Campaign Reform’s Real Losers

Political Consultants vs. McCain-Feingold

Not since Elvis Presley went to the White House to enlist in Richard Nixon’s war on drugs has a Washington event inspired as much cynicism as the passage of campaign-finance reform.

This unusual victory for the forces of good government has triggered a search for loopholes akin to a billionaire’s children scrutinizing their father’s will on the discovery that he bequeathed his entire fortune to a 19-year-old exotic dancer. The prevailing mood in Washington was symbolized by this headline in the Hotline, the online political tip sheet: “CAMPAIGN FINANCE REFORM: FORGET THE VOTE—FOCUS ON THE LOOPHOLES!” A Nexis search linking the words “campaign,” “reform,” and “unintended” (as in consequences) yielded 242 hits over the last three months.

What’s going on here? Sure, it’s easy to ridicule the politicians who made sure that the new law banning soft money would not take effect until after this year’s free-spending congressional campaigns. This legislative ploy brings to mind Saint Augustine’s famous plea to God: “Give me chastity and continence, but just not now.” And, yes, the earnest rhetoric of campaign reformers can become cloying.

But there’s another factor driving all the Beltway cynicism about McCain-Feingold: the likelihood that it will cost campaign consultants a bundle. Every political reporter’s Blackberry is ripe with the names of a bipartisan roster of ad makers, strategists, and pollsters. These hired guns are our treasured sources—colorful talkers, adroit theorists, and plugged-in gossip mongers who know that their credibility depends on not telling too many the-Democrats-will-carry-Idaho whoppers. Normally, Democratic and Republican consultants disagree. But when it comes to McCain-Feingold, an overwhelmingly bipartisan majority scorns reform.

The reason for this chorus of ridicule is simple: naked self-interest. During the long legislative battle over soft money, the campaign industry behaved like any aggrieved interest group, spreading exaggerated horror stories about how reform would destroy the pristine purity of modern politics. What they really feared was a drop in income from the likely reduction in political spending. But such mercenary motives were totally ignored by political reporters who avidly charted similar machinations by the auto industry to derail fuel-efficiency standards.

Part of the problem is ignorance. While Washington is one vast methadone clinic for political junkies eager to handicap the South Dakota Senate race, few of these addicts grasp the basic economics of the campaign industry. The naive assumption is that consultants simply bill campaigns for services rendered. Pollsters do tend to follow this fee-for-service model, which is why some of them take on upwards of 50 clients in a single election cycle. But the big bucks in politics have nothing to do with monthly retainers.

Now for the dirty little secret of the campaign industry: Media consultants take as vigorish a percentage of the overall TV buy. This ad-placement fee, a billing gimmick borrowed from Madison Avenue, was traditionally 15 percent; these days in big-ticket races, it can be negotiated down to about 7 percent. What this means is that consultants have a vested economic interest in fostering expensive campaigns built around dueling TV ad wars. As political spending has soared thanks to the soft-money loophole, media consultants have made out like … well … selfless professionals devoted to the common good.

Political reporters, who meticulously study FEC fund-raising reports as if they were the Racing Form, are notoriously incurious about the swag earned by these humble toilers in the political vineyards. It violates journalistic etiquette to press the consultants who are your best sources about what they earn. The only in-depth look at the finances of Politics Inc., was a laudable Washington Post series by Susan Glasser two years ago. It was not surprising that Glasser only turned to this nettlesome topic as her swan song before leaving the political beat.

Granted, there is a dim awareness of the connection between avarice and political consulting. There were knowing chuckles among insiders when Democratic admaker Bob Shrum helped Jon Corzine spend $63 million in 2000 to snag a New Jersey Senate seat. But the details of Shrum’s financial arrangements, like those of every consultant, cannot be divined from FEC spending reports. There is one exception to this long-standing don’t-ask-don’t-tell policy. After another self-funded Shrum client, businessman Al “I Wasted $40 Million” Checchi, finished an embarrassing third in the 1998 California gubernatorial primary, he permitted the release of his contract (later renegotiated) with his media team. On the first $20 million that Checchi squandered on TV spots, Shrum (and pollster Mark Penn) were initially slated to earn $2.8 million.

Virtually the only person to blow the whistle on this whole unseemly business was Dick Morris, who pioneered buckraking from the soft-money loophole during the 1996 Clinton re-election campaign. Writing in The Hill in February, Morris asked, “So why is the GOP so worried about the impact of campaign finance reform? Because its consultants have sold it a bill of goods. They have all figured out that their 15 percent commissions on their candidate media buys will be larger the more a candidate spends.” The same goes for Democrats, of course.

What about the hypothesis that campaign reform won’t really reduce money in politics, it will just redirect it to subterranean activities? Granted, consultants may have misjudged their economic self-interest. But it’s going to be hard for them to make up a $500 million soft-money gap (a figure certain to be surpassed this year). A lot of big donors will give $50,000 to say they had dinner with Tom Daschle the other night at a Park Avenue fund-raiser. These donors aren’t all going to be looking for ways to squeeze the same money through a loophole, especially since big-name senators will no longer be permitted to wheedle megabucks from high rollers. Even if passage of McCain-Feingold merely slows the rate of increase in political spending, the overwhelming likelihood is that your typical media consultant may have to delay the addition to his waterfront vacation home.

Sure, a little cynicism is appropriate after passage of campaign finance reform. But it should be applied to campaign consultants and their seldom-chronicled role in the money-grubbing culture of Washington.