November 8, 2004
Even With Campaign Finance Law, Money Talks Louder Than Ever
By GLEN JUSTICE, NY TIMES

LINK

WASHINGTON, Nov. 7 - The McCain-Feingold law, which did more to change how American political campaigns are financed than any legislation since the 1970's, got its first real-world test in this year's election. And now its critics are more emphatic than ever in arguing that the law has fallen short of its goals, and even some supporters are calling for revisions.

The 2002 law demolished the system that for more than a decade had allowed political parties to feed on unlimited soft-money contributions from companies, labor unions and donors. But what rose in its place remains the subject of fierce debate.

Critics say the law was undercut by a loophole that allowed advocacy groups known as 527 committees to raise hundreds of millions in soft money. Supporters say the law stands as a barrier to corruption and needs only reinforcement, and that the law was not intended as a panacea.

"You can't write legislation for every loophole that opens up," said Senator John McCain, Republican of Arizona, a chief sponsor of the law. "It's like putting your thumb in the dike."

Representative Bob Ney, an Ohio Republican who opposed the law, said: "The bottom line remains that soft money has not been removed from the system. You could drive a Mack truck through that bill."

The fight has already spilled into the courts and may land in Congress next year as Mr. McCain and his allies seek to regulate free-spending 527 committees, overhaul the Federal Election Commission and make the public financing system more attractive to presidential candidates.

The major advocacy groups at work in this year's elections, called 527 groups after the section in the tax code that created them, raised more than $350 million, according to PoliticalMoneyLine, which tracks campaign finance.

While it is axiomatic in politics that each race will cost more than the last, and while final numbers will not be in for weeks, the figures posted through mid-October set records even though candidates and parties were restricted for the first time to only hard-money donations.

The field of presidential candidates raised about $851 million (including public financing), a 70 percent increase over 2000. National political parties raised more than $1 billion, 12 percent more than when they were able to gather six- and seven-figure soft-money checks.

In total, this year's races for Congress and the White House are estimated to have cost roughly $3.9 billion, about a third more than they did four years ago, according to the Center for Responsive Politics, which tracks campaign spending.

The numbers were influenced by several factors. President Bush and Senator John Kerry opted out of public financing until after their conventions, letting them raise money without limits. McCain-Feingold also increased the hard-money contribution limits for individuals to $2,000 for a candidate and $25,000 for a party from $1,000 and $20,000, respectively.

"It wasn't the perfect storm, but it was a very good one," said Michael J. Malbin, executive director of the Campaign Finance Institute, which studies political money. "The parties learned how to do this, the campaigns really motivated people and the easy money was not there."

Lawyers and political operatives tested the boundaries of the new law with the Federal Election Commission, openly seeking ways to use the law to their advantage. They also adopted new strategies and creative ways to raise money and sometimes just worked harder.

Mr. Bush doubled his network of six-figure "pioneer" and "ranger" fund-raisers to about 550. He set a presidential fund-raising record of about $273 million. Mr. Kerry capitalized on the Internet, raising an unprecedented $82 million online and about $249 million over all to become the best-financed challenger in presidential campaign history.

Political parties scrambled for money and pushed members of Congress in safe seats to provide more. Barack Obama of Illinois gave hundreds of thousands of dollars from his campaign to Democratic candidates and party committees before he was even elected to the Senate.

Perhaps the most striking change was at the Democratic National Committee, where the chairman, Terry McAuliffe, undertook a major effort to restructure the fund-raising and outreach programs. He invested tens of millions of dollars in modernized computers. Enormous voter lists were compiled to prospect for donors and grass-roots support. And early primary dates allowed the party more time to raise money.

The committee sent out a record number of mail and e-mail solicitations, leading to a spike in the number of small donors. Contributions grew 42 percent to more than $299 million through mid-October and the party bought millions of dollars in commercials for Mr. Kerry. While it raised less than its Republican rival during that period, the difference was far less than in previous elections.

"Had we not made the changes, the party as we know it would have ceased to exist," Mr. McAuliffe said.

Supporters of the law are quick to point out that candidates and parties were amply financed this year, despite dire predictions that the law would starve the parties.

"It was never a perfect law," said Representative Martin T. Meehan, a Massachusetts Democrat who sponsored the law. "This was a compromise worked out to correct the most egregious parts of the system."

The architects of the law say it was never intended to reduce the total amount of money in politics. Rather, they say the aim was to stop federal officeholders from soliciting corporate and union soft money. And that, they say, was accomplished.

"No longer can an elected representative or senator pick up the phone and call a trial lawyer, a union head or a corporation and say, 'I need a check for six figures - and by the way, your legislation is before my committee next week,' " Mr. McCain said.

But the law's critics argue that the change is virtually meaningless in the face of the 527 groups, which can still raise the unlimited contributions forbidden to the parties. Groups like Swift Vets and P.O.W.'s for Truth and the Progress for America Voter Fund on the right and America Coming Together, the Media Fund and the MoveOn.org Voter Fund on the left spent lavishly to run television commercials and to get out the vote, though they were prohibited from coordinating with candidates or parties.

The groups turned primarily to wealthy partisans for financial support. At least 46 people contributed $1 million or more through mid-October. For the 2002 election, only six donors gave that much.

A partisan battle over whether to regulate 527 groups raged throughout this year's election in front of the election commission and the courts. Democrats, who made heavy use of the committees, generally defended the groups while Republicans argued to have them constrained.

Even Mr. Bush spoke out publicly against them at one point, calling 527's "bad for the system," and his campaign took legal action against them. But when the commission declined to pass comprehensive regulations and it became clear the groups would operate through Election Day, Republicans ultimately made strong use of their own 527 organizations.

In the end, Democrats held a fund-raising advantage through 527 groups of roughly 2-to-1, according to PoliticalMoneyLine.

With the election over, Mr. McCain and his allies have high hopes that a pending lawsuit in federal court could force restrictions on 527 groups, and they plan to push for legislation next year. The Republican stance against 527's could mean that some lawmakers who opposed McCain-Feingold may support a bill to regulate 527's. Some lawmakers may fear what 527 organizations could do if they wade into the 2006 elections, going after members of Congress the way they went after presidential candidates.

"People on both sides of the aisle wonder who's next," said Mr. Ney, the Ohio congressman, who contends that McCain-Feingold should have regulated 527 groups directly. "I expect hearings on all of these kinds of things."

Supporters of McCain-Feingold say the election commission should have done more to regulate these groups.

The six-member commission, split evenly between Republicans and Democrats, has long been derided by politicians in both parties and by advocacy groups as ineffective and lacking adequate enforcement powers. "It's a corrupt, enabling organization stacked with political hacks," Mr. McCain said. "We have got to reform the F.E.C."

Michael Toner, a Republican on the commission, said: "This is something Congress has to decide. If Congress decides to restructure the agency, I have to respect that."

See "IRS Code Allows 527 Groups' Donors to Remain Anonymous"