IE 11 is not supported. For an optimal experience visit our site on another browser.

Donors find ways to re-route cash

Financier George Soros is a big donor to anti-Bush groups.
Financier George Soros is a big donor to anti-Bush groups.Misha Japaridze / AP file

Wednesday was a good day for Democratic activist George Soros and other canny donors, Republicans and Democrats, who have already adapted to the campaign finance regulations upheld by the Supreme Court in its historic decision in McConnell vs. Federal Election Commission. Activist committees, such as the Soros-backed and Americans Coming Together, are thriving, using some of the money that once flowed to the political parties.

In a 5-4 decision, the court upheld the three most significant provisions of the Bipartisan Campaign Reform Act (BCRA), which President Bush signed into law last year.

The first provision was the ban on national party committees using so-called “soft money,” the unlimited contributions on which both parties, but especially the Democrats, had to come to rely heavily prior to 2002.

Decline of party committees
Wednesday’s ruling confirmed that the national party committees will be unable to raise “soft money” — their power is likely to continue to shrink.

In the 2001-2002 election cycle the Democrats collected $246 million in soft money, which accounted for 53 percent of the party’s total revenue.

The Republicans collected $250 million in soft money — but that was only 36 percent of their total revenue. The rest came from “hard money” designated for specific campaigns and limited under the old law to $1,000 per donor to a candidate.

The five justices said in Wednesday’s decision that “contribution limits, like other measures aimed at protecting the integrity of the process, tangibly benefit public participation in the political debate.”

Prior to the campaign law’s effective date, Nov. 6, 2002, soft money used to flow in to the political parties in increments of $100,000, $500,000 or even $5 million from corporations, labor unions and wealthy individuals such as Haim Saban of “Mighty Morphin’ Power Rangers” fame, who gave $9.2 million to the Democrats in the 2001-2002 cycle.

The justices accepted the argument that such large donations undermined “the integrity of the process” and therefore Congress could for all intents and purposes ban them in federal elections.

The court’s affirmation of the soft money ban adds weight to an argument made by Democratic presidential contender Howard Dean.

With the national parties unable to raise soft money, a presidential candidate must have his own well-funded campaign war chest to survive in the crucial period from the moment the nomination is clinched in or March until the party’s national convention in late summer, when taxpayer subsidies begin to flow in.

Without a large treasury a candidate might burn up most of his cash in the primary season and be exposed to attacks from the opposing party, which is what happened to Republican Bob Dole in the 1996 campaign.  

Restrictions on TV, radio ads
The second provision that the five justices upheld was a set of restrictions on “electioneering” TV and radio ads.

These are the all-too-familiar ads that do not explicitly call for the election or defeat of a particular candidate, but urge viewers or listeners to “Call Sen. John Smith and tell him you’re outraged about his vote against clean water.”

The court ruled that Congress had the power to require that such ads must be paid for by “separate segregated funds” — not from a corporation or labor union’s general treasury.

Corporations and labor unions must set up political action committees (PACs) to pay for these ads, but donors can only give $5,000 per year to a PAC, which is a deterrent to those top-dollar donors who want to have maximum impact.

Wednesday’s decision showed that five justices — John Paul Stevens, Sandra Day O’Connor, David Souter, Ruth Bader Ginsburg, and Stephen Breyer — were persuaded by the argument that Congress has the authority to restrict certain contributions that might create “the appearance of corruption,” even if no actual corruption could be proven.

Those five justices also formed the majority in last June’s decision that struck down state sodomy laws, and in June’s University of Michigan case, which held that colleges could give preference to an applicant due to his race or ethnic group in college admissions.

Sen. Mitch McConnell, R- Ky. and other plaintiffs had challenged BCRA on the grounds that it violated the First Amendment’s guarantee of freedom of speech.

McConnell protests
In a statement reacting to Wednesday's decision, McConnell said, "Wealthy donors like George Soros are writing multi-million dollar checks to fund massive special interest groups" which he said "have become the modern day political parties. Soft money is not gone; it has just changed its address."

In a characteristically tart dissent, Justice Antonin Scalia wrote Wednesday, “Who could have imagined that the same Court which, within the past four years, has sternly disapproved of restrictions upon such inconsequential forms of expression as virtual child pornography... would smile with favor upon a law that cuts to the heart of what the First Amendment is meant to protect: the right to criticize the government.”

Republicans scored a big victory in Wednesday’s decision as the court upheld a third provision of BCRA: its doubling of the “hard money” limit on contributions to a specific candidate from $1,000 to $2,000.

Advantage: Republicans, since they have a bigger universe of donors who can afford to write the maximum $2,000 check.

By the end of September, President Bush’s re-election campaign has raised $84 million, all in increments of $2,000, proof of the “hard money” edge Republicans continue to enjoy.

Wednesday’s decision does not affect the practice of volunteers gathering $2,000 checks from individuals in their circle of friends and acquaintances and then forwarding those checks to a campaign. This practice, called “bundling,” has helped Bush raise his $84 million.

In one sense, the McConnell decision is an anticlimax. The soft money has found other channels and continues to flow in innovative new ways.

Smart donors figured out months ago how to adapt to the new regulatory regime.

Exhibit A is currency speculator and billionaire Soros, who has pledged several million dollars to Americans Coming Together, a labor union-allied group which is working to identify and mobilize voters to defeat Bush.

The group’s leadership includes abortion rights activists such as EMILY’s List President Ellen Malcolm, as well as Sierra Club chief Carl Pope and Andrew Stern, head of the Service Employees International Union, which has endorsed Democratic presidential contender Howard Dean.

But Washington lawyers who are expert in campaign finance said Wednesday the court’s decision may have an effect — as yet unknown — on groups such as Americans Coming Together.

Here is why: The majority decision did away with the traditional distinction between “express advocacy,” calling for the election or defeat of a specific candidate, and “issue advocacy,” in which a group promotes or denigrates a candidate in the course of discussing an issue such as the Iraq war or protection the environment.

BCRA did not target non-party activist groups such as and Americans Coming Together.

If in the future such groups do run TV and radio ads that have the effect of hurting or helping a specific candidate, such as Bush or Dean, Congress or the Federal Election Commission may seek to restrict them, invoking the authority of the court’s decision Wednesday.

A potential winner from all this: Internet political ads. BCRA specifically exempts Internet, magazine and newspaper communications from its advertising restrictions.

Groups such as that have already proven adept at using the Internet and newspaper ads might press their advantage, while TV and radio ads dwindle.

“Both Congress and the FEC have gone out of their way to the let the Internet blossom in political campaigns,” said Marc Elias, a partner in the Perkins Coie law firm in Washington who specializes in campaign finance. “There’s been a real effort to not burden the Internet.”