Eliminating political party "soft money" and regulating similar
spending by groups other than political parties are central
features of many proposals that would reform campaign financing.
Soft money (defined as money raised and spent outside the
regulatory structure for federal election campaigns) has played a
growing and increasingly controversial role in politics for a
decade; in fact, most of the fundraising abuses alleged to have
occurred during the 1996 elections involved soft money.
One of the leading reform proposals is the Bipartisan Campaign
Reform Act of 1997 (S. 25), introduced by Senators John McCain
(R-AZ) and Russell Feingold (D-WI). Both McCain-Feingold and H.R.
493, a companion bill introduced in the House by Representatives
Christopher Shays (R-CT) and Martin Meehan (D-MA) would impose
extensive restrictions and regulations on soft-money activities.
Another proposal from a group of House freshmen would ban
soft-money donations to political parties and impose government
regulation on "issue advertising" that refers to specific
candidates or officeholders. Shays, Meehan, and President Clinton
have petitioned the Federal Election Commission (FEC) to ban or
limit soft-money donations to political parties.
Efforts to ban, limit, or regulate soft money and related
spending such as issue advertising are complicated by
constitutional limits on government power, difficulties in defining
targeted activities, and the relative ease with which political
activists avoid targeted regulations that are constitutionally
- Most soft-money activities already have been approved by the
Supreme Court as exercises of First Amendment rights.
- While Congress has some authority to regulate national
political parties, even those regulations must be focused narrowly
on preventing fraud or corruption.
- Regulation of the soft-money activities of non-party groups and
individuals is both subject to the strictest constitutional
scrutiny and nearly always constitutionally invalid. Regulating
advertising because it includes the name or likeness of a public
official, for example, is clearly unconstitutional.
Congressional motives and interests also should be examined.
Campaign laws and regulations clearly tend to favor incumbents,1 and congressional statements
indicate that efforts to limit soft-money issue advertising are
motivated by incumbents' desire to suppress criticism of their
actions. In other words, it appears that some politicians are
trying to use public dissatisfaction with their own actions and
campaigns as an excuse to expand government regulation of, and
reduce citizen participation in, the political process.
In considering any limited steps it might take on soft money,
Congress should recall that existing practices are direct responses
to previous attempts to regulate political activity. As "hard
money" (direct expenditures on campaigns) was limited and
regulated, activists simply changed tactics. It is arguable that
total political spending has increased as a result; it is certain
that there is a less complete and less open accounting of such
spending, and wholly foreseeable that political activists will
discover legitimate ways to avoid any new regulations by pursuing
behavior that is more objectionable and less accountable than the
activities targeted by regulation.
Rather than embark on another pointless and constitutionally
suspect cycle of regulatory expansion, Congress should re-examine
existing regulations on hard money, lifting and easing regulations
in order to encourage donors and activists to move toward entities
like parties, campaigns, and political action committees (PACs)
that already are subject to regulation and disclosure. The real
solution to the problem of soft money lies in minimizing, not
expanding, government controls.
Roots of a Controversy
This controversy has arisen because of the size of certain
soft-money donations (over $1 million in some cases); the growing
use of soft money by political parties, labor unions, and other
groups; and certain practices involved in the raising of soft
money. White House coffees and sleepovers during the 1996 campaign,
for example, allegedly were associated with soft-money fundraising
efforts by the Democratic National Committee (DNC).
A series of laws passed in the 1970s2 limited the source and size of
donations to federal election campaigns and required the extensive
reporting and disclosure of campaign expenditures. These limited
and reportable funds became known as hard money: contributions made
directly to candidates by individuals and political action
committees. Certain spending, such as internal communications by
corporations and labor unions and spending on headquarters space by
political parties, was exempt from most regulatory requirements.
Other activities, like spending on state campaigns, were not
addressed by federal statutes.
In 1976, in Buckley v. Valeo,3 the U.S. Supreme Court struck down
significant parts of the Federal Election Campaign Act (FECA) and
established strict limits on the government's ability to regulate
political activity. Subsequent decisions expanding on
Buckley declared various activities by parties and other
groups to be exempt from the FECA and other government regulation.
Activities exempt from the FECA escape its donation limits of
$1,000 (for individuals) and $5,000 (for political committees),
bans on union and corporate donations, and requirements for
disclosure of donors and spending. As parties and other groups have
adjusted their tactics to take advantage of these features, soft
money has grown.
Originally, the term "soft money" was applied solely to labor
union spending for political advocacy among union members. Internal
activities could be financed by dues from the union's general
treasury; political communications with the general public had to
be paid for through voluntary contributions and reported to the
FEC. The distinction between "hard" and "soft" union activity goes
back to 1943 and 1947 legislative prohibitions on union donations
to, or spending on, elections.
After passage of the FECA, as political parties explored the
distinctions between regulated federal campaign activities and
other party functions, the term was applied to unregulated party
activities, including voter registration, headquarters
construction, and state and local political activity. Later,
politically active groups began to provide voter scorecards and
other printed materials under the "express advocacy" exemption
specified in the Buckley ruling. Issue-related television
and radio advertising became a significant factor in campaigns
beginning in 1994 when independent term-limits, tax reform, and
conservative religious groups ran ads to alert voters to
candidates' positions on various issues. In 1996, unions and
environmental organizations made extensive use of such issue
advertising, and business and independent conservative
organizations responded in kind.
In many 1996 races, this advertising by organizations
independent of candidates and political parties was seen as a major
factor. This had been the case in a few races in 1994, and only
rarely before that time.
As with non-party efforts, political party issue advertising had
been present, but generally as a minor factor, before 1996, when it
exploded in both scope and significance. Clinton advisor Dick
Morris cites the DNC's issue advertising effort as one of the key
elements in Clinton's re election.4 From 1992 to 1996, overall
soft-money receipts by the national political parties grew more
than threefold, from $86 million to $262 million. At the state
level, soft-money receipts appear to have grown even more rapidly
as a result of a vigorous Democratic effort to channel soft-money
donations directly to state parties.
The rapid growth in soft money means that these largely
unregulated funds represent a far larger proportion of total
political spending. Soft money represented just 16 percent of
national party receipts during the 1992 election cycle but 30
percent during the 1996 elections. The DNC, the most dependent on
soft money of all major party organizations, received almost 50
percent of its 1995-1996 income in soft dollar donations: $102
million as opposed to $108 million in hard dollars. Comparable
figures for the Republican National Committee were $113 million and
$193 million. Today, the term "soft money" is applied to activities
as diverse as an internal union newsletter touting a candidate
endorsement, the "Harry and Louise" ads on the Clinton health plan,
and donations to state political campaigns. The only common element
is that these activities are not regulated under the FECA.
Soft Money, Issue Advocacy, and Free Speech
The problems involved in regulating soft money begin with its
definition, as evidenced by the wide variety of activities to which
the term is applied. In terms of contributions to political
parties, soft money is a donation which is outside limits
established by the FECA, either because it is above specified
dollar limits ($20,000 per year for an individual) or because it
comes from a "prohibited source" (a corporation or labor union). In
terms of spending, soft money is literally anything other than
donations to, or spending in behalf of, federal election
Some soft-money proposals address only political party
fund-raising. President Clinton and House sponsors of the
Shays-Meehan bill have petitioned the FEC to take regulatory action
to ban or limit contributions to parties, other than those already
subject to the FECA. This appeal is based on the commonly repeated
(but incorrect) claim that the FEC "created" soft money. In fact,
it merely defined the parameters of regulation of campaigns and
political parties, establishing accounting rules to keep regulated
and unregulated activities separate and to allocate shared
expenses. Such regulations are essential, considering the limits of
the FEC's authority under the FECA and the Constitution. To argue
that because the FEC has defined certain attributes of soft money,
either the FEC or Congress can abolish or arbitrarily limit the
practice is the same as saying that Americans' political liberties
are granted by the government and may be altered or abolished at
Other soft-money proposals, such as one drafted by a bipartisan
group of House freshmen, would combine a ban on soft-money
fundraising by political parties with restrictions on issue
advertising by non-party groups. Still other legislation, including
the McCain-Feingold proposal (similar to the Shays-Meehan bill in
the House), would attempt to subject issue advertising and many
other soft-money activities to the same FECA regulations and
fundraising limits that now apply to hard-money activity.
Issue advertising by non-party ideological groups appears to
bother politicians. Senator Max Cleland (D-GA) called for new
regulations after being subjected to a barrage of ads in Georgia
urging him to vote for the ban on partial-birth abortions. The
problem with regulating such ads as if they were campaign
expenditures is that Cleland is only some six months into a
six-year term and will not face voters again until 2002. A "Blue
Dog Democrat" reform bill would limit such ads because the
"candidate risks losing control of the tone, clarity and content of
his or her own campaign."
Thus, the real reason for limiting issue advocacy is revealed:
Politicians do not want to contend with citizens bringing up issues
they would rather ignore. In a classic "I'm from the government and
I'm here to help you" story, politicians are attempting use
understandable disgust at their own campaign tactics as an excuse
to muzzle anyone who dares to criticize them: Republicans are
outraged by labor unions' issue ads; Democrats are outraged at
Christian Coalition scorecards; both types of ads are paid for with
soft money; and politicians from both parties are trying to figure
out how to stop them.
Perhaps the most striking expression of this attitude is the
declaration by House Minority Leader Richard Gephardt (D-MO) that
"What we have is two important values in conflict: freedom of
speech and our desire for healthy campaigns in a healthy democracy.
You can't have both."5 The truth,
however, is that these values are not in conflict: The First
Amendment's guarantee of freedom of speech was designed to ensure a
healthy democracy. One cannot exist without the other.
Can Congress Limit Soft-Money Donations?
The courts generally have insisted that Congress can regulate
only direct campaign spending that calls explicitly for the
election or defeat of a particular politician: what the Supreme
Court called "express advocacy" in its landmark 1976 decision in
Buckley v. Valeo. To do more than this would encroach
on the right to free speech. Freewheeling political debate would be
impossible if citizens or organizations had to wonder whether every
statement was or was not permissible. Therefore, regulations on
political discussions require a "bright line" test, with specific
words such as "vote for," "elect," or "defeat" required to trigger
Since 1976, the Supreme Court has referred to the Buckley
decision over 100 times in setting limits on the government's
authority to regulate political debate. In a 1996 case, Colorado
Republican Committee v. FEC,6 the Court stated very clearly that
the "FECA permits unregulated `soft money' contributions to a party
for certain activities." In making this ruling, the Court referred
not to any specific permission from Congress for soft money, but to
the Act's definition of "contribution," which was circumscribed in
Buckley to limit only "express advocacy" of the election or
defeat of a federal candidate. In other words, the right to
soft-money contributions rests in the constitutional limitation on
Congress's power to regulate speech. Among the implications of this
ruling is that Congress has no authority to regulate contributions
for or spending on state elections, even when those contributions
are made by, to, or through national political parties.
That political parties, or any other group of Americans, have a
right to spend unlimited amounts for politically oriented issue
advertising has long been clear; now the Supreme Court has
clarified that contributions for such purposes may not be
regulated. Buckley distinguished between spending by
campaigns and political committees, which may not be limited, and
contributions to those committees, which may be subject to limits.
Some argue by analogy that Congress might limit soft-money
donations to parties. Even ignoring the Supreme Court's flatly
contrary statement in Colorado, extending campaign
regulation to activities that, by definition, are not campaign
activities would be difficult:
First, the Supreme Court consistently has denied efforts
to regulate anything other than campaign funds and "express
advocacy" for or against a candidate.
Second, if groups other than political parties can
collect unlimited donations for soft-money activities, political
parties arguably have that same right under Colorado.
Third, Colorado suggests that it will be difficult
to show a potential for corruption (which is necessary to justify
donation limits) through donations to political parties.
Buckley specifically rejected an intent test in defining
spending to influence a federal election. To claim that soft money,
which by definition avoids express advocacy, influences elections
in ways that justify regulation flatly contradicts Buckley.
The Court even anticipated use of the express advocacy loophole
exactly as now objected to:
It would naively underestimate the ingenuity and resourcefulness
of...groups desiring to buy influence to believe that they would
have much difficulty devising expenditures that skirted the
restriction on express advocacy of election or defeat but
nevertheless benefited the candidate's campaign.
Colorado suggests that the Supreme Court will not buy the
argument that there is something unique about political parties
that legitimizes restrictions not imposed on other groups: "We do
not see how a Constitution that grants to individuals, candidates
and ordinary political committees the right to make unlimited
independent expenditures could deny the same right to political
parties." By similar reasoning, the ability of nonpartisan
organizations to collect unlimited donations for issue advocacy
would be extended to political parties.
If the Supreme Court did agree to revise its express advocacy
rulings, it would still require a showing of potential corruption
to legitimize limits on soft-money donations. Again, the
Colorado ruling presents a roadblock: "If anything, an
independent expenditure made possible by a $20,000 donation, but
controlled and directed by a party rather than the donor, would
seem less likely to corrupt than the same (or a much larger)
independent expenditure made directly by that donor."
By extension, the Court would find less danger of corruption in
soft money donations to parties than in direct (and undisclosed)
spending by individuals, unions, or corporations.
Despite the Supreme Court's clarity, regulators and attorneys
continue to advance theories to explain why it is acceptable to
bend the Constitution to stop some practice they consider
objectionable. Some argue that everything a political party does
must be related to electing candidates, so it might be acceptable
to limit party soft money. But even limits on soft money (well
short of a ban) appear to be off the table in the Colorado
ruling: "We do not see how a Constitution that grants to
individuals, candidates and ordinary political committees the right
to make unlimited independent expenditures could deny the same
right to political parties."
The right to make independent expenditures was established by
the same 1976 Buckley decision that declared soft money
beyond the power of government to regulate. Taken together, the
Buckley and Colorado decisions point inescapably to
the conclusion that political parties have a right to spend
whatever they wish on activities not directly related to federal
Can Congress Regulate Issue Advertising?
Limiting or requiring disclosure of soft-money issue advertising
by political parties and other groups will prove nearly impossible
under Buckley and other First Amendment rulings.
As Buckley makes clear, the Supreme Court requires
"express advocacy" to trigger federal regulation of political
advertising. The fact that issue discussions "tend naturally and
inexorably to exert some influence on voting at elections" makes no
difference. Noting that candidates "are intimately tied to public
issues," the Court acknowledges that "the distinction between
discussion of issues and advocacy of election or defeat of
candidates may often dissolve in practical application." It is for
this very reason that it crafted the express advocacy standard;
thus, arguing that certain issue ads are practically the same as
election advocacy is unlikely to strike the Court as
One Ninth Circuit case, FEC v. Furgatch,7 is slightly broader than
Buckley in its definition of express advocacy. The Supreme
Court did not review Furgatch, however, partly because the
FEC argued that it was based on a unique set of facts and unlikely
to be more broadly applicable. In addition, the Court had
reaffirmed its original Buckley express advocacy standard
only a month before, in FEC v. Massachusetts Citizens for
Even if one accepts Furgatch, it provides little
additional room for regulation, requiring that a communication be
"unmistakable and unambiguous" and present a "clear plea for
action" (to vote) about which there can be no reasonable doubt. "We
emphasize," the Court notes in Furgatch, "that if any
reasonable alternative reading of speech can be suggested, it
cannot be express advocacy subject to the [FECA's] disclosure
requirements." Illustrating the difficulty of attempting to
regulate in this area, most issue ads already contain appeals to
take some action other than voting, such as writing an officeholder
or letting a non-incumbent candidate "know what you think." Any
such appeal would make a Furgatch standard inapplicable. Any
slight expansion of "express advocacy" would cause interested
groups merely to recast their ads to avoid whatever bright line
test the courts approved.
Intent, Timing, and Identification of Candidates
Both Buckley and other cases explicitly reject any sort
of intent test for regulating speech. As Buckley again makes
clear, such tests put a speaker "wholly at the mercy of the varied
understanding of his hearers, and consequently of whatever
inference may be drawn as to his intent and meaning." A speaker or
an ad may well mean to support or oppose a candidate; but as long
as explicit appeals to vote are avoided, such speech may not be
Many proposals to regulate (or require disclosure of) issue
advertising focus on the identification of a candidate in a time
period before an election. This standard, however, reaches only
half of the express advocacy requirement. Blanket regulation of ads
simply because they contain a politician's name or image is clearly
unconstitutional. A specific election-related appeal would be
required to trigger regulation. Requiring advance notice of such
ads would excite particular scrutiny as a form of prior restraint
on free speech.
Lobbying and Broadcasting
Attempting to regulate issue ads as lobbying would prove even
more difficult than arguing that they were election-related. In its
1995 decision in McIntyre v. Ohio Elections
Commission,9 the Supreme Court
defined a right to anonymous pamphleteering even when the subject
of the advertising was an election referendum. Describing efforts
to influence public opinion as "core First Amendment activities,"
the Court specified that regulation of such activities is subject
to "exacting scrutiny" and must be "narrowly tailored to meet a
compelling state interest."
In McIntyre, the Ohio agency argued that a law requiring
disclosure of the author's name and address was needed to
discourage fraud or libel and to provide voters with a way to
evaluate materials. The Court ruled that a blanket disclosure
requirement was overly broad as a protection against potentially
misleading statements, and that the "informational interest" of
voters was "plainly insufficient" to justify mandatory disclosure.
The Federalist Papers arguing for the adoption of the
Constitution were printed anonymously, the Court pointed out. Issue
advertising unrelated to an election referendum would receive even
more protection than the McIntyre statements.
The practical limit on the number of broadcast licenses has been
advanced as an excuse for requiring mandatory disclosures regarding
issue ads on television. The Supreme Court has said that the
scarcity of broadcast licenses can justify a requirement that
broadcasters provide equal time for opposing viewpoints, and that
they be fair in their public affairs programming. But a requirement
that broadcasters be fair or balanced cannot be stretched to
justify regulating those who buy time from broadcasters. The fact
that statements are paid advertising rather than a publisher's (or
station owner's) own opinions makes no difference from a
constitutional standpoint. Congress may promote opportunities for a
variety of viewpoints to be heard, but it may not regulate groups
simply because they take advantage of those opportunities.
Political parties enjoy the same rights as other groups to
participate in political debates. Party spending cannot be limited
except for direct election spending coordinated with candidates,
and possibly not even then. Further, Congress cannot limit
donations to parties for activities which it cannot regulate
directly, including activities protected by the First Amendment and
state elections. Limits on spending or donations for activities
other than federal campaigns are beyond the power of Congress.
Congress can address divisions between regulated and unregulated
activities of political parties, but it cannot arbitrarily define
issue discussions, including advertising, as campaign-related.
Even if the Supreme Court allowed Congress to change the law to
limit political party soft money, we would be far worse off than we
are today. Once again, political activity would follow the line of
least resistance. Since the right of unions, business groups, and
others to conduct unlimited, unregulated, and unreported issue
advertising is clear, donors would turn to those groups, which are
far less accountable than political parties, to run the same sort
of ads we see today.
Politicians are aware of this dynamic, which is why they always
couple proposals to limit political party fundraising with efforts
to regulate public affairs discussions by labor unions, business
organizations, citizen groups, and even individuals. Rather than
just clean up their own campaign practices, President Clinton and
many Members of Congress want to regulate what everyone else has to
say about them. In other words, when politicians say "reform,"
citizens should run for cover.
Policymakers are struggling with the consequences of
constitutionally protected efforts to avoid regulation of political
activity. Adding new regulations and limits to the extent permitted
by the courts will serve only to add complexity and spur further
avoidance of regulated activities. Instead of adding new rules,
lawmakers should consider relaxing current rules to encourage
political activity to flow through minimally regulated and
1 David M. Mason and Steven
Schwalm, "Advantage Incumbents: Clinton's Campaign Finance
Proposal," Heritage Foundation Backgrounder No. 945, June
11, 1993, and Bradley A. Smith, "Campaign Finance Regulation," Cato
Institute Policy Analysis No. 238, September 3, 1995.
2 The Federal Election
Campaign Act of 1971, which was amended in 1974, 1976, and 1979,
and the presidential campaign funding provisions of the Tax Act of
3 424 U.S. 1 (1976).
4 Dick Morris, Behind the
Oval Office: Winning the Presidency in the '90s (New York,
N.Y.: Random House, 1996).
5 Michael Lewis, "A Question
of Honor: The Subversive," The New York Times Magazine, May
25, 1997, p. 32.
6 Colorado Republican
Federal Campaign Committee v. Federal Election
Commission, No. 95-489, 135 L.Ed. 2nd 795.
7 Federal Election
Commission v. Harvey Furgatch, No. 88-6047, 869 F. 2nd
8 Federal Election
Commission v. Massachusetts Citizens for Life, Inc., No.
85-701, 479 U.S. 238 (1986).
9 Joseph McIntyre, Executor
of Estate of Margaret McIntyre, Deceased, Petitioner v. Ohio
Elections Commission, No. 93-986, 514 U.S. 334.