Inside the Campaign Finance Battle: Court Testimony on the New Reforms

The Rise of Soft Money

The Rise of Soft Money Thomas E. Mann Thomas E. Mann is the W. Averell Harriman Chair and Senior Fellow in Governance Studies at the Brookings Institution. His scholarly work has focused on elections, parties, campaign finance, Congress, and policymaking. He served as an expert witness for the defendants of the new law: the Department of Justice, the Federal Election Commission (FEC), and the primary congressional sponsors of the legislation. Mann’s full report provides a description and analysis of the development of federal campaign finance law and practice leading up to the enactment of the Bipartisan Campaign Reform Act (BCRA). This excerpt begins with a summary of the central features of the regulatory regime defined by the 1974 amendments to the Federal Election Campaign Act (FECA), which included long-standing bans on corporate and union treasury funding of federal campaigns . It then traces how that regime was undermined by the emergence of party soft money and of electioneering under the guise of issue advocacy. Mann attaches particular importance to a series of administrative rulings by the FEC that sanctioned separate federal and nonfederal accounts for national party committees. The report documents how the soft-money system was transformed in the 1996 election cycle after President Bill Clinton and his political consultant, Dick Morris, decided to mount an ambitious political advertising campaign under the cover of issue advocacy, financed in large part with unregulated party soft-money funds. Republicans and outside interest groups followed suit, leading to an explosion in the demand for soft money and a striking shift in the electoral strategies of interest groups in the 1998 and 2000 elections. Mann then argues that the collapse of the FECA regime transformed the role of political parties, elected officials, corporations, and unions in the electoral process and created glaring conflicts of interest and a widespread perception of corruption in the policy process. The rise of television and the increasingly candidate-centered nature of federal election campaigns after World War II led to a substantial increase in campaign costs and growing concerns about political financing. But it 17 Analyses of Academic Experts 02 1583-8 part1a 3/25/03 12:00 PM Page 17 was not until the early 1970s that Congress began to wrestle seriously with the shortcomings of the old system and the challenges of the new. The Revenue Act of 1971 created a presidential public financing system funded with an income tax check-off, but its effective date was delayed until the 1976 election. Congress also passed the Federal Election Campaign Act of 1971, which strengthened reporting requirements and repealed existing limits on contributions and expenditures that had proven ineffective. But it retained the ban on corporate and labor union contributions . It also put new limits on the amount candidates could contribute to their own campaigns and on expenditures for media advertising in presidential , Senate, and House elections.1 The fund-raising scandals associated with Watergate and the committee to reelect President Richard Nixon—featuring attaché cases stuffed with thousands of dollars, illegal corporate contributions, and conduits to hide the original source of contributions—led Congress to return to the campaign finance drawing board.2 In 1974 they produced major amendments to FECA, which constituted the most serious and ambitious effort ever to regulate the flow of money in federal elections. The FECA Regulatory Regime The 1974 amendments scrapped the 1971 limits on media advertising but replaced them with an elaborate set of limits on contributions and expenditures . The amendments also provided for public financing of presidential elections and created a new agency, the Federal Election Commission, to administer a strengthened disclosure system and to enforce the other provisions of the law. Barely a year after the 1974 amendments to FECA were signed into law, the Supreme Court, in Buckley v. Valeo, upheld the constitutionality of the contribution limits, the disclosure requirements, and the presidential public financing system. But it struck down the limits on expenditures (by a candidate’s campaign, by a candidate with personal funds, or by others spending independently), except for voluntary limits tied to public financing in presidential elections, and narrowed the class of political communications by independent groups subject to disclosure and limits on the source and size of contributions. For the purposes of this report, two sets of provisions are particularly germane: those governing the role of corporations and labor unions, and those governing political parties. Corporations and Labor Unions The new regulatory regime included one very familiar element: a ban...