Endless Loopholes

Weeks before Sen. Trent Lott buried the McCain-Feingold campaign-finance reform bill in parliamentary procedure, the Washington establishment of political parties, candidates, advocacy groups, and campaign-finance lawyers were already figuring out how to peck the law to death if it passed.

And peck they would have. At first glance, McCain-Feingold seemed the perfect antidote to the recent fund-raising scandals at the White House and the national party committees. But McCain-Feingold’s nobly conceived ban on soft-money contributions (funds designated by the party for nonfederal use, including party building and state-election activity) and its restrictions on issue advertisements would have changed little.

Currently, election law permits national party committees such as the Democratic National Committee and the Republican National Committee to accept unlimited soft-money contributions and redirect them. But McCain-Feingold’s prohibitions on soft money would have merely moved the fund-raising action to the states, because the bill does not regulate state party committees. The Democrats and Republicans have state party committees in every state. Created as separate entities from their national counterparts, they are in large part regulated by state law. Generally, state law is more permissive than federal law. For example, more than half the states allow corporate contributions and labor contributions, while federal law prohibits such contributions. Many states have no limits on the amount that may be contributed. Usually, a national party committee does not use its soft money to directly support state or local candidates. Instead, a national party committee transfers those funds to state party committees, which in turn support state candidates.

To evade McCain-Feingold’s soft-money ban, contributors would cut out the middleman and make their donations directly to the state party committee. Although McCain-Feingold prohibits a national party committee from “directing” soft-money contributions to others, it does not prohibit national and state committees from coordinating in other ways. For example, a national party committee could still coordinate the fund-raising efforts of the various state parties and exchange information, as long as it did not solicit or direct contributions to those state parties.

M cCain-Feingold also does not prohibit one state party from coordinating and directing contributions with others. Because the law doesn’t require state party committees to be located within their respective states, they might well open offices in Washington, D.C., to coordinate fund-raising efforts. Imagine a scenario where the Republicans’ state party committees set up a single office representing all of the Republican state party committees, rent space from the RNC, and hire their own fund-raisers. I’m sure this idea has already dawned on the state party committees. If McCain-Feingold passed, the party committees could conduct business as usual with the slight inconvenience of rearranging lease agreements and adjusting the names on their payrolls.

Under current federal election law, expenditures on issue-related speech–that is, ads that don’t expressly advocate the election or defeat of a candidate by using words such as “vote for,” “elect,” or “defeat”–are exempt from the prohibition on corporate contributions and the limits on individual contributions. (The exemption does not apply if the person behind the ad coordinated it with a campaign.) An ad that identifies a candidate and discusses his voting record on an issue is not subject to election-law prohibitions and limits unless words of express advocacy are used.

McCain-Feingold would ban all such issue-related ads that air 60 days prior to an election and clearly identify or depict a candidate. But any politician worth his salt could evade this restriction. First, he’d create and air all of his issue advertisements outside the 60-day period. Second, he’d be creative about the contents of the ads he broadcast inside the 60-day period. McCain-Feingold does not ban ads inside the 60-day period that discuss important issues in an election without identifying a candidate. Once again, it’s easy to imagine party committees and advocacy groups making inventive and persuasive ads that don’t depict or refer to a candidate, but strike the same themes as the campaign’s ads established outside the 60-day period.

Ultimately, campaign-finance laws only inconvenience campaigns as the lawyers figure out how to circumvent them and the courts dismantle them as threats to First Amendment rights to free speech. The heap of rules and prohibitions that survive these challenges are subject to the law of unintended consequences, usually causing an effect that is the opposite of the original intention.

“Money is like water,” said former Clinton aide Harold Ickes about campaign finance in a recent New York Times Magazine profile. “If there is a crack water will find it. Same way with political money.”