AllPolitics - Scandal-Driven Reforms

As Soft Money Grows, So Does Controversy

By Rebecca Carr
CQ Staff Writer

As retiring New Jersey Democratic Sen. Bill Bradley put it, money invades politics "like ants in the kitchen - without closing all the holes, there is always a way in."

This year, an unprecedented amount of money flowed into national political party coffers by way of a loophole known as "soft money."

Soft money - big buck donations from individuals, corporations and unions that are exempt from contribution limits - was originally intended for "party building activities" such as get-out-the-vote drives, palm cards and torch parades down Main Street. But if the past year is any indication, it has clearly strayed from those grass-roots origins, evolving as a major and controversial factor in federal elections.

Republican and Democratic party committees went into high gear this year to beat each other at the fundraising game. Both parties enticed donors, dangling invitations to black-tie dinners and one-on-one photo opportunities with the candidates.

Members of both parties agree that this form of unregulated donation became a back door for donors, special-interest groups and corporations to skirt federal laws that limit individuals to a maximum of $1,000 per election.

Soft money donations became a swirling controversy of the 1996 election season because of the sheer amount spent, the audacious way it was raised, and the lack of accounting on how it was spent. And this year stood out because the parties used soft money far more aggressively than before to influence congressional races in their battle to control the House.

Already, figures show that party committees have raised a combined total of $223.4 million in soft money contributions in the 1995-96 election season and have spent $210.8 million. That is nearly three times more than the 1992 presidential election and more than 11 times what they raised in 1980, the first presidential election to allow soft money. Those totals will grow by the time final reporting is done next year.

Republican Party committees raised $121 million in soft money, up 166 percent from the last presidential election, and Democratic party committees raised $102 million, up 232 percent.

The soft money race was fueled in part by a June Supreme Court decision that said the party organizations could spend an unlimited amount of money to promote their issues, as long as they did not coordinate their activities directly with candidates. That inspired the parties to build their treasure chests the quickest way possible - with large donations of soft money.

As a result of the court decision, both party committees used a good chunk of their soft money donations to finance slick ad campaigns that fell perilously close, in the eyes of many, to direct endorsement ads for Bob Dole and Bill Clinton, which is against Federal Election Commission (FEC) rules.

There was so much money flowing into congressional races this year that even the candidates conceded that they may have lost control. Rep. Sam Brownback, R-Kan., estimated that during the final 10 days of his campaign for a Senate seat, only one- third of the ad expenditures were controlled by himself or his opponent. One group he had never heard of aired ads in his behalf. "Nobody knows where the money is coming from," he said.

The competition created "an arms race without an arms control agreement," said Ellen Miller, executive director of the Center for Responsive Politics, a nonpartisan group based in Washington that tracks political contributions.

"This year broke all the rules. The parties took anything from anyone," said Larry J. Sabato, a professor of government at the University of Virginia and co-author of "Dirty Little Secrets," a book about political corruption.

Access and Influence

Much of the controversy has centered on the suspicion that those who give so prodigiously expect something back in addition to good government. They expect the most sought-after commodity in Washington - access to decison-makers.

While other donations are restricted by law and FEC rules, soft money has virtually no limits except that the donation must come from individuals who have permanent resident status or corporations with a subsidiary located in the United States.

Some watchdog groups suggest that the party committees have become nothing more than "black bag" operations, conduits for interested parties to pour unregulated money into campaigns. That leaves elected officials open to serious questions about their motives should they later support a legislative effort that is beneficial to a donor.

"This is a widespread disease," said Donald J. Simon, executive vice president of Common Cause. "Soft money is the way to buy access and influence."

The Republicans made soft money a campaign issue following allegations that John Huang, once a top DNC fundraiser, had solicited donations from the Riady family of Indonesia. Dole picked it up as a campaign theme, charging that foreign money was buying access to the Oval Office.

In response, President Clinton called for outlawing soft money. "We have played by the rules. But I know and you know we need to change the rules," Clinton said Nov. 1.

Big Ticket Donors

There may be a trend toward soft money among donors. Enron Corp., a Houston-based natural gas company, has a political action committee that gave $44,000 less this year than it did two years ago. But it was not because the company was trying to lessen its political involvement. Instead, it shifted to soft money, almost quintupling its party contributions to $627,400. In the background is legislation to deregulate energy.

During the first 16 days of October alone, 20 donors gave at least $50,000 in unregulated contributions to the Democratic National Committee (DNC), according to FEC records. That list includes television producer Norman Lear's $80,000 as well as the United Brotherhood of Carpenters and Joiners' $50,000. Republicans snared 16 such donors in that time period. Their list includes Illinois-based Caterpillar Inc. for $50,000 and the Mashantucket Pequot Tribe Nation for $50,000.

Between July 1 and Oct. 16, the Communications Workers Association, a Washington, D.C.-based union, gave the DNC $425,000. Mariam Cannon Hayes, mother of unsuccessful North Carolina gubernatorial candidate Robin Hayes, gave the Republican National Committee $500,000. Some companies gave to both parties. Agriculture giant Archer Daniels Midland Co. of Decatur, Ill., divvied up $380,000 between the parties during a year when it faced a federal investigation into price fixing.

Phillip Morris Cos. donated $1.9 million to the Republican Party committees and $349,250 to Democratic committees in 1995- 96, at a time when tobacco companies face intense scrutiny. "That's an extraordinary amount from a corporation with major issues pending before the federal government," Simon said.

In the wake of the 1996 telecommunications law, the industry gave $14.5 million in soft money, twice as much as for the 1992 election, according to the Center for Responsive Politics.

Campaign finance experts say the parties were under tremendous pressure for money this year because of the battle for control of the House.

"When you are under that kind of pressure, you lower your standards," Sabato said. "Every year, the candidates and the parties push the envelope a little further. No one bothers to say stop. The courts have given the green light, not the red light. Political people will bend the rules as far as they can."

Undisclosed Money

"The paradoxical thing is that soft money is a reform," said Ross K. Baker, a professor of political science at Rutgers University in New Jersey. It became law in 1979 after party officials complained that they had been relegated to the sidelines following changes in the campaign finance system inspired by the Watergate scandal.

Party officials figured out how to use soft money to their advantage right from the 1980 presidential race. However, the FEC did not start requiring public disclosure of this money until 1991 as a result of a lawsuit filed by Common Cause in 1988.

"There was a lot of concern that this money was not being disclosed," said Herbert E. Alexander, professor of political science at the University of Southern California and director of the Citizen's Research Foundation, which estimated expenditures during the years without public disclosure.

Alexander's research shows that Democrats were slower to use soft money, spending $4 million and $6 million in 1980 and 1984, respectively, while Republicans were spending about $15 million and $15.6 million. In 1988, Democrats topped the GOP by $1 million, spending $23 million.

Soft money in theory is not as bad as the media portray it, Alexander said. "The parties ought to have a role to play. The problem is in the way it's raised," Alexander said. "When it's raised at $100,000 to $250,000 a clip and in a dubious way, it magnifies the role of money and it raises questions about the appearance of corruption."

"The system is worse now than it was during Watergate," said Bill Hogan, director of investigative projects at the Center for Public Integrity. "I think it's sad. It took a scandal like Watergate to get change before, and that is what it will take a second time."

Although the Center's Miller advocates a ban on soft money, Sabato demurs on a total ban, saying "the cure would be worse than the disease." He advocates steps such as broadening public disclosure, offering tax credits for donations and giving candidates free television time.

The debate in the next Congress will be contentious. Republicans argue that the Democrats are unfairly supported by labor unions that send members out to canvass on extra vacation time. Leo Troy, a professor of economics at Rutgers University, estimates the undisclosed in-kind contributions of labor to be $300 million to $500 million.

Democrats argue that the Republicans were inordinately supported by big business, and that labor's activities are an exercise in free speech.

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