Harder Than Soft Money

A
fter years of reformer hand-wringing, legislative efforts on Capitol Hill, and erratic enforcement by the Federal Election Commission (FEC), campaign finance law remains riddled with loopholes. Everyone knows the most notorious loophole: Starting at a trickle about a decade ago ($12 million in 1984) and building to flood crest in 1996 (with $262 million flowing into the coffers of the two parties), the river of "soft" money has become the most obvious target of campaign finance reform. Although the law prohibits corporations, banks, and labor unions from contributing money to candidates (except via strictly regulated political action committees, or PACs) and prevents them from making independent expenditures on behalf of a candidate's election, nothing prevents them from giving vast sums to the parties. So, starting in the 1980s, they did give money. Lots of it. And while the majority of soft money flows from businesses and wealthy individuals to the Republican Party, the Democratic Party valiantly competes, pocketing dollars from business and labor. Both parties unabashedly use these funds to support their candidates in House and Senate contests.

But while soft money remains the best-known systemic money-in-politics problem, it is not the most insoluble. Despite the continued growth of soft money, the most alarming development of the 1996 election was the emergence of another, and potentially far more devastating trend: the explosion of "issue advocacy" advertising. Individuals and independent groups with a favorite political issue may legally spend money on commercials, voter guides, and direct mail that generates public support for their cause. The money these groups spend—unlike soft money—does not have to be reported to the FEC. And, again unlike soft money, issue advocacy spending does not flow through the political parties at all, but can be fired with pinpoint accuracy at selected House and Senate campaigns. Barely disguised as attempts to put "issues" before the public eye, most issue advocacy outlays in 1996 were de facto campaign contributions.

In the past, campaign-related issue advocacy was the preserve of a handful of ideological and single-issue groups on both the left and the right concerned with subjects like gun control, abortion, and other hot-button topics. But in the 1990s, issue advocates began spending to elect or defeat congressmen and in 1995-96 the AFL-CIO launched a $35 million advertising campaign targeting key congressional races. A similar game was played by both political parties, a coalition of business groups, environmental organizations, and others. As much as $100 million poured into issue advocacy campaigns, much of it concentrated on a few dozen congressional elections where Republican freshmen elected during the Gingrich revolution were thought to be vulnerable. Should Congress ever outlaw soft-money donations to parties, that money would simply flow into elections via issue advocacy groups.

T
he explosion of issue advocacy spending was a watershed in American politics. As special interests poured millions of dollars into hotly contested House races, the issue advocacy money often overwhelmed the amounts spent on campaign advertising by the candidates themselves. Stunned incumbents and challengers watched as voters were inundated by slick, 30-second spots that slammed one or the other candidate. Some of these ads were sponsored by well-known groups; others, however, were paid for by ad hoc organizations that no one had ever heard of.

The precedent set in 1996 means that in 1998, and even more in the presidential election of 2000, independent groups are likely to dramatically expand their use of issue advocacy ads, hardly bothering to distinguish them from the more strictly regulated "independent expenditures," which explicitly call for the election or defeat of a particular candidate. The prospect worries regulators, whose dwindling authority was further diminished in October, when the U.S. Supreme Court let stand a lower-court ruling (Maine Right to Life Committee v. FEC) that had overturned the FEC's regulations aimed at the kind of issue ads that proliferated last year. "The whole system of campaign finance regulation is very, very close to unraveling," says an FEC official. Issue advocacy "is the 800-pound gorilla of campaign finance," says Don Simon, general counsel for Common Cause. "This is a problem that threatens to overwhelm all regulation of money in politics, because it provides an avenue for complete evasion of the rules. And unless there is a solution to this it's going to be difficult to have any meaningful regulation of money in the political process."

The debate over issue advocacy has bitterly divided reformers. To the American Civil Liberties Union, any attempt whatsoever to bar, restrict, or regulate issue advocacy, even when it is aimed at swaying the vote just days before an election, is an infringement of free speech. "It's not a question of good reform versus the First Amendment," says Ira Glasser of the ACLU. "It's bad reform. We are unalterably opposed to that, and I don't think there is any way to do it. You can't draw those lines." So far, most court decisions, including the landmark 1976 Buckley v. Valeo, agree [see Alan B. Morrison, "Watch What You Wish For"]. Yet some legal scholars, campaign finance reform advocates, the FEC, and congressional sponsors of reform legislation say that the tricky question of how to regulate certain types of election-related speech can be resolved in a way that would render illegal most of the ads that ran last year, without violating the First Amendment. "You've got to have some dividing line," says E. Joshua Rosenkranz of the Brennan Center for Justice at the New York University School of Law. "The question is, where do you draw the line between electioneering and all other speech? I consider this the single knottiest legal issue in campaign finance reform."



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What Is Issue Advocacy?

Under the current campaign finance rules, corporations and labor unions are prohibited from certain types of election spending. Neither unions nor businesses and banks may contribute to election campaigns, directly or indirectly; these restrictions have been consistently upheld as constitutional by the courts. (The ban on corporate contributions goes back to the early part of this century, and the strictures against labor unions date to the 1940s.) To allow corporate executives and labor union members to participate in the political process, in the 1970s the Federal Election Campaign Act and the amendments to it created PACs, yet limited both the amount an individual could contribute to a PAC and the amount that a PAC could contribute to a campaign. In Buckley v. Valeo the U.S. Supreme Court upheld contribution limits but struck down parallel provisions limiting campaign expenditures by candidates. The result is the present, unsatisfactory system that allows a wealthy candidate to spend an unlimited sum of his own money on his campaign but prohibits rich donors from giving like amounts to a candidate who happens not to be wealthy himself. It also means that candidates of modest means are forced to scramble for special-interest PAC money in $5,000 or $10,000 chunks, demeaning themselves and American democracy in the process.

There are ways of getting around these limits, of course. Under the independent expenditure doctrine, individuals, PACs, and other groups are allowed to spend money on advertising and election-related speech that directly calls for the election or defeat of a candidate. Such spending, however, cannot be coordinated with any candidate, and the exact dollar amount spent on independent expenditures must be reported in a timely fashion to the FEC. As long as those rules are obeyed, groups engaging in independent expenditures can spend unlimited sums on behalf of one or more candidates. Under FEC rules derived from language in the Buckley decision, this is called "express advocacy," since it expressly advocates on behalf of a clearly identified candidate. But here, again, corporations and unions are prohibited by the FEC from spending money. While a wealthy individual or a nonprofit group like the National Rifle Association can spend hundreds of thousands of dollars on independent expenditures in a single House race, saying "Vote for Jones" or "Defeat Smith," General Motors or the Teamsters cannot spend a penny, except via the limited and difficult-to-come-by "hard dollars" in their PACs.

This is why issue advocacy was such a discovery for unions, corporations, and PACs. To qualify as issue advocacy, an advertisement, publication, or mailing must refrain from explicitly calling for the election or defeat of a candidate; instead, it is a communication designed to bring an idea or issue to the public's attention. Anyone—including corporations and unions—with a few bucks to spend can promote a cause, support or oppose a point of view, criticize the President or a member of Congress, or just let off steam. In its purest form, issue advocacy is free speech. Yet in recent years, with a wink and a nod, various groups began to use issue advocacy as a way around the FEC. Though avoiding explicit calls to elect or defeat a candidate, groups engaging in issue advocacy ran advertising campaigns lambasting a particular candidate with the clear and unambiguous intention of affecting the outcome of an election. No rational observer regards this as anything other than a subterfuge. And issue ads are paid for with cash from corporate, union, and personal treasuries, utterly free of any restriction on where the money comes from and where it goes.

Furthermore, the FEC has practically no ability to enforce the distinction between issue advocacy and express advocacy. Issue ads don't have to be reported to anyone, and the FEC does not monitor them to see whether or not they run afoul of election laws. Investigations can only start after the fact, when a complaint is filed with the FEC. Then at each step in an investigation—which can be interminably delayed by clever lawyers on the other side who simply refuse to cooperate—the FEC has to muster four votes among its highly political, party-split cast of commissioners. "It is a system built on voluntary compliance," says an FEC official. "But this time, compliance went out the window, and they just said, 'Screw it.' "



Issue Advocacy in Action

Representative Walter Capps, who died suddenly of a heart attack in October, was a Democrat from California's sun-drenched twenty-second district that includes Santa Barbara and San Luis Obisbo. In 1996, he was elected with the help of issue advocacy. At least, that's what Andrea Seastrand, the Republican freshman who lost to Capps, believes. "It was a fire hose on us," says Seastrand, still shaken by the third-party effort against her last year. "It was a constant barrage, from April 1995 to November 1996. People did not vote for Walter Capps. They voted against Andrea Seastrand. The ads were decisive."

A number of factors—her status as a freshman; her votes on issues like the environment, gun control, and the minimum wage; the widespread belief among
campaign analysts that her seat was vulnerable—made Seastrand a leading target of issue advocacy advertising by a wide range of organizations. Among those advertising in her district were the AFL-CIO, the Sierra Club, Handgun Control, NARAL, the National Education Association, Citizen Action, and the League of Conservation Voters. Late in the game, business groups, the California GOP, and the National Republican Campaign Committee ran issue advocacy ads defending Seastrand—but in vain. In all, at least $1 million was spent by Seastrand's opponents, and perhaps much more.

"People poured millions and millions of dollars into our district, where media is very inexpensive. It was so much that local candidates
could not find any room to buy their own ads. All the space was sold, and the broadcasters raised the price. Even businesses that wanted to advertise said nothing was available!" says Seastrand, who lost by 4 percent, or about 10,000 votes.

For her race, Seastrand raised $1.2 million; Capps raised $970,000. The ads criticizing Seastrand—while carefully avoiding any "express advocacy"—crimped
her ability to control the campaign agenda or even to get her own message out. Kay Reiboldt, Seastrand's campaign manager, tracked the ads as far as possible, and she says that the total spent in the oceanside district could have been as high as $4 million. Still shell-shocked by the attacks, Reiboldt says, "It was unreal. It was coming so fast and furious. And when one group wasn't up, the other one was. Don't tell me that it wasn't coordinated." Reiboldt remembers a sequence in which the NEA ran commercials attacking Seastrand on education issues, then the AFL-CIO ran similar, education-oriented ads in the form of a televised "voter guide" on education, and finally Hillary Clinton delivered a speech on education at Santa Barbara Community College. "And all that happened by accident?" asks Reiboldt.

The Capps campaign, its modest budget suddenly augmented by a vast pool of supportive resources, watched the televised fireworks with a
mixture of trepidation and pleasure. "Anytime money is being spent out of your control, it makes you nervous," says Cathy Duvall, field director for the Capps campaign in 1996. "And nobody had expertise running a campaign in that kind of atmosphere." But she says that the issues raised by the advertising barrage precisely correlated with the issues Capps wanted to raise anyway. "What the issue ads did is help set the agenda for what the campaign was going to be talking about," she says. "It was not distracting from our message."

O

f course, it is not just Republicans who are targeted by issue advocacy campaigns. For instance, Triad Management funneled $3 million from conservative donors to televised issue advertising on behalf of select Republican candidates. In 1996, as in previous years, the Christian Coalition spent millions of dollars on voter guides supporting issues that favored Republican candidates. In all, according to the Annenberg Public Policy Center, at least 25 separate groups conducted issue advocacy advertising campaigns in 54 separate House and Senate races in 1996, and that is probably only the tip of the iceberg. The center also found that in 1996, issue advocacy generally involved strongly negative, attack-oriented ads, usually not related to specific pieces of legislation, and with little or no documentation of claims made. Nearly 90 percent of the ads they studied mentioned public officials or candidates by name, and more than half contained visual images of candidates. Typically, advertisers ran "cookie-cutter" ads, containing identical words and images, changing only the name and photograph of the candidate being pilloried to fit the voting district. For instance, Handgun Control, Inc., aired radio ads reading:

Our Congressman, [Name], voted to repeal the ban on semiautomatic assault weapons. Can you believe it? [Name's] vote would put military style weapons back in the hands of violent criminals! Call . . .

Paul Taylor of the Free TV for Straight Talk Coalition, who is researching issue advocacy in conjunction with the League of Women Voters Education Fund, estimates that at least $50 million and perhaps as much as $100 million was spent in 1995-96 by two or three dozen groups. But tracking down the ads, and their sponsors, is not easy work. "You can easily fly beneath the various radar screens in doing issue advocacy," says Taylor. A Washington Post study of the race between freshman Representative Phil English and Democratic challenger Ron DiNicola in Pennsylvania's twenty-first district used FEC reports, local television station records, and interviews with advertisers to estimate that at least $1.4 million was poured into the race, eclipsing by more than two-thirds the $833,000 spent on advertising by the two candidates. But other media reports, in the heat of the campaign season, were frustrated by the lack of disclosure and accountability, especially when advertising was sponsored by previously unknown groups like Citizens for the Republic Education Fund or the Coalition for Americans Working for Families.

C
onsultants and campaign strategists have learned the lessons of 1996, and they are preparing an intensified onslaught of issue advocacy advertising in 1998. Unlike independent expenditures, which by definition may not be coordinated with candidates, there is no rule that prohibits a candidate from encouraging well-heeled supporters to give thousands of dollars to an "issue committee" governed by the candidate's friends and backers. That committee, in turn, without having to disclose its donors or report its expenditures to the FEC, could run unlimited advertising on behalf of the candidate, taking pains only to thinly disguise it as issue advocacy. "The AFL-CIO beyond any question has opened Pandora's box," says Norman Ornstein of the American Enterprise Institute. "All of a sudden consultants, groups, and the parties came to realize that they have a wonderful new weapon in their arsenal. And they're mobilizing."


Issue Advocacy and the Law

The Supreme Court has already taken one look at efforts to restrict issue advocacy, and didn't like what it saw. The 1976 Buckley v. Valeo decision held that political candidates and issues are so inextricably tied together that it is impossible to limit political speech, including advertising, that mentions candidates in the context of expressing views about issues. Only communications that "in express terms advocate the election or defeat of a clearly identified candidate" are subject to FEC regulation, the Court said. In a footnote, the Court helpfully provided a list of words that would signal express advocacy: vote for, elect, support, cast your ballot for, "Smith for Congress," vote against, defeat, reject. This is the rock on which all efforts to restrict issue advocacy have foundered so far.

Except one. In 1987, the Ninth Circuit Court of Appeals in California issued the lone court ruling that provides a legal basis for restricting issue advocacy, in FEC v. Furgatch. The case was generated by an advertisement critical of President Jimmy Carter placed in the New York Times and the Boston Globe by a wealthy individual one week before the 1980 election. Its text read, in part:

DON'T LET HIM DO IT.



The President of the United States continues degrading the electoral process and lessening the prestige of the office. . . . If he succeeds the country will be burdened with four more years of incoherences, ineptness and illusion. . . .


DON'T LET HIM DO IT.

The FEC claimed that "don't let him do it" is the equivalent of "defeat," when read in the context of the ad on the eve of the election. The court agreed, ruling that a "test requiring the magic words 'elect,' 'support,' etc. or their nearly perfect synonyms for a finding of express advocacy would preserve the First Amendment right of unfettered expression only at the expense of eviscerating the Federal Election Campaign Act." Instead, the Furgatch court said that speech was express advocacy, and thus could be regulated by the FEC, as long as the words, "when read as a whole, and with limited reference to external events, be susceptible of no other reasonable interpretation but as an exhortation to vote for or against a specific candidate."

In 1995, armed with Furgatch, the FEC added a new regulation expanding the definition of express advocacy to include certain ads that now escape scrutiny under the guise of issue advocacy. Under that regulation, a communication is express advocacy if,

when taken as a whole and with limited reference to external events, such as the proximity to the election, [it] could only be interpreted by a reasonable person as containing advocacy of the election or defeat of one or more clearly identified candidates because (1) the electoral portion of the communication is unmistakable, unambiguous, and suggestive of only one meaning; and (2) reasonable minds could not differ as to whether it encourages actions to elect or defeat one or more clearly identified candidates or encourages some other kind of action.

The FEC was immediately sued by the Maine Right to Life Committee (MRLC). Five years before, the FEC had lost another battle with MRLC, in an important case called Faucher v. FEC. In that case, in 1991, the First Circuit Court of Appeals said, "In our view, trying to discern when issue advocacy crosses the threshold and becomes express advocacy invites just the sort of constitutional questions the Court sought to avoid in adopting the bright-line express advocacy test in Buckley." That decision—and several others before and since—directly contravened the Furgatch opinion. Thus it was no surprise when the district court and then the appeals court in the First Circuit ruled that the 1995 FEC regulation would "chill" free speech. "What the Supreme Court did," said the First Circuit, "was draw a bright line that may err on the side of permitting things that affect the election process, but at all costs avoids restricting, in any way, discussion of public issues."

In May, the FEC appealed this decision to the Supreme Court. In its petition to the Court, the FEC quite frankly laid out the stakes in MRLC v. FEC: "If left unreviewed, the decision below would open the door for corporations, unions and others in the First Circuit to influence federal elections by spending large amounts of money in independent advertisements that unambiguously attacked clearly identified candidates, while carefully avoiding the terms listed as examples in Buckley." The Court declined in October to hear the case; thus the door to corporations and unions in the First Circuit is now open.

The FEC's defeat in MRLC v. FEC is only the latest in a nearly unbroken—Furgatch was the lone victory—string of court losses in its attempts to define issue advocacy more strictly. In 1986, in a case called FEC v. Massachusetts Citizens for Life, the Supreme Court opened the door to unbridled corporate and labor spending on issue advocacy, ruling that the prohibition on corporate and labor funds being used in independent expenditures only applies when their communications expressly advocate the election or defeat of a candidate. In lower courts, actions in FEC v. National Organization for Women (1989) and FEC v. Survival Education Fund (1995) knocked down FEC enforcement efforts. These losses added weight to a growing body of court opinion that stymied the commission.

The FEC's most devastating court defeat, however, came in the Fourth Circuit (Virginia) in 1996, in FEC v. Christian Action Network, a case involving a 1992 commercial portraying Clinton as a supporter of radical gay and lesbian activists and "special rights for homosexuals." Over images distorted to give Clinton what the court called a "sinister and threatening appearance," alongside images from gay rights demonstrations, the narrator asked: "Is this your vision of a better America?" The FEC sued the ad's sponsor, the Christian Action Network, claiming that the images, not the words, constituted express advocacy. In essence, the FEC argued, the negative images in the ad were the equivalent of urging the defeat of Clinton. However, in a stinging rebuff to the FEC, Judge Luttig of the Fourth Circuit Court of Appeals accused the FEC of not learning from "its string of losses in cases between the FEC and issue advocacy groups." Claiming that the FEC should have known that the case was a nonstarter, the court said, "There is no doubt that the Commission understands that its position that no words of advocacy are required in order to support its jurisdiction runs directly counter to Supreme Court precedent." To hammer home its point, the court ordered the commission to pay court fees and costs for the Christian Action Network, implying that the FEC had abused its authority by bringing the case. Says Trevor Potter, an attorney and former FEC commissioner, "That's the strongest statement by a court that if it doesn't contain a magic word, you can forget it."

S
till, a growing number of activists and legal scholars believe that it is possible to construct language that will widen the definition of express advocacy beyond the so-called "magic words" yet survive challenges on First Amendment grounds.

One strategy, adopted by the FEC, creates a standard that would subject advertising and other communications to what is essentially a discretionary test—whether or not a "reasonable" person would ascribe electioneering purposes to a particular commercial. (That is not unlike certain legal standards that apply to pornography.) Yet even among supporters of campaign finance reform, few believe that the FEC's standard will survive Supreme Court review.

Another strategy adopts the "bright line" test. Rather than leaving the decision up to the discretion of some mythical reasonable person, the definition of express advocacy would be expanded to include advertising and other communications that appear within a certain time frame—say, 60 days before an election—and carry the name or image of a particular candidate. Then, any commercial that meets those criteria would simply be defined as electioneering and fall under the FEC's purview. But this definition is considered too arbitrary and too broad to pass muster under the First Amendment.

This leaves a hybrid approach, combining elements of both strategies. According to Alan Morrison of Public Citizen, a provision might pass the Supreme Court's litmus test if it applied only within specific temporal limits; if it applied only to spending in excess of some fairly large dollar amount; if it applied only to communications that mention a specific candidate's name; if it included the reasonable-person standard; and if it avoided levying criminal penalties for violations. The Brennan Center's Josh Rosenkranz makes a similar argument:

It ends up being extraordinarily important where you draw the line. If you define the concept too broadly, you could end up restricting speech on issues of public importance that happens to have an impact on elections. And that is a result that I fully acknowledge is antithetical to the First Amendment, is dangerous, and ought to be avoided. But if you define it too narrowly, you might as well not have campaign finance laws at all.

"I would create a standard that is so protective that you allow anything that's even close to the line to escape it," says Rosenkranz, who argues that the standard must include a provision that says that the predominant purpose of the speech must be intended to influence the election for it to be considered electioneering.

But this is precisely the slippery slope that the ACLU, for example, would prefer to avoid. "It's during an election campaign that people are paying attention to issues!" says Ira Glasser. "So when you have people's attention is when you most want to speak. Yet they suggest that groups like ours and people who are trying to influence public policy ought to have less right to speak during an election year. Once you start down that road, you unravel the whole thing. There's no way to stop that ball from rolling." Glasser says that by allowing the FEC and the courts to use their discretion about what qualifies as electioneering, and what doesn't, the provision will be applied unevenly against progressives. Comparing the notion to the use of poison gas, which often wafts back against those who release it, Glasser says: "The left will be the major victim. That's how power works in this country."


A Congressional Solution After All?

While most courts have agreed with the ACLU, some reform advocates believe that an act of Congress would carry weight with the Supreme Court. Were Congress to pass legislation that specifically defined express advocacy to include more than just the "magic words," it would be tougher for the Court to knock down than a mere FEC regulation, like the one that was challenged in Maine Right to Life Committee v. FEC. A broader definition of this sort is contained in the bipartisan McCain-Feingold proposal. And even though the chances of this bill's becoming law appear small, parts of it—including the section on issue advocacy—could be acted on separately.

Many members of Congress were unnerved by the proliferation of issue advertising in 1996. "It's a frightening prospect to incumbents," says Paul Taylor, especially for those who narrowly escaped the AFL-CIO's onslaught. But those same conservatives in Congress are under heavy fire from right-wing activist groups like the National Rifle Association, the Christian Coalition, and anti-abortion groups, who will join with the ACLU to fight to the death any movement to limit issue advocacy.

It's always safe to bet against any sort of campaign finance reform passing Congress. Despite the current attention to the problems of money-in-politics, serious action remains unlikely. Yet as election spending sets new records, crowding out the voices of ordinary citizens, Congress at some point will have to sort out what is protected free speech and what is illegal campaign money laundering.




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