The Heritage Foundation

Backgrounder #885

February 28, 1992

February 28, 1992 | Backgrounder on

Back to the Congress: Campaign Finance Reform

(Archived document, may contain errors)

.885 BACK To CONGRESS CAMPAIGNH"~REFolRMINl992 INTRODUCIlON In reaction to Congressional scandals and anti-incumbent sentiment, Congress is considerin g a complex revision of the campaign finance system. Billed as an ef fort to make elections fairer, the Congressional proposals will actually only hrther entrench incumbent members and hinder challengers. Meanwhile, real reforms that would produce a more c ompetitive electoral system are ignored. Late last year, the House passed H.R 3750, a Rube Goldberg-style combination of new regulations, subsidies, spending limits, public election financing and unspecified tax increases. The House bill was initially spo n sored by Connecticut Democratic Representative Sam Gejdenson, and was substantially revised by North Carolina Democratic Representative Charles Rose before passage. In the Senate Democrat David Boren of Oklahoma, sponsored .cimilar legislation, S. 3, whic h passed May 23,19

91. A House-Senate conference committee is expected to com plete a compromise version as early as March Both bills would impose a purportedly voluntary system of campaign spending limits. Candidates who comply with the limits would recei ve government subsidies in the form of vouchers, cash grants, and government-mandated discounts on post al rata and on purchases of advertising from private radio and TV stations. Can didates who refuse to abide by the spending limits would both forego th e se sub sidies and trigger a windfall of new benefits for their opponents. The House bill in stitutes a spending limit of SaoO,OOO, with several exceptions, for House primary and general elections. Candidates would also be limited in how they could raise f unds within this overall cap. No more than one-third of the limit (generally S200,OOO) could be raised from each of three sou~ccs: political action committees PACs large individual donations (over $200) and government matching funds.

Individual donations b elow $200 would be limited only by the overall spending cap, and would serve as a way to make up for a candidate's failure to raise the al lowed maximum limits in other categories. Exceptions to the spending limits in clude provisions for run-off election s , closely contested primaries and spending for accounting and legal fees to comply with the complex new law. Advertised spending limits in the Senate bill vary from $95O,OOO to $55 million, depending on state population, though effective limits would be 2 to 3 times these amounts due to a series of exceptions and subsidies Funds for Senate races could be raised only through individual donations of $l,OOO or less, but no sub-limits such as those in the House bill would apply. The source of revenues for fede r al matching funds and vouchers is not specified in either bill, but is likely to include new taxes on businesses unions, and -political organizations H.R. 3750 and S. 3 would maintain most existing features of federal campaign finance law, including limit s on the amounts individuals and organizations may give to campaigns, and reporting and disclosure requirements. However, the bills would expand vastly the scope and detail of federal regulation of campaigns, politi cal parties, non-partisan organizations, and other groups associated with the politi cal process. This represents an intensification of the Watergate-era theory: that political activity must be regulated, and as far as possible funded, by the govern ment. But the Watergate reforms only increased the power of monied interests and incumbents. Overall campaign spending, PAC spending and incumbent re election rates have risen steadily since the 1974 reforms. The new bills would make the critical task of raising money for non-incumbents even more diff icult.

For instance, most incumbents raise the $200,000 in PAC funds allowed by the House bill; challengers average only about $25,OOO. Yet a challenger can offset S,OOO PAC gifts only through donations of $200 or less. At least 875 individual contribution s would be needed to offket the average incumbent PAC advantage.

President Bush has vowed to veto legislation which includes either campaign spending limits or public financing and he should. But the startling increases in regulation of political activity contained in both bills are at least as alarming. Such regulations will inevitably favor those who write them in this case incumbent politicians -and will only serve to stifle the free and vigorous political debate es sential to a democracy. Cementing th e impression that the campaign reform bills are incumbent-protection plans is the fact that the House bill applies only to the House and the Senate bill only to the Senate. This allows incumbents to tailor sub sidy and fundraising provisions to their diffe r ing needs, rather than to objective standards of fairness. Rather than a greater government role in elections true campaign reform should eliminate existing overwhelming government support for incumbents. Steps needed to level the playing field for challe n gers include: eliminating tax-hnded (fEanked) campaign mailings by incumbents; restricting the use of Congressional statpin campaigns; ending incumbents ability to transfer campaign finds from one elec- easing fundraising restrictions on non-incumbent can didates; prohibiting unions &om using mandatory dues for political activity tion to the next and 2 eliminating fhvored treatment of PACs by equalizing PAC and in I dividual donation limits.

THE HISTORY OF CAMPAIGN F'INANCE REFORM The Watergate scandal insp ired the first major wave of campaign finance regula- tion. In 1974 Congress created a system of spending and fund-raising limits in an attempt to clean up campaigns, open up the process to average citizens and reduce the influence of big special inter es t donors. Instead incumbent re-elec tion rates increased sharply and funding from monied inter- ests exploded. Be tween 1974 and 1990 incumbent re-elec- tion rates rose from 85 to 97 percent in the Senate and from 80 to 96 percent in the House. In 1988 the House re-elec- tion rate was above 98 percent.

While the 1974 law outlawed cor porate donations and severely limited individual Contribu- tions, it gave politi- cal action commit tees (PACs then usedprimarilyby labor unions -a five Chart 1 PAC Spending Sk yrockets Effects of Campaign Finance Reform In Millions of Conrtant 1990 Dollar8 $160 100 10 0 1976 1990 Houre (PACE El Senate (PACE Houre (Other Sonata (Other Mrrltago Dataohart Swrco& 1078 House of R1pf

Sent6tl~~S Cempeions' Receipts end Expendllures. Sept. 1077. pp. 4, 10. and 1078 Senetorlei Cempel~ns' Receipts end Expendlturea, April 1077, pp. 3, 6.

All 1980 dela from unpubllshed FEC computer tapes. Apr. 1881 1 The 1974 law, which was partially hvalid ated by the Supreme Court in BUJJCY v. Vh, 424 US l, 19 (1976 dcdared the mandatory spending limits of the 1974 campaign finance refom biU, S. 3044, unconstitutional, as a possible infringement on amtributors' free speech rights in contributing to the can didate of their choice. The Supreme Court also ruled that under the Fa Amendment's guarantee of free speech, individual campaign contributor limits cannot be so low as to prevent "candidates from amass

the resources necessary for effective advocacy giving rise to questions about the Sl,W individual donor limit, which has remained the same since 1974.

Nonnan J. Omstcin, Thomas E. Mann, Michael J. Malbin, Htal Srorisriw an Gmpss, 1991-1992, Washington D.C American Enterprise Institute, pp. 5&59,19!l2 2 3 fo ld advantage over individual contributors. While individual donors can give a maximum of $l,OOO to a campaign, PACs may donate up to S5,OOO. The predict able if unintended, result was an explosion in the number of PACs, which grew 600 percent, from 608 in 1974 to 4,268 in 1988.3 PAC spending in Congressional elections grew from $20 million in 1976 to $150 million in 1990, and overall cam paign spegding quadrupled, from $98 million to over $400 million between 1976 and 19

90. In short, a law designed to cur b special interest money and open up elections-using means similar to H.R. 3750 and S. 3, had precisely the opposite ef fect (See Chart 1 on previous page lengers Of the $108.6 million PACs contributed to House candidates in 1990 only 6 percent went to ch a llengers? PAC contributions now account for more than 50 percent of Democratic incumbents' war chests, md 40 percent of incum bent Republicans' funding; dozens of House members receive more than three fourths of their funds from 0.6 The great majority of t his new money has flowed to incumbents rather than chal Chart 2 Challengers Fall Further Behind Campaign Finance Since 1974 In Thousands of Actual Dollars Incumbent Spending Challenger Spending 1974 76 78 80 82 84 86 88 90 Mean Expenditures 8oumo: VIraI S t etlsrlcs on Congress, 1991-1992, Table 3-1. p.74 NOTE GNP prlce dallators are trom the Economlc Report of the President. 1991 Horltago Dataohart 3 4 hid p. 97, Table 3-11 1976 House data from FEC disclosure series #9: 1976 House OfRepentatiw CMp'p'Receipu ond Eqxnditum, Scpsanbcr 1977, pp. 4,lO. 1976 Senate data from FEC disdosure series #6 1976 Senatorial cimpaip' Recdm and Eqndllm Apd 1977, pp. 3,

5. AU 1990 data from unpublished FEC computer tape of US. Senate and House campaigns, April 1991 NOTE: Unles s otherwise indicated, all mes in nominal dollars 5 6. Wtal St-atMcs on Congress, 1991-1992, p. 93, and Representative Bill Thomas Campaign Funds Should Be vi St&tiCs on cbng?t?ss# 1991-1992, p. loo Raised Within the District" San Luis Obispo Cbunty Teleg r am-Tribune, September 15,1989 4 Seventeen years after the passage of the monumental 1974 reform bill, special interest money and the huge advantages of incumbency are even more powerful than in the pre-reform days. Incumbent re-election rates have gone up , voter par ticipation has declined and, most strikingly, campaign spending has skyrocketed while incumbents have gained ever larger inancial advantages over challengers See Chart 2 on facing page CAMPAIGN FINANCE REFORM REVISmD Even though the Watergate r eforms failed miserably, arguments about cam paign finance reform today are much the same as they were in 19

74. The Water gate-era legislation was intended to reduce the influence of wealthy campaign contributors and give citizens without access to such s ources equal opportunity to run for public ~ffice Massachusetts Senator Edward Kennedy contended that enactment of the public financing provisioIq could end the corrosive and corrupt ing influence of private money in public life. Seventeen years later, Co n necticut Democratic Congressman Sam Gejdenson introduced H.R. 3750 noting that Elections are not supposed to be a participatory process for only the wealthy and privileged and claiming that his bill would benefit the disadvantaged, the poor, and the middl e clas Oklahoma Senator David Boren, author of the Senate reform bill S. 3, complained that special interests dominate todays elec The Senate Bill. Senator Borens bill would replace alleged special interest dominance with a reign of federal regulators by p r ohibiting or restricting cam paip contributions and other political activity by disfavored groups. Among these provisions are an outright ban on PAC contributions to Senate candidates and restrictions on small contributors who combine their individual che c ks for for warding to a candidate (a practice known as bundling The bill would for the first time impose spending limits and significant federal regulation on spending not associated with a particular campaign. This so-called soft-money is now used by uni ons, businesses and state and local political parties for registration drives, get-out-the-vote efforts and similar activities.

While S. 3 includes spending caps, they are largely cosmetic. General election spending would vary from $950,O00 to $5.5 million , depending on state popula tion. In addition, candidates may spend: 67 percent of the general election limit in a primary (to a maximum of $2.75 million another 20 percent in the case of a run off; 15 percent for legal and accounting fees (maximum $300,0 0 0 and, another 25 percent with contributions in amounts of $100 or less. In addition, S. 3 would shift many campaign costs from candidates to taxpayers, broadcasters and the post al service. Candidates would receive government vouchers worth 50 percent di s ti0nS.l0 7 Congn?ssional Quae* Almanac, 1974, p. 611 8 Congessional PuarlerEy Almanac, 1974, Q. 618 9 Conpssional Recod, November 151991, Extensions of Remarks, E 3795 10 Congressional Record, January 14,1991 S 480 5 count on their lowest rates for ads p u rchased with the vouchers or with other funds. Senate candidates would get a 75 percent discount on first class mail (or 2 cents less for third class), up to 5 percent of their general election limit. Finally candidates would receive government matching f u nds to totally offset inde pendent expenditures (spending by non-candidates) over $10,000, and to offset spending by candidates who refuse to comply with the limits Non-complying can didates would also be forced to include disclaimers in their advertising All told thewirious add-ons andsubsidies could triple the advertised limits.ll ternative would have restricted PACs and bundling in ways similar to S. 3, but would have also restricted unregulated labor union spending, and enhanced the role of political p arties. The Republican plan did not include spending limits or public funding.

The House Bill. H.R. 3750 also contains complex spending limits, new regula tions, public financing, and advertising subsidies, accompanied by undefined new taxes and fees to pa y for public financing. The centerpiece of H.R. 3750 is a 600,000 voluntary limit on total campaign spending, with restrictions on sour ces in three categories. One-third of a candidates money could come from PACs one-third in large individual donations ( t hose between $200 and $1,0000 and up to one-third in public funds matching up to $200 of individual donations. The over all spending limit would be increased by $l00,OOO in the case of primary runoffs and by another $150,000 if the Winning primary margins was less than 10 percent.

House candidates would not receive vouchers or advertising discounts as in the Senate bill, but would be eligible for generous postal discounts. Ue their Senate colleagues, House candidates would get federal funds to offset indep endent expen ditures and spending by candidates who ignore the spending limits. Also like S. 3 H.R. 3750 would extend federal regulation to many groups and activities for the first time. A Republican proposal, which would have required a majority of funds to be raised in a candidates district, was defeated on the House floor.

Agreeing to Disagree. It is important to note that while the stated objective of both bills is to clean up campaigns, the House and Senate have apparently agreed to disagree on how to do it. Two years ago the House and Senate passed competing versions of campaign finance legislation, but failed to reach a com promise in conference -with each side holding out for provisions it felt were vital.

The Senate has now passed a bill that appl ies only to Senate races, while House legislation applies only to House races. Breaking all precedent, apparently the two legislative bodies intend to pass a bill with two entirely different sets of regula tions cobbled onto each other, one set tailored t o the needs of House incumbents the other set designed for Senators S. 3 was approved by the Senate by a vote of 56-42 last May

23. A Republican al 11 Senate biU, Cbnpssional Record, January 14,1991, p. S. 465 l2 GmgmsiondRecord, November l2,199l, pp. E 3 795,3796 6 If the bills are both intended to keep campaigns clean, why could not the House and Senate agree on provisions at least roughly similar in principle? Why, for in stance, would the Senate view PACs as evil special interests and abolish them whil e the House would perpetuate the five-fold PAC advantage in donation limits? Why would one scheme emphasize discounted postal rates, and the other focus on radio and TV broadcast prices? The answer is that, given the different dynamics of their campaigns t he favored funding and expenditure sources in each bill are.those-most. favored by House or Senate incumbents, respectively.

There is no reason to believe that these new and more complex schemes will succeed where the 1974 reforms failed. The details of the House and Senate bills may change in conference, but each of the major elements spending limits public financing and burea u cratic regulation of political activities -are so fun damentally flawed that any likely compromise will impede competitive elections SPENDING LIMITS Spending limits appear to be an appropriate response to concerns over soaring campaign spending. In 1976, only 31 House candidates spent over $200.4

00. In 1990,428 candidates spent over $2OO,O00, and 168 spent over $500,0

00. The Keating Five and other fund-raising related scandals have raised concerns about widespread corruption of the political process. Bu t in actuality spending limits only work to the incumbents' advantage. Challengers, who are not often subject to the temptations of influence-peddling or vote-selling, have a far greater need for substantial campaign treasuries than incumbents In fact, sp e nding limits would cripple the ability of the few challengers capable of raising strong support to overcome the long odds. One analysis of the 1990 House elections concluded that a challenge's ability to raise money was the deter mining factor: "For chall engers spending between 250,000 and $500,000, the odds against winning were 11-

1. Those who spent $500,000 or more faced 6-1 odds, while those who spent less than $300,000 lost in every case."14 Particularly disastrous for challengers is the three-fold di vision of limits in the House bill While an incumbent should have no trouble reaching his limit in each category, challengers may be hard pressed to raise 200,000 from incumbent loving PACs. A challenger can make up for a dearth of PAC funds only by raisi ng money in the least efficient and most costly way from small individual contribu tions under $2

00. In other words, challengers may have to find 1,OOO or more in dividual contributors to offset an incumbents' built-in PAC advantage. Further H.R. 3750 ret ains the regulatory disparity between PAC and individual Contribu tions, allowing PAC donations of $5,000, but limiting individual contributions to l,O00, while S. 3 makes the constitutionally questionable attempt to prohibit PACs from making any contribu t ions in Senate elections 13 Htal Statistics on costgr#Fs, 1991-1992, p. 76, Table 3-3 14 "Challengers Fall Further Behind in 1988 July 24-30,1989, Roll Gdl, p. 8 7 The spending limits written into H.R. 3750 are far from arbitrary. Because in cumbency offe r s tremendous advantages, a challenger has to spend a significant amount to become competitive. When the challenger reaches this level, additional spending by the incumbent is less and less effective.15 In the 1988 campaign, the mean expenditure of challen g ers who beat House incumbents exceeded $600,000 the limit under H.R. 3750? The limit is just below the amount challengers need to get a message across, and almost assures that even a strong challenger cannot overcome the advantages of incumbency. Clearly, legislation designed to hold down challenger spending is an incumbent reelection bill, and H.R. 3750 would cap challengers below this competitive level with scientific exactitude. Should a challenger choose to give up the incentives in the House bill for a n opportunity to raise more funds, he is equally disadvantaged. As soon as a non-complying can didate raises $WO,OOO, his opponent has his $600,000 limit removed and becomes eligible for unlimited federal matching funds. The punitive nature of these provi sions is evident from the fact that the advantages kick in at a point at which the publicly-funded candidate may have a two-to-one spending advantage. The trigger point is also the level at which challengers have any chance of defeating an incumbent.

Spend ing limits have also run afoul of the First Amendment. According to the Supreme Court ruling in Buckley v. Virleo, mandatory spending limits can prevent citizens from meaningfully supporting a candidate. Any spending limit amounts to a contribution restri c tion on citizens, negating their right to influence an election for the candidate of their choice. While the spending limits in S. 3 and H.R. 3750 are advertised as voluntaxy, they are for all practical purposes man datory to challengers, because exceedin g the limits would trigger a windfall of public money for their opponents. In fact, the structure of offsetting funding to counteract challenger or independent campaign spending is so coercive that it may well be disallowed by the Supreme Court. The Federa l subsidies triggered to offset independent efforts, in particular, may run afoul of the Buckley decision which ruled that restricting independent campaign expenditures was an uncon stitutional encroachment on free speech.

Spending limits are simply unwork able. Those written into S. 3 and H.R. 3750 are so porous to anyone familiar with the legislative arcana of the bills that they amount to little more than a rhetorical ploy. To the initiated (incumbents and their legislative assistants who wrote the rules ) the exemption of PAC donations for accounting purposes, exceptions for primaries and runoff elections, and other loopholes virtually negate the limits provided by Representative Dick Gephardt (D-MO Tbe 1988 Gephardt One example of how incumbents have avo i ded mandatory spending limits was 15 CMpaign Finance Refom: The Case for Demgulation, Tallahassee, n: The James Madison Institute of Policy 16 Htd Statistics on Gmgms, 1991-1992, p. 82, Figure 3-2 17 Buckley v. Vdeo, 4% US 1,19 (1976 studies, p. iii 8 pre s idential campaign used a technicality in the Federal Election Commission FEC) rules to construe campaign ads as fund-raising expenses, which were not subject to the limits. After reviewing his claim, the FEC arbitrarily assigned half of Gephardts televisi o n buy in the Iowa primary toward fund-raising costs, admitting that it could not make an informed accounting The Commission did disallow Gephardts effort to deduct 25 percent of all his Iowa expenses as a national cam paign exemption.18) Gephardt received nearly $3.4 million in Federal matching The FEC found such gamesmanship common in regard to state-by-state spend effort in high-priority neighboring states such as funds for his presidential race ing limits, which Presidential candidates must comply with i n order to obtain Federal primary matching funds. One popular technique is to rent cars in one state and use them in a cam ai Iowa or New Hampshire. Gh%arly, candidates frequently cross state lines to find lodging so that expenses can be shifted from one s tate to another Aside from the tricks used to evade limits, the bureaucratic burden of tracking campaigns often makes enforcement irrelevant. Four years after the fact, the Federal Election Commission is still tracking spending for the 1988 Presidential r a ce. New Hampshires 1990 Congressional elections, which were the first with a system of voluntary spending limits, were plagued by problems of enforcement and accounting of independent expenditures, leading to dissatisfaction among many of the participants . Former Representative Chuck Douglas (R-NH) has charged that the New Hampshire law enables somebody to overspend in the elec tion by waiting to report expenditures until the final weeks of the campaigx Congress has repeatedly turned a deaf ear to the FECs longstanding request to eliminate the state-by-state limitations on expenditures for publicly financed Presidential primary candidates The 1990 annual report of the FEC states that abolishing state-by-state limits would eliminate some rather wbersome requ irements of the Federal Election Campaign Act that have become a burden for all campaigns to follow, as well as for the Commission to track and enforce; yet the limitations could be removed with no significant impact on the process.

Instead, Congress now p roposes to impose restrictions on all 535 House and Senate races as well. If the restrictions for the few presidential primary candidates have become a burden, Congress proposals are a guaranteed bureaucratic nightmare. And at the glacial pace the FEC is a ble to investigate violations now accounting for 1992 campaigns might be completed by the turn of the century 18 Auditors Still Tracking 88 Trail for Signs of Errant Spending, Wrrshington Parr, July l5,1991, p. A9 19 hid 20 The Great N.H. Campaign Spendin g-Limit Experiment Proves Less Than a Big Success, Roll Coll, January 14 1991, p. 8 9 The spending limits in the new campaign reform bills are begging to be broken.

By signing up for the limits, candidates receive vouchers for broadcasting, reduced mail ra tes, and matching funds, while repercussions for breaking the limits will be slight. The systems implemented by both bills call for random audits of about one tenth of the candidates; so each candidate has a 90 percent chance of going com pletely monitore d . Should a candidate be audited, the audit will be completed long after the election With candidates secure in office, FEC penalties for viola tions will be toothless. A candidate found guilty of breaking spending limits will merely be fined, a small pric e for the ph, zkd incumbents will find it easy to recoup such losses. There are not even penalties for refusing to cooperate with the audit process, which encourages stonewalling.

PUBLIC FINANCING TAXPAYER FUNDING, GOVERNMENT CONTROL In making the case for S. 3's public financing provisions, Senate Majority Leader George Mitchell stated I recognize there will be those who will be concerned that taxpayers could be asked to help pay for cleaner more competitive campaigns. But this isn't a novel idea; we have been doing it in Presidential elections since 19

76. The cost of this is quite minor and like the presidential system would be finan2yd by the voluntary checkoff system on the tax return.

Apparently Senator Mitchell has not looked closely at the FEC repo rts to Con mart3 Funding Shortfall Presidential Campaign Fund gress. The commission projects that the Presidential campaign fund will begin running a deficit beginninz?gin February or March of this year. By 1996, that deficit will be in excess of 150 mill i on See Chart 3.) Thus, the FEC has recommended that this voluntary checkoff system" be changed to an appropriated account. In other words, an election tax, paid out of the federal government's operat ing revenues. Of course, this is true of the current ch e ckoff system for the Presidential campaign fund. Because it does not affect a taxpayer's bill, dollars are diverted ?om general tax revenues which would otherwise be available for other government programs 21 Congmsional Recod, January 14,1991, p. S 479 2 2 Federal Election Commission Annual Report 1990, Washington, D.C: p. 3,1991 10 Americans clearly do not want government financing of campaigns. The number of contributors to the Presidential election fund has declined by nearly 10 million since 1981, and the Federal Election Commission expects a $100 million shortfall in the Presidential Fund by 19

96. When put to popular vote, Proposition 70, a public financing proposal for state legislative races was defeated in California last year. The public financing provisions in both the House and Senate bills promise to be extremely costly The Senate version covering only the costs of Senate.races was-estimated

the Congressional Budget Office (CBO) to cost the federal government alone 91 million in one Senate election cycle. This figure does not include the hundreds of millions of dollars that mandatory discounted air time will cost the broadcast industry, and consequently, American consumers.

One estimate has placed the cost of S. 3 at over a billion dollars.25 Make Democracy Work for Incumbents: When Is a Tax Not a Tax CBO estimates that H.R. 3750 could cost over $115 million every two years figure, too, excludes the cost of postage and broadcast subsidies. Yet the bill contains no rev e nue-raising provisions. Were working on a mechanism to put off the delicate question of how to fund the public matching portion of the package, said House Administration Committee Chairman Charles Rose on the eve of the bills passage.n Proposals include f e es on FEC filings, limiting tax deductions for businesses and unions and voluntary donations to a Make Democracy Work fund. As mentioned, however, the prospects for substantial voluntary funding are poor. The other funding options amount to further govern ment expenses, which will ultimately be borne by individual taxpayers and con sumers, even if the direct taxes are levied on businesses. In addition, using taxes to pay indiscriminately for campaigns compels associations or individuals to pay to support v iews that may run completely contrq to their own, thereby adding to the bills First Amendment problems.

The David Duke Party?

Another danger of public financing is illustrated by the Presidential primary financing scheme. The first candidate to qual

for 1992 matching funds was not George Bush or a major Democratic hopeful, but third-party candidate Lenora Fulani. Fulani, of the leftist New Alliance Party, qualified for nearly $1 million in matching funds in the 1988 campaign. Former Ku Klux Klan member D avid Duke may soon qual for Federal subsidies for his 1992 presidential campaign. Politi cal extremists of all stripes find the lure of free tax dollars too attractive to pass up. In order to be fair to challengers, a matching-fund threshold must be set l o w 23 Federal Eldon comrmssl on Recd, October 1991, Volume 17, No. 10, p. 2 24 Appeals Court Upholds Campaign Fmcing Law, Los Angdes Tunes, April 11, 1991, p. B1 25 One Billion Dollars and counting: the Costs of S. 3, Republican Policy Committee Issue Upda t e Campaign Finance Reform, April 19,1991 26 Washington Post, November 26,1991, p. A4 27 Cbngms Daily, November 22,1991, p. 2 11 But that low threshold attracts every kook with a cause and a mailing list to run for office in order to gain a platform, free m oney and, under the proposed Congres sional schemes, discounted postal and broadcast advertising rates In other words there would be David Duke and Lenora Fulani clones in hundreds of Congres sional districts and dozens of Senate races, with no chance of Winning a general election, but a good chance at obtaining some tax dollars and a little publicity.

This would drive up public financing costs drastically, and force the Post Office and broadcasters to subsidize fringe,political agendas or candidates.

Pub lic financing is particularly objectionable when used to enforce spending limits in campaigns, because spending limits disproportionately hinder chal lengers. Public financing will further mire elections in the morass of government regulations that alread y hamper challengers. Public financing is immensely expen sive and voters do not wish to be compelled to pay for election campaigns.

Government financing would give control of elections to the elected, severing one of the most effective controls exercised by citizens over elected officials -the ability to refuse funding or to contribute to an opponent.

REGULATORY NIGHTMARE The Code of Federal ReguZutions contains 262 pages crammed with regulations covering every conceivable element of campaigning and polit ical organization I ranging from vending machine sales to volunteers using their home computers for a campaign. Anyone who organizes a group to promote any federal candidate or cause is covered, and recordkeeping begins the first time a stamp or stapler i s used. These rules are constantly changing, due to legislation, regulatory adjust ments and the results of litigation. s. 3 and H.R. 3750 would add dozens of new provisions, and eventually hundreds of new regulations to federal election law.

Today the Fed eral Election Commission tracks relatively simple contribution limits for House and Senate campaigns and hands out public funds in one quad rennial election. Even so, the workload is immense. In 1990 the FEC Reports Analysis Division processed 57,982 docu ments and reviewed 34,726 reports. The Public Records office processed 1,134,974 pages of campaign finance material?

The Commission opens reviews of over 200 possible violations a year, requiring in vestigations and possible litigatioaB This occupies a full-time staff of over 250 employees, and will cost over $18 million in 19

92. To date, there have been no studies on the increase in workload, personnel and expense that can be expected should S. 3 and H.R. 3750 pass. However, the FEC would have responsibi lity for public financing in nearly 1,OOO times as many races over four years as they do under present law.3o 28 Fe&ml Election Commission Annual Report 1990, p 2 29 Federrrl Election Commission Annual Repi 1990, p. 15 30 The FEC would monitor 435 House r a ces twice, plus approximately 67 Senate races and several sped eldons every four years, a minimum of 937 additional races hvolvhg government subsidies or grants 12 Aside from the intrinsic flaws of spending limits and public financing, the sheer complexit y of the schemes in both campaign reform bills argues against their adop tion. The new bills would greatly increase the reporting and regulatory of the present system, which already hinders legitimate political activities.

The present legal regime imposes on candidates, political organizations and political activists a heavy and for campaigns in particular, a costly burden of compliance with the increasingly complex law. Constant change in legal rules sows considerable confusion within the regulated commun i ty, increases the cost of com pliance, and necessarily detracts from the efficient conduct of legitimate political activities. Moreover, the readiness to make repeated changes in the laws invites a struggle for partisan advantage which is waged in the nam e of sound public poli but actually serves the interest of electoral advantage This is a dangerous trend.

Regulation will always favor those who do the regulating. H.R. 3750 in par ticular, exemplifies this. House incumbents depen d heavily on PAC money, which makes up a large portion of their funding and which supports incumbents almost exclusively. Thus, the House bill limit for PAC contributions remains five times greater than that for individuals. This insures that PACs will re m ain an inordinate ly powerful incumbent protection device. The campaign legislation would also add to the administrative costs of those involved in political campaigns. The Senate bill includes an automatic 15 percent cost increase for legal and accountin g fees and the amount could go higher. This increase in expenses would be borne by every federal campaign, but would weigh heaviest on financially-strapped chal lengers. While S. 3 has fewer obvious disadvantages for challengers, its provisions are dauntin g in their complexity. There are twenty or more factors which may fig ure in determining the spendhg limit for a Senatorial candidate.

H.R. 3750 would aggravate many of the worst features of the existing campaign financing system. PAC growth, soft money an d bundling came about as responses to ill-advised efforts to regulate political activity. The overall complexity of S. 3 and H.R. 3750 would compound the problems caused by the original attempts at reform. The more intricate the election financing laws, t h e easier it will be for in siders to manipulate the system to their advantage, and the heavier the burden of compliance for candidates, especially inexperienced challengers. S. 3 and H.R 3750 would only multiply the hundreds of regulations, tens of thousa n ds of reports, and millions of pages of documents that already limit free political activity in America 3 31 Campaign Finance Refom A Report to the Majority and Minority Leader, United States Senate, Campaign Finance Reform Panel, March 6,1990, p. 3 13 In fact, so complex is the House bill that even the sponsor was confused. Shortly after..Representative Sam Gejdenson proclaimed public financing was essential to balance politically driven money with non-politically driven money32 in the Nau Yo& 7hes, he wa s em hasizing on the House floor that We do not have public financing in this bill.93And in their haste to pass the bill before going out of ses sion for Thanksgiving it was easy for members to overlook provisions buried deep within the pages of regulation s outlined by H.R 3750 One overlooked provision was a sense of the House resolution calling for legis lation to overturn the constitutional prohibition on involuntary spending limits enunciated by the Supreme Court in Buckky v. Vuleo. Another would require the FEC to record all donations over $50, rather than the current $200, a measure that would tremendously increase the bureaucratization of elections. And despite the anti-PAC rhetoric surrounding H.R. 3750, it actually increases by $S,OOO the amount PACs can contribute to national parties. There is even a provision, Title VII, that would allow members to keep amounts raised in excess of the limit in a separate account available for any lawfd purpose other than campaigning.34 As has occurred frequently in the past, campaign contributions could be used for ur poses such as country club dues, family travel, and meals at fancy restaurants.

But perhaps most disingenuous of the sleeper provisions in H.R. 3750 is Title XI, an attempt to seize bureaucratic control of the grassroots term-limitation movement by subjecting ballot initiatives affecting federal offices to the yoke of FEC reporting requirements. This unprecedented provision will regulate any group that organizes to influence popular ballot initiatives i n volving (A) inter state commerce the election of candidates for Federal office and the permis sible terms of those so elected; (C) Federal taxation of individuals, corporations or other entities; or (D) the regulation of speech or press, or any other righ t guaranteed under the United States Constitution. This provision sinks the talons of the federal government into almost any popular state referendum or initiative ranging from insurance refom to abortion and nuclear waste.

Perhaps most important to the pr ofessional politicians in Washington, however is the ability to regulate term-knit initiatives. This portion of Title XI will serve principally to bog down a populist threat to the perpetual governance of the Washington elite. Since most states already ha v e disclosure requirements for groups supporting ballot initiatives, this provision is simply a Congressional at tempt to squelch a grassroots effort to rein in the power of incumbency B 32 New Yonk Tunes, October 10,1991 p. B16 33 Congressional Recd, Nove m ber 25,1991, p. H11162 34 The Fine Print in the Campaign Reform Bill, Rdl MI, December 5,1991 p. 14 35 Roll Call, February 20,1995 p. 14 14 INCUMBENCY Inherent in all of the campaign finance reform proposals is a glaring double standard. Congressional ele c tion reform proposals consistently fail to factor the advantages of incumbency into the campaign finance equation. Free name recog nition belongs to incumbents simply by virtue of holding office. Behind from the start, a challenger has to spend money on f acilities, sa postage, computers, of fice equipment, research and other essentials to run a campaign. All this is on the taxpayers tab for incumbents.

Among the biggest advantages of incumbency is the ability to send out taxpayer financed franked mail. In 1990, the House exceeded its $44 million franked mail budget by between $31 and $32.8 million, and an attempt to tack yet another 25 million on the tab for mailing costs onto a Fiscal Year 1990 Dire Emergency Supplemental Appropriation bill failed in a vo t e on May 24 of that year. For tunately for the House, the vote [had no immediate effect on House mailing practices because, by law, the Postal Service must deliver franked mail regardless of whether Congress pays for it.37 Congress has steadily increased F ederal expenditures on these advantages. The Senate increased its Fiscal Year 1990 franking allowance of $24 million to $30 mil lion for 1991, and again to $32 million in Fiscal Year 1992, while the House ap propr#ion has exploded, from $59 million in Fis c al Year 1991 to $80 million for 1992 These figures do not include other costs associated with mass mailings such as labor and mailing lists, or the cost of pMting, which was estimated at $60 million in 1989,39 a nonelection year Public outcry against fran king abuses in 1990 forced the House to introduce some accountability into its franking practices with H.R. 5399, the Legislative Branch Appropriation for Fiscal Year 19

91. Prior to these reforms, there had been no disclosure of mailing costs in the House , and no limits on spending. H.R 5399 set a maximum spending limit per member calculated at three times the first class postage rate times the number of non-business addresses in a district.

The House Administration Committee moved almost immediately to negate the effect of the new limits by arranging a secret $250,O00 loan for a small com pany to develop computerized lists of registered voters for every Congressman.

The new lists, which should be ready for the 1992 campaign season, will allow in cumbents to target campaign-style mailings by age, sex and voting habits.40 Fur 36 H.R. 3014, Legislatk Branch Appropriations for FY 1990 37 Roll Calf, May 28,1990, p. 1 38 Arsenal of Hill Perks Leaves Incumbents Well-Armed, Washington limes, March 5,1990, p. A10 39 Wahingron Ties, March 5,1990, p. A10 40 With Innovations Like CD-ROM Voter Lists and Laser Printers, House Entering New Era, Rdl Calf, October 21,1991, pp. 18-19 15 ther, by excluding non-voters, incumbents can take credit for reducing costs while actu ally increasing the amount of election-related mail proved incumbents to be more than willing to use the power of office to give them selves election advantages On October 29,1991, the House defeated an amend ment to cancel the contract 231 to 1

82. Federally administered public financing will let these same incumbents abuse the rules governing financing campaigns in a similar' manner.

The average franking allowance is about $200,000 per year for each House member and 59O,OOO for the average Senator in 19

92. Onlilabout 8 percent of this avalanche of mail goes to answer constituent inquiries. The rest goes out as free PR to incumbents' districts. This advantage is compounded by the fact Con gress consistently sends out much less mail in off-election years, and increases the volume during election season, especially in the months immediately preceding an election, allowing some incumbents to spend much more than the average annual allowance figure during an election year. Further, a common practice among Se nators has been for those not running for office to transfer portions of their franking allotment to those facing tough election campaigns.

Transferring postage allowances from office to office and year to year allows Senate and House members to send out m uch more mail in a campaign season than the average allowance would suggest. Many Senators spend well over a mil lion dollars on franked mail in an election year, and some as much as three or four million. House members, too, can pour huge amounts of mail into a district during periods just before an election!2 One of the few positive features of S. 3 is its ban on election year mass mailings by Senators. Having admitted implicitly that such mailings are a campaign device, however, the Senate should follow its own logic and abolish political junk mail during the other five years of a Senate term.

The huge congressional staff is another taxpayer-financed resource that often contributes to incumbents' campaigns. Among frequent abuses, shuttling staff be tween the Washington office and campaign work is a widespread practice. In some cases, staffers take "extended leave" to work on their boss's campaign off the public payroll, but receive an inflated salary for a several months upon returning.

Some incumbents keep full-time campaign workers on campaign and congres sional payrolls contemporaneously. Incumbents' campaigns are often run out of the same building as their home state office, with rent paid principally by the tax payer. The Gating Fiv e investigation unearthed a campaign staffer who was directing the official business of a Senate office Even after the Committee's unorthodox plan came to light, a vote last fall 41 Senator Pete Wilson The Congressional Frank: A Simple Case of Abuse Herita g e Foundation LecnCre No 221 42 "Mail Incumbents' No. 1 Weapon Washington Tunes, February 5,1990, p. Al 16 The cost of the overall legislative budget., covering sw facilities, supplies, mail and other expenses for the operations of Congress has ballooned a t a rate far out pacing Mation, growing an astounding 1,709 percent since 19

60. The 1992 Con gressional budget., including Member salaries, is about $2.4 billio or $4.5 mil lion per Congressman per year. One reason for the expense is that the number of st aff Congress employs has virtually tripled since 1960 to 19,0oO, making it the largest legislative staff in the world nine times over.44 Since a large portion of Con gressional budgetsare used for free mail, constituentservice, publicity efforts, and othe r campaign-related activities, incumbents have a multi-million dollar head start on challengers.

These advantages of incumbency are not included under the campaign spending limits of either bill. If supporters of spending limits and public financing are se rious about reducing the cost of campaigning, these enormous incumbent expen ditures on mail, which drove up the amount a challenger needs to spend, have to be considered RECOMMENDATIONS If lawmakers are serious about a level playing field, the best way t o insure com petition is to help credible challengers compensate for the huge advantages of in cumbency. This could be done through easing measures that restrict contributions to challengers, or through measures to prevent incumbents from using their of fi ces for reelection. Neither S. 3 nor H.R. 3750 addresses either of these concerns.

Steps that should be taken toward this goal include 1) Cut Taxpayer-hded Congressional Mail. Using taxpayer money to fund campaign mailings is a clear case of abuse. Use of the Congressional frank should be restricted to answering constituent mail and for legitimate legislative business rather than for flooding a district with PR pieces If campaign reformers insist on spending limits, the limits for challengers should be rai s ed to match the amount spent on printing and postage by an incumbent in an election cycle, minus a generous 10 percent for the mail sent in response to con stituents. This would likely reduce one of the biggest hidden campaign costs publicly financed incu mbent mail, and would certainly raise the challengers limit enough to insure competition. The limit for House challengers would be in creased by approximately $200,000, and for Senate challengers by an average of over $700,000.

If campaign reformers insist on public financing, they could begin by offering to challengers the same public financing they already enjoy. They should give half of their allotment for mass mailings to their challengers. This would make chal lengers more competitive, reduce the othe r costs of campaigning, require no addi 43 Congressional Quarterly Special Report, where the Monty Goes, December 7,1991, Volume 49, p. 111 44 Saenz, Luis The Costly Congress Grows More Costly, Heritage Foundation Backpunder No. 832, May 30 1991, p. 4 17 t i onal taxes and would not cost an extra cent. In fact, knowing that for every dollar they spent from their mail fund one dollar would go to their challengers would probably drastically reduce the amount of taxpayer money incumbents thought necessary to con s tituent mail 2) Limit Campaigning by Staff. Tax dollars are funding Congressional reelec tion campaigns in many other ways. The use of Congressional staff for campaign ing, which is effectively unregulated, could be prevented by reducing the bloated Congr e ssional staffs, or by prohibiting campaign activity by Congressional staff as with Hatch Act limitations on other Federal employees. This would keep Congres sional staffers from being put to work on campaigns, and prevent tax dollars from being put to wor k for incumbents. Other uses of public money on materials useful primarily in campaigning, such as voter registration information, should be eliminated 3) Stop the Carryover of War Chests Incumbents make their seats impreg nable by saving unused campaign m oney from one campaign for use in the next.

By amassing huge war chests to make themselves virtually unbeatable, incumbents try to scare off potential challengers from even mounting a campaign. Prohibiting the carry-over of funds from one campaign to the n ext would serve to level the playing field for challengers and incumbents 4) Boost Challengers. Challengers often need a boost at the beginning of a cam paign just to get out of the blocks and into a race. Limits on contributions could be raised or elimin a ted for challengers in the early part of a Congressional race. Chal lengers with strong local or party support could then overcome an early handicap that plagues challengers 5) Edorce Beck. Big Labor loves incumbents, and remains extremely potent politica l ly. Labor funding is conscripted from the paychecks of union members, as suring a steady flow of cash that is largely used for political lob%g. The Supreme Court, in Beck v. Communkhm Workem of Americtz, mandated that unions must accounf to their members for the uses of dues, insisting that compul sory dues cannot be used for political purposes against the will of the dues payer.

However, the burden has been left to individuals to make unions account for dues spending through the courts. The Beck decision needs to be enforced to assure political freedom for members of labor unions. Beck should be codified, and unions held accountable for the use of members' dues 6) Defang Special Interests by Deflating PACs. The prhary cause of dispropor tionate special in t erest influence in our existing campaign finance system is the dif 45 Beck v. Communications Wwficers of America, 468 F.Supp.93 (Md.1979) The Supreme Court ruled that unions can use mandatory dues and fees only for purposes directly related to collective b argaining and contract administration At the time the Communication Workers union at the time was spending 79 percent of its funds on political activity.) More specifically, Beck allows workers to be refunded their money if they object to the political us e of their dues. However, the ruling is presently not administratively enforced, so workers generally must sue labor unions to obtain a refund 18 fering limits on PAC and individual donations. Anyone with a large stake in the political process is forced to operate through a PAC because it is five times as ef fective. Simply equalizing contribution limits for PAC and individual donors would greatly reduce the special interest focus of fundraising CONCLUSION The stated purpose of H.R. 3750 is to cap the ever e scalating costs of cam paigns; second, protect the ability of all individuals, and of modest means, to par ticipate in competitive election Federal campaigns; and hird, reduce the amount of time and energy spent in soliciting campaign funds The real aim o f campaign finance reform should be to make elections competi tive so that voters have real alternatives at the voting booth. The spending limits public financing, and bureaucratic complexity of H.R. 3750 and S. 3 fail to do so The bills passed in both hou ses only help Congressmen keep their jobs with less effort in fund-raising.

Spending limits are unworkable, increase challengers difficulties, and are of dubious constitutionality. Loopholes and lack of effective enforcement make the limits ineffective. In sofar as they serve to restrict contributions, they threaten free political activity and hinder challengers, who already face slender prospects of beating incumbents.

Government financing of elections would be enormously expensive, and Americans have demo nstrated that they do not want to foot the bill for politicians campaigns Any voluntary contribution system such as the Make Democracy Work fund will go broke, with the alternative being a combination of expensive requirements on broadcasters and the post office and tax money to subsidize politicians.

The complexity of the present system already contributes to the expense of elec tions, and especially injures non-incumbent candidates, magnifying the inherent advantages of incumbency. Intricate new rules an d more bureaucratization will only exacerbate present problems.

Genuine campaign reforms would allow voters a choice between competitive candidates on election day. This would best be achieved by reducing incumbent advantages rather than by increasing reg ulation and government control of elec tions. Contributions should be limited principally by public opinions. Disclosure rules allow voters to choose not to vote for a candidate if they deem certain private donations to be corrupting. That decision should remain with the voter however, rather than with government.

The American political system requires the same freedom it is designed to protect If elections are to be truly democratic, they must reflect the interests of in 46 GmgmsionalRecord, Extensions of Remarks, p. E 3795 19 $vidual citizens, not those in government. With the maze of contribution limits public matching funds, advertising subsidies and new regulations contained in S. 3 and H.R. 3750, federal lawmakers have designed a game only they can w in StexenkSchwalm Policy Anaiyst US. Congress Assessment Project

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