Money 2000

Money 2000

The Nation Institute’s Investigative Fund provided research assistance.


The thunder in the distance signals an approaching storm that will deluge Campaign 2000 with political money. In every category–hard money, soft money, political action committee donations, independent expenditures, issue advertising–the presidential, House and Senate candidates and the two national parties are set to shatter all records.

But the story is more than one of numbers. Though the old system was awash in special-interest money and contributions from a tiny elite of wealthy individuals, it was at least modestly regulated by the Federal Election Commission. But 2000’s hurricane will finally sweep that regulatory apparatus away. What’s left will be a freewheeling, free-market political system in which politicians and parties are bought and sold by America’s ruling class.

Survey the landscape. The FEC, long crippled and in failing health, is powerless. The courts, ever more sympathetic to the arguments of campaign lawyers, have handed down a series of rulings eviscerating campaign finance laws and regulations. The Justice Department has adopted a hands-off policy. Congress, while murmuring about reform, has no intention of doing anything. The two leading Republican presidential candidates have bypassed the FEC’s system of spending limits and matching funds. And President Clinton, who squandered his only chance to strengthen the tottering edifice of campaign finance laws in 1993-94, when he refused to press the Democrat-controlled Congress to enact reforms, has long since abandoned the cause.

What’s new for 2000 is the harmonic convergence of two previously separate loopholes: soft money, the unregulated cash that’s been growing exponentially since the late eighties, and issue advocacy, the unregulated campaign ads that played an important role in the 1996 presidential year. It’s the merger of these two, with both major parties likely to spend hundreds of millions of dollars in soft money for issue ads touting their candidates and disparaging their opponents, that promises to make 2000 the Goliath of all money-in-politics years. “This will be the first election since the establishment of the FEC in which there are no rules and no limits,” says Ellen Miller, executive director of Public Campaign.

Optimists hope the public will be so horrified by the current election cycle’s abuses that it will demand reform. Yet those same optimists, most of whom are members of the campaign finance reform fraternity–Common Cause, Public Campaign, Public Citizen, US PIRG, the League of Women Voters and Democracy 21–and most of whom hark back to the post-Watergate reforms of the mid-seventies that strengthened the then-fledgling FEC, thought 1996 would have the same effect. The avalanche of soft money in ’96, the White House coffees and Lincoln Bedroom one-night stands, Roger Tamraz’s donations aimed at winning government help for oil concessions in the Caspian and the hubbub over China’s alleged influence-buying was enough to create momentum for change, they thought. But it wasn’t.

Whether money in politics will even be a big issue in the 2000 presidential campaign is questionable. Arizona Republican contender John McCain, chief Senate sponsor of a modest but useful reform bill, is trying to make campaign finance reform a showpiece of his own campaign, but this hasn’t caught fire. (The Senate was to begin debate on campaign finance reform by October 5.) Gore supports the same modest reforms but has refrained from raising the issue aggressively and won’t back public financing–and in so doing, Gore has given rival Bill Bradley, the former Senator from New Jersey, an opening to position himself as a campaign reform advocate. Both Gore and Bradley, meanwhile, are zealously courting big-dollar donors from the corporate world. Texas Governor George W. Bush, the fundraising champion, is vulnerable on the issue and recently has tried to deflect it by proposing changes. But his reforms either do little or could make the problem worse: He supports banning soft money from business and labor but not from individuals, and he wants to raise the limits on hard-money campaign contributions that have been in place since the seventies. Some hope that one or more of the possible fringe candidates, like Jesse Ventura or Warren Beatty, will try to make money in politics an issue, but it’s unlikely that any of them could have an impact.

What’s gotten the nation’s attention so far, of course, is Bush’s breathtaking pile of campaign cash, which will likely break the $60 million mark by the end of the current reporting period on September 30. But Bush’s feat, though prodigious, is just a small part of the story. The two parties and their House and Senate campaign committees raised $57.3 million in unregulated soft money by June 30, more than twice as much as at the same point in the last presidential cycle, according to the FEC. (Unless otherwise indicated, data in this story come directly from the FEC or from analyses of the FEC data by public interest groups.) The 435 members of the House pulled in $77.9 million by June 30, half again as much as House members had raised at the same point in the last election cycle. And this is just the start of the political season. In 1996 total spending on all campaigns for federal offices totaled $2.1 billion, according to estimates by Public Campaign. For 2000, if current trends hold, the total could be $3.5 billion.

Driving the process is the fact that the regulatory breakdown coincides with a white-hot political year. Not only is the presidency up for grabs but for the first time since the fifties (not counting 1994, which was a surprise), control of the House is at stake. Besides that, there is an outside chance that Democrats will win back the Senate, meaning that key Senate races–in New York, California, Michigan, Florida and elsewhere–will be vastly expensive duels. At the presidential level, Bush’s fundraising has set the pace for the pack. By June 30, when candidates last reported, Bush, Gore, Bradley and the also-ran Republicans had pulled in $105 million (of which Bush pocketed $37 million), a 75 percent increase over the $60 million raised by candidates at the same point in the 1996 cycle. Among the three presidential candidates leading the money chase (not counting Steve Forbes, who is largely financing his campaign with his own wealth), roughly 75 percent of their total has been raised in the form of $1,000 checks, the maximum allowed under federal law, and upward of 90 percent in donations of $200 or more. Much of it is bundled into great wads by leading law firms and financial services companies like the Texas law firm Vinson & Elkins, which funneled $184,850 to Bush, and Goldman Sachs, which bundled large sums to Bush, Gore and Bradley. Bush raised nearly $1 million each in just two ZIP codes–75205 and 75225, the affluent Dallas suburbs of Park Cities and Preston Hollow–while Gore and Bradley are cleaning up in 10021 on Manhattan’s East Side.

Working at corralling cash for Bush is virtually the entire Republican Party establishment, led by most of the GOP governors, state party machines, the Washington lobbyist and trade association network and the remnants of President Bush’s old Team 100–the 1988 and 1992 soft-money donors who gave $100,000 to the GOP. More than a hundred “Pioneers” have raised $100,000 in hard money for George W. Bush: Frederick Webber, head of the Chemical Manufacturers Association, is lining up CEOs and executives in the chemical, oil and gas industries, and other Pioneers run the gamut from CEOs of firms like Johnson & Johnson, CSX Transportation and Texas Utilities to investors, lawyers, doctors, lobbyists and high-tech executives.

Gore, who raised more than $17 million through June, and Bradley, who raised nearly $12 million, are following a similar path. Gore’s donors are led by lawyers and lobbyists, securities and investment executives, and the media, telecommunications and high-tech sectors. Bradley, who is making progressive noises, counts as his leading backers the longtime Wall Street allies who bonded with him during his eighties years on the Senate Finance Committee. Nearly one-seventh of his money has come from the financial services industry, often nicely bundled: $80,500 from Lehman Brothers, $74,150 from Citigroup, $65,000 from Goldman Sachs, $56,500 from Merrill Lynch, $55,750 from Morgan Stanley Dean Witter and $51,600 from J.P. Morgan. Thomas Byrne, an investment banker, matter-of-factly explains the preponderance of Wall Street types among Bradley’s donors. “People who make $1 million [a year] are generally more willing to write you a $1,000 check than people who make $50,000,” he told the Newark Star-Ledger. “That’s just a fact of life.”

So frenzied is the money chase that more than 1,600 individuals have contributed to multiple candidates, often across party lines, according to the Campaign Study Group, which specializes in campaign finance research. Leading the pack is New York real estate developer Lew Rudin, who gave $1,000 apiece to Gore, Bush, Bradley, Dan Quayle and Elizabeth Dole. Similarly, Ivan Seidenberg, chairman of Bell Atlantic, gave $1,000 to both Bush and Gore and another $1,000 to McCain, who happens to chair the Senate Commerce Committee, which oversees telecommunications. Joe Manko, who chairs Bradley’s Pennsylvania campaign, told the Philadelphia Inquirer that he isn’t surprised by the practice of giving to multiple candidates. “You can only give a thousand, so you cover your rear end,” he said.

Money rules in Congressional races, too. In the House, where the GOP has a slim, five-seat margin, control could go either way. According to analyst Charles Cook, that control will be determined by a mere handful of races, probably fewer than twenty out of the 435, since most House seats are safe. (In ’98, 401 incumbents ran, and 395 of them won.)

Money works its magic in Congressional races in two ways. First, incumbents amass enormous war chests to scare off challengers, with the average incumbent in next year’s races already having stockpiled $350,000 sixteen months before the election. Representative Robert Menendez, a New Jersey Democrat, has $1.7 million in his campaign account, including half a million dollars raised at an April fundraiser with New York Yankees pitcher Orlando Hernandez, reports the Bergen Record. House Speaker Dennis Hastert, not considered a fundraising heavyweight before his rise to power, has pulled in $594,000 for his campaign and $965,000 more for his leadership PAC. And Representative James Rogan, the California Republican who is considered vulnerable because of his outspoken role as a House impeachment manager, raised nearly $1.6 million in the first half of ’99.

Second, leadership PACs, party committees and outside interest groups are preparing to pour millions of dollars into those few races where the outcome is still in doubt. Hastert and Texas Representative Tom DeLay, the GOP majority whip and the party’s liaison to Washington’s lobbying community, have set up Retain Our Majority Program funds aimed at raising up to $200,000 for each of ten endangered GOP incumbents. Meanwhile, DeLay has also set up an innovative and highly controversial nonprofit group intended to raise $25 million in soft money from corporate allies of the GOP. And so far, the National Republican Congressional Committee has raised $27.8 million, 87 percent over the $15 million it had raised by the same point in the last cycle. On the Democratic side, the Democratic Congressional Campaign Committee, led by Representative Patrick Kennedy, who has engaged in a frantic schedule of fundraiser-hopping since January, has nearly tripled its take, compared with the last time around, to $17 million. On March 9 a Republican House dinner raised $4 million, and the next day Congressional Democrats held a $3 million meal. Plus, with little fanfare, for the first time the NRCC and the DCCC have set up soft-money accounts, allowing them to take in vast, unlimited sums from deep-pocket donors, money that–like all of these rapidly proliferating funds–can be spent with little or no oversight in a handful of House races.

The thirty-three Senate races in 2000 could cost nearly as much as all 435 House races. In ’98, candidates for the House raised $424 million, and Senate candidates $288 million; that year, candidates in the four most expensive Senate races–New York, Illinois, California and North Carolina–spent $118 million, and that’s not counting tens of millions spent by their primary opponents. Just by itself, the prospective Hillary Clinton/Rudolph Giuliani race in New York could set a new benchmark. Both parties are busily recruiting superwealthy candidates who can either self-finance their runs or call on personal networks of rich donors; in Nevada, the likely GOP Senate standard-bearer will be former Representative John Ensign, whose father is head of the Circus Circus casino empire, while in New Jersey Democrats are counting on Jon Corzine, former Goldman Sachs executive, worth $300 million. The two candidates have scared off credible opponents.

Both parties are meanwhile building soft-money war chests that will finance issue-ad commercials for presidential, House and Senate candidates on a scale never seen before. Some background: Soft money started in the late seventies, in a tiny trickle, after the FEC ruled that state political parties could spend unregulated money on activities like voter registration drives and get-out-the-vote efforts. In 1988, when Michael Dukakis ran unsuccessfully for President, the Democratic National Committee began spending significant funds on activities related to the presidential campaign, and the Republicans soon followed. It was called “soft” money to distinguish it from the “hard” dollars that fall under FEC regulations, including strict limits on how much donors can contribute. In 1988 the parties raised about $50 million in soft money. (At the time, soft money did not even have to be reported to the FEC, and it wasn’t until a lawsuit by Common Cause in 1991 that soft money became subject to reporting and disclosure–but it was still unregulated.) For the 1992 campaign, the two parties raised $86 million in soft money, and in 1996 they tripled their total to $262 million. This year campaign watchers expect that soft money will rise to between $500 million and $750 million.

Issue advocacy traces its origin to the 1976 Buckley v. Valeo Supreme Court decision [see David Cole, page 14]. The decision meant that unless an advertisement expressly called on voters to elect or defeat a candidate for federal office, such ads were now safely outside the realm of regulation. By the late eighties and early nineties, a handful of advocacy groups began to test that theory by airing commercials that attacked Congressional candidates for their stands on issues. The FEC challenged the commercials in court but, with one exception, suffered a string of defeats. With each such defeat, alert campaign lawyers began to encourage groups to expand the use of such advertisements, which quickly became little more than thinly disguised election ads, often running intensively in the days or weeks before the vote. Then, in the mid-nineties, two more things happened: The AFL-CIO spent up to $35 million in 1996 targeting a few dozen House races in the first truly nationwide, multimillion-dollar issue-ad effort; and the two parties, tentatively and then with vigor, began using soft money to run issue ads in support of the ’96 presidential campaigns. Yet another court-administered blow came this past August, when an FEC challenge to the Christian Coalition over its electioneering “voter guides” was rejected by a federal court.

In addition to its setbacks in court, the FEC proved itself unwilling to take tough action against the breakdown of the regulatory system. After FEC auditors sought to penalize the ’96 Clinton and Dole campaigns for their cavalier use of soft money in support of issue ads, proposing a $17.7 million fine against Dole and a $7 million fine against Clinton, the six FEC commissioners voted 6 to 0 last December to reject their staff’s recommendation. That decision shattered the pretense of any restraint, making such ads an all but certain feature of Campaign 2000. It also effectively signaled the end of the FEC’s reign.

Meanwhile, politicians like Tom DeLay are speeding through the green lights. DeLay’s Republican Majority Issues Committee is undoubtedly the first of many ersatz nonprofits that will collect campaign money from corporations and the wealthy. Leaders of Congress are setting up state soft-money PACs completely outside the FEC’s scrutiny and pocketing chunks of cash in amounts of $100,000 and up. Like corporate lawyers scanning the tax code for tax shelters, campaign counsels are devising improved ways to game the system. And corporate donors are lining up to contribute: AT&T gave $527,000 in soft money to the Republicans in the first half of ’99 and another $305,000 to the Democrats. While labor unions are also big soft-money donors, this year business and wealthy individuals outspent labor by $42.6 million to $2.5 million by June 30, a 17-to-1 ratio.

Just imagine, says Fred Wertheimer, president of Democracy 21, when Bush’s Pioneers early next year are asked to stop collecting $1,000 “hard money” checks and instead to start foraging for $100,000 “soft money” donations. To take advantage of the anything-goes situation, the GOP is reportedly creating what it calls Team One Million, donors willing to give $250,000 a year to the party for all four years of a presidential cycle; the Democrats, joining the race, are creating a group of $350,000-per-cycle givers.

Oh yes, Congressional reform efforts. The House in mid-September passed a campaign finance reform bill, sending it to the Senate, where Trent Lott and Mitch McConnell have assembled enough votes to kill it for the second year in a row. Reformers hope a motley bloc of Republican senators will join McCain and his six GOP Senate allies to create the sixty-vote majority needed to halt the Lott-McConnell filibuster, but no one is budging. The House-passed bill would ban soft money and some issue advertising, though few believe its issue-ad provisions would survive court challenges on constitutional grounds. Meanwhile, to win scarce converts, McCain and Wisconsin Senator Russell Feingold have scaled back the Senate bill, stripping out the restrictions on issue ads. And there is growing talk about increasing the amounts that individuals can contribute per election, from $1,000 to, say, $3,000–which would open the doors to more money. (A reform-minded group of business leaders supports the increases but paired with a ban on soft money.) In the current climate, any reform bill that passes Congress will do little, if anything, to alleviate the problem. “Public outrage is lacking in general in the good-time era, and people have become so cynical that it plays to the benefit of the politicians,” says Wertheimer.

Many reformers believe the outrages of 2000 will create true pressure for change, yet even they find it difficult to explain exactly how such opinion will translate into political action. “I don’t know why I think it will this time,” says Larry Makinson, director of the Center for Responsive Politics, “but I do.” But here’s the paradox: It’s hard to imagine the public getting excited about incremental reform–yet it’s even harder to imagine Congress seriously considering measures that would grab the nation’s attention, like public financing of Congressional elections. Some reformers hope that work at the state level can aid momentum for change in Washington, and to that end Public Campaign launched a drive on September 29 to enlist 1,000 elected officials in 30 states to endorse public financing of elections. Going state by state, however, implies a long march effort that could easily take a decade or more. Although Maine, Vermont, Massachusetts and Arizona have passed reforms that include public financing for state races, and Oregon and Missouri will likely vote on it in 2000, the many millions of dollars it would take to carry this campaign to big states like California and Michigan just aren’t there.

In the end, what’s important about campaign finance reform is this: Real reform is going to require a political movement that will raise the issue in terms that Republicans like to dismiss as “class warfare,” because that’s exactly what it is. Reform means taking a measure of political power out of the hands of the wealthy corporate elite. That’s not something most Republicans or Democrats, or even some foundations that support campaign finance reform, contemplate with equanimity. They’d rather see reform that tinkers with the system, preserving the power of the affluent while smoothing out some of the system’s rough edges. So far, there is no one on the horizon who looks able to carry the reform movement on his or her shoulders. The hurricane is coming.

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