A Collapse of the Campaign Finance Regime?

This article originally appeared in the April 2008 issue of The Forum. Copyright is given to The Berkeley Electronic Press.

The fascinating 2008 presidential election has produced many unexpected twists and turns, with more likely to follow on the long road to the national party conventions and November election. Those of us who profess to be experts on presidential elections have been humbled by the limits of received wisdom and by the rapid pace of change in many aspects of electioneering. Campaign finance is one such change. Developments are sufficiently dramatic as to raise questions about the viability of the entire regime of campaign finance law.

The presidential public financing system is largely irrelevant in this election cycle. All of the serious candidates except John Edwards opted out of public matching grants in the nomination phase (in John McCain’s case, not without a legal challenge) and both major party candidates may forego the public grant in the general election. (Even if they don’t, those public funds are likely to be dwarfed by independent expenditures by parties and outside groups.) The striking increase in private funds raised by presidential candidates, initially from maxedout individual donors facilitated by bundlers and later from Internet-based small donors, confirms that many candidates have real alternatives to public funding and the spending limits that come with it.

Outside groups have also had a large campaign finance presence in the current election cycle, a presence that will become even more prominent once both presidential nominees are decided and the general election campaign begins in earnest.

The new Supreme Court under Chief Justice Roberts, with Justice Alito replacing Justice O’Connor, has moved in a decidedly deregulatory direction. James Bopp and Brad Smith are mapping and executing a very promising litigation strategy aimed at limiting or reversing earlier decisions – extending from McConnell v. Federal Election Commission to Buckley v. Valeo and before – upholding various forms of campaign finance regulation. They will likely have a sympathetic Court to work with for some time.

And an extended political deadlock between Senate Democrats and Republicans over the nomination of Hans von Spakovsky as Commissioner of the Federal Election Commission (FEC) has left the agency with only two members (two short of the majority required for formal action) in the heat of a highly contested presidential election.

Assessing how these developments have altered the regulatory regime and exploring how they might more dramatically reshape the role of money in elections are central to this issue of The Forum. I hope it might presage some cooling of the ideologically-charged and tendentious debates about campaign finance that have become so depressingly repetitive and sterile. Most of these debates revolve around the alleged objectives and consequences of the Bipartisan Campaign Reform Act of 2002, widely know as McCain-Feingold.

Let me be clear about my own perspective on this matter. McCain-Feingold was a very limited legislative initiative designed to restore the effectiveness and credibility of longstanding contribution limits and restrictions on the use of corporate and union treasury funds in federal elections. Its two major pillars – a ban on party soft money and the regulation of electioneering communications – were agnostic about the total amount of money raised and spent in federal elections even while the rhetoric of some of the bill’s supporters in Congress and outside reformers made clear they longed for a reduction in the money chase.

The ban on party soft money has been remarkably successful: parties and elected officials are out of the business of soliciting large unlimited contributions from corporations, unions, and individuals. For the most part, soft money contributions have not been diverted to outside groups. And the parties have adapted very well to a post-soft money world. They are today more significant players in the financing of presidential and congressional elections than they were before the enactment of McCain-Feingold.

The electioneering communications section of the law was limited to candidate-specific broadcast, cable and satellite communications to targeted audiences in close proximity to primary and general elections. Its purpose was to extend the existing prohibition on corporate and union expenditures on express advocacy to what had become its functional equivalent. McCain-Feingold left untouched the many avenues for campaigning available to corporations and unions not covered by the bright-line test for electioneering (or by the ban on party soft money). The second pillar of McCain-Feingold also imposed no new restrictions on large individual donors. Pre-existing law set a limit of $5,000 for individual contributions to non-party political committees.

The electioneering provision of McCain-Feingold largely achieved the limited goal it set for itself, although that goal increasingly appears circumscribed by outside group activity unaddressed and unaffected by the law. Moreover, the successful as-applied challenge in FEC v. WRTL is likely to open new opportunities for candidate-specific advertising supported by corporations and unions (see the Briffault article in this issue).

Critics of McCain-Feingold clearly take a much less benign view of the law’s purposes and consequences. Their arguments sometimes emphasize the draconian reach and impact of the law, other times its ineffectualness and pattern of generating unintended negative consequences. Most prominent among the former is that campaign finance law, McCain-Feingold in particular, suppresses free speech. The argument is decidedly theoretical, not empirical. By virtually every indicator available – ads broadcast, dollars spent, the diversity of views expressed in all forms of campaign activity – political speech has been alive and well in the elections since the enactment of McCain-Feingold. Compared with most other democracies which routinely prohibit paid campaign ads, limit expenditures by parties and candidates, and ban independent expenditures by groups and individuals, free speech in this country is guaranteed by a powerful First Amendment. Repeated charges, by such serious analysts as columnists David Broder, Robert Samuelson and George Will, that McCain-Feingold imposes a reign of censorship rest on a house of cards. It is not surprising that campaign finance critics scrambled to put together a test case to bring an as-applied challenge since no real ones were available. Attorney James Bopp, Jr. searched nationally for groups that would be willing to run an appropriate ad and eventually struck pay dirt in Maine and Wisconsin. This was a perfectly legitimate legal strategy that proved successful but hardly evidence of the suppression of political speech.

Critics often argue that the law harms political parties by denying them an important source of income and weakening them relative to unregulated nonparty groups. Yet party fundraising and spending in the 2004 and 2008 elections relative to those preceding McCain-Feingold have been robust, with large sums spent (and more efficiently than soft-money financed “issue ads”) on behalf of candidates and state and local party organizations. Moreover, the increase in electioneering activities by 527 and nonprofit organizations began before McCain-Feingold was on the books. Clearly, larger forces are at work.

Some have even argued that McCain-Feingold is responsible for the collapse of the presidential public financing system by virtue of its doubling and indexing of individual contribution limits. That is preposterous. Many aspects of the public grant program – state and national spending limits, the size of the match, the timing of payments – fell out of date well before the new law was enacted. George W. Bush successfully opted out of the public match program in 2000 and would have done the same in 2004 without any change in contribution limits. The same is true for Dean and Kerry in 2004 and the major presidential candidates in 2008.

Critics also point to the fecklessness of efforts such as McCain-Feingold to limit the amount of money in elections or the overall role of wealthy individuals. I agree that such efforts are likely to fail but insist that they were not objectives of this most recent round of reform.

My resistance to the arguments leveled at McCain-Feingold by its critics does not mean that I believe that the constitutional rationale for and traditional approaches to campaign finance regulation will or indeed should have a bright future. The constitutional, political and practical obstacles to maintaining and strengthening the current regime are daunting. The Roberts Court will look askance at legislative initiatives to shore up the regulatory system as they reconsider previous decisions. New opportunities for fundraising will make it even more difficult to use public funds to entice candidates to limit their spending. Parties and nonparty groups will use their constitutionally protected right to make independent expenditures to prevent any election campaign from being fully financed with public funds and to ensure a cacophony of voices in federal election campaigns. Determined wealthy individuals will avail themselves of a myriad of legally-sanctioned channels for attempting to influence the outcome of elections. Continuing partisan battles over the appointment of FEC commissioners will reinforce the many other sources of the agency’s ineffectiveness.

Consequently, I think we are overdue for a reconsideration of campaign finance regulation, one that doesn’t simply rehash the old and stale arguments between reformers and deregulators. Technology is dramatically reshaping the ways in which funds are raised and campaigns are conducted. The not-too-distant future may witness major reductions in the cost of campaigns (with targeted digital communications replacing broadcast ads) and the replacement of a limited number of large contributors with millions of small donors. Candidates and parties will have less control of their campaigns as the potential of the Internet for motivated individuals and self-forming social groups is more fully realized. In this new world, some forms of regulation might stymie rather than facilitate constructive change. At the same time, limits on contributions to candidates and parties might well prove of lasting value. The point is that serious rethinking of the new world of campaigns and campaign finance, one characterized by openness and pragmatism, not by ideological rigidity, is to be welcomed.

The 2008 presidential election cycle provides some encouraging developments for those concerned about the role of money in politics. These include the rise of small donors, the failure of some well-funded campaigns and the success of others that were poorly funded, the limits of paid broadcast ads, the investments in grassroots campaigning, and the signs that suggest fundraising is more an indicator than a cause of interest, energy and electoral appeal.

Huge challenges lie ahead. Encouraging electoral competition, strengthening transparency, promoting political equality, and reducing conflicts of interest in our electoral system require continuing attention to the role of money. But the question of how best to advance those objectives becomes more interesting with each passing year.

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