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MARCH 18, 2002


Opponents of the McCain-Feingold campaign finance reform bill that
will likely hit the Senate this month make two arguments. The first,
which I addressed in my last column, is ostensibly about principle.
When campaign finance reform's critics say it will savage the First
Amendment, they speak in the outraged tones of the ideologically
pure. The second argument is different. It isn't about principle;
it's about pragmatism. Money, the critics explain with a sigh, is
like water. Plug one loophole, and a dozen others will open up.
Even as we speak, they often say, crafty lawyers are devising crafty
schemes that will make a mockery of your grand reforms.But when you think about it, this argument is rather strange. After
all, crafty lawyers devise crafty schemes to evade all kinds of
laws. Tax lawyers, for instance, invent endless new ways to avoid
paying taxes. But politicians and pundits don't generally respond
by throwing their hands up and noting the similarities between
money and water. Instead, they expect our crafty tax lawyers--the
ones who work for the Internal Revenue Service (IRS)--to expose
these schemes and make people obey the law. Even if the United
States shifted to a flat tax or a national sales tax--as some
conservatives propose--those new systems would still depend on
government lawyers plugging the loopholes that would inevitably

And, in fact, we have a group of crafty lawyers whose job it is to
keep other crafty lawyers from evading America's campaign finance
laws. They work at the Federal Election Commission (FEC). The
problem is that many of the same people who insist that campaign
finance laws can't be enforced have been working for years to deny
the FEC the power to enforce them. It's a nice trick. Campaign
finance reform's critics gently explain to naive reformers how the
world really works. They just forget to mention that they're a big
part of the reason it works that way.

The authors of the Federal Election Campaign Act (FECA)--the
campaign finance system that today lies in ruin-- recognized that
their system would fall into ruin unless it were effectively
enforced. To do that, in 1974 they created the FEC and gave it
broad powers to write regulations "reasonably related to the
purposes of the enabling legislation under which it was
promulgated." In other words, if someone found a loophole that
clearly violated the law's intent, the FEC could issue a regulation
to close it.

For the first few years after the law was passed, politicians and
parties generally complied with it. Then, in 1978, the
FEC--recognizing that the authors of the 1974 reforms had wanted to
preserve grassroots political activity--ruled that money for
"party-building" efforts like voter registration was not subject to
FECA's donation limits. It was a minor exception. And for the next
decade or so, the FECA system continued to work reasonably well.
McCain-Feingold's critics don't like to mention this, because it
suggests that campaign finance reform laws aren't necessarily
futile. But it's true.

Then, in 1988, Robert Farmer, head fund-raiser for Democratic
presidential nominee Michael Dukakis, hit upon an idea. To
counteract the GOP's financial edge, he would use "party-building"
money (later dubbed "soft money") not for grassroots activities,
but to fund the Duke's campaign. Rich Bond, deputy campaign manager
for then-Vice President Bush, called the effort "illegal on its
face." But the FEC did nothing. So the Bush campaign followed the
Dukakis campaign's lead. And over the course of 1988, they blew the
soft money loophole wide open.

In 1996 the parties opened Farmer's loophole even wider, pouring
five times more money into their presidential candidates' coffers
than they had eight years earlier. Both the Clinton and Dole
campaigns used soft money, FEC auditors found, to vastly exceed the
legal spending limits governing presidential candidates who
received federal matching funds. The auditors proposed that the
campaigns be required to pay the money back. But it took the FEC's
commissioners until 1999, three years after the election was over,
to make a final decision. And their final decision was that the
campaigns' use of soft money didn't violate the law.

Why does the FEC tolerate such flagrant violations? Because at the
same time politicians have been blowing the 1974 campaign finance
regime to smithereens, they have been emasculating the FEC. In 1979
Congress banned the commission from randomly auditing campaigns, as
the IRS does taxpayers. Congress requires the FEC to follow an
administrative procedure so cumbersome that it virtually guarantees
no action until an election is over. And the six-member
commission-- split three-three between Democrats and
Republicans--often deadlocks rather than punish a candidate of one
party or another. As then-FEC Chairman John Warren McGarry told The
Washington Post in 1997, "we have our hands tied behind our

Not surprisingly, the fiercest opponents of campaign reform have
also done the most to eviscerate the FEC. In 1998 Senate
Republicans held Clinton's judicial nominees hostage in a
successful bid to force him to appoint David Mason, a former aide
to Trent Lott, as the commission's vice-chairman. In 2000, in a
similar maneuver, they pressured him into choosing Bradley Smith, a
protg of arch campaign finance opponent Mitch McConnell. Both Mason
and Smith consider strict campaign finance laws an abomination. And
not surprisingly, since their appointments the FEC has deteriorated
even further. In 2000 several Senate candidates--including Hillary
Clinton and John Ashcroft--took campaign finance evasion to a new
level. They set up "joint fund-raising" committees with their
national parties so they could not just spend soft money, but
basically raise it themselves as well. The commission voted four to
two to overrule its staff and ignore the infractions.

If the FEC had done its job all these years--and kept soft money
from swallowing the 1974 law--we probably wouldn't need
McCain-Feingold. But by the same token, unless the FEC is radically
overhauled, McCain-Feingold won't work. For instance, critics
charge that since McCain-Feingold limits the parties' ability to
funnel unregulated money to candidates, independent groups will
emerge to do the same thing. McCain-Feingold tries to prevent that
by limiting the expenditures independent groups can make in
coordination with a candidate. But if the FEC doesn't aggressively
check whether coordination is taking place, the loophole will
undermine the bill.

Next month a task force led by campaign finance reform group
Democracy 21 will propose replacing the FEC with a more muscular
body. If they really believe what they now say about
McCain-Feingold, Mitch McConnell and Co. won't object. After all,
if crafty lawyers will inevitably surmount any new restrictions,
then it really shouldn't matter whether the agency enforcing
America's campaign laws has teeth or not. The result will be the
same either way. But, of course, McCain-Feingold's critics will
object, furiously, because they're afraid that with real
enforcement, campaign finance reform might just work. And in so
doing, they will tacitly admit that they don't really think money
is like water after all.

By Peter Beinart

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