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
(4) These Democratic 527 groups you speak of--they're the people financier George Soros has been giving money to, aren't they? Yes. The Democratic plan got under way in earnest during a meeting of strategists convened last summer at the eccentric multibillionaire's Southampton, Long Island, beach house. Two of the attendees, Steve Rosenthal, former political director of the AFL-CIO, and Ellen Malcolm, longtime president of Emily's List, had just cofounded something called America Coming Together (ACT), an organization through which they hoped to direct "a massive voter contact program . . . to defeat George W. Bush." Soros rather liked this idea, seeing as how--he would later tell a Washington Post reporter--Bush's defeat had developed into "the central focus of my life." So Soros pulled Rosenthal and Malcolm aside, away from the other guests, told them he'd like to get in on their ACT, and promised to give the group $10 million, just like that. At least half this pledge has since been fulfilled.
Not coincidentally, ACT remains the richest and best known of the new anti-Bush 527s. But there are a handful of similar enterprises so closely affiliated that--except on paper--it's difficult to determine where one of them ends and the next begins. Down the hall from ACT, on the same floor of the same Washington office building, is another Soros-supported 527 called the Media Fund, which will produce and purchase all the television ads. Raising additional money for use by both ACT and the Media Fund is a third 527, Joint Victory Campaign 2004. ACT's CEO Rosenthal and Service Employees union president Andy Stern, who serves on ACT's executive committee, are also executive director and board chairman, respectively, of still another 527 called Partnership for America's Families. The Partnership plans a voter registration drive focused on union households, women, and "communities of color"--whom it will "inform and engage" about the "disastrous impact" of "failed Bush administration policies." And ACT executive Cecile Richards, previously a top aide to House minority leader Nancy Pelosi, is doing double duty as president of America Votes, a 527 whose job it is to ensure that a long list of cooperating nonprofit groups traditionally friendly to the Democratic party--Planned Parenthood, the NEA, the Sierra Club, People for the American Way, the trial lawyers, and so forth--don't work at cross purposes with ACT and its satellites.
It's a vast left-wing conspiracy, you might say.
(5) So the FEC was being asked to take sides in a purely partisan argument, is that it? Democrats are the pro-527 faction, and Republicans are their enemies? More or less. But it hasn't always been that way. By itself, Section 527 of the Internal Revenue Code is no big deal. It's the provision in federal law that grants tax-free status to any organization "operated primarily for the purpose" of exercising "influence" over elections and appointments to "Federal, State, or local public office." All federal political committees registered with the FEC and subject to the laws it regulates--including the national committees of both major parties--are also 527s.
But the reverse isn't true; not all 527s need be FEC-registered political committees. Some steer clear of federal elections, restricting their attention to state and local politics--subject, therefore, only to state and local campaign laws. Other 527s do concern themselves with federal elections, but avoid any hint of (or successfully disguise) a partisan interest in the outcomes. You've got to make at least $1,000 worth of "expenditures" for or against a federal candidate before the FEC will trouble itself with how you obtained the money--from whom and in what amounts.
With a second category of 527s, the question whether some outflowing dollop of cash constitutes an "expenditure" has been rendered moot by McCain-Feingold. These are unambiguously partisan organizations, most notably the Democratic and Republican national committees, whose work the law now assumes to be exclusively directed toward the support or opposition of federal candidates. The party committees may not solicit, receive, spend, fold, spindle, or mutilate a single dollar of soft money. Their every bank account must be registered with, and exhaustively disclosed to, the FEC.
For a third category of 527s, however, the definition of "expenditure" is fraught with significance. These are the groups like America Coming Together--and Americans for a Better Country, ACT's mischievous doppelgänger--who freely concede their intention to spill a good bit of change on the public promotion of particular candidates for federal office. So they go to the commission, and register themselves as political committees, and pledge, in that capacity, to obey strict hard-money diets. At the same time, though, these groups have plans for a wide variety of additional undertakings: some plainly partisan but not strictly federal ("Vote Democratic!"); some, indeed, whose true partisan character may never be articulated (demographically targeted voter registration initiatives, for example). Which of these activities has a federal "purpose" requiring that they be paid for, in whole or part, by the "expenditure" of federally regulated contributions? And which, instead, may be paid for with a single, seven-figure, soft money George Soros gift?
That's where the controversy comes in.
It used to be the rule, inferred from a footnote in the Supreme Court's 1976 Buckley decision, that only "express advocacy," the baldest possible kind of direct electioneering activity ("Vote for Bush!"), was regulated. So it used to be the case that there'd be clearly partisan 527 organizations, who were clearly involving themselves in federal elections, clearly spending lots more than $1,000 in the process, and clearly doing so with particular ballot results in mind--but they never spoke the "magic words" of express advocacy, and thus could claim never to have made an "expenditure." Which excused them from registration with the FEC as a "political committee." Which meant they didn't have to abide by the financial restrictions attached to that designation. Which is another way of saying: They could gorge themselves on all the soft money they wanted.
Not so many years ago, the most notorious such 527 project was run by a man named Newt Gingrich. It was called GOPAC. Most Republicans defended the practice (and soft money generally) on free speech grounds. Almost everyone in the Democratic party, on the other hand, railed against GOPAC-like 527 schemes (and soft money generally) as a species of political corruption. And those were the positions both parties maintained right up through the congressional enactment of the McCain-Feingold campaign finance reform in 2002.
Since then, the Supreme Court has (a) dramatically reinterpreted its 27-year-old "express advocacy" footnote; and (b) included with that reinterpretation a crucial, brand-new footnote the obscurity of which we will no doubt be debating for another 27 years; while (c) upholding McCain-Feingold's prohibitions on soft money fundraising by the national political committees. So all of a sudden, Newt Gingrich is forgotten, Democratic GOPACs are popping up all over, and it's Republicans who are decrying the 527s as an unconscionable "loophole," demanding that something be done. Republican House Administration Committee chairman Bob Ney of Ohio has held investigative hearings into the activities of ACT and its allies, complete with threatened subpoenas. Republican Senate Rules Committee chairman Trent Lott is promising to follow suit. Meanwhile, Democrats have rediscovered the First Amendment and the value of big-boned (and well-financed) debate on issues of great public moment. On February 10, Nancy Pelosi and 57 other House Democrats signed a letter urging the FEC to proceed cautiously, if at all, on new regulation of 527s. When they were voting "aye" on campaign finance reform, Pelosi and her colleagues never dreamed it would come to this: "In fact, it was our hope that BCRA would reinvigorate grassroots organizations" (funded by ordinary grassroots billionaires, presumably) "to participate in the political process." On February 12, a group of Senate Democrats rounded up by minority leader Tom Daschle sent the FEC a nearly identical petition.
God bless America.
(6) What about the campaign finance reform lobby? Surely, having worked for years to put the major-party soft money machines out of business, the reformers don't want to see a private, even less accountable version of that system recreated by a couple dozen rich guys like George Soros. Surely the reform folks are lining up with Republicans on this one, no? Surely you jest. The largest and most influential campaign finance reform outfits, forced to choose between the logic of their own past arguments, on the one hand, and the logic of the Democratic party's near-term electoral prospects, on the other . . . well, there's little evidence these groups have spent much time struggling with their consciences, let's put it that way. They've thrown in with the Democrats, abandoning--even directly repudiating--views on soft money and 527s to which many of them have been firmly committed for years.
Take Common Cause, for instance, the group probably most associated in the public mind with campaign finance reform. In May 2000, Common Cause president Scott Harshbarger wrote the FEC to warn that any further proliferation of 527 political committees would augur an "accelerating collapse of the federal election laws." To forestall such a disaster, Harshbarger recommended that the FEC require any and all 527s that solicit money in connection with a federal election "to register and report" to the commission as regular, hard-money-only political committees. Even today, Common Cause still has posted on its website a full-length report condemning the existence of soft money 527s as an "attack on our nation's elections," and an illegitimate "evasion" of federal laws governing campaign contributions.
And yet on February 17, 2004, the day before the FEC was due to rule on the Americans for a Better Country advisory opinion request, Common Cause faxed the commission an urgent plea that it not too hastily ignore "the free speech rights of individuals to come together in voluntary organizations to raise their voices" in the political arena. Though it had been perfectly clear to Common Cause before, it was somehow no longer clear at all "that 527 political committees offer the same opportunities for corruption . . . that soft money donations to political parties demonstrably did." Nor, for that matter, "have we yet witnessed 527s playing an anti-democratic role in the political process, such as by giving the interests of wealthy donors greater influence than those of other citizens." George Soros? Never heard of him.
Cosigning the Common Cause letter, incidentally, was NYU Law School's Brennan Center for Justice. The Brennan Center's most recent previous communication to the FEC on the question of 527 groups had come just about this time three years ago. In those days, even before enactment of McCain-Feingold's new fundraising and election-advocacy limits, Brennan was of the view that most 527 soft money activity was already illegal. "Unless they engage only in de minimus federal political activities," Brennan advised the commission, all 527s should automatically be considered regular political committees--and thus be prohibited from soliciting or accepting soft money contributions. Other groups might escape regulation by avoiding "express advocacy." But 527s "are not entitled to the benefit."
(7) Has anyone in this controversy acted honorably, or at least taken a position that isn't hypocritical? Sure. John McCain favored a broad-scale regulatory crackdown on soft money in federal elections before. And he favors it now: "The recent creation of certain new organizations under Section 527" represents, he says, a "blatant end run around the campaign finance laws [that] should not be tolerated." Three smaller campaign finance advocacy groups also stuck by their philosophical guns last month: Democracy 21, the Campaign Legal Center, and the Center for Responsive Politics all urged the FEC to confront politically active 527s with the most rigorous possible regulatory pressure, else already operational Democratic schemes like ACT--and theoretical Republican schemes like ABC--would soon be committing "massive violations of the law." On the opposite side of the partisan equation, a tiny group of conservative nonprofits like the National Right to Life Committee, just as they did to Congress during the larger battle over McCain-Feingold, has now insisted to the FEC that Planned Parenthood's right to affiliate itself with soft money efforts to unseat a pro-life president . . . well, even that is protected by the First Amendment.
And then there's the Federal Election Commission itself, the agency that everybody's always loved to hate. The FEC's career staff lawyers, long reviled by reformers for allegedly lax enforcement of the campaign laws, labored for months to produce a draft response to the ABC advisory opinion request. What they came up with should have delighted their former critics, but horrified most of them instead, which under the circumstances is all the more impressive: The document was extraordinarily tough. Nothing that ABC suggested it might wish to do could legally be funded from soft money bank accounts alone, the FEC general counsel's office concluded. Which meant that most of what the Soros/Rosenthal/Malcolm crowd are planning to do is out of bounds. As a matter of fact, if the FEC staff's reading of things is correct, it's hard to see how ACT and Soros haven't already broken the law. But we'll come back to that in a moment.
The FEC's current Republican chairman, legal scholar Bradley Smith, forcefully demurred from this view. Smith, too, has traditionally occupied a bogeyman's role in campaign-reform cosmology. He was supposed to be a rabid dogmatist about unfettered political speech, so rigidly resistant to new constraints on election activity as to be "unfit" for appointment to the FEC, where he would constantly be called upon, but couldn't be trusted, to enforce such constraints. That was the smear, anyway, emanating from the Brennan Center types when Smith's name was first put up for his present post, back in 1999.
Last month--in the matter of soft money raised and spent by nonparty political organizations whose publicly stated, primary purpose is to alter the outcome of a federal campaign--Bradley Smith did indeed prove resistant to new constraints on election activity. And the Brennan Center types, who have no shame, were rhapsodic in their praise. "Brad Smith has shown he is a man of principle," gushed Common Cause research director Celia Wexler. Some of us never doubted it, actually.
In any case, why at this point should anyone think that some quirk of ideology is what causes Bradley Smith to hesitate over handcuffing the 527s? Nowadays, isn't it possible that even an expert like Smith must sometimes hesitate over such matters just because it's all begun to sound like Greek? Federal campaign law is a freakish mess--a 1974 omnibus statute, gutted and rendered only semi-coherent by the Buckley decision in 1976; the scars then plastered over with a quarter-century's worth of regulatory microscopia and equally gnostic judicial edicts; next, McCain-Feingold, a second omnibus statute barnacled onto the first; and, finally, last year's "landmark" Supreme Court look-back at the whole, decades-long lost weekend. In which a five-justice majority, by unspoken appeal to the Constitution's Make-It-Up-As-You-Go-Along clause, deemed it acceptable for a forest of obscurantist technical jargon to govern what thoughts this or that group of American citizens may or may not voice about their politics, during which months of an election year. And where. And with how many dollars.
Could be Bradley Smith wasn't feeling at all this grumpy at the FEC's meeting on February 18. It doesn't matter; his was the undogmatic, nonideological argument for cautious regulatory restraint in the face of legal uncertainty. The draft response the commission's staff had produced hamstringing 527s was a "plausible" reading of the statutes and precedents, he allowed. It was true that the Supreme Court had finally washed its hands of that famous footnote from 1976: "Express advocacy" was no longer an absolute boundary for congressional regulation of campaign activity. With few exceptions, nobody is guaranteed an "unlimited" right to influence the results of a federal election--or a right to use unlimited amounts of money in the attempt.
But in the absence of an explicit congressional directive to the contrary, Smith thought it unwise for the commission to debar anyone from such activity, either. And since no such explicit prohibition concerning the soft money bank accounts maintained by FEC-registered political committees can be found anywhere in the text of McCain-Feingold, maybe it was best, he concluded, for the commission to tread lightly here, however "plausible" and well meaning heavier and more ambitious steps might be.
In their precise details, the more modest moves Smith would have preferred the commission take need not divert us here, for he lost the argument. Suffice it to say that Bradley Smith, as did one of the other Republican FEC commissioners, cast an honorable vote against the interests of his own party.
(8) I'm relieved you said that about the "precise details"; my head started hurting two pages ago. What's the bottom line on the Soros people and the $300 million they want to spend against President Bush? News accounts have largely obscured that bottom line. The final vote on February 18 was 4 to 2 for what's generally been described as a "compromise" between the clampdown recommended by the FEC's staff and the relatively laissez-faire alternative proposed by Bradley Smith. There was no such compromise, really. In the end, the FEC's third Republican commissioner, joined by all three of his Democratic counterparts (who were voting against the interests of their party, it bears pointing out), embraced the entire, essential substance of the staff's first draft. The commissioners' only apparent changes were cosmetic editorial adjustments apparently intended to render the text less daunting for native English speakers. It was nice of them to try.
Translated into the quasi-vernacular:
* All public communications that "promote," "support," "attack," or "oppose" any clearly identified candidate for federal office--say, for example, George W. Bush--whether or not the damn things "expressly advocate" his defeat, and no matter when they're made during the political calendar, must be paid for with hard dollars only. No money from labor unions or corporations. And no checks for more than $5,000 from a billionaire. Who may only write one such check to America Coming Together for this purpose each year. The other $9,995,000 that billionaire has offered ACT are useless here.
* If such a communication as described above should happen to mention, in addition to the dastardly George W. Bush, some clearly identified candidate for nonfederal office, too--or should it merely add a nasty swipe at "Republicans" generally--well, sorry, that'll only get you so far. Somewhere between half and three-quarters of the cost will still have to come from your hard-money accounts.
* Same goes for voter-registration and get-out-the-vote initiatives. (Incidentally, judging from their most recent FEC and IRS disclosure filings, ACT and the other anti-Bush 527s haven't got any hard money to speak of at the moment. They'll have to go raise it from scratch, competing for donors directly with the Democratic national party committees--and with the Democratic party's presumptive presidential nominee. Neither those committees nor that nominee will be happy about it.)
* Oh, almost forgot. Only federally regulated contributions--in amounts no larger than $5,000 per donor, per year--may be requested in fundraising appeals that mention specific candidates for federal office "in a manner that conveys" an intention to use the money in support or opposition to those candidates. So you know how when you guys were up in Southampton last summer, and you were talking to Mr. Soros about what you wanted to do to defeat George Bush, and he told you he wanted to give you $10 million? It looks like when you started taking that money, it might have been illegal. And though the commission declines to get into such a hypothetical, it looks like Soros's giving you the money might have been illegal, too. The relevant criminal penalties are outlined in Title 2 of the U.S. Code: "Any person who knowingly and willfully commits a violation of any provision of this Act which involves the making, receiving, or reporting of any contribution, donation or expenditure . . . aggregating $25,000 or more during a calendar year shall be fined under Title 18, United States Code, or imprisoned for not more than 5 years, or both." There's probably wiggle room in that "knowingly and willfully" part. Good luck.
* Also, you know how, right at this very moment, on the America Coming Together website, there's that section labeled "Donate," which offers a person the chance to respond, "Yes, I am committed to kicking George W. Bush out of the White House"? And then there are some instructions about how to send in money? And then way at the bottom, in smaller type, there's a notice that indicates how contributions in excess of $5,000 per year "will be placed in the America Coming Together non-federal account"? Whaddya think? Maybe that's illegal, too? See above.
Anyone inclined to file an FEC complaint against America Coming Together on the basis of the commission's February 18 advisory opinion would thus seem possessed of a fairly strong case for enforcement action. And while it's true that certain of ACT's closest allies in the anti-Bush 527 orbit (the Media Fund, for example) will claim to fall outside the scope of this advisory opinion--on the basis of their own failure to have registered with the FEC as political committees--it's just as true that the commission will be attempting to resolve that pesky detail in a formal rulemaking procedure due to begin in a matter of weeks. Here the question will be: What constitutes a "political committee" subject to the hard-money contribution and expenditure requirements of federal election law, with special attention to the status of currently unregistered 527 political organizations.
It is difficult to imagine how the commission could fail to conclude that an outfit like the Media Fund has the same "major purpose" as ACT--with whom the fund is joined at the hip, and from whom it is otherwise indistinguishable, as both organizations routinely admit. And should the commission indeed draw such a conclusion, then the Media Fund and all the others would immediately become subject to the full reach of federal election law: None would be permitted to accept more than $5,000 per year from George Soros for use against George W. Bush. And under separate but related provisions of the law, Soros would be prohibited from contributing more than a total $37,500 for that purpose--to all the 527s put together, during the whole, biennial 2003-2004 election cycle.
That $300 million would appear to be evaporating awfully fast.
(9) What's the bottom line on the the whole election, then? Are you saying Bush is a lock? C'mon: Only an idiot would say something like that. If "things are bad" and they're in the mood, the voters are going to "send Bush back to Texas," as the saying goes, no matter how much money gets squirreled into anybody's bank accounts. And if the reverse is true, yes, Bush is going to win, but campaign fundraising won't have made the difference.
But what if, to a significant chunk of the electorate, things seem neither especially good nor especially bad? What if the election is therefore a close one, as it was last time? And what if, in a close election, money really can make the difference--a postulate, after all, on which much of American politics has based itself since at least the time when Karl Rove's hero, Mark Hanna, was managing the fortunes of William McKinley?
In that case, it looks like Bush really will be a lock. Unless the Democratic party--and fast--can figure out a way around the no-soft-money boulder that's been placed in its path by the campaign finance reform law. For which Democrats have only themselves, principally, to blame. Raising soft money outside the party apparatus no longer seems feasible. Indeed, it may never have been feasible, even if the legal and regulatory obstacles the anti-Bush 527s now appear to confront at the FEC had never emerged. According to their most recent public disclosures, the eight most important Democratic 527s had raised only $27.6 million by the end of December. The Media Fund, with an announced budget of $95 million, was still $92 million short of that goal.
There are intelligent and experienced political observers who'll tilt at conventional wisdom and tell you the McCain-Feingold experiment has proved healthy for the Democratic party. John Harwood of the Wall Street Journal has recently written up a particularly subtle version of the argument. The Brookings Institution's Tom Mann has recently been quoted endorsing Harwood's theory on Loyola Law School professor Rick Hasen's invaluable website, electionlawblog.org. The Democratic party is "thriving in a McCain-Feingold world," Mann says, "a case largely unaddressed in press coverage." Democrats "got lazy going after soft dollars in large denominations." Now the new law "has forced their hand." And, lookit: "The Democratic presidential candidates have raised collectively as much money as Bush has. The Democratic party committees are doing very well in their hard-money fundraising and especially with 'cash-on-hand.'"
As I say, these men are intelligent and experienced, and the argument is subtle. Too subtle, really. The Democratic party committees may be doing very well with their fundraising, but the Republican committees are doing better. Each of the GOP committees raised more than twice the money its Democratic counterpart did during January. Together, at the beginning of February, the Republican committees had almost three times as much cash on hand. Yes, the Democratic presidential candidates have collectively raised as much as Bush--more, actually: just over $178 million for the 10 Democrats to just under $147 million for the lone Republican. But so what? All of that Democratic money has been spent already. Toting up the cash-on-hand figures in the final reports of those candidates who've dropped out and the latest available reports of those few who are still in, you get $13.4 million. From which, for a fully accurate perspective, one must subtract $17.3 million in standing debt. Which leaves the Democratic candidates $3.9 million in the collective hole.
John Edwards, who theoretically retains some hope of securing his party's nomination, has a net current campaign war chest of barely $100,000. John Kerry, who's highly likely to secure the nomination, has a net current campaign war chest of negative $5 million. George W. Bush, on the other hand, has more than $100 million to play around with over the next five months.
"We will never catch up," Kerry spokesman Michael Meehan told the Washington Post on February 22. Meehan's right. The soft money's gone. The party may be over.
David Tell is opinion editor of The Weekly Standard.