to the top twenty-five politician 527
groups. These included such groups as AT&T, SBC Communications, Philip
Morris, Mortgage Insurance Companies of
Judge Kollar-Kotelly concluded that, “It is clear that prior to
BCRA, the political parties donated nonfederal funds to nonprofit entities
which then used those funds to affect federal elections in ways that assisted
the political party that donated the money.
Furthermore, federal candidates have solicited funds for nonprofit
corporations that have assisted them in their campaigns, and donors note that
the political parties and federal candidates have directed them to donate to
specific nonprofit groups in order to affect federal elections. What the record
shows is that BCRA’s framers were aware of this budding practice which would
become a gaping loophole if not addressed by the campaign finance reform
legislation in light of BCRA’s other provisions affecting the collection and
use of nonfederal funds by the national and state political parties.”
Historically there were two types of 527 groups. Groups that existed to promote certain politicians and those that existed to promote certain ideas, ideologies, and partisan views in election campaigns. The Kollar-Kotelly memorandum cited that “Politician 527s” generally were used as a soft money funnel for leadership PACs which incumbents use to aid other candidates and their own re-elections (Kollar, 2003, 197). This purpose was to provide a loophole to the fact that leadership PACs can receive only hard money contributions. The politician 527 was the prevalent political 527 before the Bipartisan Campaign Reform Act banned them in 2002. The result is that after 2002 only 527 groups that promoted certain ideologies and issues through advocacy without advocating a specific race or candidate survived. The founders of the Bipartisan Campaign Reform Act believed that their banning of the activities of “politician 527’s” would shut the loophole. Yet the line between advocating an issue and advocating a candidate can be blurry and imprecise at times.
History
of 527 Groups - Post BCRA up to the 2004 Election
As parties prepared for the 2004 Election, political activists began to see large non-federal donations go to 527 groups. These donations were in the millions of dollars but were to be used for issue advocacy only as required by the Bipartisan Campaign Reform Act. Yet these large massive amounts of non-federal donations were eerily reminiscent of soft money. Campaign finance reform advocates immediately took note and drove for more stringent regulations.
In July of 2002, the United States General Accounting Office submitted a report to the chairman of the Ways and Means Committee of the House of Representatives, Bill Thomas (U.S. General Accounting Office Report, 2002; hereafter USGA Report). This report outlined the history of 527 groups political spending and asked the Internal Revenue Service to enhance oversight of the groups. The report stated, “In federal elections, these organizations have been able to use unregulated “soft money” for indirect or “issue advocacy,” such as that conducted when an organization sponsors an advertisement that supports or opposes a candidate’s position on an issue” (USGA Report, 2002, 6). The General Accounting Office stressed that appropriate disclosure to the public of these funds were necessary and required by P.L. 106-230. The General Accounting Office found that the IRS’ current system of public disclosure of 527 spending had “shortcomings.” The report stressed that these shortcomings needed to be fixed promptly because they “inhibit timely analysis of the relationships between political organizations and the influence of soft money on federal campaigns” (USGA Report, 2002, 7). At the time of the report, the General Accounting Commission concluded that 527 oversight was severely limited. In review of the 527 reporting requirements, they found that the IRS provided only minimal oversight to ensure the groups met the filing requirements, that the data from the groups were correct, timely, and complete (USGA Report, 2002, 19). Furthermore the report found that none of the filed 527 reports were audited to ensure the forms were complete and correct. These conclusions when taken in totality point to a serious deficiency. Without audits to identify potential non-filers and to identify incomplete or incorrect data on forms that are filed, the IRS had little or no ability to identify noncompliant organizations. As a result, adherence of 527 groups to the requirements set forth by P.L. 106-230 was almost voluntary in nature (as of July 2002) and noncompliance did not result in any penalties.
In the fall of 2002, the House of Representatives and the Senate began to draft legislation to address the shortcomings of P.L. 106-230 and the IRS’ treatment of 527 disclosure. H.R. 5596 was approved by Congress in October 2002 and was sponsored by Senators Joseph Lieberman (D-CT), Kay Bailey Hutchison (R-TX), John McCain (R-AZ) and Russell Feingold (D-WI) and by Representatives Kevin Brady (R-TX), Lloyd Doggett (D-TX), Christopher Shays (R-CT) and Marty Meehan (D-MA). Of importance is the inclusion of the original sponsors of the Bipartisan Campaign Reform Act in the sponsorship of this bill. In general, the bill enacts several corrective measures: the bill enhances the quality of information required to be reported by 527 groups, mandates the Internal Revenue Service to provide an easily-accessible electronic filing and disclosure system for 527 financial data, and streamlines which groups must file with the IRS – specifically stopping past duplicate filings (Public Citizen Congress Watch, 2002, 1). The new law requires groups to update the organizational reports when the group changes its leaders or political affiliation. Second, legislation increased the reporting requirements of 527 groups to include the date of contribution and purpose of expenditure. The legislation also requires electronic filing and for the IRS to provide searchable website database for the public. Lastly, the legislation eliminates unnecessary duplicate filings from state and local groups and also federal candidates and committees. These groups already must file with state and local organizations and also the Federal Election Commission. This law is pivotal in amending the deficiencies in the original 527 requirements. Of greatest importance is the measures enabling the public to assess where the money is coming from and at what time, what is the affiliation of the 527 group, and by requiring the 527 group to express the purpose of their financial activity. This section enables researchers and the public to recognize the purpose of the money and not just the amount and adds clarity to when, where, and why the money is being spent.
In 2004,
with the run up to the election, many 527 groups were accepting large donations
of non-federal funds considered soft money by many. The question emerged whether 527 groups
should be regulated by campaign finance regulations, and if 527 groups taking
in large soft money donations were a loophole in the Bipartisan Campaign Reform
Act. Three reform groups including Democracy
21, the
The complaint charges that, “Since the enactment of BCRA, a number of party and political operatives, and former soft money donors, have been engaged in efforts to circumvent BCRA by planning and implementing new schemes to use soft money to influence the 2004 presidential and congressional elections. These schemes, for the most part, involve the use of so-called “section 527 groups” –entities registered as “political organizations” under section 527 of the Internal Revenue Code, 26 U.S.C. § 527 – as vehicles to raise and spend soft money to influence the 2004 federal elections. They were, as one published report noted..created after McCain-Feingold to circumvent the ban on soft money.” The complaint further states that soft money has shifted from being a party phenomenon to now an independent expenditure 527 phenomenon, in that, “section 527 groups are attempting to replace the political parties as new conduits for injecting soft money into federal campaigns.” Further the complaint suggests evidence that 527 groups are taking over past traditional party functions of voter registration, canvassing, and turnout (FEC Complaint, 2004, 1-4). The reform groups take a partisan stand in claiming these groups are soliciting soft money for the sole purpose of defeating President Bush in the 2004 election, citing press releases from groups which identify this fact, and that, “these groups are, in effect, taking over the function of the Democratic National Committee, now barred by law, that once took in the much vilified and unrestrained contributions called soft money” (FEC Complaint, 2004, 3)
The complaint takes the position that 527 groups are the new vehicle for unlimited and unregulated soft money contributions and are in essence not non-profit groups but rather federal “political committees” that have a recognized mission to influence federal candidate elections, and thus should be regulated accordingly under the Bipartisan Campaign Reform Act. These groups are required to register under the federal campaign finance laws, and are subject to the federal contribution limits and source prohibitions on the funds they receive, according to the complaint. This includes that 527 groups with this purpose may not receive more than $5,000 per year from an individual donor, and may not receive any union or corporate treasury funds (2 U.S.C. § §441a(a)(1)(C), 441b(a)). Furthermore the complaint states these limits and prohibitions apply to all “political committees,” even committees that engage in independent spending. (11 C.F.R. § 110.1(n)).
The main strategy of the complaint was to convince the Federal Election Commission that the 527 groups listed were really defined as a “political committee.” Yet the definition of a “political committee” is complicated. If the reform groups accomplished this labeling, then the Federal Election Commission would be required to restrict these groups accordingly under the limits of the Bipartisan Campaign Reform Act. This point, whether these groups could actually be defined as “political committees” was the crux of the whole argument. The reform groups define a “political committee” from the United States Code as a group with a major purpose to influence federal candidate elections and a group which receives contributions and makes expenditures of more than $1,000 a year. The expenditure or contribution in this definition must have the expressed purpose of “influencing any election for federal office (2 U.S.C. § 431(4); see also 11 C.F.R. § 100.5(a).” The defendants in the complaint meet both of these requirements and are thus in violation of the law. These 527 groups therefore must register with the Federal Election Commission, file disclosure reports, and be subject to spending and contribution limits. Yet this definition is very broad in nature.
In Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court construed the term
“political committee” to the definition, “only encompass
organizations that are under the control of a candidate or the major purpose of
which is the nomination or election of a candidate.” Yet this begs the question when applied to
527 groups, how does one define “major purpose.” This was clarified by FEC v. Massachusetts
Citizens for Life, 479 U.S. 238 (1986), which used the “major purpose” test
and ruled that if a group’s independent spending activities “become so
extensive that the organization’s major purpose may be regarded as campaign
activity, the corporation would be classified as a political committee.” Therefore, the court implied that these
groups would be subject to “obligations and restrictions applicable to those groups whose
primary objective is to influence political campaigns.”
The definition of “political committee” was further more specifically defined in FEC v. GOPAC, 917 F.Supp. 851(D.D.C. 1996). This federal district court stated that a political committee as determined by the “major purpose” test is a group whose objective is “the nomination or election of a particular candidate or candidates for federal
Office (917 F.Supp. at 859).” Yet ruling further begs the question about how one determines what is the objective of a group. In this case the court clarified in the ruling that the organization’s purpose or objective can “be evidenced by its public statements of its purpose or by other means, such as its expenditures in cash or in kind to or for the benefit of a particular candidate or candidates. (917 F.Supp. at 862).”
The Federal Campaign Finance Laws further complicate the definition of a “political committee” by offering an alternate test. The test is “two pronged” yet includes the stipulations of the above definitions (FEC Compliant, 2004, 20). A “political committee” is an entity or group of persons whose major purpose is to influencing the “nomination or election of a candidate,” (Buckley), or of influencing the “election of a particular candidate or candidates for federal office,” (GOPAC), and receives “contributions” or makes “expenditures” of at least $1,000 or more in a calendar year. This definition includes all previous and is the basis for the reform groups complaint that the three named 527 groups in the article are in violation of the law.
The complaint provides evidence that public statements of these 527 groups have identified their purpose of defeating President Bush in the 2004 election and thus have the major purpose of influencing election of a candidate according to the Buckley and GOPAC rulings. Therefore, the named 527 groups meet the first prong. Further the complaint states that the named 527 groups are registered as “political organizations” under section 527 of the Internal Revenue Code, which labels them as “party, committee, association, fund, or other organization organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function of influencing or attempting to influence the selection, nomination, election or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice Presidential electors.” Accordingly, the complaint argues that this definition alone meets the major purpose test, and thus must also be labeled as “political committees” (FEC Compliant, 2004, 21).
The complaint also states that the named 527 groups meet the second prong of taking in contributions and sending out expenditures in excess of $1,000 a year which have the purpose of influencing any federal election. Therefore, this prong can be negated if the money was spent solely on issue advocacy without directly indicating a federal election. There exists a fine line between issue advocacy and electioneering communications, yet the complaint argues that 527 groups are formed for the express purpose of influencing candidate elections and cites Buckley, in which the Supreme Court ruled that the “express advocacy” standard does not apply to entities which have a major purpose of influencing candidate elections (FEC Compliant, 2004, 22). Therefore, the complaint argues that 527 groups can not defend themselves by stating that all their contributions and expenditures are used for issue only advocacy and thus they do not meet the second prong of the “political committee” test.
In
summary the complaint outlines how groups that should be restricted as
political action committees under the Bipartisan Campaign Reform Act are
instead operating as 527 groups with the ability to raise unlimited amounts of
money and spend these funds in get out the vote drives and issue ads. On
The 527 group Americans for a Better Country, which is also registered as a political committee with the FEC, requested advice from the Federal Election Commission about using federal and non-federal funds for campaign activities that included: communications regarding specific federal candidates, coordinating campaign activities with federal candidates and their agents, and having federal candidates solicit funds for the group (Federal Election Commission Advisory Opinion, 2003, 2). The opinion stated that those 527s with federally-registered political committees can only use hard money on broadcast advertisements and other public communications that directly promote, support, attack, or oppose federal candidates. Therefore, 527 groups that are also registered as political action committees with the Federal Election Commission cannot use soft money in these express ads. The Federal Election Commission further ruled that 527 groups also registered as political action committees may combine hard and soft money to fund activities that influence both federal and nonfederal elections. Third, the Federal Election Commission held that soft money can be used for voter registration and voter turnout drives that do not mention a federal candidate. If the voter drive does mention a federal candidate or federal race, then these groups must only use hard money as required by the Bipartisan Campaign Reform Act. The ruling was an indirect one in response to the complaint issued by the reform groups in that it skirted the pivotal issue of whether the three named 527 groups are considered political action committees. The advisory opinion expressed clearly that the ruling did not apply to 527 groups that are not registered as political action committees with the Federal Election Commission. Yet the ruling is of great importance, in that if 527 groups can be successfully labeled as political committees, then they must be registered with the Federal Election Commission and adhere to the same limitations.
In March of 2004, the Federal Election Commission addressed the problem of 527 groups not registered with the FEC yet taking part in federal election activities. The commission released a “Notice of Proposed Rule Making” which recommended certain restrictions on 527 groups and asked for public comment on the proposed rules (Federal Election Commission Notice, 2004, 1). The report made no definite rulings but did schedule hearings on the proposed rules for April 14th and 15th of 2004. Under the proposed rules, certain 527 groups would be required to register with the FEC as a “political action committee” and would only be allowed to spend hard money in federal election activities. The proposed rules directly addressed the complaint submitted by the Center for Responsive Politics. Under the FEC proposal, a 527 political organization would be forced to register with the FEC as a PAC and be subject to spending regulations if it makes more than $1,000 in federal "expenditures" and has as a "major purpose" to influence federal elections. The FEC proposed a system to solidify and determine what constituted a “major purpose.” A 527 organization would pass the "major purpose" test if the group explicitly states that the group's purpose is to nominate or elect federal candidates and meets the $1,000 annual contribution or expenditure limit, or if the 527 group focuses half of its annual spending to federal election activities, or if the 527 group spends more than $50,000 on federal election activities in a single year (Federal Election Commission Notice, 2004, 1). The proposed test was heralded as a success for campaign finance activists, as it would close the loophole on 527 groups not registered as political action committees with the FEC that raised unlimited non-federal soft money donations and spent the funds in federal election activities.
Commissioner Michael Toner strongly supported the proposed rules in his statement on political committee status, made public on March 4, 2004 (Federal Election Commission Toner Statement, 2004, 1; hereafter FEC Toner). In closing his statement he supported the claims by campaign reform activists that certain 527 groups are indeed the new soft money loophole. Commissioner Toner remarked, “Outside groups are essentially seeking to replicate much of the advertising and voter mobilization activities that the national parties financed in part with soft money before the new law (BCRA) was enacted” (FEC Toner, 2004, 3). Commissioner Toner stressed that the rules if enacted must be clear, understandable, and effective and charged “anything less than that would be a disservice to the regulated community, and to the law we are responsible for enacting.”
On
Senator Feingold’s statement concurs with that of McCain. Senator Feingold stated, “My view is that groups that claim a tax exemption because their primary purpose is to influence elections should be required to register as political committees with the FEC ...the FEC must not bless a new circumvention of the election laws, so soon after we closed the last loophole it created” (Feingold Statement, 2004, 2). At this point, political reform groups, commissioners in the FEC, and the two authors of the Bipartisan Campaign Reform Act stressed the need to close the existing loophole currently being taken advantage of by 527 groups not registered as political committees and thus not regulated. Much emphasis was placed on the proposed rules forwarded by the Federal Election Commission to the public that would be decided upon on April 14th and 15th of 2004. According to the Federal Election Commission, over 97,000 public comments on the proposed rules were submitted to the FEC before the hearing dates (FEC Notice, 2004, sum.) The stage was set for an important ruling, compounded by the fact that the ruling would be in mid election.
Before
the hearing, the Republican National Convention and the Bush-Cheney campaign,
filed a formal complaint to the Federal Election Commission on
On April 14th and 15th, the Federal Election Commission held hearings on the proposed rules on 527 groups. Interest group representatives commented upon the proposed rules which echoed previous complaints. The commission decided to vote on the proposed rules on May 13th. As the issue of 527 groups soft money influence grew to a climax compounded by multiple complaints, the May 13th ruling was much the anti-climax. The Federal Election Commission voted to defer action on the rules for 90 days against the general counsel’s recommendation (Federal Election Commission Memorandum, 2004, 1). The commission voted against enacting the rules requiring certain 527 groups to register as political committees at that time, and voted against a second proposal to enact the same rules yet delaying their implementation to 2005.
The
result of the Federal Election Commission’s choice of inaction gave 527 groups
a free hand at continuing to raise and spend soft money for use in the 2004
election. This ruling infuriated
campaign finance reform activists.
Proponents of 527 restriction immediately went to different outlets to
try to force change. On September 1,
2004, the Bush-Cheney campaign filed a lawsuit against the Federal Election
Commission in the U.S. District Court of the
On
Facing an incompliant Federal Election Commission and lacking a legal venue to force action on the proposed 527 rules, proponents of the Bipartisan Campaign Reform Act began to draft legislation. Senator Joseph Lieberman, Senator Russell Feingold, Senator John McCain, Representative Martin Meehan (D-Mass.), and Representative Christopher Shays introduced the a new bill to Congress on September 22, 2004. The proposed bill will require all 527 groups to register as political committees with the Federal Election Commission and therefore be subject to spending regulations imposed by the Bipartisan Campaign Reform Act. Currently, the bill has only been introduced.
The result in totality is that for the 2004 Election, 527 groups were given free reign to raise and spend soft money contributions in the federal election. These funds have been utilized for television ads and get out the vote drives, two things usually funded by the national party committee with soft money in the past. Further, proof exists in the Bush-Cheney compliant that some level of illegal coordination between the Kerry campaign and several 527 groups existed. The result is that the Bipartisan Campaign Reform Act was unsuccessful in stopping the flow of soft money according to these groups and campaigns. An analysis of the level of soft money spending in 2004 is necessary to survey the damage and give hint to the scale of the proposed loophole.
Chapter 7: 2004 Data Analysis
and Comparison
Table three integrates the top fifty soft money donors of 2000 with their contributions to 527 groups in 2004. The first column records the name of the donor and the second column records the 2000 soft money donation. The third and fourth column records the amount given in soft money to Democrats and Republicans respectively in 2000. The last column gives the amount given to 527 groups in 2004. The exact amount of the 527 donation that went to supporting Democrats or Republicans cannot be determined from the data. Therefore, row 3 and 4 can give us insight into where the 527 donations are going.
Table 3: Comparison of the Top Soft Money Donors in 2000
versus their 2004 527 Donations
|
Table three presents a complex picture of the correlation of 2000 soft money donations with 2004 527 donations. The first thing to notice is that only eleven out of the original fifty soft money donors made donations to 527 groups in 2004. This is a rate of 22%. For some reason, 39 of the 2000 donors decided not give donations to 527 groups. Enron, Phillip Morris, US Tobacco, Microsoft, and Anheuser Bush are five groups that did not give donations to 527 groups for legal reasons. These five groups’ lack of action is easily explained. Of the 41 groups that did not give 527 donations, 39 of them are businesses. The Association of America Trial Lawyers and the National Rifle Association are the two exceptions. Businesses have a propensity to change leadership, political strategies, and even go bankrupt in a four year period. This is one possible explanation of why 39 businesses failed to 527 donations. Businesses, on an individual level, tend not to be consistent donors but rather focus funds on access techniques such as lobbying. The nature of 527 donations can explain this phenomenon. Soft money donations were given directly to the Democratic or Republican party, often with expressed purposes, or with intent for the donation to be allocated for one specific campaign. Therefore, a candidate was aware of a business’ donation to his own campaign in soft money. 527 groups present a more indirect route. A business would have to give the money to an already established 527 group or form their own 527 group. The 527 group then spent the money on television ads or get out the vote drives. This route took the money out of the party’s immediate control; therefore the donation is not seen as a donation to a campaign or candidate. This indirect route would gain the business less “access” to the candidate.
The “access” technique is used by businesses to buy a congressman or even a president’s time on an issue. Therefore a donation to a candidate, theoretically, will eventually lead to the candidate spending time on your issue. There is one big if; the candidate must win. Groups that were after “access” therefore gave money to both parties. A look at table 2 or table 3 will prove that the majority of the 2000 soft money business donors were after this access technique as shown by their soft money donations to both parties. The 527 route provided a less ideal access route than other strategies such as lobbying, therefore the majority of businesses in 2004 failed to give 527 donations. This is one probable explanation for the 39 businesses’ failure to jump on the 527 loophole. The loophole simply did not suite their goals.
Of course there are some exceptions to this explanation. Of the eleven 2000 soft money donors that gave donations to 527 groups in 2004, three are businesses. American Financial Group gave $1,280,000 in soft money in the 2000 election, roughly half to the Democrats and half to the Republicans. In 2004, American Financial Group gave $2,245,000 in 527 donations. Amway-Alticor Inc gave $1,138,500 in soft money in 2000, all to Republicans. In 2004, Amway-Aliticor gave $4,020,000 to 527 groups. Blue Cross – Blue Shield gave $1,104,415 in soft money in 2000, roughly 80% to Republicans and 20% to Democrats. In 2004, Blue Cross – Blue Shield gave only $237,750. One thing all three of these businesses have in common, despite Amway’s dubious reputation, is stability, unlike an opposite example – Enron.
The real
pattern emerging from this data is exemplified by those eleven groups that did
give 527 donations. Of the eleven, eight
were some type of labor union or professional union. Of those eight groups, all of them in 2000
gave the majority of their soft money contributions to one party. Therefore, it can be argued they were not
trying to buy access like most businesses, but rather had an ideological
stance. Further, labor and occupational
unions have a history of sustained political donations, unlike businesses that
often alter their political strategies annually. In looking at these labor and professional
unions, the second main thing the data presents is the scale of their
donations. The American Federation of
State, County, and Municipal Employees gave $5,949,000 in soft
money in 2000. In 2004, the American Federation
of State, County, and Municipal Employees gave over five times the 2000 amount:
$29,413,517.
The Service Employees International Union gave $4,288,096 in soft money
in 2000. In 2004, the Service Employees
International Union gave twelve times the 2000 amount: $52,030,168. Both of these cases attest to the ability of
groups to take advantage of the 527 loophole.
The International Brotherhood of Electrical Workers also was able to
increase their donation. In 2000, the
International Brotherhood of Electrical Workers gave $1,780,000; and in 2004
they gave $6,669,892. The Carpenters and Joiners Union, the
Communications Workers of America, the American Federation of Teachers, and the
Sheet Metal Workers Union gave roughly the same amount in 2004 that they did in
2000. This attests to the fact that soft
money was not eradicated but rather just shifted to another path. The one anomaly, the United Food and
Commercial Workers Union decreased their contributions from $2,146,450 in 2000,
to only $894,661 in 2004.
In
review, the data presents a complicated picture. Businesses engaged in the “access” technique
as shown by their 2000 soft money donations to both parties, decided not to
engage in 527 donations in 2004. One
explanation for this phenomenon is that the 527 route included independent
expenditure groups rather than political parties and thus were considered an
indirect contribution to a campaign or party.
Lobbying, hard money donations, and other access techniques are thought
to be more successful than indirect contributions to an independent 527
group. Three businesses marked by their
corporate stability, Amway, Blue Cross, and American Financial Group, decided
to give 527 donations. It is interesting
to note that in 2000, Amway and Blue Cross gave the majority of their donations
to Republicans, showing a more ideological goal than an access technique. Of the eleven soft money donors that gave 527
donations, eight of them were labor unions or occupational unions with
ideological goals. The major players
were the American Federation of State, County, and Municipal Employees and the
Service Employees International Union.
Both of these groups gave a substantially larger amount to 527 groups
than they did in soft money in 2000.
Two points must be made. The data is deceiving in that only eleven of the original fifty gave 527 donations. Businesses are prone to change names or form side organizations with different names that could have given to 527 groups. This strategy can cause a lack of correlation in the data between the past business’ donation and new business’ donation. The second point is on the aggregate level. The data shows that only eleven of the groups used the 527 loophole which seems to be a success in numbers. In order to judge this, one must look at the sum of each year’s donations. In 2000, the fifty soft money donors gave a total of $78,653,187. In 2004, the eleven 527 donors gave a total of $103,808,138. Considering this is a newly formed loophole, this would not be a victory for the Bipartisan Campaign Reform Act in monetary comparison.
Overall Look at 527
Donors in the 2004 Election
The data
presented in table three presents several conclusions about the Bipartisan
Campaign Reform Act’s effectiveness, but the table does not paint a true
representation of the overall picture of 527 donations in the 2004
election. In 2000, donors gave $495.1
million in soft money. In 2004, donors
gave exactly $526,139,724 to 527 groups.
The amount of money is comparable and shows the Bipartisan Campaign
Reform act failed, but it is interesting to look at who makes up the donors in
each year. A look at table 2 or 3 proves
that labor unions and businesses/corporations made up the bulk of soft money
donors. This was not the case in 2004. The
Chapter 8: Conclusion and the
Need for Further Research
The data presented has shown that organizations that wished to continue giving soft money could do so in 2004 despite the Bipartisan Campaign Reform Act. Donors could no longer give soft money to parties, but rather created their own 527 group or gave to a 527 group which represented their interests. In some cases, the soft money donors such as unions gave twelve times the amount they gave in soft money in 2000. In other cases, donors such as businesses dropped from using soft money altogether. The amount of soft money donated to 527 groups from our researched donors and in total exceeded the amount of soft money raised in 2000. The Bipartisan Campaign Reform Act did not stop the flow of soft money, it just rerouted it from parties to independent expenditure groups. Some groups even had close contact with party and campaign employees. The money, on whole was used for the same purpose. 527 soft money was spent on candidate ads disguised as issue ads and on voter mobilization efforts. Big business was replaced by ideological groups and wealthy individuals in 527 groups. The amount of soft money raised increased, and the money was used toward the same ends as previous elections. In the end, 527 groups were created and used to circumvent campaign finance laws and continue to inject soft money into federal elections.
This occurred even though Federal laws and U.S. Supreme Court decisions established that a 527 group with a "major purpose" to influence federal elections must register as a federal political committee and adhere to contribution limits. Yet, the Federal Election Committee failed to enforce these mandates leading to a long legal battle during which 527 groups raised more and more soft money. Proponents of the Bipartisan Campaign Reform Act, including John McCain, claim that the Federal Election Commission is to blame for their lack of enforcement.
This is
an interesting claim when considering on
This bill, through its definition of a 527 committee, will effectively stop the large soft money donations to 527 groups that were present in the 2004 election. By defining it by its purpose and activities, a 527 in a Federal election would be regulated to nothing more than a political action committee. This is a solution to the short term problem if Congress decides to pass the bill, but is this a long term solution?
This thesis has analyzed and established the trend from soft money in the 2000 election to 527 groups in the 2004 election. The authors of the Bipartisan Campaign Reform Act failed to account for a probable loophole when writing the bill. If the Bipartisan Campaign Reform Act would have included a section changing the definition of the 527 group, they would have remained relatively unknown in American politics in the 2004 election. The authors lacked the foresight to stop every perceivable loophole in 2002; do they still lack the foresight to stop the next loophole in 2006 or 2008?
This thesis presented a comparison of the top fifty soft money donors in 2000 and their corresponding actions in 2004. The data for the thesis became available in mid February which left little time to account for why some organizations decided to pull out of soft money and 527 organizations. This is one weakness of the thesis, as the author can only speculate why these groups decided not to give 527 donations. Further, this paper while presenting the relatively unknown history of 527 groups fails to be able to account for their full picture in the 2004 election. Only a few of the 527 major players in the 2004 election, Service Employees International Union and American Federation of State, County, and Municipal Employees, were present in this thesis’ analysis. The growth of the 527 phenomenon belongs to the individual donors such as George Soros ($23 million), Peter B. Lewis ($22 million), and Steven Bing ($13.8 million). The expenditures of 527 groups in the 2004 election belongs to groups that raised money to defeat or support George W. Bush: American Coming Together ($78 million), Joint Victory Campaign ($72 million), Media Fund ($59 million), Progress for America ($44 million), and Swift Vets and POWs for Truth ($17 million), just to name a few. The data analysis did not include these groups because they didn’t exist in 2000. The comparative research and design exposed the failure of the Bipartisan Campaign Reform Act but failed to display the larger picture of 527 groups in the 2004 elections.
Future studies should employ a research and design better suited for the “high speed low drag” and ever changing system of campaign finance. The 527 Reform Bill should be traced through the Senate. If the bill fails to pass and the Federal Election Commission remains stagnant on enforcing 527 groups to abide by political committee limits, the amount of soft money give to 527 groups in the 2006 and 2008 elections will skyrocket. This was the first year of the 527 loophole, and the loophole provided for the passage of more soft money than was raised in the 2000 election. This should be a sign of what is coming. Can campaign finance reform ever really get rid of loopholes? History proves that once one loophole is closed, another one or two are discovered. If Congress passes the 527 Reform Act, researchers must be ready to discover and counter any new loopholes. The only solution to the loophole dilemma is to employ the people that find the loopholes for special interest groups. A consortium of scholars and lawyers working together with government funding should be able to identify new loopholes and propose legislation closing them before they are fully utilized. A constant revision of our laws is necessary to meet unwarranted actions, but the political process of enacting legislation and the Federal Election Commission review process is too slow to stem every loophole immediately. The 2004 Election is a perfect example of this.
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