CAMPAIGN FINANCE INSTITUTE CAMPAIGN FINANCE REFORM FORUM FRIDAY, JANUARY 14, 2005 NATIONAL PRESS CLUB WASHINGTON, D.C. PANEL TWO PARTICIPANTS: ELLEN MALCOLM, FOUNDER AND PRESIDENT, EMILY’S LIST MICHAEL J. MALBIN, EXECUTIVE DIRECTOR, CAMPAIGN FINANCE INSTITUTE STEPHEN WEISSMAN, ASSOCIATE DIRECTOR, CAMPAIGN FINANCE INSTITUTE, POLICY MIKE RUSSELL SENIOR VICE PRESIDENT, CREATIVE RESPONSE CONCEPTS Transcript by: Federal News Service Washington, D.C. MICHAEL MALBIN: Please take your seats again. The second panel today will be about the effects of BCRA on interest groups and advocacy organizations. That section of the book will include a chapter by Clyde Wilcox from Georgetown University that will trace former soft money donors to see whether their funds have reentered the system. And just to let you know -- because this relates to a comment that was made during the past session -- the data have not been completely analyzed but seem to be showing that many of the soft money donors did not participate this time. We’ll report those complete results as they become available. Other chapters will look at the effects of BCRA on ongoing interest groups and advocacy organizations, which can operate politically through a large number of forms. For example, they can form a federal political action committee, or PAC; they can encourage members to contribute as individuals to candidates; they can contribute money from their corporate treasuries to a political party’s – they can still contribute money from the treasury to a political party’s convention committee or to an inaugural committee; they can contribute to a nonprofit issue advocacy organization or trade association that, for tax buffs, would be one that is organized under 501(c)(4), (5), or (6) under the Internal Revenue Code, or they can support a kind of political committee that has become known as a 527 committee, named after that section of the Internal Revenue Code for political committees. Now, the 527 section of the Internal Revenue Code governs all political committees including candidate committees and political action committees, but of course when we speak about that in the common parlance, we are referring to ones that are "other" committees: a non-party, non-candidate, non-political action committee. These are ones that received the most publicity during this election season. As you know, or as many of you know, the Federal Election Commission has been considering how to regulate 527 committees, and its approach has provoked controversy. There is also a proposal before Congress to regulate the 527 committees more rigorously than the FEC has done so far. The paper we are about to hear by Steve Weissman and Ruth Hassan is not about the details of the proposed regulations; it’s not about precisely how these things ought to be regulated. And in fact, the Campaign Finance Institute did not testify on that question and has not taken a position on those kinds of questions. Rather what the paper does is to take a close look not at the legal disputes but at the realities of 527 fundraising in 2004 to see how these have changed since 2002. The point is to add a crucial empirical dimension to any future discussions about policy. The paper will be presented by Steve Weissman. Steve is the associate director for policy at the Campaign Finance Institute. Before arriving at the institute he was a legislative representative for Public Citizen’s Congress Watch, specializing in campaign finance reform. And he is also the author of a book, “A Culture of Deference: Congress’s Failure of Leadership in Foreign Policy” that grows out of his work both as a person who taught political science before he came to Capitol Hill and had a long career on Capitol Hill in international relations committees. Our co-author, Ruth Hassan is also here today. Ruth is a graduate student [at George Washington University] and a research assistant at CFI. Steve will be followed by Ellen Malcolm, who is on my right, who is the president of America Coming Together, which ran a national voter mobilization campaign. She is one of the founders of the Joint Victory Campaign, which raised money for ACT and for the Media Fund. She is best known, or perhaps after this year equally- known but before that best-known, as the founder and president of EMILY’s List, which stands for Early Money is Like Yeast. That’s a political network for pro-choice Democratic women that raises early money for women Democratic candidates. She will be followed by Mike Russell. Mike is the senior vice president of Creative Response Concepts, which is a public relations firm. He manages both corporate and political clients and developed strategies on earned media campaigns for such organizations as the Swift Boat Veterans for Truth, Progress for America, and the Pharmaceutical Researchers and Manufacturers Association, or Pharma. Prior to joining Creative Response, he was communication director of the National Republican Senatorial Committee and then before that was a journalist. And so we’ll start with Steve Weissman. STEVE WEISSMAN: Thank you, Michael. As Michael indicated, there is a large political controversy about what to do about the section 527 groups. In principle, you have really two sides to the issue. The first side says, look, these groups are a way to get around the soft money ban of BCRA; they are a way that people are corralling large contributions, and this is going to corrupt politics again; we have to regulate them. On the other hand, many people say, look, these 527s are not regulated tightly because they are not giving any money to candidates; they are just spending on their own. And this really enriches the public debate if, as some – as one tax attorney once said, causes can have angels. Well, we have rich people helping enrich the debate on both sides. And what I’m hoping to do here, in giving you the results of our studies, is to give you some real-world analysis that might help refine that debate – refine those questions so that we can apply those principles to practical reality. In brief, let me just throw at you the conclusions of this analysis and then I’ll go over them in detail. We found through a painstaking examination of 527s active in federal elections that most of the soft money banned by BCRA was not replaced by 527 money in 2004. We found that there are two different kinds of 527s. One kind, represented very well by EMILY’s List, for example, or the National Association of Realtors, has been active over the cycles since there were 527s, which is not very long but they were active in 2002 and 2004. They tend to have a different character than some of the groups that – and I’ll explain that – that came out in 2004 only. With regard to the issue that was raised in the last panel about the relationship of parties to 527s, we found that existed with a group of 527s – a very large group of 527s, but we didn’t find illegal coordination with the parties. Nothing illegal was done; no laws were broken. But we did find that the parties, through their leading paid consultants, through former President Clinton, through official statements and winks and nods by the campaigns – by the parties and the Bush campaign, that they facilitated not only the creation in some respects, but the fundraising of the 527s. This is something I’ll also go into. In terms of who is giving the money to these 527s, we found that unions are more important than a lot of people have considered, but that individuals provided most of the money for the 527s and the business community was very recalcitrant. Finally, in terms of the donors to the 527s, we found that the thing that is most striking in 2004 is that the 527s benefited from the willingness of donors to give more across the board, whether it was labor, whether it was business, whether it was individual people, who just are not George Soros, who gave $24 million, but someone who gave $100,000. The number of people who gave $100,000 to a 527 went from 66 in 2002 to 265 in 2004. And so the donors have changed, and I’ll lay that out a little more. Finally, one question that has intrigued people is, well, are these the soft money donors -- even as individuals, even if it’s not companies -- that are turning now and saying, okay, we can’t give to parties; let’s give to 527 organizations because we can give as much as we want to such groups? And we found that while it’s true that most of the large donors in 2004 and even in 2002 were party soft money donors, the striking thing is how they, like everybody else – they were willing to give so much more to the 527s in 2004 than they ever gave to political parties. In fact, the 73 former soft money donors in 2004 who helped provide $157 million to the 527s had given only $50 million to the parties. If you combined what they gave parties in 2000, what they gave in 2002, and if you threw in the few million they gave to the 527s in 2002, altogether there is only something like one-third of what they were willing to part with in 2004 for 527s. So what you’re looking at here is, to the extent that there has been any transfer of money, you’re also looking at the fact that these donors got a lot more willing to give big bucks in 2004 than they had ever been before.