Campaign Finance Reform: the Unfinished Agenda

Campaign Finance Reform: The Unfinished Agenda

By FRED WERTHEIMER

ABSTRACT: In 1974, following the Watergate scandal, Congress enacted major campaign finance reform legislation. The legislation created a revolutionary new public financing system for our presidential campaigns, but it left congressional campaigns to be financed totally by private money. The presidential public financing system has worked well. Despite some incremental problems, the system has accomplished its basic goal of allowing individuals to run for the presidency without becoming dependent on their financial backers. The system for financing congressional campaigns, on the other hand, is out of control and in need of fundamental reform. The inappropriate role of special interest political action committees (PACs) in influencing congressional elections and congressional decisions is the single biggest problem facing the political process. Congress needs to complete the unfinished campaign finance reform agenda of the 1970s by enacting public financing for congressional campaigns and establishing new restrictions on the total amount that PACs may give to a congressional candidate.

Fred Wertheimer is president of Common Cause, a national citizens’lobbying organization. He joined the organization as a lobbyist in 1971 and became president in 1981. He has been Common Cause’s chief lobbyist on campaign finance reform and served as director of its Campaign Finance Monitoring Project. Before joining Common Cause, he served as minority counsel to the House Small Business Committee, as legislative counsel to Congressman Silvio Conte, and as an attorney with the Securities and Exchange Commission. Mr. Wertheimer is a graduate of the University of Michigan and Harvard Law School.

NOTE: The author wishes to acknowledge the important contributions made in the preparation of this article by Common Cause staff members Marcy Frosh, Carole Geithner, Randy Huwa, Ann McBride, and Jane Mentzinger.

86 87

nUR democracy is founded on the any other sweet old lady in a calico dress just concept of representation. Citizens does not know anything about politics:’ elect leaders who are given responsibil- Beginning in the early 1970s, Com- to all the and ity weigh competing mon Cause and other election reform conflicting interests that reflect our groups pressed for fundamental changes and to decide what, in their diversity in the campaign finance statutes. The judgment, will best advance the interests goals were to end secrecy in campaign of the citizenry. financing, to limit the influence of large It is a system. It obviously rough contributions, to enable candidates of often does not measure up to the ideal modest means to seek office without we might hope to attain. But we con- becoming beholden to campaign donors, tinue to our trust in this system place and to increase competition in the polit- because we believe our best chance at ical process. The reform called ourselves lies in the agenda governing obtaining for: best judgment of elected representatives. Unfortunately, that is not happening -effective campaign contribution today. We are not obtaining the best and expenditure reporting require- judgment of our elected representatives ments ; are not free to in Congress because they -limits on the size of individual and it to us. As a result of our give present group campaign contributions; congressional campaign financing sys- -a of of tem-and the increasing role of political system public financing candidate action committee (PAC) campaign con- campaigns, including access to federal funds and limits tributions-members of Congress are on and rapidly losing their ability to represent spending; the constituencies that have elected -effective enforcement by an inde- them. pendent agency. We have long struggled to prevent This reform agenda took on a new from used to influence money being importance in the wake of Watergate, government decisions. We have not our nation’s greatest political scandal. always succeeded, but we have never lost Watergate revealed that our govern- sight of the goal. Buying influence vio- ment was literally up for sale. The lates our most fundamental democratic came in the form of funds con- values. We have recognized that money long tributed for the presidential campaign. the to make con- ability large campaign As the then chairman of American Air- tributions does, in fact, make some lines explained: more equal than others. In the mid- 1960s, for example, Senator Russell The law ... is based on a system by which Long, Democrat of Louisiana, observed, candidates for public office must seek funds from persons affected by the actions of such One sweet woman was on the side opposite candidates when elected to office. The sys- [in an election] and thought they were going to lose and came charging in there with a 1. U.S., Congress, Senate, Committee on of hundred thousand dollars to couple pump Finance, Hearings on S. 3496, Amendment No. up their side.... Anybody who would 732, S. 2006, S. 2965, and S. 3014, 89th Cong., 2d suggest that she had no more influence than sess., 1966, p. 78. 88 tem provides no limits on the total amount Reflecting on the meaning of Water- that may be raised or spent and hence places gate, John Gardner, founder and former a premium on pressure to raise greater and chairman of Common wrote at 2 Cause, greater amounts . the time: In its final the Senate Water- report, In almost every aspect of Watergate, there as a gate Committee concluded that, was one common element: the flow of secret result of the systematic solicitation of campaign cash. There are honest donors to corporate donors, 12 major corpora- political campaigns and honest recipients; tions gave approximately $749,000 in but the existence of these does not outweigh illegal contributions to the Nixon cam- the fact that the present system legitimizes paign.’ Corporate executives testified the buying and selling of politicians. The cash bribe has been that they succumbed to such solicitations old-style, flat-footed replaced by the campaign gift, its all-purpose, as a way of access to administra- gaining modern tion decision makers and also out of fear prepackaged equivalent.’ of experiencing competitive disadvan- The result of these revelations, not tages if they failed to contribute. Said surprisingly, was an alarming drop in one Gulf Oil executive, &dquo;I considered it citizens’ confidence in their government. considerable pressure when two Cabinet Pollster Louis Harris in 1973 told a officers and an agent of one of the Senate committee that &dquo;public confi- committees that was handling the elec- dence in government generally must be tion ... ask[ed] me for funds-that is reported as being lower than a constit- just a little bit different than somebody uent democracy can afford.&dquo;’ 4 collecting for the Boy Scouts.&dquo; The nation’s greatest political scan- The Milk Producers Association’s dal led to one of the nation’s most pledge of $2 million to President Nixon’s historic and revolutionary reforms, the reelection campaign was linked in the public financing of our presidential public’s mind to the increase in milk elections. Congress enacted public price supports. More than $1.8 million financing to prevent private campaign in contributions to the Nixon campaign contributions from being used as a vehi- came from people who received ambas- cle for obtaining influence with the sadorial appointments during his president of the United States. Under administration.’ this system, limits were placed on the 2. D. Michal Freedman, The Watergate size of contributions, overall expendi- Reforms: Ten Years After (Washington, DC: tures were capped, and an alternative Common Cause, 1983), p. 16. source of campaign money was created: 3. U.S., Congress, Senate, Select Committee public funds generated by the dollar on Presidential Campaign Activities, Final checkoff on the federal income tax.’ Report, 93rd Cong., 2d sess., 1974, p. 446. 4. Ibid., p. 471. 5. Ibid., pp. 127, 492-93, 579. See Fred 6. Freedman, Watergate Reforms, p. 17. Wertheimer and Randy Huwa, "Campaign 7. U.S., Congress, Senate, Committee on Finance Reforms: Past Accomplishments, Future Government Operations, Hearings on a Survey of Challenges,"New York University Review of Law Public Attitudes, 93rd Cong., 1st sess., 1973, and Social Change, 10:44 (1980-81). Unless pp. 6-8. otherwise noted, figures used in this article are 8. FECA Amendments of 1974, Pub. L. No. based on analyses prepared by Common Cause of 93-443, §§ 101-302, 88 Stat. 1263 (1974) (codified campaign finance disclosure statements filed with as amended in scattered sections of 2, 5, 18, 26, 47 the Federal Election Commission. U.S.C.). 89

Unfortunately, the same progress new problems that have arisen, such as was not made at the congressional level. soft money and independent expendi- Although Congress established limits tures, these changes are required to on contributions by both individuals preserve the integrity of an existing and PACs and placed limits on overall system that has accomplished its basic expenditures,9 members of Congress goals. were unwilling to take the last crucial step-to establish an alternative public PRESIDENTIAL source of campaign funds for their own PUBLIC FINANCING campaigns. While congressional public Simply stated, the presidential public financing was passed by the Senate, the financing system is an idea that works; it House narrowly rejected it, by a vote of is the crowning achievement of the 187 to 228, and the provision was amendments adopted in 1974 to the dropped in conference. At the same Federal Election Campaign Act. Under time, in a major step backward and over the system, candidates who agree to the objections of reform groups, Con- abide limits on overall the door for an increased by campaign gress opened and the of role in special interest giving by repeal- spending expenditure personal wealth are able to receive federal ing a prohibition on the formation of tax dollars, funds to a PACs by government contractors. 10 As designated sepa- rate account by individual taxpayers. a result of these actions, campaign con- Public funds are available to match tributions remain a vehicle for powerful small contributions raised access and influence in the private by obtaining candidates the United States Congress. during nominating process ; for the election, The presidential and congressional general major- party candidates are entitled to full systems thus campaign-financing require with dollars. different types of reform today. campaign funding public sharply In the three elections for which this Comprehensive legislation must be new system has been in place-1976, enacted to remedy the defects in the 1980, and 1984-presidential public system for financing congressional cam- financing has been successful. Thirty- paigns. Limits on overall PAC receipts four of the 35 candidates must be established. A public financing major party since the law was passed have chosen to system must be created to over- provide in this Pres- all spending limits and adequate alter- participate voluntary system. idential public financing has checked native funding so that candidates are no the increase in presidential campaign longer dependent on special interest expenditures. Presidential contenders group contributions. In contrast, the no longer must &dquo;tin-cup it around the system of financing presidential cam- ‘ in search of funds.’ paigns has already been successfully country&dquo; campaign In contrast to the contest of transformed. While significant adjust- presidential 1972, candidates are no ments are needed in order to deal with longer dependent on a relatively few fat-cat contributors; 9. The limits on overall expenditures were rather, the funding base for campaigns struck down by the Supreme Court in the land- is broad. PAC contributions play a mark case Buckley v. Valeo, 424 U.S. 1(1976). 10. Act of 14 June 1940, chap. 640, § 5(a), 54 11. "Fat Cat as Endangered Species," Wash- Stat. 772 (repealed 1976). ington Post, 26 June 1980. 90 minor role in presidential campaigns. This major reform of the 1970’s should be PACs gave less than $1.5 million to 1984 continued presidential candidates, or less than 2 percent of the total funds raised. As the CONGRESSIONAL New York Times has observed, &dquo;Public CAMPAIGN FINANCING confers on Presidential candi- financing While the presidential campaign dates the freedom not to grovel.&dquo;’2 finance system stands as a model for Public financing also confers an reform, the congressional campaign sys- added freedom to without the govern tem is out of control and in need of attached donors or strings by large fundamental that such exist. repair. public suspicion strings The last decade of The Carter and congressional Reagan presidencies financing has been marked by have been free of the hint that campaign relatively an increase in the number favors have been traded for exponential government of PACs formed labor contributions. Stories by corporations, large campaign unions, trade associations, and other the influence of contri- linking campaign In 1974 there were 608 PACs. butions with official actions in the legis- groups. Today there are more than 4000. lative branch are common;’3 for the This explosion in PACs can be traced executive branch, very rare. The Com- to congressional action-and inaction- mission on National Elections, headed in 1974. Ironically, at the very time when by Melvin Laird and Robert Strauss, members of Congress were acting to concluded, clean up presidential elections, they Public financing of presidential elections has opened the door for PACs to enter the clearly proved its worth in opening up the congressional arena in an unprecedented process, reducing undue influence of indi- way. The key to the PAC explosion was viduals and and groups, virtually ending a provision attached to the 1974 law by in election finance. corruption presidential labor and business groups, over the opposition of Common Cause and other 12. "Sneak Attack on Finance," Campaign reform advocates, that authorized gov- New York Times, 3 June 1985. ernment contractors to establish PACs. ~ ~ 13. See, for example, Common Cause, How Money Talks in Congress: A Common Cause In addition, by creating public financing Study of the Impact of Money on Congressional for presidential campaigns, but not for Decision-Making (Washington, DC: Common congressional races, the 1974 amend- Cause, 1979); Wertheimer and Huwa, "Campaign ments focused the attention and interest Finance Reforms: Past Future Accomplishments, of PACs and other Challenges," pp. 49, 51, 52, 53; Walter Isaacson, private campaign "Running with the PACs" Time, 25 Oct. 1982, donors on Congress. pp. 20-26; Brooks Jackson and Jeffrey Birnbaum, The resulting growth in PACs was no "Dairy Lobby Obtains U.S. Subsidies with Help accident, and it certainly was not a from Urban Wall Street Journal, 18 Legislators," reform. The growth of PACs, moreover, Nov. 1983; Judith Bender, "The PAC Game on is no unintended Capitol Hill," Newsday, 12 Mar. 1984; Brooks certainly consequence Jackson, "PAC Helps Push Pet Electric Bill," of the 1974 law-the provision was Wall Street Journal, 29 Mar. 1984; and Jeffrey 14. Report of the Commission on National Sheler and Robert Black, "Is for Sale?" Congress Elections, Executive Summary (Washington, DC: U.S. News and World Report, 28 May 1984, Georgetown University, Center for Strategic and pp. 47-50. International Studies, 1985), p. 7. 15. 2 U.S.C. § 441c(b) (1976). 91 included to protect and enhance the role tremendous increase in PAC contribu- of PACs in financing campaigns, and it tions to congressional candidates. In has. 1974, PACs gave $12.5 million to con- This tremendous increase in the gressional candidates. By the 1984 elec- number of PACs has not resulted in tions, their contributions had exceeded balanced representation in Washington. $100 million, an eightfold increase in ten As Senator Gary Hart, Democrat of years. Colorado, has told the Senate: PAC money also represents a far more important part of the average It seems the only group without a well-heeled candidate’s funds than it did PAC is the average citizen-the voter who campaign ten or so In has no special interest beyond low taxes, an years ago. 1974,15.7 percent of candidates’ efficient government, an honorable Congress, congressional campaign and a humane society. Those are the demands money came from PACs; by the 1984 we should be heeding-but those are the election, that proportion had increased demands the PACs have drowned out.’6 to 30 percent. Yet these numbers to tell In fact, the increasing number of PACs only begin the story. The increased dependence on has largely served to increase the ability PAC contributions has been greatest for of single interests to bring pressure to winners, those individuals who serve in bear on a congressional candidate or a Congress and who cast votes that shape member of Congress. There are more our daily lives. In the Ninety-ninth Con- than 100 insurance company PACs, gress (1985-86), over 150 House mem- more than 100 PACs sponsored by bers received 50 percent or more of their electric utilities, and more than 300 funds from includ- by labor unions. Representa- campaign PACs, sponsored 20 of the 27 committee chairs and tive David Obey, Democrat of Wiscon- ing leaders. House winners in the 1984 sin, has observed that frequently in party election received an of 41 Washington average percent of their campaign dollars from an issue affects an entire industry and all of PACs. Of all winning House candidates the companies and labor unions in that in the 1974 election, only 28 percent When a industry.... that occurs, [and] large received one-third or more of their cam- number of groups which have made substan- paign funds from PACs. By 1984, that tial contributions to members are all lobby- figure had grown to 78 percent. ing on the same side of an issue, the pressure For senators, PAC contributions are generated from those aggregate contribu- also a more source tions is enormous and warps the process. It is becoming important of dollars. Senators elected in as if they had made a single, extremely large campaign contribution.&dquo; 1976 received a total of $3.1 million from PACs; Senate winners in the 1984 in The increase the number of PACs, election raised $20 million from PACs. not surprisingly, has also produced a In the 1984 elections, 23 winning Senate 16. U.S., Congress, Senate, Congressional candidates raised more than $500,000 Record, 99th Cong., 1st sess., 131(165):16683. each from PACs. 17. Statement of Congressman David R. Some have suggested that the growth Obey, Democratic Study Group, 26 July 1979, in PACs is an important new form of quoted in Fred Wertheimer, "The PAC Phenom- citizen involvement in the enon in American Politics," Arizona Law Review, political 22:622-23, n. 114(1980). process. Yet PAC participation is often 92 likely to be more of an involvement in races, those in which the incumbent the corporate process or the union pro- received 55 percent or less of the vote. In cess or the trade association process these races, incumbents received an aver- than it is in the political process. age of over $230,000 from PACs; their University of Minnesota professor Frank challengers received less than $110,000. J. Sorauf has noted: The advantage enjoyed by incumbents is true for all kinds of PAC giving-for To understand political participation through contributions labor groups, corpo- PACs, we need also to note the nature of the by rate and trade and participation. Some of it is not even political PACs, membership PACs. activity; buying a ticket in a raffle, the proceeds of which go to a PAC, a party, or a Second, there is a growing awareness candidate, does not qualify as a political act that PAC money makes a difference in by most standards. Even the contributory the legislative process, a difference that act of writing a check or giving cash to a is inimical to our democracy. PAC PAC is a somewhat limited form of partici- dollars are given by special interest that little time or immediate pation requires groups to gain special access and special involvement; in a sense it buys political influence in Most often, mercenaries who free the contributor from Washington. PAC contributions are made with a the need to be personally active in the purpose in mind. The late campaign. It is one of the least active forms legislative Justin former chairman of Dart of political activity, well suited to the very Dart, once noted that busy or to those who find politics strange, Industries, dialogue boring, or distasteful.&dquo; with politicians &dquo;is a fine thing, but with a little money they hear you better.&dquo;’9 In the of PACs and the fact, growth Senator Charles Mathias, Republican increased of PAC importance money of Maryland, has stated: have had a negative effect on two different parts of the political process- An official may not change his or her vote congressional elections and congres- solely to accommodate the views of such sional decision making. First, PAC contributors, but often officials, including will to meet with an individual money tends to make congressional cam- myself, agree who made a contribution so the official paigns less competitive because of the large can hear the contributor’s concerns and overwhelming advantage enjoyed by make the contributor aware these concerns incumbents in PAC The fund-raising. have been considered.... Since an elected ratio of PAC contributions to incum- official has only so much time available, the bents over challengers in 1984 House inevitable result of such special treatment for races was 4.6 to 1.0; in the Senate, incum- the large contributor is that other citizens are bents in 1984 enjoyed a 3.0 to 1.0 advan- denied the opportunity they otherwise would tage in PAC receipts. On the average, have to confer with the elected official.2° 1984 House incumbents raised $100,000 Common Cause and others have pro- more from PACs than did challengers. duced a number of studies that show a This was true even $100,000 advantage relationship between PAC contributions in the most highly competitive House 19. "Companies Organize Employees and 18. Frank Sorauf, "PACs in the American Holders into a Political Force," Wall Street Political System" (Background paper, Twentieth Journal, 15 Aug. 1978. Century Fund Task Force on Political Action 20. Brief for Appellees, p. 53, Buckleyv. Valeo, Committees, 1984), pp. 82-83. 424 U.S. 1 (1976). 93 and legislative behavior. The examples process as swarms of candidates and well- run the gamut of legislative decisions, heeled special interest groups jostle to trade including hospital cost containment, the political favors for money.... It would be Clean Air Act, domestic content legisla- hard to find a PAC that gives solely to Most see their tion, dairy price programs, gun control, support good government. contribution as an investment in maritime policies, and regulation by the promoting laws favoring their interests. 23 Federal Trade Commission of profes- sional groups or of used-car sales.&dquo; And Chemical Week warns: PAC gifts do not guarantee votes or [A] new force has intruded into our system support. PACs do not always win. But of representative democracy that, if un- PAC contributions do donors provide checked, could topple it or seriously hurt with critical access and influence; they it. We refer to the phenomenon of Political do affect legislative decisions and are Action Committees.... The plain truth increasingly dominating and paralyzing of the matter, no matter what gloss is put the legislative process. on it, is that PAC money aims at influ- In the last few years, something very encing congressional action. The other side important and fundamental has hap- of the coin is that new candidates and pened in this country-and that is the incumbents alike become beholden to their PAC benefactors. That’s the whole point, development of a growing awareness isn’t it?Za and recognition of the fact that the PAC system is a rotten system that must be Criticism of the PAC system is also changed. We know that concern is grow- increasingly heard in the halls of Con- ing when Irving Shapiro, former chair- gress. More and more members from man and chief executive officer of both parties are speaking out about duPont and the former chairman of the the PAC problem. Consider the fol- Business Roundtable, describes the cur- lowing : rent system of financing congressional [The present campaign-financing system] campaigns as &dquo;an invidious thing, it’s forces members of Congress to go corrupting, it does pollute the system.&dquo;22 virtually around hat in hand, begging for money from We know that concern is reaching Washington-based special interest political new audiences when Business Week action committees, whose sole purpose for editorializes that existing is to seek a quid pro quo.... the scandal is taking place every day and will fears are growing that the proliferation of continue to do so while the is PACs ... is balkanizing the nation’s political present system in place.25 21. for Common "How See, example, Cause, PAC money is destroying the election pro- Money Talks in Wertheimer and Congress"; cess. It is breaking down public confidence in Huwa, "Campaign Finance Reforms: Past Accomplishments, Future Challenges," pp. 49, 51, 23. "How to Curb PAC Power but Not Free 52, 53; Isaacson, "Running with the PACs," pp. Speech," Business Week, 22 Nov. 1982. 20-26; Jackson and Birnbaum, "Dairy Lobby 24. Patrick P. McCurdy, "Let’s Pack in the Obtains U.S. Subsidies"; Bender, "PAC Game on PACs—All of Them," Chemical Week, 15 Aug. Capitol Hill"; Jackson, "PAC Helps Push Pet 1984, p. 3. Electric Bill"; and Sheler and Black, "Is Congress 25. Statement of Senator Thomas Eagleton, in for Sale?" U.S., Congress, Senate, Committee on Rules and 22. Nina Easton, "Swimming against the Administration, Hearings on Campaign Finance Tide," Common Cause Magazine, 9(5):13 (Sept.- Reform Proposals of 1983, 98th Cong., 1st sess., Oct. 1983). 1983, p. 52. 94 free elections and it is ruining the character devote more time to raising money than to and quality of campaigns. 21 their public duties. 28 In the in the influence of addition, growth And Senator Eagleton has said on the PAC’s further fragments our Nation and its Senate floor: elected legislative bodies. It makes it increasingly difficult to reach a national consensus Throughout the last decade, the money and hold[s] our decisionmaking process factor has exploded exponentially. Most of hostage to the special interests which PAC’s us have our &dquo;tin cups&dquo; for alms-begging; our represent.... We cannot expect Members of call lists to fat cats; our endless procession of Congress to act in the national interest when fundraising receptions; our direct mail pleas; their election campaigns are being financed and so forth. more and more by interests . 21 special The money race never ends. Senators start In addition to the growing role of the process in the early years of their 6-year PAC contributions, the congressional terms by &dquo;building a war chest&dquo; for their campaign-financing system is also reelection. House Members start on the marked by unlimited and skyrocketing Wednesday after the Tuesday elections to spending. In 1974, House and Senate amass the funds for the next go-around.29 candidates spent $77 million on congressional races. Ten years later, House THE CAMPAIGN FINANCE REFORM AGENDA and Senate candidates spent a record $374 million, almost five times as much. A number of changes in federal elec- The cost of a seat in Con- winning tion law are needed if the campaign is also In the gress rising dramatically. finance reform effort begun over a 1975-76 election House winners cycle, decade ago is to be finished. In some spent $38 million, an average of over cases, unfinished business needs to be $87,000 each. In the 1983-84 election completed. The foremost item of old House winners mil- cycle, spent $117 business, of course, is a fundamental an of each. On lion, average $269,956 restructuring of the congressional cam- the Senate winners mil- side, spent $20 paign-financing system. In addition, new lion in the 1975-76 an of cycle, average problems that have emerged in the years $606,060; in 1984 elections, Senate since Watergate need to be addressed. winners spent $94.8 million, an average Adjustments to the presidential public of $2.9 million each. financing system-a system that is About rising campaign expenditures fundamentally sound and that has dem- Senator Goldwater has said, onstrated its effectiveness-need to be made. A finance reform Unlimited campaign spending eats at the campaign heart of the democratic process. It feeds the agenda today should include congres- growth of special interest groups created sional campaign finance reform, inde- solely to channel money into political cam- pendent expenditures, and soft money, paigns.... And it causes elected officials to as well as other issues.

26. Remarks of Senator Barry Goldwater, in 28. U.S., Congress, Senate, Committee on U.S., Congress, Senate, Congressional Record, Rules and Administration, Hearings on Cam- 99th Cong., 1st sess., 131(165):16679. pcign Finance Reform Proposals of 1983, p. 403. 27. Remarks of Senator David Boren, in ibid., 29. U.S., Congress, Senate, Congressional no. 164, p. 16605. Record, 99th Cong., 1st sess., 131(165):16683. 95

Congressional campaign legislation similarly needs to provide finance reform alternative sources of campaign funds to candidates. This could be done in the The major unfinished business on the form of public funds to match small reform agenda is a thorough overhaul of contributions from individuals, as is the congressional campaign finance sys- done in the presidential nominating tem. Comprehensive legislation is or to candidates, as is needed that includes the following process, grants done in the presidential general election, essential components: limitations on or a 100 percent tax credit for small overall PAC receipts, provision of an contributions to candidates,3’ or some alternative campaign fund source, and combination of these systems. The limits on overall campaign spending and creation of a broad-based alternative on the expenditure of a candidate’s will once make personal funds. financing system again elective office a realistic ambition for Limitations on overall PAC receipts. individuals without personal fortunes While current law restricts the amount and for those who are unwilling or that an individual PAC may give to a unable to raise large sums from PACs. candidate, there is no restriction on the Overall campaign spending and can- total amount that a candidate may didates’personal funds. Limits on over- accept from all PACs. Thus in the last all and the use of two elections we have seen four Senate spending personal funds are a feature of the candidates who have each accepted key presidential system and are more than $1 million in PAC funds. An public financing needed for congressional campaigns as overall limit on aggregate PAC receipts well. The Supreme Court in its 1976 would help shift the focus of congres- Buckley decision upheld the constitu- sional fund-raising away from large of such limits as of a PAC contributions and back to small tionality part for contributions from individual donors. system providing public financing presidential candidates, but the Court An amendment establishing an over- struck down the spending limits enacted all limit on PAC receipts was adopted for races because by the House in 1979-the Obey-Rails- congressional they were not tied to any back bill-but was not considered public campaign by finance It is clear from the the Senate. The introduction in 1985 of system. Buckley decision that limits for con- a PAC-limit amendment by Senators gressional races along with limits on the Boren and Goldwater revived congres- use of personal funds can be constitu- sional consideration of the concept of an enacted as of a aggregate PAC limit. 30 tionally part public finance campaign system. Alternative campaign funds. Essen- In crafting reform legislation, it is tial to the presidential public financing important to ensure that spending limits system are the federal funds made avail- are set at levels high enough to allow able to candidates. Con- presidential 31. See, for example, H.R. 2490, printed in gressional campaign finance reform U.S., Congress, House, Congressional Record, 98th Cong., 1st sess., 129(45):1992; H.R. 4428, in 30. S. 1806, printed in ibid., no. 146, p. 14360; ibid., no. 159, p. 10056; and U.S., Congress, debate on S. 1806 is found in ibid., no 164, Senate, Congressional Record, 99th Cong., 1st p. 16603; see also ibid., no. 165, p. 16678. sess., 131(143):14065. 96 challengers to run competitive cam- ited, but no limits may be imposed on paigns. Since any campaign-financing expenditures undertaken independently system that includes spending limits by a PAC or an individual on behalf of must be voluntary under the Buckley or in opposition to a candidate. decision, candidates who felt unable to Through these so-called independent wage effective congressional campaigns expenditures, PACs and individuals can within the spending limits would be free evade the intent of limits on direct to run their races without public finan- contributions. They can and do spend cing. Those who claim that public finan- substantial sums-far in excess of statu- cing with spending limits favors the tory contribution limits-supporting or reelection of incumbents should not lose attacking candidates. sight of the fact that in the first two Independent spenders are unaccount- presidential elections conducted under able. They do not have to assume respon- the presidential public financing sys- sibility at election time, nor do they face tem-1976 and 1980-incumbents were the political impact of any misrepre- defeated, for the first time since 1932. sentation they may make. A leader in Nor should these critics forget that it is the independent spending movement, incumbent members of Congress who Terry Dolan of the National Conserva- thus far have failed to rush to enact tive Political Action Committee, has public financing for congressional races. said, &dquo;A group like ours could lie For the past decade a majority of incum- through its teeth and the candidate it bent members do not appear to have helps stays clean. ,31 reached the conclusion that public The persistent use of independent financing and spending limits are an spending in politics alters the political incumbent’s advantage. process for the worse.33 Independent Enactment of a new campaign-finan- spending can seriously distort the com- cing system for Congress would free our petition between candidates. Candidates elected representatives from their dan- are faced with spending not only by their gerous dependence on special interest opponents but also by independent contributions. A new system is also groups. Senator Ernest Hollings, Demo- essential if we are to restore public crat of South Carolina, has noted, &dquo;We confidence in the integrity of Congress all have seen how PACs can seriously and its members. damage the balance in a campaign Two additional major changes are through the expenditure of enormous needed to protect the integrity of the amounts of money. In effect, a candi- presidential public financing system and date budgets to fight one well-financed any new system established for congres- opponent but then ends up fighting sional campaigns. The changes deal many. with the issues of independent expenditures and soft money. 32. Myra MacPherson, "The New Right Bri- gade," Washington Post, 10 Aug. 1980. 33. See, for example, David Broder, "Equal Independent expenditures Time for Targets," Washington Post, 26 Aug. 1981; "Nick-Pack Strikes Home," New York Under the Court’s decision in Buck- Times, 18 Nov. 1981. ley, contributions made directly to a 34. U.S., Congress, Senate, Congressional candidate may constitutionally be lim- Record, 99th Cong., 1st sess., 131(80):8268. 97

Within the confines of the Supreme Response time would help to protect Court’s decisions in Buckley and later the integrity of the present system of cases, there are steps that can and contribution limits by assuring that a should be taken to curb the impact of candidate could respond without major independent expenditures. First, the expense to an independent expenditure Buckley decision specified that indepen- campaign. Response time would enable dent expenditure activities are exempt candidates to refute misrepresentations from limitation only if they are not made by independent spenders. A coordinated with candidates or the response-time proposal would not end agents of candidates. Additional legis- independent expenditures, but it would lation and regulations should be devel- restore some measure of accountability oped to clarify the standards to be used to independent spending activities.36 in assessing the true independence of an The response-time proposal has been expenditure campaign.&dquo; included as a major provision of S. 1310, Second, and more important, the the Clean Campaign Act of 1985, intro- federal communication statutes should duced in the Ninety-ninth Congress by be amended to provide to federal candi- Senators John Danforth, Republican of dates free and equal time to respond to Missouri, Ernest Hollings, Democrat of broadcast advertisements purchased by South Carolina, and Barry Goldwater, means of independent expenditures. Republican of Arizona.3’ This proposal Under a response-time proposal, radio 36. Fred Wertheimer, "Fixing Election Law," and television stations would be New York Times, 3 Sept. 1981. See also Ronald required to provide free and equal time Brownstein, "Soft Money," National Journal, 7 to candidates for federal office in cases Dec. 1985, p. 2828; Center for Responsive Politics, and where a broadcaster sells time to any Money Politics: Soft Money—A Loophole from federal candidates- for the ’80s (Washington, DC: Center for Respon- person-aside sive Politics, 1985); Common Cause, "Comments to broadcast material that either of Common Cause with Respect to Its Petition for endorses or opposes a candidate. If the Rulemaking Regarding ’Soft Money,’ " (Manu- broadcast advertisement opposes a can- script, Common Cause, 1985); Elizabeth Drew, didate, that candidate would be entitled Politics and Money: The New Road to Corruption (New York: Macmillan, 1983); Thomas Edsall, at no cost to an equal amount of broad- "Loophole Lets Parties Raise Millions from Firms, cast time. If the broadcast advertisement Unions," Washington Post, 17 Apr. 1984; idem, endorses a candidate, other legally qual- ’’’Soft Money’ Will Finance Voter Sign Up," ibid., ified candidates for the same office 12 Aug. 1984; Maxwell Glen, "Republicans and would be entitled at no cost to an equal Democrats Battling to Raise Big Bucks for Voter Drives," National Journal, Sept. 1984, amount of broadcast time. The response- pp. 1618-22; "Soft Money," Washington Post, 31 time builds re- concept upon existing Aug. 1984; "The Soft-Money Loophole," ibid., 1 sponsibilities placed on broadcasters- Nov. 1985; Ed Zuckerman, "Lobbying and Cam- such as the personal-attack rule-and is paign Ethics: The Ethical Implications of ’Soft " a constitutional extension of existing Money’ (Remarks delivered at George Wash- communication standards that have been ington University, Washington, DC, 28 Oct. 1985); idem, "Democrat ’Soft Money’ Nets Catch the courts. upheld by $30 Million," PACs & Lobbies, 21 Nov. 1984; idem, "’Soft Money’: A New Life for ’Fat Cats,’" 35. Wertheimer and Huwa, "Campaign Finance ibid., 16 Jan. 1985; and idem, "More DNC ’Soft Reforms: Past Accomplishments, Future Chal- Money’ Accounts Found," ibid., 6 Feb. 1985. lenges," p. 64. 37. U.S., Congress, Senate, Congressional 98 is also a significant component of the tem, and disclosure requirements of the Boren-Goldwater PAC-limitation federal election law.39 amendment.38 In 1984, Common Cause proposed to the Federal Election Commission (FEC) Soft money that new regulations be adopted to control the use of the soft-money sub- In federal elections the amounts that terfuge. Under these regulations, individuals and PACs contribute may national-level political party commit- are limited; direct contributions from tees, including party congressional cam- corporations and unions are completely paign committees, and federal officials and all contributions in excess barred; would be prohibited from establishing of $200 are to subject public-disclosure soft-money accounts or from otherwise In states, however, requirements. many channeling to state parties for use in parallel regulations do not exist. In the federal campaigns contributions that so-called 1980s, soft money has increas- would be illegal under federal law. 40 been funneled ingly to state party A number of additional campaign organizations. Soft money funds are finance issues have arisen in the 1980s contributions from sources-corporations or unions-that are not permitted 39. See, for example, Brownstein, "Soft Center for Politics, to make any direct contributions in Money," p. 2828; Responsive and Politics: Common federal and contributions Money Soft Money; elections, Cause, "Comments of Common Cause with from or individuals groups in amounts Respect to Its Petition"; Drew, Politics and above the federal limits. Money; Edsall, "Loophole Lets Parties Raise"; " While soft money is purportedly for idem, ’Soft Money’ Will Finance Voter Sign and Democrats Bat- use in party-building activities at the Up"; Glen, "Republicans pp. 1618-22; "Soft Washington state and local there is tling," Money," levels, increasing Post; "Soft Money Loophole"; Zuckerman, "Lob- evidence that these funds are in fact bying and Campaign Ethics"; idem, "Democrat being spent in connection with federal ’Soft Money’ "; idem, " ’Soft Money’: A New candidates, particularly presidential can- Life"; and idem, "More DNC ’Soft Money’ didates, in violation of federal law. This Accounts Found." 40. In a 5 Nov. 1984 letter to Lee Ann Elliott, is one of the most serious in problems chair of the FEC, Common Cause urged the the campaign finance area today. This commission to take the following steps regarding practice seriously undermines the integ- soft money practices: (1) to initiate on a priority rity of the contribution limits and pro- basis its own broad-ranging factual investigation hibitions contained in the federal law, into soft-money practices, with a view toward prosecuting actual past violations; (2) to initiate a including the limits on contributions by rule-making proceeding to establish the broader the political parties, expenditure limits administrative tools, such as additional disclosure in the presidential public financing sys- requirements, needed to facilitate the commission’s effective enforcement of the current laws; and (3) to undertake a review of the current laws to determine what additional statutory remedies may Record, 99th Cong., 1st sess., 131(80):8267; see be required to assure that soft-money abuses are also Congress, Senate, Committee on Commerce, most effectively curtailed. On 4 Feb. 1985 Com- Science and Transportation, Hearings on S. 1310, mon Cause submitted to the FEC "Comments of the Clean Campaign Act of 1985, 99th Cong., 1st Common Cause with Respect to Its Petition for sess., 10 Sept. 1985; ibid., 8 Oct. 1985. Rulemaking Regarding ’Soft Money’ " and 38. U.S., Congress, Senate, Congressional thereby set out its formal proposal for rule making Record, 99th Cong., 1st sess., 131(146):14361. on soft money. 99 that require legislative action. Congress PACs, like others, may make campaign should address delegate committee contributions. In many cases, particu- spending, candidate and officeholder larly in the case of presidential hopefuls, PACs, presidential candidate founda- these PACs are also used to finance a tions, bundling, the grandfather clause, candidate’s political travel and related and the FEC. expenses, expenditures that at this point do not count against the spending ceil- Delegate ings of the presidential public financing committee spending system. These PACs also allow larger individual and PAC contributions to be While candidates who presidential made to the candidate or officeholder receive federal funds do so in matching involved than could be made to his or return for a commitment to limit their her candidate campaign committee. overall and state-by-state spending, They also place officeholders and office who are as individuals seeking selection seekers in the position of using PAC to a con- delegates party’s nominating money to curry favor. Congress should vention are presently not subject to ban the creation of PACs by members of these limitations. Expenditures by the Congress and by prospective candidates committees of these delegates create the for president or vice-president. 41 capacity to bypass these spending limits, if the are particularly expenditures Presidential made at the direction of, with the encour- candidate foundations agement of, or in conjunction with a candidate’s campaign.4’ Federal elec- An increasing number of public fig- tion law needs to be amended to apply ures, particularly prospective presiden- the limitations on contributions and tial candidates, have set up tax-exempt expenditures to convention delegates.42 foundations. Unlike campaign committees, these foundations may accept Candidate and unlimited amounts of money, including officeholder PACs contributions from corporations and unions, and they are not required to A growing number of presidential report the source of their funds. Dona- candidates and members of Congress tions to these foundations, furthermore, are establishing their own PACs. These are fully tax deductible. These established to do 41. Similarly, delegate committees enable indi- foundations, viduals and PACs to override the contribution research on issues and to undertake limits to a presidential candidate by making other educational activities, in theory multiple contributions to numerous delegate are not linked to any individual. In committees, all of which are intended to benefit practice, however, they can pay and directly a presidential candidate’s single campaign. have for travel Such contributions serve to undermine the effec- paid by presidential tiveness of the existing contribution limits. hopefuls and have provided informa- 42. Thomas Edsall, "Candidates Find It Easy tion that forms the basis of campaign to Give Spending Curbs the Runaround," Wash- position papers-activities that appear ington Post, 3 June 1984; Brooks Jackson, "Loopholes Allow Flood of Campaign Giving by 43. See Maxwell Glen, "Starting a PAC May Businesses, Fat Cats," Wall Street Journal, 5 July Be Candidates’ First Step Down Long Road to 1984. 1988," National Journal, 16 Feb. 1985, pp. 374-77. 100 to help promote the public officials who Under current FEC regulations, the created them.44 At a minimum, tax- bundled contributions are not treated as exempt foundations that are controlled a contribution by the intermediary PAC by or maintained for a political candi- unless it actually controls the choice of date should be required to disclose the the recipient. The result is a loophole source and amount of contributions that is increasingly being exploited by received.45 PACs to expand their capacity to exert influence and to undermine the contri- Bundling bution limits. The bundling loophole should be Another on the cam- development closed by amending federal election law that Con- paign-financing landscape to provide that bundled contributions must address is a gress bundling, would count against the contribution practice by which a PAC puts together, limits of both the individual contributor or bundles, numerous individual checks and the intermediary person or PAC. made out to a candidate’s particular That is, if a PAC collects or otherwise and them to the campaign provides aggregates contributions that are ear- candidate. This presently is practice marked or directed to a particular being used by PACs effectively to evade candidate’s campaign and assists in the contribution limits of the federal transmitting these contributions to that election laws. By aggregating these indi- campaign, the contributions will be con- vidual contributions a PAC can single sidered contributions to the candidate to a candidate amounts far in provide by the conduit PAC as well as by the excess of the current $5000-per-election original individual contributor. limitation. A Wall Street Journal story, for example, noted that one insurance Grandfather clause company PAC was able to funnel contributions of more than $168,000 to one In 1979 Congress amended federal senator’s reelection campaign through law to prohibit candidates from con- bundling.46 verting surplus campaign funds for personal use. Under a clause 44. As David Spear, a spokesman for former grandfather Senate majority leader Howard Baker, has noted, included in that amendment, however, "If it’s not a violation of the law, it’s certainly a any member of Congress who was in violation of the of the law ... candidates spirit office on 8 January 1980 is permitted to ought not to be able to raise campaign funds under keep his or her surplus campaign con- the guise of a tax-free foundation." Bryan Abas, tributions for use after "Hart Has a Better Idea," Westword, 13-19 Nov. personal leaving 1985, p. 8. Congress. Members who qualify under 45. See Report of the Commission on National this provision may thus take campaign Elections, Executive Paul Summary, p. 8; West, money upon retirement. These surplus " ’Foundations’ Are Promoting Politicians," Bal- in some now timore Sun, 29 Sept. 1985; and Thomas Edsall, campaign funds, cases, "’88 Candidates’ New Tricks Stretch Federal Elec- range to amounts as high as $600,000. tion Law," Washington Post, 20 Oct. 1985. While House and Senate rules prohibit 46. Brooks Jackson, "Insurance Industry conversion of these funds for personal Boosts Political Contributions as Congress Takes up Cherished Tax Preferences," Wall Street Jour- nal, 10 Oct. 1985. See also idem, "GOP Group Michael Wines, "Bundling: A New U.S. Cam- Uses Cash Creatively," ibid., 13 Sept. 1984; and paign Custom," Los Angeles Times, 3 Oct. 1981. 101 use while members remain in office, commission threatens to undermine the several members who have retired have effectiveness of the prohibitions, restric- in fact converted surplus funds for tions, and limits of the federal election personal use. Other members, still in law. Congress, seem to regard building up Both external and internal organiza- campaign surpluses as a new form of tional factors act to undermine the political individual retirement account. 47 effectiveness of the FEC. Congress Congress already has recognized the created the commission with a partisan problems inherent in allowing retiring split and has never clarified the roles of members to convert contributions into the staff director and general counsel, personal funds by banning this activity the two statutory officers of the com- for many members. It should complete mission. Consequently, the FEC has the task started in 1979 and remove the failed to have management and policy grandfather clause, which allows some direction. Congress also consistently members to escape the ban. underfunds the agency, making it more difficult for the commission to carry out FEC its various responsibilities. The performance of the FEC is criti- While it is to examine the important cal to the effective implementation of rules for and congressional presidential federal election laws. Congress needs to a careful assess- campaign financing, consider changes in both the structure ment must also be made of the FEC, the and the administration of the commis- for federal body responsible enforcing sion to ensure the proper implementa- election laws. tion of federal election laws.48 The commission has failed the public in several Most important respects. sig- CONCLUSION nificantly, it is ponderously slow in its enforcement proceedings and is often In the spring of 1973, Common prone to concentrate on technicalities Cause chairman John Gardner told the rather than major issues of rule making. Senate Commerce Committee that &dquo;there While the FEC’s efforts at promoting is nothing in our political system today disclosure of the receipts and expendi- that creates more mischief, more cor- tures of PACs and candidates have been ruption, and more alienation and dis- a major success, lax enforcement by the trust on the part of the public than does our system of financing elections. ,,49 47. At the end of the 1984 election cycle, for Despite major progress in improving the instance, members of the House who could con- presidential campaign-financing system, vert surplus funds upon retirement had average cash-on-hand figures of $106,935; their colleagues 48. See generally Common Cause, Stalled who were not grandfathered averaged $50,421. from the Start (Washington, DC: Common See Lee Norrgard, "You Can Take It with You," Cause, 1981); see also William C. Oldaker, "Of Common Cause Magazine, p. 9 (May-June 1985); Philosophers, Foxes, and Finances: Can the Fed- Maxwell Glen, "Finishing a Campaign in the eral Election Commission Ever Do an Adequate Black Becoming More Prevalent in the House," Job?" this issue of The Annals of the American National Journal, 22 June 1985, pp. 1467-69; Academy of Political and Social Science. Kevin Chaffee, "Money under the Mattress: What 49. Statement of John Gardner, in U.S., Congressmen Don’t Spend," Washington Monthly, Congress, Senate, Commerce Committee, Hear- pp. 32-38 (Sept. 1984). ings on S. 372, 93rd Cong., 1st sess. 1973, p. 1. 102 that observation remains true today system of representative government . 51 with regard to the congressional cam- The question now remaining is whether paign-financing system. As former that public consensus can be translated Watergate special prosecutor and cur- into congressional action. rent Common Cause chairman Archi- No solution that may be adopted will bald Cox has observed, inaction has be final and perfect. We will always need resulted in &dquo;a Congress still more deeply to reevaluate and adjust any campaign trapped in the stranglehold of special finance system. The presidential public interests which threatens to paralyze the financing system demonstrates the need process of democratic government.’,50 for periodic adjustments. But more impor- Congress needs to complete the reforms tant, the experience of presidential begun in the wake of Watergate by public financing shows us that funda- fundamentally transforming its own mental improvement in our campaign campaign-financing system and by mak- finance laws is indeed attainable. ing other adjustments needed to preserve We can and must have a better system the integrity of presidential public finan- for financing congressional campaigns. cing, campaign reporting requirements, Representative government is at stake. and limitations on contributions by individuals and PACs. 51. A May 1984 Harris survey, for example, A consensus has been reached in this found that "a 70-20 percent majority of all likely voters across the country that PACs are inimical to our country feels that candidates for federal office should refuse to accept PAC funds." 50. Archibald Cox, Address before the Com- Louis Harris, "PACs: Good or Bad Influence," monwealth Club of California, San Francisco, Harris Survey, 31 May 1984. CA, 7 Jan. 1981.