The Guardian November 20, 2002

US mid-term elections and "soft money"

by Bob Briton

The US mid-term Congressional Elections have come and gone. Republicans now 
hold majorities in the House of Representatives and the Senate. They also 
polled well in the 50 states where the governorships were up for grabs. 
George W. Bush will, no doubt, claim the result as an endorsement of his 
"War on Terrorism" and plans for an escalation of his administration's 
aggression against Iraq. He will also claim a mandate for a raft of pro-
corporate, anti-people measures. On the home front, US citizens can look 
forward to all sorts of "Back to the Future" legislation like bills to 
tighten welfare regulations and to give religious charities a greater role 
in the provision of social services.

The cloud over his election in 2000, when most honest observers gave the 
election to his Democrat rival Al Gore, will be said to have lifted. 
Further, the recently passed Help America Vote Act will provide US$3.8 
billion for equipment and training to help(so we are told) prevent a repeat 
of the farcical Presidential elections of 2000 in which perhaps millions of 
Americans were denied their right to vote.

Everything is neat and tidy once more in Elector-land USA. Or is it?

A tale of two crises

Unfortunately, the crisis that has overtaken US big business has its 
counterpart in the country's electoral system. Investors in US companies 
are still reeling at the stream of revelations about criminal practices at 
the very top of corporations and their accounting companies. The past year 
of overall losses on US stock markets can be traced back, to a large 
degree, to the exposure of the extent of corruption in the country's 
corporate life.

Some of the players in those corporate scandals show up again in the 
ongoing saga of the "soft money" paid to politicians and political 
organisations. Enron and its Chairman Kenneth Lay (more about them later) 
appear in reports on these major issues.

Public outrage at the secretive means used by wealthy organisations and 
individuals to gain access and influence in Washington has given rise to a 
widespread movement for finance reforms.

First things first, though, a brief overview of US federal election 
campaign financing is in order.

In the US, there are legal limits on the amounts of money that individuals 
and organisations can contribute to their favoured political candidate or 
organisation. In addition, there are requirements for the disclosure and 
publication of these contributions so that the public can at least guess at 
the amount of influence these benefactors have in the legislative process.

Funds in the US can be made to a party's national body, into the "Political 
Action Committee" (PAC) of a particular candidate for the advancement of 
his or her own career or to the "leadership" PAC of a candidate for the 
promotion of other would-be or office holding legislators.

Under current regulations, members of Congress may not accept contributions 
of more than US$1,000 per election from an individual and US$5,000 from a 
PAC. The Federal Election Commission oversees all of these apparently 
straightforward matters and lists the contributions on its web site.

However, the stated intention of the restrictions on campaign financing has 
been subverted by the growth of "soft money" spent on behalf of candidates. 
These funds create organisations, run issue advertisements (in effect 
campaign ads) during the election period and render all sorts of other 
services to candidates. Salaries are paid to campaign consultants, 
pollsters, media consultants, Get Out The Vote (GOTV) specialists, and so 

This practice has been growing since efforts were first made in 1976 to 
regulate the amounts flowing from the wealthy to their mouthpieces in 
Congress and the White House.

Public resentment finally prompted what is called the Bipartisan Campaign 
Reform Act of 2002. Passed into law last week, this act appears, at face 
value, to put an end to the era of unchecked, unlimited and unaccountable 
federal campaign contributions.

Staying ahead of the game

However, it would be foolish to think that the days of "soft money" are 
gone forever. The Federal Election Commission (FEC) itself seems to have 
done its best to create several Grand Canyon sized loopholes in the Act.

Eleven different challenges to the FEC's rulings have been announced on 
behalf of 84 plaintiffs. Several have amalgamated into McConnell v. the FEC 
lawsuit. Named after Republican Senator Mitch McConnell from Kentucky, the 
suits gives voice to concern in the American electorate about the gutting 
of the original legislation.

Concerns focus on FEC rulings like Regulation #1 that allows state and 
local parties to raise unlimited amounts of money and spend it on ads to 
promote or attack the Democrat or Republican parties during federal 
elections. They are also free to pay for consultants working on federal 

Regulation #2 will permit anyone, including national parties, to set up 
"independent" committees before November 6, 2002 that can raise and 
distribute unlimited amounts of "soft money". As you can imagine, there has 
been furious activity in political circles in the US recently as 
"independent" committees were established at break-neck speed.

Regulation #3 gets around the ban on federal office holders soliciting 
funds. The FEC ruled that this would only preclude such an office holder 
verbally asking for a soft money donation. Others are still free to ask for 
the cheque.

Regulation #4 means that a blind eye is turned to donations from 
"leadership PACs" used to rally supporters and put around the good word 
about an office holder. So long as the object of all this adulation keeps 
his or her distance from the committee, it's OK by the FEC.

Regulation #5 deals with broadcast advertisements that depict candidates 
within 60 days of the election. If they do this, they are defined as 
campaign ads and subject to contribution limits and disclosure 

Commentators in the US like those at US consumer advocacy group Public 
Citizen, believe that the law is so unclear in this area and so full of 
holes that, if challenged, courts may be tempted to throw the whole 
Bipartisan Campaign Reform Act out the window.

Further into the shadows  "527 Groups"

The "527 Groups" are unlikely to be touched by all of these law-making 
efforts. They are tax-exempt political organisations that can accept 
unlimited contributions from any source. The funds can be used to promote a 
candidate or a cause with practically no obligation for disclosure.

This is possible because, unlike other political organisations, the 
Internal Revenue Service (IRS)  and not the FEC  monitors their 

The groups take their name from a section of the IRS Code that governs 
them. Virtually every member of the US Congress has their own 527and for 
many of theses incumbents the group has become their largest source of 
campaign funds.

Contributors to the 527 groups are much happier about their generosity 
being on IRS records than those of the FEC. For one thing, the IRS website 
has been likened to a filing cabinet with over 14,800 different, unlinked 
folders and you can only find a 527 group if you know its name. This isn't 
as straightforward as you would imagine.

Republican MHR Ted Stevens has one called "Northern Lights". Democrat John 
Tanner has called his "Leadership 21".

While it is true that anyone is free to make a contribution and buy a bit 
of influence, the top six politicians received 94 per cent of their 
contributions in amounts of $5,000 or more. Most of these came from 
corporations directly and, because donors are not required to supply their 
employer's name, the real percentage can only be guessed at. The 527 game 
is certainly not played on a level playing field for rich and poor!

"How Much Are We Talking  What Will It Get Me?"

Public Citizen calculates that soft money contributions to 527 groups alone 
for the 2002 election cycle come to nearly US$108 million. The top 25 of 
these groups have collected US$19.9 million in the third quarter according 
to IRS reports. These are just a fraction of the amounts traded in exchange 
for political influence by corporate America.

The major contributors to the groups, by industry are: computers/internet, 
securities and investments, lawyers/law firms, telephone utilities, real 
estate, TV/music/movies, tobacco, oil and gas. Top corporate contributors 
include: AT&T, SBC Communications, Philip Morris, Mortgage Insurance 
Companies of America, Clifford Law Offices, US Tobacco, American Airlines 
and Caterpillar.

Different capitalist interests compete by these means with market rivals to 
gain a legislative advantage.

For example, Regional Bell telephone services paid US$277,666 into the 527s 
of House Speaker Dennis Hastert (R-Ill.), Majority Whip Tom DeLay (R-Texas) 
and Chief Deputy Whip Roy Blunt (R-Mo.) at the time the House was 
considering the deregulation of high-speed internet phone services.

Consumer groups have condemned the changes as pro-monopoly.

Enron, the failed energy-trading giant was surely the daddy of all 
purchasers of political influence. Between 1989 and 2002, Enron and its 
employees gave US$5.95 million in individual, PAC and soft money 
contributions to federal parties and candidates. Three quarters of this 
went to the Republicans and the rest to the Democrats. Enron gave an 
additional US$160,000 to 527 groups.

Enron loved George W Bush. He got US$312,500 for his 1994 and 1998 Texas 
Gubernatorial campaigns; US$113,800 for the Bush 2000 presidential 
campaign; US$10,500 for the Bush-Cheney Recount Fund; and US$300,000 to the 
Bush-Cheney 2001 Inaugural Fund.

Hardly surprising was the Bush administration's record of measures 
favourable to Enron. The corporation's officials had six meetings with Vice 
President Dick Cheney and other administration officials who were drafting 
energy policy at the time.

In 2001, Enron Chairman Kenneth Lay put forward two names to Bush's chief 
personnel adviser to fill two vacancies on the Federal Energy Regulatory 
Commission (FERC). At the same time, Enron was having its problems with 
FERC chairman Curtis Herbert Jr. Herbert was sacked and Pat Wood III (one 
of Enron's nominees) was made chairman.

Business as usual

Some well meaning but exasperated supporters of social and economic systems 
like those of countries like the USA, Australia and the other developed 
capitalist countries respond to scandals like the one surrounding soft 
money corrupting US politics by calling for tougher legislation.

A struggle certainly needs to be waged for the limiting of contributions 
from corporate and other wealthy sources and for greater transparency in 
the reporting of this funding.

However, the chances of success in this venture are remote if the issues 
are ultimately left to bodies like the US Congress. After all, Congress is 
made up of wealthy individuals legislating overwhelmingly on behalf of 
wealthy corporations.

It is hard to see why present or future members of the US Congress would 
sincerely want to plug every gap in every piece of legislation ostensibly 
designed to ban these currently sanctioned forms of bribery.

Unfortunately, the issue is not one that can be looked at as a party 
"thing" with corrupt Republicans on one side, cleanskin Democrats on the 
other (in Australia insert the words Liberal and Labor).

If it was such a question, we could look forward to much higher standards 
in public life when the opposition party is swept into power.

Until greater and ultimately decisive numbers of people begin to see the 
class exploitative nature of our societies at the root of these problems 
and to demand a truly more democratic society, the people of countries like 
the US will continue to be buffeted by one crisis after another.

* * *
Acknowledgements: Public Citizen, Common Cause, Center for Responsive Politics

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