Between McCain-Feingold and the Democratic Ideal

The Nature of the Achievement

Passage of the Shays-Meehan and McCain-Feingold legislation banning soft money and making other changes to campaign finance law is the most remarkable legislative accomplishment since the Tax Reform Act of 1987. Those of us who know our way around Congress saw everything we thought we knew overturned: House members never defy their leadership by signing a discharge petition (they did); the Senate never passes House bills unchanged (it did); coalitions never stick together through every amendment (the reform coalition in the House did); Senators never influence House members (John McCain did). The opposition in the House fell apart as quickly as the Taliban, slipping into caves of intellectual dishonesty, from which, instead of putting forth their practiced defenses of free speech and well-funded political parties, they claimed to believe instead that the bill didn't go far enough in limiting money.

The accomplishment is all the more remarkable when one considers that, aside from a hard core of passionate reformers identified with the issue, almost every member of Congress would have been just as happy to see the bill die, since every one of them has at least mastered the current rules and has reason to fear any change. Further, the bill passed even though, on nationwide polls, and despite the Enron scandal, campaign finance reform still barely registers in the single digits among issues that matter to voters. And, perhaps most remarkably, the bill was not significantly watered-down along its path to passage. Although a useful amendment from the bill that passed the Senate in 2001, which would have reduced television costs, was dropped, the overall bill went further than the version that Senators McCain and Feingold introduced in 1999.

This accomplishment is surely sound evidence that there exists at last a true movement for campaign finance reform: the numbers are small, but represent a group of citizens engaged and knowledgeable enough that elected officials know they can expect to be rewarded for supporting reform and punished for opposing it. Of course reform would not have passed without John McCain and his small band of Republican allies in the Senate, Chris Shays and Martin Meehan in the House, the remarkable unity of Democrats, etc. But it also could not have happened with the "movement" of five years ago, which went no deeper than a handful of Washington careerists who had been working on the issue so long they'd forgotten why anyone cared about anything else. Today's movement has a new energy and depth in the states, it is notably more diverse than before, and it has forged deep connections with environmental groups, public health groups, and other intermediaries that can help connect the role of money in politics to the issues that will inevitably matter more to voters, like threats to their children's health.

Foundations cannot take credit for the passage of McCain-Feingold, since we did not lobby for it or fund the legislative effort itself. With one notable exception, most institutional funders have objectives that go beyond banning soft money, so passing McCain-Feingold was not an end in itself (1). But foundations can and should take substantial credit for building the movement that revealed its strengths in February. Funders helped build many of the state groups, through Piper Fund and Public Campaign, and gave them opportunities to engage citizens in local reform efforts and local data-collection about the influence of money in politics. Those local efforts in turn supported the national campaign either directly or in spirit. Funders helped build a cadre of lawyers and legal scholars, most notably at the Brennan Center for Justice, that brought our understanding of the constitutional questions to a remarkable level of sophistication, and will give the few constitutionally untested provisions of McCain-Feingold a solid and informed defense. We also built the institutions that provide reliable information about campaign contributions, spending and influence. Foundations helped the most significant citizen group find new opportunities to make an impact, when new Common Cause president Scott Harshbarger and chairman Derek Bok decided to launch, for the first time, an affiliated 501(c)3 organization to perform its research and public education functions.

Funders also bear some responsibility for encouraging the movement to shed some of its famously self-destructive tendencies and find ways to work together even where groups disagreed. Without suppressing disagreement, groups and individuals who, for example, opposed the compromise that increased the hard-money contribution limit to $2,000 from $1,000, found a way to express that view without threatening to bring down more of the bill than they wanted to. The Arca Foundation in particular should be applauded for bringing together all the major advocacy groups in a meeting moderated by Common Cause in December, 2000. But all funders who refused to be drawn into choosing sides in internal disputes played a part in changing the culture, and so did Harshbarger's energetic and coooperative leadership of Common Cause.

The Legislation and Its Limits

For all that it represents as an achievement, the legislation itself is assuredly not, as the New York Times wishfully calls it, a "sweeping overhaul" of the system by which campaigns are financed. Even its sponsors did not make that claim. It will close one major loophole, through which long-prohibited corporate and labor union money, in unlimited and staggering amounts, came directly to influence the outcomes of federal elections. That loophole was soft money. Without soft money, corporate money will no longer directly fund campaigns or parties, and million-dollar contributions, though not expelled from politics, will at least have some distance from campaigns and elected officials. Once again, as was the case from 1976 through the early 1990s, only individuals will contribute to candidates and parties, and only in limited amounts. Further, independent committees will not be allowed to run ads obviously intended to influence an election within 60 days before a general election or 30 days before a primary, unless they follow all the rules on disclosure that apply to other independent expenditures. Finally, certain changes are intended to increase the supply of hard money - that is, limited money from individuals. The limit on a single contribution to a federal candidate is raised to $2,000 from $1,000; the aggregate total that a person can give to all candidates and parties is increased; and a new category is created for limited contributions to state and local parties for voter registration and turnout efforts.

These are essential reforms, long overdue, and there is no doubt that when they take effect (which will not be in time for the 2002 elections) they will discombobulate the routines, rituals, and tricks that political operatives have mastered over the years. But after the disruption, what comes next? Is it a dramatically improved situation, in which money matters less than ideas, as Senate Majority Leader Tom Daschle put it? Is it the same big-money game in a different form? Or is it a different set of problems, requiring new solutions? The remainder of this paper will look at these questions, and the areas that activists and funders who recognize the work still to be done on the issue of money in politics should be watching.

In the days after the House passed Shays-Meehan, making its ultimate success inevitable, the opinion pages filled with earnest predictions about exactly what could be expected. From anti-reformer George Will and retired ultra-reformer Ellen Miller came predictions, almost to the dollar, of what the changes will mean for particular candidates and parties. They could be right. Or their predictions could turn out to be as accurate as those of the Federal Election Commissioners who thought soft money would lead to stronger political parties. Paradoxical results occur frequently in the world of campaign finance. Each of the predictions, from supporters as well as opponents, should be treated as an area for scrutiny, for ongoing research. We don't know all that we need to know about either the problem or the solution, and we cannot underestimate the importance of research to find out. One could even argue that it was research, such as David Magleby's and Jonathan Krasno's on issue ads, the Campaign Finance Institute's on hard money, or the reliable basic data from the Center for Responsive Politics, that played the decisive role in passage of McCain-Feingold.

In the vast zone between McCain-Feingold and the as-yet-unimagined legislation that will finally strike the proper balance between money and democracy, there are three issues that merit close attention:

A. Hard Money. Most attention, from Will, Miller, and others, has been given to the possible effect of the increases in the hard money contribution limit to $2,000. While this increase was a compromise necessary to get the bill passed, the new limit is not as high as the $3,000 that many foresaw as the logical update of 1974’s limit of $1,000 into current dollars. But opponents on the left worry that it will further concentrate political influence in the hands of the tiny fraction of the population that is wealthy enough to give any significant amount to political campaigns.

This line of attack, however, overlooks the problem of the supply of political money and the competitiveness of races. A greater concern than the influence of $2,000 donors should be the fact that it's now virtually impossible to become a competitive candidate for the House or the Senate while raising money entirely in $1,000 contributions. The price of entry to a competitive race for the House now starts at one million dollars. With a single exception, every House freshman elected in a reasonably competitive district in 2000 spent at least $1 million. (The exception spent $915,000, by the way.)

Yet only 80 non-incumbent candidates (both challengers and open-seat candidates) in 2000 had a million dollars to spend. Of that 80, one-third financed their campaigns mostly with their own money, leaving just 54 non-incumbents who reached the threshold for competitiveness through hard money alone, even including political action committee contributions. That fact, even more than the potential corruption of larger contributions, is the problem of money in politics. It is not the problem of too much money, but that too few candidates have it (2).

In this light, the higher contribution limits should be seen as an open question. Is it possible that the higher limit will help challengers who now cannot be heard to reach the threshold? Yes, it’s possible. Every plausible candidate probably begins with a core of 200 or 300 old friends, classmates, professional aquaintances and well-off local activists. If those allies can each give $2,000 instead of just $1,000, then the candidate might have a better chance of reaching the million dollars needed. And of the few people who can give $1,000, most can also give $2,000, without a noticeably greater corrupting influence.

On the other hand, since individual donors still give more to incumbents than to challengers, the $2,000 limits could mean that incumbents can put themselves further out of reach than ever. The price of entry to a congressional race could reach $2 million. Or, it could be that challengers will get closer to the threshold of viability, but most will still fall short . My own guess is that this last outcome is the most likely, but we should all keep an open and observant mind.

B. Self-Financed Candidates. Given that it’s all but impossible to run for office on hard money alone, super-wealthy candidates who can fund their own campaigns have become a central feature of the political system. Self-financed candidates have always been with us, and they are often dismissed as relatively harmless, since so many, blessed with more ego than political sense, flame out spectacularly. But in recent years, self-financed candidates have become a systemic element of the political process, especially for Democrats. Consider this: Democrats control the Senate because of wealthy candidates. Exactly half of the Democratic Senators who defeated Republican incumbents over the last two elections financed their own campaigns. For non-incumbent Senate candidates, the largest source of funds was the candidates themselves, not individuals, political action committees, or parties (3).

The self-financed Democrats of most recent vintage – Senators Edwards, Corzine, Dayton, Cantwell – have shown themselves to be as capable, liberal, and brave as their older counterparts like John D. Rockefeller IV. Corzine’s knowledgeable leadership on 401k retirement plan reform, in the wake of the Enron scandal, is just one example of these legislators’ independence. But there is no getting around the fact that the advantage of self-financed candidates has created a political plutocracy that looks less like America, economically, than at any time since before the direct election of senators. More than 100 members of Congress are now millionaires. Yet many reformers seem more concerned about the power of wealthy individuals when they donate to others than when they win office themselves.

Without soft money, the number and advantage of self-financers is likely to increase. One can see this just by looking at the recruitment patterns of the Democratic Senate Campaign Committee: In each state, the DSCC looked first for a very popular statewide elected official, like governors Carper of Delaware and Carnahan of Missouri. Absent that, they looked for candidates who could fund their own campaigns. A third option was to take less well-known challengers, like Debbie Stabenow of Michigan, and infuse their campaigns with soft money (4). Without the third option, the party will face even more pressure to find the second. Republican have a deeper base of hard-money contributors, so they do not face quite such a stark choice.

The McCain-Feingold bill actually includes a provision intended to offset the advantage of self-financers, but it takes exactly the wrong approach. It allows candidates facing a wealthy opponent to accept contributions of up to $6,000, and to ignore limits on spending coordinated with the party. This is surely the most offensive provision in the bill. If $2,000 contribution limits are fair for challengers facing well-known and well-funded incumbents, why are they too low for incumbents facing wealthy challengers? One can only hope that this exception meets with a vigorous challenge to its constitutionality. There are far better ways to offset the advantage of self-financed candidates, and help ordinary challengers as well as incumbents.

3. Outside Money. Soft money through political parties was never the only way that million-dollar gifts, and corporate or union money, entered political campaigns. Independent committees registered under Section 527 of the tax code could serve virtually the same purpose as parties, and even 501(c)(4) non-profits can run ads that might influence elections. The legislation will significantly shrink this “loophole.” By prohibiting elected officials from raising money for such committees, it will eliminate the politicians’ committees that a large number of members of Congress had established as a way to accept and use large or corporate contributions. (Rep. Tom DeLay, a leading reform opponent, had several.) And by prohibiting television ads that mention a candidate in the period leading up to the election, it will shut down the most effective way for these committees to be used to influence elections.

These provisions will be challenged in court. They are well drafted to withstand constitutional challenge, but in the event that they are overturned, then McCain-Feingold might as well have not passed at all (5). The soft money now moving through political parties will instead be used to fund 527s, which will run the same thinly disguised ads currently being run by parties.

But even if these provisions stand, it is likely that the activity of independent committees will increase, as corporations, labor unions and advocacy groups seek ways to retain their political influence. For one thing, plenty of very effective campaign ads are aired months before an election, often in an effort to demolish an opponent’s reputation before he or she has a chance to start running ads. (Bob Dole’s 1996 presidential candidacy never recovered from the Democrats’ soft-money ad barrage of late 1995.) And there are also effective ads that don’t mention a candidate at all. Do they really need to? Wouldn’t an ad touting tax cuts benefit a Republican? Or an ad promoting prescription drug coverage benefit a Democrat, especially if it echoed a candidate’s themes? Former California Governor Pete Wilson devised the technique of creating a big-money slush fund by running a campaign on a ballot initiative on a popular issue like crime side-by-side with a campaign for office on the same themes.

Although many operatives still believe that an ad that doesn’t name a candidate is ineffective, they are beginning to see that there are other options. In 2000, for example, pro-choice groups ran an aggressive campaign, targeted toward pro-choice Republican and independent women in a handful of swing states. The ads did little more than remind women that abortion rights were at risk and that the next president would appoint the justices who would determine whether Roe v. Wade survives, based on research showing that women were complacent about reproductive rights. While they did not win the electoral college for Vice President Gore, these ads probably helped him win several targeted states in the Midwest.

There’s nothing wrong with such ads, and they belong in a vibrant, pluralist democracy in which interest groups, candidates, and parties compete for voters’ attention. The shift of money from parties toward groups with distinct issue viewpoints, and toward communications that highlight issues rather than attack candidates, could be a healthy development. A politics of issues and not personality should be something that all of us good government types would applaud.

But there’s another version of the same issue ad that’s far less benign, where corporate interests hide behind issue groups in an effort to influence elections. The Los Angeles Times recently revealed that Enron lobbyist Ed Gillespie, a longtime aide to House GOP leader Dick Armey, had devised a plan to use ads discussing the Bush Administration energy plan as “a political weapon against Democrats.” The ads, some of which depicted Jimmy Carter in a reminder of the energy crises of the 1970s, were sponsored by a new group called the “21st Century Energy Project,” with Gillespie as its director, and funding undisclosed (6).

This is the future. It will be far easier to convert corporate and union money now contributed to the parties as soft money into this kind of soft issue ad than to convert it to hard money.

There is another danger to the substitution of either corporate or interest-group issue ads for party soft money. It is the risk that, with limits placed on both candidates and parties, but outside groups unrestricted, the voice of outside groups will come to dominate and shape the agendas of campaigns. At worst, candidates will become bystanders to their own campaigns. In Wisconsin, as Alan Ehrenhalt reported in the magazine Governing in 2000, campaigns are already dominated by two broad clusters of interest groups, one led by the teachers’ union and the other by the state’s business and industry association, which sometimes outspend both candidates in key races. Candidates wake up in the morning to radio ads attacking or praising them, ads that they neither wrote nor approved. One lobbyist told Ehrenhalt, “It’s interesting that the candidates seem to think the campaigns belong to them.”

The Limits of Limits

Perhaps some of the potential problems discussed above will not emerge, or will take a different form. But they all have one thing in common: They cannot be solved by further limits on political money. Limits will not help challengers or new voices be heard. Limits on candidates’ spending on their own campaigns, or on interest groups’ right to speak on their issues, will not survive constitutional scrutiny. Nor should they.

McCain-Feingold, then, is not the last word on campaign finance reform. But it should be the last bill of its kind – the last that has as its goal “getting money out of politics.” The next step on campaign finance reform must involve making it easier for candidates to be heard and increasing competition. It should give candidates, including incumbents, new ways to fund their campaigns without having to relentlessly pursue special interest donors, press the edge of the envelope on outside money, or use their own wealth. It must involve public financing, ideally in combination with free television time for candidates, since it is the price of television advertising that has made a million dollars the price of entry.

Public financing can take several different forms, and each is likely to have merits and drawbacks, some as yet unknown:

• New York City’s system provides a public match of $4 for every $1 in contributions of less than $250. In 2001, this approach created vibrant city council races with six or seven viable candidates in some districts. Although Mayor Michael Bloomberg has been accused of “trashing” the system by financing his own campaign, keep in mind that the system allowed Democrat Mark Green to spend $17 million in combined public and private funds – an amount that only a handful of candidates in U.S. history have ever had available, and probably enough for his message to be heard.
• Maine and Arizona this year are entering their second election cycles under a system known as “Clean Money,” which provides full funding of campaigns at a fixed amount for candidates who agree to take no private money beyond small qualifying contributions to show broad support. A recent study of these systems in their first run showed that they were attractive to candidates of both parties, and that they brought in candidates who would not run have been able to run otherwise or who hated fund-raising. In Arizona this year, 70% of legislative candidates are participating, along with all but one of the candidates for governor. Questions remain about whether this system will be able to provide sufficient funds for candidates to participate, and about whether its strict limits – no private funds whatsoever – will be enforceable in a world rife with outside money.
• A third approach to public financing is the tax credit. Minnesota, for example, provides a full, refundable tax credit for any political contribution of up to $50. This is combined with a one-to-one match, so every citizen, in effect, gets a free $100 to make his or her political voice heard. This is a good way to encourage politicians to seek smaller contributors as well as a way to help candidates be heard.

Insiders will debate the relative merits of these approaches with passion and sometimes venom. But for the purposes of developing a broad agenda for the next steps on reform, that argument is a distraction. Public financing of any kind is unfamiliar to most voters, and opposed in all forms by most Republicans, even those who supported McCain-Feingold. At this point, just to get the idea of public financing onto the political agenda would be an accomplishment. To do so will require a coalition as broad as the one that supported McCain-Feingold to speak with one voice, not on the details, but on the ideals.

Prospects for Further Reform

Another one of those predictions offered with great certainty goes something like this: “After delaying reform for 25 years, Congress is now going to declare the job done, pat itself on the back, go back to business as usual, and we’ll wait another 25 years for real reform.” This might be, but there’s just as much reason to believe the opposite. Historically, when Congress breaks a stubborn logjam on an issue, it tends to come out with momentum to do even more. That’s why great legislative breakthroughs have come in pairs or clusters: The Clean Air Act and the Clean Water Act; the Voting Rights Act and the Civil Rights Act; successive deficit reduction legislation in the early 1990s.

Most supporters of McCain-Feingold acknowledge that there is much more to be done to find the proper place for money in democracy. The only way that Congress can pat itself on the back and go home is if the press and the conventional wisdom allow it to. (For example, by declaring it a “sweeping overhaul” of the law when it is not.) We should move quickly to establish a clear sense that more needs to be done, find consensus on an agenda of next steps, and use the momentum of McCain-Feingold, the hard-won respect earned by individuals like Feingold and Shays, and organizations like Common Cause, to keep campaign finance reform from slipping from the agenda.

To sum up, there is much yet to be done:

• Establish a clear next agenda for campaign finance reform, one that involves all or most of the coalition of groups and individuals that came together around McCain-Feingold, and others.
• Continue to connect campaign finance reform with other issues of public concern, as well as other problems of democracy such as electoral reform. Remember that campaign finance reform is not an end in itself, but one among several means to a more responsive democracy and a just society.
• Ensure that the Federal Election Commission’s rulemaking on key issues in McCain-Feingold is well done and does not open new loopholes or create new problems.
• Defend McCain-Feingold (except the millionaire exception) in the courts.
• Research, research, research. Keep an open mind and watch for new developments as candidates and political operatives master the new rules.
• Expand the experiments with public financing, focusing particularly on building support among legislators in the states, beginning with North Carolina, Wisconsin and Connecticut. Also pursue opportunities for public financing of judicial elections in Wisconsin, Illinois and other states, which also brings new, mainstream constituencies.
• Call attention to reform that works, and make sure that it really works. The story of public financing in New York City, Los Angeles, Maine and Arizona should be better known.
• Continue to maintain public awareness of the problems of money in politics, and promote a sense that change is possible – as McCain-Feingold proved – because cynicism about politics is no help.

After passage of McCain-Feingold, there is a natural temptation to respond in one of two ways: Celebrate the miraculous achievement and the vigor of the movement, or despair at how much is left undone and how much room remains for the distortion of politics by money. But there is much more to be done, and an important role for foundations and individual funders. If we fail to fulfill our obligations, either out of celebration or despair, then surely all of the bleakest predictions will come true and the responsibility will be ours.

Mark Schmitt is director of the Governance and Public Policy program at the Open Society Institute, U.S. Programs. He was formerly policy director for Senator Bill Bradley.

1. The exception is the Pew Charitable Trusts, which should be commended for supporting research and bipartisan meetings which led to long-needed specific solutions, such as the Snowe-Jeffords compromise on the regulation of issue advocacy advertising.

2. Even as the cost of campaigns was skyrocketing, the number of non-incumbents approaching competitiveness was declining. Only 134 candidates raised $400,000 in 2000, down from 184 four years earlier, while the average cost of campaigns rose about 25%. All data are author’s analysis of data from Federal Elections Commission, FECInfo, and the Center for Responsive Politics.

3. Paul S. Herrnson and Kelly D. Patterson, “Financing the 2000 Congressional Elections,” in Magleby, ed., Financing the 2000 Elections, forthcoming.

4. See Michael S. Traugott, “Soft Money and Challenger Viability: The 2000 Michigan Senate Race,” PS: Political Science and Politics, June 2001.

5. The San Francisco Chronicle recently noted the kind of ad that could lead to the provision being overturned: a radio ad in Illinois urging House Speaker Dennis Hastert to bring legislation banning employment discrimination against gays and lesbians to the House floor, funded by the ACLU. The ad mentioned Hastert, and happened to run right before the Illinois primary in which his name was on the ballot, but it was not intended to influence the election. Such ads are rare, but just a few of them would bolster an argument that the provision is overbroad.

6. Mark Z. Barabak, “Enron Lobbyist Plotted Strategy Against Democrats,” Los Angeles Times, February 11, 2002, part 3, page 4.