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Debate Club
DEBATE CLUB 10/11/04

Has Campaign Finance Reform Failed?

Richard Hasen and Robert Bauer debate.

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When the McCain-Feingold bill became law in November 2002, it was the first new major regulation of campaign finance in 28 years. Its key component was a strict limit on gifts of "soft money" to political parties. Curbing these large donations from corporations, unions, and rich individuals, Arizona senator John McCain argued, would "stop the significant corrosive effect that soft money has had on our political system and the American people."

But this year's presidential election has been heavily influenced by independent organizations called 527s, tax-exempt advocacy groups that are allowed to raise unlimited soft money and spend it on anything short of directly stumping for a candidate. Spend it they have. These groups have exercised their financial muscle on behalf of the right and the left, paying for the anti-Kerry charges made by Swift Boat Veterans for Truth, the anti-Bush ads by, and tens of millions of dollars more.

Does the prominence of 527s mean McCain-Feingold has failed? If it does, what's the next step for campaign-finance reform?

Richard Hasen is Professor of Law at Loyola Law School and runs Election Law Blog. Robert Bauer is Managing Partner of Perkins Coie's Washington, D.C. office and author of More Soft Money Hard Law.

Hasen: 10/11/04, 09:01 AM
The McCain-Feingold law has gotten a bad rap. Critics argue that the law, which we in the election-law world call "BCRA" (think "bik-rah," for the Bipartisan Campaign Reform Act), has somehow "failed" because of the rise of 527 organizations. These are organizations with an election-related purpose but that act independent of political parties and candidates.

In fact, despite what some critics have said, BCRA was never intended to limit 527 organizations, whose rise was both a predictable and inevitable result of BCRA's ban on large "soft money" donations to the political parties.

I'll flesh out some of the issues related to 527s in upcoming posts, but I begin here with some basics. Though BCRA is a complicated law, it had three main goals: (1) to sever the connection between large donors and elected officials (and candidates) facilitated through large "soft money" donations solicited by the parties; (2) to limit the role of corporate and labor union money in the political process; and (3) to facilitate disclosure of the funding of election-related activities.

On all three fronts, the early evidence indicates that BCRA has been a success. First, parties are no longer brokering nights in the Lincoln bedroom or golf weekends with the House leadership in exchange for six-figure donations. Both the potential for corruption and its actual appearance have lessened under this law, because parties can collect only smaller amounts of money, and elected officials cannot solicit large donations. The 527s cannot sell access because they cannot coordinate with candidates or parties.

Second, we have much better disclosure than we had before. In the 2000 Republican New York presidential primary, for example, a previously unknown group, "Republicans for Clean Air," spent millions on TV ads bashing Senator McCain, who was running against George W. Bush. Who paid for the ads? The law required no disclosure. Some enterprising journalists discovered the ads were paid for by two Bush supporters from Texas. Under BCRA, disclosure of the funding for such ads is now legally required.

Third, we have seen a reduction in corporate and union involvement in funding election-related ads. The federal success contrasts with what is happening in some states, where, for example, the Chamber of Commerce has been funding major campaign ads involving state judicial and attorney general races.

BCRA may not be perfect, but it appears on track toward meeting its three major goals.

Bauer: 10/11/04, 06:25 PM
Rick has addressed his challenge—defending BCRA—by doing what a savvy debater does: hoping to define the question to fit his answer.

I would counter as follows:

1 . BCRA supporters have emphasized different purposes at different times, but there are some key objectives, very vociferously proclaimed by reform supporters, missing from Rick's account. One had to do with limiting overall the amount of money spent on politics—principally "soft money," but, more generally, money. Anyone who doubts this as an objective should consult the legislative history which reflects the intentions of those actually empowered to vote the reform up or down. In those debates, you will also find much discussion of the importance of limiting "negative" or "attack" politics; and this objective was incorporated into a number of provisions, including the "stand by your ad" provision under which the candidates have to appear to clearly state their approval of their advertising. But, of course, this Presidential campaign is awash in money, spent in recordbreaking amounts, and the dialogue sounds fairly negative to the ear.

2. The ruckus over 527s and their role has been raised by the very reform organizations and Hill supporters that wrote and lobbied for the bill. They have filed lawsuits, petitioned the Federal Election Commission for relief, and now introduced new legislation on the Hill—all of this to counter what they claim to be "loopholes" exploited in contravention of McCain-Feingold. It is hard to argue that 527 activity was "a predictable and inevitable result of BCRA's ban on large 'soft money' donations to the political parties" when both McCain, Feingold, and their allies are arguing to the contrary.

3. There is no question about the clarity of the law's prohibition on officeholders or national party official solicitation of "soft money" to the parties. Senator McCain and others have argued, as Rick does, that this provision has been effective. To muddle matters, however, the sponsors of the bill and their allied reform organizations have filed suits in court to overturn the FEC's implementing rules, arguing precisely that these rules
allow for massive circumvention of the law. So which is it: an effective law, or an ineffective one?

So far, McCain-Feingold has, as Rick acknowledges, facilitated the flow of money from political parties to other organizations—from the parties (and their candidates) that have to answer in the public square for their activities, to "Swift Boat Veterans for Truth." This is a sufficient basis on which to question the accomplishment so far of McCain-Feingold.

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Hasen: 10/12/04, 09:41 AM
Bob points to a lot of apparent hypocrisy and double-talk in the reform community over the goals of BCRA and what it was intended to cover. His points are well taken, but he's aiming at the wrong target. I have neither defended BCRA as a way of taking money out of politics, nor claimed that 527s are exploiting BCRA loopholes. So Bob's first two arguments are irrelevant.
To this point, then, Bob has not disagreed that BCRA has had three salutary effects: it has broken the parties' sale-of-access game, it has improved disclosure rules, particularly for election-related broadcast ads, and it has placed a lid on extensive corporate and labor union involvement in federal elections.

So far, so good. This leaves Bob's third point, that BCRA has caused money to flow from parties "that have to answer in the public square" to ostensibly nefarious groups like "Swift Boat Veterans for Truth."

Is this really so? Bob had been vocal in claiming that BCRA would decimate the parties, particularly the Democratic Party, which had relied upon a small cadre of six-figure donors. Some even called BCRA the "Democratic Party Suicide Bill."

But it would be more accurate to consider BCRA a savior of the Democratic Party. John Kerry has raised over $225 million, mostly in small donations, and much of it over the Internet-setting a record for fundraising by a presidential challenger.

According to figures just compiled by Professor David Magleby, the Democratic National Committee raised $125.4 million in hard money between January 1 and June 30 under BCRA rules, compared to $99 million in hard and soft money during the comparable 2001-2002 period and $116.7 million in the 1999-2000 period. Republican committees are doing well too, and the combined candidate and party monies raised this year will exceed the amounts of hard and soft money raised in the 2000 election cycle

Yes, the 527s are raising and spending money, but most of groups have spent amounts that pale compared to the parties. Swift Boat Veterans, for example, spent only about $2.3 million so far. Free publicity for making outrageous claims, not spending, accounts for most of their notoriety.

And, so far as we know, no one is getting to sleep in the Lincoln bedroom or golf with the Democratic Senate leadership for giving a big contribution to a 527. That's a victory.

Bauer: 10/12/04, 03:19 PM
I agree that Rick defined the goals of BCRA more narrowly, perhaps even more prudently, than BCRA Congressional sponsors and supporters did. But my arguments—directed to the amount of money and the prevalence of "negative campaigning" —are not, as Rick suggests, "irrelevant," because our task here is to judge BCRA as it was conceived and not as its more temperate defenders like Rick choose to define it. We can hardly dismiss as irrelevant what those who voted the bill into law said about what they were trying to accomplish.

I cannot agree that BCRA is the "savior" of the political parties. The data does not really support the view. The question has never been whether the parties could ever overcome the new legal restrictions under favorable, even unusual conditions, such as a Presidential campaign in wartime conducted before an impassioned, polarized electorate. None of the "studies" control for these kinds of factors and so they tell us little about the long-term effect of McCain-Feingold on parties. A number of cycles' experience will help to shed some light on this question. In the meantime, those sympathetic to political parties will be hard put to believe that our parties have been "saved" by a law that severely restricts possible sources of funding (soft money prohibitions and restrictions); limits their communications with political allies (solicitation and coordination restrictions); and encourages even "hard money" activities to be conducted "independently" of their own candidates (independent expenditure and coordination rules).

These restrictions are said to be tolerable, even commendable, because we do not have parties arranging overnight stays for a fee in the Lincoln bedroom, or charging for golfing with a Senator. The reform community often cites these examples, expecting to bring vividly to mind the fabled campaign finance horrors of the past. Some will be glad indeed to have these lapses in taste and questions of appearance behind us, even if no sale of office was ever established as a result of restful evenings at the White House or a sunny 18 holes with a politician. Others will question the price we paid for tidying the official political landscape, which includes—in Rick's word—a "complicated law" that, forcing all manner of complications on parties, has helped the term "527" achieve national recognition.

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Hasen: 10/13/04, 09:08 AM
I don't view our task as "judg[ing] BCRA as it was conceived" by some but rather as assessing the question, put forward by Legal Affairs, "Has Campaign Finance Reform Failed?" For reasons detailed in my first two posts, I think BCRA has been a success in the three important ways I mentioned. I also agree with Bob, that to the extent anyone truly conceived of BCRA as a means of taking money out of politics or reining in negative campaigning, it has been a failure.

Bob makes the important point that it is too early to fully assess the effects of BCRA on the political parties. He's right, of course, but there's reason to be optimistic that hard money party fundraising will continue to flourish.

According to Professor Gary Jacobson, the partisan divide in this country has never been larger, and it is growing. Don't think that if John Kerry wins the presidency we will see a decline in partisanship. The sad (or happy) fact is that intense partisanship is good for party fundraising. And Democrats, who lagged behind Republicans in creating a good donor database, now have one, thanks to those myriad Internet donations. Their future fundraising prospects seem bright.

This leaves us with Bob's final point: that the price to pay to end the sale of access by the parties has been the unfortunate rise of the 527s. I said in my first post that the rise of independent organizations following BCRA was inevitable, but that does not mean that their rise has been desirable.

Many worried that 527s would somehow replace parties as the locus for politics. Parties serve crucial functions in a democracy, not the least of which that they provide a cue for busy and uninterested voters. I can walk into the polling booth knowing very little about who is running for U.S. Senate, but if I know the candidates' party labels (Democrat, Republican, Green) and I know my own preferences on a liberal-to-conservative scale, I can make a pretty good choice about which candidate to choose.

The 527s have not undermined the parties' abilities to provide that cue to voters. 527 spending thus far has been relatively modest and has not drowned out parties or candidates.

BCRA has made the system marginally better. If we want serious reform, though, we need to move much more heavily to public financing of election campaigns.

Bauer: 10/13/04, 11:42 AM
Rick's most recent post raises the important question: what clarity of purpose and effectiveness should we expect from a statute that imposes significant restrictions on the conduct of political activity? We expect rigorous constitutional tests to be applied to them, to be sure; but there is also the question of how the legislature—or the public at large—should identify and balance the costs and benefits. A fair case would be made that we should not launch these kinds of statutory initiatives unless the benefits are clear and concrete, because the costs are well documented and considerable: regulatory complexity, government intrusion into the political process, restricted political activity, and the increased use of the law to achieve competitive advantage.

So far, Rick and I agree that to the extent that the law was intended to limit the amount of money overall, it has failed; and that it has failed also to fulfill any intent to limit "negative campaigning." So we can set these possible "benefits" aside. We disagree over the significance of blocking the access of soft money donors to the Lincoln bedroom or golf tournaments with Senators, but I am prepared to allow for the possibility that some will feel better that special interests will have to find their lodging and entertainment elsewhere. Rick also mentions disclosure, and this is all well and good: but all in all, we have managed to identify few benefits of impressive consequence.

But everything is relative, and so what of the costs?

Rick denies that the parties have been seriously harmed, suggesting in fact they may have prospered. To nail his point down, he now gestures to the likelihood of continuing heightened partisanship, which should afford each party a steady supply of hard money donors. It seems to me peculiar that a supporter of reform—committed to an improved, healthier political process—takes comfort in highly polarized politics as the parties' buffer against the blows of McCain-Feingold. It also proves little to say, as Rick says, that parties have not been "replaced" by 527s. We have not seen a complete replacement of parties, but as strong party identification declines, and as other organizations like 527s demonstrate they can influence the course of campaigns, we cannot be altogether sanguine about the parties' ability over the long run to hold their position. So the legislative choice through McCain-Feingold to limit the operational flexibility of parties, through fundraising and other restrictions, does not seem well considered.

Rick concludes his last post by mentioning that the benefits of McCain-Feingold have been "marginal." Is that good enough when considered in the light of its costs?

Finally, Rick believes that the real benefits of reform will come our way only via public financing. But McCain-Feingold's approach to political reform could not be more sharply different from the public financing model: it represents a view of reform as police work, concerned with restricting "corrupt" activities rather than promoting participation with public resources. The adoption of the McCain-Feingold model makes a turn to the public financing alternative unlikely any time soon. The reform community, with support from the press, is pronouncing the new law a success, which leaves little reason for elected officials to propose, or for the voting public to accept, more ambitious experiments with public funds.

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Hasen: 10/14/04, 09:24 AM
In one sense, Bob and I have reached an impasse. He has grudgingly agreed that BCRA has broken the sale of access to the highest bidder by the parties to federal candidates and officeholders, and he apparently approves of the vastly improved (though far from perfect) BCRA disclosure rules. Presumably (he doesn't say), he's happy about BCRA's tougher rules for corporate involvement in the political process, though, as a lawyer for Democrats, he's likely not too thrilled with parallel limits on labor unions.

I have also agreed that BCRA is not lowering the costs of campaigns or restoring some ostensibly long-lost civility to political campaigns (a goal which would be unconstitutional in my opinion, even if it were possible to achieve).

So at this impasse the reader can judge for herself whether the benefits of BCRA are worth the costs, primarily the risk that the power of political parties in the United States will decline further. I think the parties have and will continue to adapt and be major political players under BCRA.

But our broader debate is far from over. As with any new law, there are bound to be difficult and controversial cases. (As Bob and I debate the big picture here, we are simultaneously debating on our blogs Sinclair Broadcasting's decision to broadcast an anti-Kerry documentary shortly before the election (see here and here). And then there is the question of what happens next. Bob thinks that the pronounced success of BCRA will deter further reform, including strengthened public financing. I disagree. It is quite clear that the public financing system for presidential elections is now broken. No rational, serious candidate again will opt in to a system that limits him to spending $45 million in the period up to the party convention, when his opponent can raise 4 or 5 times that much through private financing.

And, as controversies continue to swirl over 527s and others, reformers will argue that the best way to limit corruption and promote fairness is to reduce politicians' demand for private money. I prefer public financing allocated through a market-like voucher system, and my guess is that Bob would prefer the parties to be the locus for such allocations. Another way to lower demand for money is through free broadcast time for candidates on television and radio stations.

I don't expect these major changes to happen soon. We'll probably need another scandal for that. (Watergate led to the passage of the major 1974 campaign finance legislation, and Enron was a major factor in BCRA's passage.) But with the breakdown of the system for financing presidential candidates, the issue of reform will remain on the table.

Bauer: 10/14/04, 03:34 PM
I am not sure that I quite agree with Rick on the issues he identified, or in the ways he suggests. For example, I agree that BCRA limits the ability of the press and reformers to develop "appearance" claims around officeholder and party solicitation of soft money. But those claims are not the same as well documented cases of access improperly "sold." The question has never been whether a politician uses the assets of his office to draw political support, including through fundraising: of course they do. Politicians introduce bills with no chance of passing to appeal to particular constituencies; they cast votes for similar reasons; and they certainly manage their schedules for political, as well as official, effect. A good politician does so without compromising his or her office; a bad one—not necessarily bad in the sense of being venal, but perhaps just inept—does not draw the right lines and lapses into unethical or illegal conduct. Reformers attack both kinds of politicians with the "appearance" argument, never accepting that they are contributing to, even insisting on, on the very "appearance" they deplore. In short: BCRA limits the scope of the problem of "appearances", but I do not agree that it does much more—for example, by actually preventing the "sale" of office or access.

I do agree that the equivalency established under the campaign finance laws between corporations and unions—applying the same restrictions to both—is almost obscene. So it goes with campaign finance reform. The Republicans insisted on this equivalency, forcing it into law when they could; and now we all live with it, many assuming that it is more or less the natural order of things. That people otherwise committed to progressive politics can tolerate this result, remaining fully committed to "reform," is beyond me.

Rick, citing the current questions presented by the actions of Sinclair Broadcasting, says that "As with any new law, there are bound to be difficult and controversial cases". This is a significant point of tension between his outlook and mine. I do not regard political laws—laws that restrict political activity and govern the allocation of resources for political purposes—as just "any law." The "difficult and controversial cases" engendered by these laws directly affect democratic life and participation, and for that reason, these laws—how they are made, by whom, and for what purposes—require special, critical attention. Of course they do not get such attention in the elite media where their support is passionate and perhaps decisive: what we are offered there instead is facile, dismissive characterizations of the political process, a process alleged to be dominated by self-serving politicians striking sinister alliances with "special interests." So my view of the "difficult and controversial cases" brought on by McCain-Feingold is less acceptant: I view them as disruptive to political life and without significant redemptive benefits.

I do agree with Rick that a public financing program is well worth consideration. We are not likely to see one anytime soon, with or without the encouragement of a "scandal." Here, too, McCain-Feingold has played its part. On the floor of the Senate, the late Senator Wellstone introduced an amendment that, by removing the obstacle of preemption, would have encouraged state experiments with public financing of federal elections. It was a brilliantly conceived amendment. Senators Feingold and McCain opposed and voted against it, and it failed.

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Hasen: 10/15/04, 09:34 AM
I am heartened Bob thinks public financing is well worth considering. And I am not the least bit worried by the fact that it was not made part of McCain-Feingold. As Bob well knows, the passage of BCRA was like a three-dimensional chess game in Congress, and any attempt to add public financing would have doomed the measure. Indeed, BCRA could spur renewed efforts to enact public financing as a means to ensure candidate- or party-centered campaigns in the era of 527s.

As I mentioned, a major benefit of public financing is that it lowers politicians' demand for money. Here's another electoral reform we could adopt that would do so, and also minimize the need for 527s: universal voter registration. The parties and 527s are pouring millions into voter registration drives, and now there are myriad fights over whether new voters have properly registered and what happens if those voters cast a ballot in the "wrong precinct." Every adult citizen should be registered at age 18 in a national voter database to prevent fraud and facilitate transfer of voter registration as voters move.

In the meantime, we live in the complicated world of McCain-Feingold. Part of the problem is one of transitions. The legal and administrative wheels turn slowly, so it will be another election cycle or so before most of the rules of the game are set.

Along the way, creative lawyers like Bob will be looking for ways around McCain-Feingold. The major battles this time around have centered on exemptions for media corporations: besides the current Sinclair controversy, we have had controversies over ads for Michael Moore's Fahrenheit 9/11 and a new satellite broadcast from the National Rifle Association, NRANews. There will be other controversies and line-drawing problems in the future. (Good news for election lawyers, no?)

For Bob, these uncertainties make BCRA not worth the cost. He's willing to have the AFL-CIO and George Soros bankroll the Democratic Party and get unprecedented access to Democratic elected officials (with similar bankrolling occurring on the Republican side, of course).

A return to six- and seven-figure soft money donations to parties would raise concerns not only about corruption. It is not fair in a democracy that access to make one's case to elected officials should go to the highest bidder. BCRA has been successful, at least for now, in stopping that practice. It should be commended on this score.

Bauer: 10/15/04, 04:52 PM
We can bring this debate to a close on a partial note of concurrence. But let me also thank the sponsors, Rick, and the University Arizona at Tem--oh, whoops. In any event, I did enjoy it, just as I have enjoyed and profited from many exchanges with Rick, even if they consist of some significant measure of disagreement.

I could only applaud efforts to raise the level of participation in this country, through reformed registration, balloting and election administration procedures. This is a major frustration with McCain-Feingold and similarly cast reforms: its various restrictions are inspired by a dark, and some might say, anti-democratic view of politics: one that holds that people require protection from the expenditure of money, from "negative campaign speech", and from "appearances" that seem to be of passionate interest to an elite community of media and nonprofit reform critics whose members do not suffer in the least from restricted access to political power.

Rick says that I appear to be willing to see "bankrolling" of my party by the Soros' and unions of this world. Let us set to one side the term "bankrolling"--something like the suggestion that these individuals and interests would act as "paymaster" for the party. I am prepared to agree that, yes, I would welcome their support, and the party would be accountable to the voting public, along with its candidates, for managing these and other relationships and alliances in an ethical, politically intelligent and publicly acceptable manner. I believe that this is a more democratic arrangement than one in which elected officials promulgate legal restrictions developed by "reform" organizations, with miniscule or no public membership, that draw their funds from foundations and their support from the academy and the media.

In closing, I note Rick's comment that:

"In the meantime, we live in the complicated world of McCain-Feingold. Part of the problem is one of transitions. The legal and administrative wheels turn slowly, so it will be another election cycle or so before most of the rules of the game are set."

Rick is mistaken that we will have a transition from the "complicated" McCain-Feingold to a less complicated edition. It is precisely because the "rules of the game" under laws of this kind will be forever in doubt or in contention, that Rick can be confident that I will be busy, as he puts it, "looking for ways around McCain-Feingold." I prefer to state the point differently: that I and others will be looking for ways that Americans, organized by shared interest or otherwise, can most freely, and therefore most creatively and effectively, participate in politics.

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