Money Talks, Reform Walks

Even by Washington-in-July standards, political consultant Steven Stockmeyer should have been sweating plenty this summer. In June, the Senate passed a bill banning campaign contributions from political action committees (PACs). Although the bill was weaker than many reform advocates had hoped, and although it still faced tough political obstacles in the House, the prognosis for Stockmeyer seemed grim. Stockmeyer is the spokesperson for several of Washington's largest PACs, and if the Senate bill were to become law, those clients presumably would face extinction.

But Stockmeyer wasn't that worried. A veteran fundraiser for the Republican Party, he knew that the business of campaign finance would for the most part continue, even if the Senate bill did become law. The reason: for all its seemingly impressive provisions-- a ban on PAC money, limits on "soft money," restrictions on lobbying--it still lacked public financing. "The demand for money will still be there from candidates and legislators," he said. "Everyone would just have to find new rules for getting it to them."

To be sure, Stockmeyer's cynicism betrays self-interest; like any good member of the Beltway lobbying establishment, he dislikes procedural change and would just as soon see this bill die. But self-interest need not be self-delusion, and Stockmeyer's conclusions reflect a solid grasp of history. Congress, after all, tried a similar path of incremental reform once before, in the early 1970s. The result was the very system that so alienates voters today: a system in which candidates and officials spend much of their time fundraising, incumbents can beat challengers by outspending them, and legislators seem accountable to those who finance their campaigns instead of those who elect them to office. If lawmakers are not prepared to embrace a more comprehensive plan--namely, public financing with mandatory spending limits--then passing a reform package may not be worth the effort.


Until the 1970s, most presidential and congressional campaigns were financed by donations from a few wealthy individuals. Public disclosure was easily circumvented, as were various limits on contributions. A few unions operated political action committees (the Congress of Industrial Organizations invented the term), which pooled small donations together to give them more influence, but PACs accounted for a small proportion of total giving. Use of direct mail and other means of small-donor solicitation began in earnest with the Goldwater campaign of 1964 and increased markedly with the McGovern campaign of 1972. Even then, however, fundraising remained the province of wealthy individuals and corporations, with much of it hidden from public view.

Then came Watergate. While vaguely remembered today for the break-in and cover-up, much of the scandal involved the abuse of high office to shake down campaign contributions. The revelations that followed included exposés of giant slush funds and undocumented cash payouts flowing through the Finance Committee for the Campaign to Re-elect the President (known affectionately as F-CREEP). In the aftermath of Watergate, Congress was suddenly in the mood to enact dramatic reform.

And so it did, with the 1974 Federal Elections Campaign Act Amendments, which strengthened a disclosure law from 1971. The new law imposed aggregate spending ceilings on all federal campaigns in an effort to level the playing field between challengers and incumbents as well as to limit the time candidates devoted to fundraising. In addition, the law limited individual contributions to campaigns: individuals could give no more no more than $25,000 in one election year, with no more than $1,000 per election (a primary counts as a separate election, as does a run-off). The law institutionalized PACs for the first time, limiting their contributions to $5,000 per election and requiring extensive public disclosure and reporting of their activities. The law also created the Federal Election Commission (FEC) to enforce both the new and old regulations.

The package was not all that public interest advocates had wanted: Congress balked at enacting public financing provisions for congressional races. (Partial public financing for the presidential campaigns had begun in 1971.) In addition, it left unregulated "soft money" donations to the parties. But reformers remained optimistic that the law would produce marked improvements, particularly given the extensive new requirements for full disclosure of campaign giving.

What the reformers did not count on was Buckley v. Valeo, the 1976 Supreme Court decision that threw out congressional campaign spending limits. Reasoning that such restrictions "impose direct and substantial restraints on the quality of political speech," the Court declared spending ceilings unconstitutional except in cases where they were a condition for public subsidy (as they were soon made for presidential campaigns). The ruling was not a complete loss, because the court upheld contribution limits, yielding to the government's "compelling" interest in preventing unfair influence by wealthy donors. But without the public financing and aggregate spending limits the reforms proved ineffective if not perverse.

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Today, big money still reigns. The wealthy individuals and corporations that once used their millions to finance individual campaigns now fill party coffers instead. While soft money's emergence has put a buffer between large financiers and officials, the overall influence of wealthy contributors has hardly diminished. In one notorious 1992 case, President Bush approved a special tax exemption for ethanol. Although opposed by most environmentalists, the measure greatly benefited the Archer Daniels Midland Corporation--for years the GOP's top soft money donor. Soft money corruption is not always explicitly quid pro quo, but its pervasive influence within the government is widely recognized by even the most stalwart defenders of the status quo.

To be sure, limits on individual giving to campaigns have limited millionaires' direct influence on campaigns, though not that of organized interest groups. But as Herbert Alexander, the godfather of campaign finance reform, once remarked, the government merely traded wealthy financiers for well-connected fundraisers. Because the 1974 reforms lacked public financing, they made raising money more difficult without making it any less necessary. As a result, only the method of fundraising changed. Instead of shaking down one donor who can write a $100,000 check, candidates now depend on fundraisers who can, in turn, produce one hundred $1,000 checks. "Parlor money" raised at million dollar fundraising events sponsored by well-connected high rollers has replaced individual large donations. Whatever influence the millionaires have lost (and it isn't much, thanks to the soft money loophole), the fundraisers have gained--and passed on to those whom they represent.

PACs, meanwhile, have become a widely recognized symbol of special interest power. Although the average donation to a PAC remains low, most of the PAC money flowing through Washington represents money from wealthy donors who give either to professional trade associations, such as the bankers and the realtors, or to corporate PACs, such as RJR Nabisco and General Electric. While the giving does not split down party lines--most PACs give to powerful incumbents, regardless of party--the preponderance of PACs representing upper-middle-class donors conspires to tilt the scales of influence heavily against the working middle class and the poor. Most of the PACs that still represent small-donor bases are unions, a fact that mainly serves to reinforce the public's sense that government has become too accountable to interest groups.

The corrupting influence of PACs and soft money is the reason many reform advocates have backed the bill the Senate passed in June--a bill that bans PAC giving while strictly limiting soft money and lobbying, but does not provide for substantial public financing. Common Cause, whose last-minute endorsement allowed Senate leaders to break a Republican filibuster, cites the two-pronged effort as an important, if incremental, step forward. "This is no watered down compromise," says Common Cause lobbyist Mike Mawby.

But even as Common Cause and others who have supported the Senate bill seek to undo the damage of 1974, they miss the most important lesson of that debacle: reform won't succeed without enforceable spending limits and public financing.


Consider how the American Medical Association (AMA), the perennial leader in PAC contributions, might respond to a law like the Senate bill. The Senate bill bans PACs from collecting donations and then giving money directly to legislators. It also bans PACs from "bundling," or collecting donations and then sending them along to candidates without grouping them into a single check. (Bundled donations are not officially considered PAC money, since they are technically just a group of individual contributions that just happen to be delivered at the same time.) Though the law, like most campaign finance limitations, rests on shaky First Amendment ground, it includes a contingency provision to limit PAC donations to $1,000 per election if the Supreme Court declares the outright ban unconstitutional. Technically, the law would work, assuming it had judicial approval: the AMA would have to stop doling out its PAC money to legislative candidates.

The money flow, however, would continue, since there is no constitutional way to keep the AMA from communicating with its members. If the AMA PAC could give only $1,000 instead of $5,000 to candidates (or if the AMA could give nothing), the organization would simply ensure that individual donations from AMA members made up the difference. "Many groups do that now," observes Tony Coelho, former Democratic fundraiser and congressman. "It's not bundling, and it would be perfectly legal, even under the proposed law." As one prominent PAC lobbyist says, it is primarily a matter of "redirecting our efforts, not shutting them down."

Organizations like the AMA, in fact, already have a network of political communication in place. (AMA officials repeatedly refused to comment on their operations for this article , referring all calls to Stockmeyer.) The Senate bill attempts to anticipate that by prohibiting PACs from soliciting donations and banning employers from directing employees to give. But a PAC need only keep its "encouragement" vague enough to skirt the law by, say, sending newsletters to members rating congressmen and senators. "The private money will be even more disguised than it is now," says Gene Karpinski, executive director of the U.S. Public Interest Research Group, which is holding out for public financing. "At least with PACs, you can trace the money. If you're merely replacing PACs with wealthy individuals, you're making the whole situation worse."

Of course, banning PACs would appear to promote at least a subtle improvement over the status quo--namely, weakening the K Street crowd. PACs have leverage because they have lobbyists in Washington who pay regular visits to Capitol Hill (and anywhere else they can find lawmakers), pushing for legislation and implicitly holding money over the heads of legislators. Some reformers insist that without the clout of actual contributions, PACs will not carry such weight with members of Congress.

Such reasoning, however, is naive. Even if the PAC ban became law, the AMA would not disband its Washington staff. The same lobbyists would make the same rounds with the same legislators. Instead of wielding the threat of a check, they would wield the threat of an organizational endorsement that means, in financial terms, much the same thing. The only difference: the voters could no longer single out the official for his or her AMA funding, since statistics on who was giving to whom--which are now public record and well reported in the media--would be almost impossible to track. As former Democratic fundraiser Martin Franks says, "The group knows they've given the money. The member knows where it came from. The only people who don't know are the public."

The AMA could get around a PAC ban in one final way, as well: through so-called independent expenditures, made on behalf of candidates but without the candidates' explicit help or direction. During the 1991-92 election cycle, the AMA political action committee spent well over $1 million--nearly one-fourth of its total budget--on independent expenditures for specific candidates. (FEC records show the AMA devoted more than $250,000 alone to supporting California Rep. Vic Fazio, chairman of the Democratic Congressional Campaign Committee, or DCCC, and member of the Appropriations Committee.) If the government prohibits PACs from giving directly, it's a safe bet that increased independent expenditures will help offset the difference.

Under the Senate bill, independent expenditures on behalf of one candidate in a congressional election would in theory trigger public assistance on behalf of that candidate's opponent, in the form of communications vouchers that could be used to buy TV time. But even if that prohibition withstood the Supreme Court's scrutiny--a questionable possibility--it still might not deter lobbies like the AMA from running advertisements on key election issues. At the very least, it would not prevent them from doing political advertising on their own behalf (a strategy to which health care lobbies are turning already).

Under a PAC ban, many PACs would also nurture grass-roots operations that could play pivotal roles in swinging tight races. Even though such programs would have to be nominally "nonpartisan," masking something like a get-out-the-vote drive as nonpartisan is easy; the organization need only be discreet about whom it targets. As Stockmeyer puts it, a group like the AMA "would just happen to organize people who just happen to vote for the candidates they support." Indeed, groups like Citizen Action and the Sierra Club have used this approach for years--all the while maintaining non-profit, non-partisan status. (Again, the AMA refused comment on its independent expenditures and grass-roots activities, acknowledging only their existence.)

When the dust from the Senate bill settled, then, the scene would look quite familiar. AMA lobbyists would still roam the Hill. They would still speak for a group with deep political pockets. They would still get their phone calls returned. And the public, in all likelihood, would be no closer to getting its national health care reform--or any other number of programs that entrenched lobbies now oppose.


Coelho, who rose quickly from chairman of the DCCC to House majority whip while he was in Congress, finds this line of argument intriguing but overblown. For Coelho, the problem boils down to the fact that the current environment forces officials and candidates to spend inordinate amounts of time raising money. "It's a crazy system," Coelho says. "Members don't have time to be good members anymore."

Whatever Coelho's personal bias concerning special interest money--allegations of questionable financial dealings prompted his resignation in 1989--his conclusions resonate with the complaints of legislators and reform advocates alike and point to the real problem with half-hearted reform. Even if the current proposal worked just as proponents hope, it would only make the time problem more acute.

It's the very same failing that doomed the 1974 package. Since money would continue to be a requirement for winning, and since the government still would not provide that money, the Senate bill would force candidates to work harder to get private money. That would detract from the time legislators spend governing, and could--ironically--increase the influence of special interests willing to use their donations as bargaining chips, even with the new restrictions on lobbying. "Conflicts arise because a member has to spend so much time on the road, making so many deals," Coelho says. "With this proposal, you're just making that problem even greater."

Supporters of incremental reform dispute that prognosis to an extent. They say if individual contributions were limited, PACs were out of the picture, fundraisers were prohibited from lobbying, and lobbyists were prohibited from giving money directly (all features of the Senate bill), then the influence of individuals or groups would be significantly diluted. And, the argument goes, as long as soft money contributions were also banned, the last loophole would be closed.

But at what cost? Without a public source of money, the demand for private money will remain. Though wealthy donors might continue to become marginally less powerful, well-connected fundraisers would become significantly more powerful. "The Charles Keatings of the world would love this bill," Stockmeyer says. "It puts an incredible premium on good fundraisers." These fundraisers would continue to represent the wealthy individuals, wealthy trade groups, and wealthy corporations whose influence reformers aim to limit.

All of this favors incumbency, and by extension policy conservativism (as in resistance to change). Incumbents are the ones with the ties to fundraising masterminds, and incumbents are the ones who receive the vast majority of money from special interests. A proposal that increased the importance of well-connected fundraisers while eliminating the only available means for small donor influence would serve primarily to protect incumbents from upstart challengers and to preserve the policies of the incumbent coalition.


To defenders of the status quo, Democratic and Republican, this amounts to a stinging critique of reform--any reform. In truth, however, this logic merely underscores the need for a comprehensive solution that tackles the entire campaign finance system instead of nibbling at the edges. That solution is public financing.

Public financing is crucial for three reasons. First, it would allow spending limits to pass constitutional muster under the terms set forth in Buckley v. Valeo. (See Bruce Ackerman, "Crediting the Voters," TAP, Spring 1993.) If the government tried limits without public financing, the Supreme Court would almost certainly strike down the limits again, just as it did in 1976. Second, public financing would eliminate the demand for private campaign contributions, thus diminishing the role of wealthy private interests who now meet a vital need for money-starved candidates. Third, public financing would put challengers and incumbents on a more level playing field. It would not eliminate the advantages of incumbency altogether, but it would not enhance them, either.

The Senate bill faintly echoes this scheme. It proposes to set spending ceilings based on state size and then offer incentives to those Senate candidates who volunteer to abide by them. The incentives would include broadcast and postal discounts, plus offsetting communications vouchers for candidates whose opponents exceeded the ceilings. Were such limits in place--and observed--in 1992, they would have substantially reduced spending in more than 20 Senate races and prevented many incumbents from outspending their opponents. (Among the most egregious would-be offenders now in Congress: Oregon's Bob Packwood, whose spending was more than three times the proposed limit, and Connecticut's Christopher Dodd and Pennsylvania's Arlen Specter, who each spent roughly twice the proposed limit.)

Few legislators, however, see those incentives as terribly enticing, especially since the mail and advertising vouchers might not kick in until after the primaries. "Another letter that no one's going to read--that's no help to a challenger," Senator Joseph Biden told Congressional Quarterly. Even if the candidates abided by the limits, that would not help free candidates from the burdens of raising private money. While communications vouchers and discounted air time are steps in the right direction, they are not enough, particularly when many challengers cannot raise the maximum funds anyway.

Real public financing in the presidential campaigns, on the other hand, has already helped level the playing field and wean candidates off the special interest dole. The system is far from perfect, in part because the soft money loophole remains and in part because it is not comprehensive. Because of those two failings, presidential candidates still spend a great deal of time fundraising, if not for themselves, then for their parties. But the partial public financing for the presidential campaigns is generally considered a marked improvement over the pre-Watergate era. As for whether a similar system would work with congressional campaigns, just listen to the experts: of the ten fundraisers, both Democratic and Republican, interviewed for this article, many said they opposed public financing for diverse ideological reasons, but every one acknowledged it would probably succeed in at least curbing the abuses that so anger reformers and alienate voters.

Of course, public financing is no panacea. There will always be room for independent expenditures, and an interested group with money can always give to a needy cause or charity close to an important legislator's heart. Even if a defense contractor could not donate $50,000 to Sam Nunn, there's no way to prevent that contractor from giving to Nunn's favorite political organization, the Democratic Leadership Council. Stockmeyer, for one, predicts that with any reform "there will be a great increase in gifts to favorite charities and causes"--thus preserving at least a partial role for special interests within the system no matter how comprehensive a reform package emerges.

That is why other institutions--more democratic institutions (small "d")--must be made to speak louder than the small lobbies and wealthy financiers. To a great extent, campaign finance is a problem because of the political environment in which it exists. Special interests--whether corporations, interest groups, or other associations--wield power largely because the political representatives of the mass public, the parties, pale in relative influence. As William Greider detailed in Who Will Tell the People?, the evils of campaign finance are a symptom of the broader failure of American political institutions to represent the electorate--a symptom, unfortunately, that contributes to the disease.

In the long run, campaign finance reform must be part of a comprehensive program of political renewal. The failure of reform has been a failure to consider reform in a broad enough context. Disempowering special interests will create a vacuum. Unless the architects of reform ensure that other democratic institutions fill that vacuum, the special interests will in time return to their place of influence.

Holding out for more comprehensive reform may seem politically treacherous to would-be reformers, most of whom happen to be Democrats. The president did promise reform during the campaign, and campaign finance is one of the few issues on which the public's desire for change is indisputable. Just producing something, no matter how symbolic, would forestall the impression of failure and keep the likes of Ross Perot temporarily at bay.

Liberals, though, need to consider the long-term political imperative. In the short run, compromises like the Senate bill will preserve incumbency and thus the Democrats' majority in both houses. But over time, the Democrats stand to lose from any change that further entrenches incumbents, for those lawmakers are the ones most likely to resist the economic programs that might allow the party to recapture its working-class base. Political renewal demands a strong Democratic Party. A strong party requires some freedom from wealthy fundraisers as well as a constant infusion of new blood in the form of upstart challengers. Reform that protects incumbents will not make such a revival more likely; if anything, it postpones or even precludes that possibility.

Before signing off on any half-hearted legislation, then, would-be reformers should heed Ralph Nader's warning: "You only get one chance every 10 years at this thing." (In fact, 20 years would be more accurate.) At its best, the proposal now on the agenda would promote marginal improvements. At its worst, it could actually make matters considerably worse. Given recent experience with similar incremental reforms, it would be better to scuttle this proposal now and demand something stronger than to waste such a precious opportunity on a measure of such dubious distinction.

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