Soft Money and the FEC

Feb. 18 Washington Post editorial that shares Common Cause’s view of 527s

THE FEDERAL Election Commission is scheduled today to take up one of the most controversial issues in campaign finance regulation: what rules govern a new breed of political committees that involve themselves in federal elections but say they are free, unlike political parties and candidate committees, to take unlimited funds from any source. The activities of these groups are of concern, and they bear watching in 2004 and beyond. But for now, as a matter of both law and policy, the FEC should refrain from subjecting them to the same rules that cover ordinary political committees.

These groups, known as 527s for the section of the tax code under which they are organized, argue that they are allowed to raise and spend unlimited amounts of “soft money” from wealthy individuals, corporations and labor unions as long as they avoid directly calling for the election or defeat of particular federal candidates. They existed even before the passage of the McCain-Feingold campaign finance law.

But now, with soft money off-limits for political parties, they’ve become more important. That’s particularly true for Democrats, because Republicans lead in limited “hard money” contributions. A coterie of Democratic strategists has assembled what amounts to a shadow political party devoted to ousting President Bush — and using soft money to do so.

This helps explain why a Republican group calling itself Americans for a Better Country — and modeling its proposed activities precisely on the Democratic 527s — has come to the FEC seeking an advisory opinion on its own legality. This is a cynical tactic (albeit one that Democrats, too, have employed) aimed less at achieving reform than at hobbling the Democrats.

In a draft opinion to be considered today, the FEC’s general counsel, relying on the Supreme Court’s ruling upholding McCain-Feingold, said 527s become subject to the stricter rules governing federal political committees whenever they “promote, support, attack or oppose one or more clearly identified federal candidates.” They then would have to rely on limited hard money.

But this restrictive analysis ignores a few important factors. Congress, concerned about the activities of 527s during the 2000 campaign, required them to disclose their finances — suggesting that Congress expected them to be involved in federal elections. And McCain-Feingold itself contemplated that such groups would continue to operate. As the Supreme Court said, McCain-Feingold leaves interest groups “free to raise money” for voter registration, get-out-the-vote activities and mailings, in addition to broadcast advertising outside the 60-day window before an election.

That speaks to existing law; whether it’s good policy to allow such groups to accept and spend soft money to influence federal elections is a tougher question. A two-tiered system that lets the 527s spend unlimited sums from any source to affect federal elections, while others are restricted to collecting far smaller checks, is troubling. At the same time, the value of regulation always has to be balanced against the risks of dampening political expression. New rules shouldn’t stifle legitimate outside groups participating in policy debates.

The chief rationale for cutting off soft money to political parties was its corrupting influence on the process, in particular the involvement of elected officials in soliciting such huge checks. McCain-Feingold wisely prohibited federal officials from collecting soft money on behalf of outside groups as well. It may turn out that those who end up benefiting from these big checks will know full well who is writing them.

But the Democratic 527s have so far raised just a sliver of the soft money that once flowed to the party, and it has yet to be seen whether the same corrupt system that subsumed both parties will re-create itself in outside groups. Congress took a big step when it outlawed soft money to political parties. Before it — or the FEC — takes another, it would be wise to wait and see how the new system operates in practice.