The Magazine

Who's Afraid of George Soros?

From the March 8, 2004 issue: Campaign finance reform bites the hand that passed it.

Mar 8, 2004, Vol. 9, No. 25 • By DAVID TELL
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By restricting soft money fundraising, McCain-Feingold has magnified the importance of an existing Republican advantage in still-legal "hard money" donations. The GOP had a much larger base of small-dollar individual contributors to begin with, and its lead appears to be expanding. Democratic party officials have managed to find 600,000 first-time donors since BCRA took effect--which is pretty good, except that the comparable Republican figure is a million. What's more, by raising hard-money contribution limits, BCRA made those extra 400,000 GOP supporters a good deal more valuable than they would have been four years ago; each of them is now allowed to write a bigger check. All of which helps explain why it was such an easy decision for President Bush to turn down close to $19 million in free federal matching funds (and the expenditure limits that come with those funds) for his uncontested primary campaign this year. Exclusively by tapping individual, private contributors, Bush has been able to raise a record $150 million (and counting), triple the amount he'd otherwise have been allowed to spend before being formally awarded his second presidential nomination.

Democratic insiders have long foreseen and worried over a scenario like this: March 2004 would roll around and the president would be sitting on a giant stack of cash. Their own party's nominee, by contrast, would just be emerging from a series of contested primaries, and his bank account would be close to empty. Worse, if he'd accepted federal matching funds, the Democratic standard-bearer might already be running up against the $44.6 million pre-convention spending limit that participants in the public financing system are required to observe--forcing his campaign to lie largely dormant, and defenseless, until the end of July.

The fear, in short, was that President Bush would be free to pound away at his rival with television commercials all through the spring and summer, much the way President Clinton ran devastating "issue ads" against Bob Dole in 1996, paying for them mostly with soft money from the Democratic National Committee--a rule-bending scheme that caught Republicans flatfooted. This time, though, the Bush PR blitz would be a hard-money-only affair, entirely on the up and up. And under McCain-Feingold, there'd be no DNC soft money accounts to which the Democratic nominee could go running for help. Somebody would have to figure out another way to prop him up.

So in the late spring and early summer of 2003, a small group of Democratic campaign hands, labor-movement representatives, and left-leaning interest-group activists formulated plans for a roughly $300 million voter-mobilization and ad campaign targeting President Bush for defeat this fall. The project would be administered through a variety of groups specifically created for that purpose--all of them organized as "nonconnected" political associations under Section 527 of the tax code. And because each of these so-called 527s disclaimed any formal relationship with the Democratic party, they were effectively beyond reach of McCain-Feingold's soft money prohibitions, and entitled to fund the bulk of that $300 million budget with the big-dollar donations the party itself had been forced to give up. Or so the leaders of these groups supposed.

Then last September, three prominent Washington Republicans registered a 527 of their own with the IRS: the aforementioned Americans for a Better Country. And two months after that--not having done much else in the meantime--ABC sent its "advisory opinion request" to the FEC. Most observers don't believe ABC ever really intended to pursue the extensive agenda of broadcast and grassroots pro-Bush activity outlined in that query letter. Most observers think, instead, that ABC's sole ambition was to secure a public regulatory pronouncement from the commission about the legality of such a program: Can a Republican 527 raise and spend soft money in support of George W. Bush exactly the way those Democratic 527s are raising and spending soft money against him? Most observers suspect that ABC always wanted the FEC to say "no way."