86

Campaign Finance Reform:The Unfinished Agenda

By FRED WERTHEIMER

Fred Wertheimer is president of Common Cause, a national citizens’lobbying organiza-tion. He joined the organization as a lobbyist in 1971 and became president in 1981. He hasbeen Common Cause’s chief lobbyist on campaign finance reform and served as director ofits Campaign Finance Monitoring Project. Before joining Common Cause, he served asminority counsel to the House Small Business Committee, as legislative counsel toCongressman Silvio Conte, and as an attorney with the Securities and ExchangeCommission. Mr. Wertheimer is a graduate of the University of Michigan and Harvard LawSchool.

ABSTRACT: In 1974, following the Watergate scandal, Congress enactedmajor campaign finance reform legislation. The legislation created arevolutionary new public financing system for our presidential campaigns,but it left congressional campaigns to be financed totally by private money.The presidential public financing system has worked well. Despite someincremental problems, the system has accomplished its basic goal ofallowing individuals to run for the presidency without becoming dependenton their financial backers. The system for financing congressional cam-paigns, on the other hand, is out of control and in need of fundamentalreform. The inappropriate role of special interest political action commit-tees (PACs) in influencing congressional elections and congressionaldecisions is the single biggest problem facing the political process.Congress needs to complete the unfinished campaign finance reformagenda of the 1970s by enacting public financing for congressionalcampaigns and establishing new restrictions on the total amount thatPACs may give to a congressional candidate.

NOTE: The author wishes to acknowledge the important contributions made in the preparation ofthis article by Common Cause staff members Marcy Frosh, Carole Geithner, Randy Huwa, AnnMcBride, and Jane Mentzinger.

87

nUR democracy is founded on theconcept of representation. Citizenselect leaders who are given responsibil-ity to weigh all the competing andconflicting interests that reflect our

diversity and to decide what, in theirjudgment, will best advance the interestsof the citizenry.

It is obviously a rough system. It

often does not measure up to the idealwe might hope to attain. But we con-tinue to place our trust in this systembecause we believe our best chance at

governing ourselves lies in obtaining thebest judgment of elected representatives.

Unfortunately, that is not happeningtoday. We are not obtaining the bestjudgment of our elected representativesin Congress because they are not free togive it to us. As a result of our presentcongressional campaign financing sys-tem-and the increasing role of politicalaction committee (PAC) campaign con-tributions-members of Congress arerapidly losing their ability to representthe constituencies that have electedthem.We have long struggled to prevent

money from being used to influence

government decisions. We have notalways succeeded, but we have never lostsight of the goal. Buying influence vio-lates our most fundamental democraticvalues. We have long recognized thatthe ability to make large campaign con-tributions does, in fact, make somemore equal than others. In the mid-

1960s, for example, Senator Russell

Long, Democrat of Louisiana, observed,

One sweet woman was on the opposite side[in an election] and thought they were goingto lose and came charging in there with acouple of hundred thousand dollars to pumpup their side.... Anybody who wouldsuggest that she had no more influence than

any other sweet old lady in a calico dress justdoes not know anything about politics:’

Beginning in the early 1970s, Com-mon Cause and other election reform

groups pressed for fundamental changesin the campaign finance statutes. Thegoals were to end secrecy in campaignfinancing, to limit the influence of largecontributions, to enable candidates ofmodest means to seek office without

becoming beholden to campaign donors,and to increase competition in the polit-ical process. The reform agenda calledfor:

-effective campaign contributionand expenditure reporting require-ments ;

-limits on the size of individual and

group campaign contributions;-a system of public financing of

campaigns, including candidateaccess to federal funds and limitson spending; and

-effective enforcement by an inde-pendent agency.

This reform agenda took on a newimportance in the wake of Watergate,our nation’s greatest political scandal.Watergate revealed that our govern-ment was literally up for sale. The

money came in the form of funds con-tributed for the presidential campaign.As the then chairman of American Air-lines explained:

The law ... is based on a system by whichcandidates for public office must seek fundsfrom persons affected by the actions of suchcandidates when elected to office. The sys-

1. U.S., Congress, Senate, Committee onFinance, Hearings on S. 3496, Amendment No.732, S. 2006, S. 2965, and S. 3014, 89th Cong., 2dsess., 1966, p. 78.

88

tem provides no limits on the total amountthat may be raised or spent and hence placesa premium on pressure to raise greater andgreater amounts .

2

In its final report, the Senate Water-

gate Committee concluded that, as aresult of the systematic solicitation ofcorporate donors, 12 major corpora-tions gave approximately $749,000 inillegal contributions to the Nixon cam-paign.’ Corporate executives testifiedthat they succumbed to such solicitationsas a way of gaining access to administra-tion decision makers and also out of fearof experiencing competitive disadvan-tages if they failed to contribute. Saidone Gulf Oil executive, &dquo;I considered it

considerable pressure when two Cabinetofficers and an agent of one of thecommittees that was handling the elec-tion ... ask[ed] me for funds-that isjust a little bit different than somebodycollecting for the Boy Scouts.&dquo;

4

The Milk Producers Association’s

pledge of $2 million to President Nixon’sreelection campaign was linked in thepublic’s mind to the increase in milkprice supports. More than $1.8 millionin contributions to the Nixon campaigncame from people who received ambas-sadorial appointments during hisadministration.’

Reflecting on the meaning of Water-gate, John Gardner, founder and formerchairman of Common Cause, wrote atthe time:

In almost every aspect of Watergate, therewas one common element: the flow of secret

campaign cash. There are honest donors topolitical campaigns and honest recipients;but the existence of these does not outweighthe fact that the present system legitimizesthe buying and selling of politicians. Theold-style, flat-footed cash bribe has beenreplaced by the campaign gift, its all-purpose,prepackaged modern equivalent.’

The result of these revelations, notsurprisingly, was an alarming drop incitizens’ confidence in their government.Pollster Louis Harris in 1973 told aSenate committee that &dquo;public confi-dence in government generally must bereported as being lower than a constit-uent democracy can afford.&dquo;’

The nation’s greatest political scan-dal led to one of the nation’s mosthistoric and revolutionary reforms, thepublic financing of our presidentialelections. Congress enacted publicfinancing to prevent private campaigncontributions from being used as a vehi-cle for obtaining influence with the

president of the United States. Underthis system, limits were placed on thesize of contributions, overall expendi-tures were capped, and an alternativesource of campaign money was created:public funds generated by the dollarcheckoff on the federal income tax.’

2. D. Michal Freedman, The WatergateReforms: Ten Years After (Washington, DC:Common Cause, 1983), p. 16.

3. U.S., Congress, Senate, Select Committeeon Presidential Campaign Activities, FinalReport, 93rd Cong., 2d sess., 1974, p. 446.

4. Ibid., p. 471.5. Ibid., pp. 127, 492-93, 579. See Fred

Wertheimer and Randy Huwa, "CampaignFinance Reforms: Past Accomplishments, FutureChallenges," New York University Review of Lawand Social Change, 10:44 (1980-81). Unless

otherwise noted, figures used in this article arebased on analyses prepared by Common Cause ofcampaign finance disclosure statements filed withthe Federal Election Commission.

6. Freedman, Watergate Reforms, p. 17.7. U.S., Congress, Senate, Committee on

Government Operations, Hearings on a Survey ofPublic Attitudes, 93rd Cong., 1st sess., 1973,pp. 6-8.

8. FECA Amendments of 1974, Pub. L. No.93-443, §§ 101-302, 88 Stat. 1263 (1974) (codifiedas amended in scattered sections of 2, 5, 18, 26, 47U.S.C.).

89

Unfortunately, the same progresswas not made at the congressional level.Although Congress established limitson contributions by both individualsand PACs and placed limits on overallexpenditures,9 members of Congresswere unwilling to take the last crucialstep-to establish an alternative publicsource of campaign funds for their owncampaigns. While congressional publicfinancing was passed by the Senate, theHouse narrowly rejected it, by a vote of187 to 228, and the provision wasdropped in conference. At the same

time, in a major step backward and overthe objections of reform groups, Con-gress opened the door for an increasedrole in special interest giving by repeal-ing a prohibition on the formation ofPACs by government contractors. 10 Asa result of these actions, campaign con-tributions remain a powerful vehicle forobtaining access and influence in theUnited States Congress.

The presidential and congressionalcampaign-financing systems thus requiresharply different types of reform today.Comprehensive legislation must beenacted to remedy the defects in thesystem for financing congressional cam-paigns. Limits on overall PAC receiptsmust be established. A public financingsystem must be created to provide over-all spending limits and adequate alter-native funding so that candidates are nolonger dependent on special interest

group contributions. In contrast, the

system of financing presidential cam-paigns has already been successfullytransformed. While significant adjust-ments are needed in order to deal with

new problems that have arisen, such assoft money and independent expendi-tures, these changes are required to

preserve the integrity of an existingsystem that has accomplished its basicgoals.

PRESIDENTIALPUBLIC FINANCING

Simply stated, the presidential publicfinancing system is an idea that works; itis the crowning achievement of theamendments adopted in 1974 to the

Federal Election Campaign Act. Underthe system, candidates who agree to

abide by limits on overall campaignspending and the expenditure of per-sonal wealth are able to receive federaltax dollars, funds designated to a sepa-rate account by individual taxpayers.Public funds are available to match

small private contributions raised bycandidates during the nominating pro-cess ; for the general election, major-party candidates are entitled to full

campaign funding with public dollars.In the three elections for which this

new system has been in place-1976,1980, and 1984-presidential publicfinancing has been successful. Thirty-four of the 35 major party candidatessince the law was passed have chosen toparticipate in this voluntary system. Pres-idential public financing has checkedthe increase in presidential campaignexpenditures. Presidential contendersno longer must &dquo;tin-cup it around the

country&dquo; in search of campaign funds.’ ‘

In contrast to the presidential contest of1972, candidates are no longer dependenton a relatively few fat-cat contributors;rather, the funding base for campaignsis broad. PAC contributions play a

9. The limits on overall expenditures werestruck down by the Supreme Court in the land-mark case Buckley v. Valeo, 424 U.S. 1(1976).

10. Act of 14 June 1940, chap. 640, § 5(a), 54Stat. 772 (repealed 1976).

11. "Fat Cat as Endangered Species," Wash-ington Post, 26 June 1980.

90

minor role in presidential campaigns.PACs gave less than $1.5 million to 1984

presidential candidates, or less than 2percent of the total funds raised. As theNew York Times has observed, &dquo;Public

financing confers on Presidential candi-dates the freedom not to grovel.&dquo;’2

Public financing also confers anadded freedom to govern without the

strings attached by large donors or

public suspicion that such strings exist.The Carter and Reagan presidencieshave been relatively free of the hint thatgovernment favors have been traded for

large campaign contributions. Stories

linking the influence of campaign contri-butions with official actions in the legis-lative branch are common;’3 for theexecutive branch, very rare. The Com-mission on National Elections, headedby Melvin Laird and Robert Strauss,concluded,

Public financing of presidential elections hasclearly proved its worth in opening up theprocess, reducing undue influence of indi-viduals and groups, and virtually endingcorruption in presidential election finance.

This major reform of the 1970’s should becontinued

CONGRESSIONALCAMPAIGN FINANCING

While the presidential campaignfinance system stands as a model for

reform, the congressional campaign sys-tem is out of control and in need offundamental repair.

The last decade of congressionalcampaign financing has been marked byan exponential increase in the numberof PACs formed by corporations, laborunions, trade associations, and othergroups. In 1974 there were 608 PACs.

Today there are more than 4000.This explosion in PACs can be traced

to congressional action-and inaction-in 1974. Ironically, at the very time whenmembers of Congress were acting toclean up presidential elections, theyopened the door for PACs to enter thecongressional arena in an unprecedentedway. The key to the PAC explosion wasa provision attached to the 1974 law bylabor and business groups, over the

opposition of Common Cause and otherreform advocates, that authorized gov-ernment contractors to establish PACs. ~ ~In addition, by creating public financingfor presidential campaigns, but not forcongressional races, the 1974 amend-ments focused the attention and interestof PACs and other private campaigndonors on Congress.

The resulting growth in PACs was noaccident, and it certainly was not areform. The growth of PACs, moreover,is certainly no unintended consequenceof the 1974 law-the provision was

12. "Sneak Attack on Campaign Finance,"New York Times, 3 June 1985.

13. See, for example, Common Cause, HowMoney Talks in Congress: A Common CauseStudy of the Impact of Money on CongressionalDecision-Making (Washington, DC: CommonCause, 1979); Wertheimer and Huwa, "CampaignFinance Reforms: Past Accomplishments, FutureChallenges," pp. 49, 51, 52, 53; Walter Isaacson,"Running with the PACs" Time, 25 Oct. 1982,pp. 20-26; Brooks Jackson and Jeffrey Birnbaum,"Dairy Lobby Obtains U.S. Subsidies with Helpfrom Urban Legislators," Wall Street Journal, 18 Nov. 1983; Judith Bender, "The PAC Game on

Capitol Hill," Newsday, 12 Mar. 1984; BrooksJackson, "PAC Helps Push Pet Electric Bill,"Wall Street Journal, 29 Mar. 1984; and JeffreySheler and Robert Black, "Is Congress for Sale?"U.S. News and World Report, 28 May 1984,pp. 47-50.

14. Report of the Commission on NationalElections, Executive Summary (Washington, DC:Georgetown University, Center for Strategic andInternational Studies, 1985), p. 7.

15. 2 U.S.C. § 441c(b) (1976).

91

included to protect and enhance the roleof PACs in financing campaigns, and ithas.

This tremendous increase in the

number of PACs has not resulted inbalanced representation in Washington.As Senator Gary Hart, Democrat ofColorado, has told the Senate:

It seems the only group without a well-heeledPAC is the average citizen-the voter who

has no special interest beyond low taxes, anefficient government, an honorable Congress,and a humane society. Those are the demandswe should be heeding-but those are thedemands the PACs have drowned out.’6

In fact, the increasing number of PACshas largely served to increase the abilityof single interests to bring pressure tobear on a congressional candidate or amember of Congress. There are morethan 100 insurance company PACs,more than 100 PACs sponsored byelectric utilities, and more than 300sponsored by labor unions. Representa-tive David Obey, Democrat of Wiscon-sin, has observed that frequently in

Washington

an issue affects an entire industry and all ofthe companies and labor unions in that

industry.... When that occurs, [and] a largenumber of groups which have made substan-tial contributions to members are all lobby-ing on the same side of an issue, the pressuregenerated from those aggregate contribu-tions is enormous and warps the process. It isas if they had made a single, extremely largecontribution.&dquo;

The increase in the number of PACs,not surprisingly, has also produced a

tremendous increase in PAC contribu-tions to congressional candidates. In

1974, PACs gave $12.5 million to con-

gressional candidates. By the 1984 elec-tions, their contributions had exceeded$100 million, an eightfold increase in tenyears.PAC money also represents a far

more important part of the averagecandidate’s campaign funds than it didten or so years ago. In 1974,15.7 percentof congressional candidates’ campaignmoney came from PACs; by the 1984election, that proportion had increasedto 30 percent.

Yet these numbers only begin to tellthe story. The increased dependence onPAC contributions has been greatest forwinners, those individuals who serve inCongress and who cast votes that shapeour daily lives. In the Ninety-ninth Con-gress (1985-86), over 150 House mem-bers received 50 percent or more of their

campaign funds from PACs, includ-ing 20 of the 27 committee chairs andparty leaders. House winners in the 1984election received an average of 41 per-cent of their campaign dollars fromPACs. Of all winning House candidatesin the 1974 election, only 28 percentreceived one-third or more of their cam-

paign funds from PACs. By 1984, thatfigure had grown to 78 percent.

For senators, PAC contributions arealso becoming a more important sourceof campaign dollars. Senators elected in1976 received a total of $3.1 millionfrom PACs; Senate winners in the 1984election raised $20 million from PACs.In the 1984 elections, 23 winning Senatecandidates raised more than $500,000each from PACs.Some have suggested that the growth

in PACs is an important new form ofcitizen involvement in the politicalprocess. Yet PAC participation is often

16. U.S., Congress, Senate, CongressionalRecord, 99th Cong., 1st sess., 131(165):16683.

17. Statement of Congressman David R.Obey, Democratic Study Group, 26 July 1979,quoted in Fred Wertheimer, "The PAC Phenom-enon in American Politics," Arizona Law Review,22:622-23, n. 114(1980).

92

likely to be more of an involvement inthe corporate process or the union pro-cess or the trade association processthan it is in the political process.University of Minnesota professor FrankJ. Sorauf has noted:

To understand political participation throughPACs, we need also to note the nature of the

participation. Some of it is not even politicalactivity; buying a ticket in a raffle, the

proceeds of which go to a PAC, a party, or acandidate, does not qualify as a political actby most standards. Even the contributoryact of writing a check or giving cash to aPAC is a somewhat limited form of partici-pation that requires little time or immediateinvolvement; in a sense it buys politicalmercenaries who free the contributor fromthe need to be personally active in the

campaign. It is one of the least active formsof political activity, well suited to the verybusy or to those who find politics strange,boring, or distasteful.&dquo;

In fact, the growth of PACs and theincreased importance of PAC moneyhave had a negative effect on two dif-ferent parts of the political process-congressional elections and congres-sional decision making. First, PACmoney tends to make congressional cam-paigns less competitive because of theoverwhelming advantage enjoyed byincumbents in PAC fund-raising. Theratio of PAC contributions to incum-bents over challengers in 1984 Houseraces was 4.6 to 1.0; in the Senate, incum-bents in 1984 enjoyed a 3.0 to 1.0 advan-tage in PAC receipts. On the average,1984 House incumbents raised $100,000more from PACs than did challengers.This $100,000 advantage was true evenin the most highly competitive House

races, those in which the incumbentreceived 55 percent or less of the vote. Inthese races, incumbents received an aver-

age of over $230,000 from PACs; theirchallengers received less than $110,000.The advantage enjoyed by incumbents istrue for all kinds of PAC giving-forcontributions by labor groups, corpo-rate PACs, and trade and membershipPACs.

Second, there is a growing awarenessthat PAC money makes a difference in

the legislative process, a difference thatis inimical to our democracy. PACdollars are given by special interest

groups to gain special access and specialinfluence in Washington. Most often,PAC contributions are made with a

legislative purpose in mind. The lateJustin Dart, former chairman of DartIndustries, once noted that dialoguewith politicians &dquo;is a fine thing, but witha little money they hear you better.&dquo;’9Senator Charles Mathias, Republicanof Maryland, has stated:

An official may not change his or her votesolely to accommodate the views of suchcontributors, but often officials, includingmyself, will agree to meet with an individualwho made a large contribution so the officialcan hear the contributor’s concerns andmake the contributor aware these concernshave been considered.... Since an electedofficial has only so much time available, theinevitable result of such special treatment forthe large contributor is that other citizens aredenied the opportunity they otherwise wouldhave to confer with the elected official.2°

Common Cause and others have pro-duced a number of studies that show a

relationship between PAC contributions

18. Frank Sorauf, "PACs in the AmericanPolitical System" (Background paper, TwentiethCentury Fund Task Force on Political ActionCommittees, 1984), pp. 82-83.

19. "Companies Organize Employees andHolders into a Political Force," Wall Street

Journal, 15 Aug. 1978.20. Brief for Appellees, p. 53, Buckley v. Valeo,

424 U.S. 1 (1976).

93

and legislative behavior. The examplesrun the gamut of legislative decisions,including hospital cost containment, theClean Air Act, domestic content legisla-tion, dairy price programs, gun control,maritime policies, and regulation by theFederal Trade Commission of profes-sional groups or of used-car sales.&dquo;PAC gifts do not guarantee votes or

support. PACs do not always win. ButPAC contributions do provide donorswith critical access and influence; theydo affect legislative decisions and areincreasingly dominating and paralyzingthe legislative process.

In the last few years, something veryimportant and fundamental has hap-pened in this country-and that is thedevelopment of a growing awarenessand recognition of the fact that the PACsystem is a rotten system that must be

changed. We know that concern is grow-ing when Irving Shapiro, former chair-man and chief executive officer ofduPont and the former chairman of theBusiness Roundtable, describes the cur-rent system of financing congressionalcampaigns as &dquo;an invidious thing, it’s

corrupting, it does pollute the system.&dquo;22We know that concern is reaching

new audiences when Business Weekeditorializes that

fears are growing that the proliferation ofPACs ... is balkanizing the nation’s political

process as swarms of candidates and well-

heeled special interest groups jostle to tradepolitical favors for money.... It would behard to find a PAC that gives solely tosupport good government. Most see theircontribution as an investment in promotinglaws favoring their interests. 23

And Chemical Week warns:

[A] new force has intruded into our systemof representative democracy that, if un-

checked, could topple it or seriously hurtit. We refer to the phenomenon of PoliticalAction Committees.... The plain truthof the matter, no matter what gloss is puton it, is that PAC money aims at influ-

encing congressional action. The other sideof the coin is that new candidates and

incumbents alike become beholden to their

PAC benefactors. That’s the whole point,isn’t it?Za

Criticism of the PAC system is also

increasingly heard in the halls of Con-gress. More and more members from

both parties are speaking out aboutthe PAC problem. Consider the fol-lowing :

[The present campaign-financing system]virtually forces members of Congress to goaround hat in hand, begging for money fromWashington-based special interest politicalaction committees, whose sole purpose for

existing is to seek a quid pro quo.... thescandal is taking place every day and willcontinue to do so while the present system isin place.25PAC money is destroying the election pro-cess. It is breaking down public confidence in

21. See, for example, Common Cause, "HowMoney Talks in Congress"; Wertheimer andHuwa, "Campaign Finance Reforms: PastAccomplishments, Future Challenges," pp. 49, 51,52, 53; Isaacson, "Running with the PACs," pp.20-26; Jackson and Birnbaum, "Dairy LobbyObtains U.S. Subsidies"; Bender, "PAC Game onCapitol Hill"; Jackson, "PAC Helps Push PetElectric Bill"; and Sheler and Black, "Is Congressfor Sale?"

22. Nina Easton, "Swimming against theTide," Common Cause Magazine, 9(5):13 (Sept.-Oct. 1983).

23. "How to Curb PAC Power but Not Free

Speech," Business Week, 22 Nov. 1982.24. Patrick P. McCurdy, "Let’s Pack in the

PACs—All of Them," Chemical Week, 15 Aug.1984, p. 3.

25. Statement of Senator Thomas Eagleton, inU.S., Congress, Senate, Committee on Rules andAdministration, Hearings on Campaign FinanceReform Proposals of 1983, 98th Cong., 1st sess.,1983, p. 52.

94

free elections and it is ruining the characterand quality of campaigns. 21In addition, the growth in the influence ofPAC’s further fragments our Nation and itselected legislative bodies. It makes it increas-ingly difficult to reach a national consensusand hold[s] our decisionmaking processhostage to the special interests which PAC’srepresent.... We cannot expect Members of

Congress to act in the national interest whentheir election campaigns are being financedmore and more by special interests . 21

In addition to the growing role ofPAC contributions, the congressionalcampaign-financing system is also

marked by unlimited and skyrocketingspending. In 1974, House and Senatecandidates spent $77 million on con-

gressional races. Ten years later, Houseand Senate candidates spent a record$374 million, almost five times as much.

The cost of winning a seat in Con-gress is also rising dramatically. In the1975-76 election cycle, House winnersspent $38 million, an average of over$87,000 each. In the 1983-84 electioncycle, House winners spent $117 mil-lion, an average of $269,956 each. Onthe Senate side, winners spent $20 mil-lion in the 1975-76 cycle, an average of$606,060; in 1984 elections, Senatewinners spent $94.8 million, an averageof $2.9 million each.

About rising campaign expendituresSenator Goldwater has said,

Unlimited campaign spending eats at theheart of the democratic process. It feeds the

growth of special interest groups createdsolely to channel money into political cam-paigns.... And it causes elected officials to

devote more time to raising money than totheir public duties. 28

And Senator Eagleton has said on theSenate floor:

Throughout the last decade, the moneyfactor has exploded exponentially. Most ofus have our &dquo;tin cups&dquo; for alms-begging; ourcall lists to fat cats; our endless procession offundraising receptions; our direct mail pleas;and so forth.

The money race never ends. Senators startthe process in the early years of their 6-yearterms by &dquo;building a war chest&dquo; for their

reelection. House Members start on the

Wednesday after the Tuesday elections toamass the funds for the next go-around.29

THE CAMPAIGN FINANCEREFORM AGENDA

A number of changes in federal elec-tion law are needed if the campaignfinance reform effort begun over adecade ago is to be finished. In some

cases, unfinished business needs to be

completed. The foremost item of oldbusiness, of course, is a fundamental

restructuring of the congressional cam-paign-financing system. In addition, newproblems that have emerged in the yearssince Watergate need to be addressed.Adjustments to the presidential publicfinancing system-a system that is

fundamentally sound and that has dem-onstrated its effectiveness-need to bemade. A campaign finance reformagenda today should include congres-sional campaign finance reform, inde-pendent expenditures, and soft money,as well as other issues.

26. Remarks of Senator Barry Goldwater, inU.S., Congress, Senate, Congressional Record,99th Cong., 1st sess., 131(165):16679.

27. Remarks of Senator David Boren, in ibid., no. 164, p. 16605.

28. U.S., Congress, Senate, Committee onRules and Administration, Hearings on Cam-pcign Finance Reform Proposals of 1983, p. 403.

29. U.S., Congress, Senate, CongressionalRecord, 99th Cong., 1st sess., 131(165):16683.

95

Congressional campaignfinance reform

The major unfinished business on thereform agenda is a thorough overhaul ofthe congressional campaign finance sys-tem. Comprehensive legislation is

needed that includes the followingessential components: limitations on

overall PAC receipts, provision of analternative campaign fund source, andlimits on overall campaign spending andon the expenditure of a candidate’s

personal funds.

Limitations on overall PAC receipts.While current law restricts the amountthat an individual PAC may give to acandidate, there is no restriction on thetotal amount that a candidate mayaccept from all PACs. Thus in the lasttwo elections we have seen four Senatecandidates who have each acceptedmore than $1 million in PAC funds. Anoverall limit on aggregate PAC receiptswould help shift the focus of congres-sional fund-raising away from largePAC contributions and back to smallcontributions from individual donors.An amendment establishing an over-

all limit on PAC receipts was adoptedby the House in 1979-the Obey-Rails-back bill-but was not considered bythe Senate. The introduction in 1985 ofa PAC-limit amendment by SenatorsBoren and Goldwater revived congres-sional consideration of the concept of an

aggregate PAC limit. 30

Alternative campaign funds. Essen-tial to the presidential public financingsystem are the federal funds made avail-able to presidential candidates. Con-gressional campaign finance reform

legislation similarly needs to providealternative sources of campaign fundsto candidates. This could be done in theform of public funds to match smallcontributions from individuals, as isdone in the presidential nominatingprocess, or grants to candidates, as isdone in the presidential general election,or a 100 percent tax credit for smallcontributions to candidates,3’ or somecombination of these systems. Thecreation of a broad-based alternative

financing system will once again makeelective office a realistic ambition forindividuals without personal fortunesand for those who are unwilling orunable to raise large sums from PACs.

Overall campaign spending and can-didates’personal funds. Limits on over-all spending and the use of personalfunds are a key feature of the presi-dential public financing system and areneeded for congressional campaigns aswell. The Supreme Court in its 1976

Buckley decision upheld the constitu-tionality of such limits as part of a

system providing public financing forpresidential candidates, but the Courtstruck down the spending limits enactedfor congressional races because theywere not tied to any public campaignfinance system. It is clear from the

Buckley decision that limits for con-gressional races along with limits on theuse of personal funds can be constitu-tionally enacted as part of a publicfinance campaign system.

In crafting reform legislation, it is

important to ensure that spending limitsare set at levels high enough to allow

30. S. 1806, printed in ibid., no. 146, p. 14360;debate on S. 1806 is found in ibid., no 164,p. 16603; see also ibid., no. 165, p. 16678.

31. See, for example, H.R. 2490, printed inU.S., Congress, House, Congressional Record,98th Cong., 1st sess., 129(45):1992; H.R. 4428, inibid., no. 159, p. 10056; and U.S., Congress,Senate, Congressional Record, 99th Cong., 1st

sess., 131(143):14065.

96

challengers to run competitive cam-paigns. Since any campaign-financingsystem that includes spending limitsmust be voluntary under the Buckleydecision, candidates who felt unable towage effective congressional campaignswithin the spending limits would be freeto run their races without public finan-cing. Those who claim that public finan-cing with spending limits favors thereelection of incumbents should not lose

sight of the fact that in the first two

presidential elections conducted underthe presidential public financing sys-tem-1976 and 1980-incumbents were

defeated, for the first time since 1932.Nor should these critics forget that it isincumbent members of Congress whothus far have failed to rush to enact

public financing for congressional races.For the past decade a majority of incum-bent members do not appear to havereached the conclusion that publicfinancing and spending limits are anincumbent’s advantage.

Enactment of a new campaign-finan-cing system for Congress would free ourelected representatives from their dan-gerous dependence on special interestcontributions. A new system is also

essential if we are to restore publicconfidence in the integrity of Congressand its members.Two additional major changes are

needed to protect the integrity of thepresidential public financing system andany new system established for congres-sional campaigns. The changes dealwith the issues of independent expendi-tures and soft money.

Independent expenditures

Under the Court’s decision in Buck-

ley, contributions made directly to acandidate may constitutionally be lim-

ited, but no limits may be imposed onexpenditures undertaken independentlyby a PAC or an individual on behalf ofor in opposition to a candidate.

Through these so-called independentexpenditures, PACs and individuals canevade the intent of limits on directcontributions. They can and do spendsubstantial sums-far in excess of statu-

tory contribution limits-supporting orattacking candidates.

Independent spenders are unaccount-able. They do not have to assume respon-sibility at election time, nor do they facethe political impact of any misrepre-sentation they may make. A leader inthe independent spending movement,Terry Dolan of the National Conserva-tive Political Action Committee, hassaid, &dquo;A group like ours could lie

through its teeth and the candidate it

helps stays clean. ,31The persistent use of independent

spending in politics alters the politicalprocess for the worse.33 Independentspending can seriously distort the com-petition between candidates. Candidatesare faced with spending not only by theiropponents but also by independentgroups. Senator Ernest Hollings, Demo-crat of South Carolina, has noted, &dquo;Weall have seen how PACs can seriouslydamage the balance in a campaignthrough the expenditure of enormousamounts of money. In effect, a candi-date budgets to fight one well-financedopponent but then ends up fightingmany.

32. Myra MacPherson, "The New Right Bri-gade," Washington Post, 10 Aug. 1980.

33. See, for example, David Broder, "EqualTime for Targets," Washington Post, 26 Aug.1981; "Nick-Pack Strikes Home," New YorkTimes, 18 Nov. 1981.

34. U.S., Congress, Senate, CongressionalRecord, 99th Cong., 1st sess., 131(80):8268.

97

Within the confines of the SupremeCourt’s decisions in Buckley and latercases, there are steps that can andshould be taken to curb the impact ofindependent expenditures. First, theBuckley decision specified that indepen-dent expenditure activities are exemptfrom limitation only if they are not

coordinated with candidates or the

agents of candidates. Additional legis-lation and regulations should be devel-oped to clarify the standards to be usedin assessing the true independence of anexpenditure campaign.&dquo;

Second, and more important, the

federal communication statutes shouldbe amended to provide to federal candi-dates free and equal time to respond tobroadcast advertisements purchased bymeans of independent expenditures.Under a response-time proposal, radioand television stations would be

required to provide free and equal timeto candidates for federal office in caseswhere a broadcaster sells time to anyperson-aside from federal candidates-to broadcast material that eitherendorses or opposes a candidate. If thebroadcast advertisement opposes a can-

didate, that candidate would be entitledat no cost to an equal amount of broad-cast time. If the broadcast advertisementendorses a candidate, other legally qual-ified candidates for the same officewould be entitled at no cost to an equalamount of broadcast time. The response-time concept builds upon existing re-sponsibilities placed on broadcasters-such as the personal-attack rule-and isa constitutional extension of existingcommunication standards that have been

upheld by the courts.

Response time would help to protectthe integrity of the present system ofcontribution limits by assuring that acandidate could respond without majorexpense to an independent expenditurecampaign. Response time would enablecandidates to refute misrepresentationsmade by independent spenders. Aresponse-time proposal would not endindependent expenditures, but it wouldrestore some measure of accountabilityto independent spending activities.36

The response-time proposal has beenincluded as a major provision of S. 1310,the Clean Campaign Act of 1985, intro-duced in the Ninety-ninth Congress bySenators John Danforth, Republican ofMissouri, Ernest Hollings, Democrat ofSouth Carolina, and Barry Goldwater,Republican of Arizona.3’ This proposal

35. Wertheimer and Huwa, "Campaign FinanceReforms: Past Accomplishments, Future Chal-lenges," p. 64.

36. Fred Wertheimer, "Fixing Election Law,"New York Times, 3 Sept. 1981. See also RonaldBrownstein, "Soft Money," National Journal, 7Dec. 1985, p. 2828; Center for Responsive Politics,Money and Politics: Soft Money—A Loopholefor the ’80s (Washington, DC: Center for Respon-sive Politics, 1985); Common Cause, "Commentsof Common Cause with Respect to Its Petition forRulemaking Regarding ’Soft Money,’ " (Manu-script, Common Cause, 1985); Elizabeth Drew,Politics and Money: The New Road to Corruption(New York: Macmillan, 1983); Thomas Edsall,"Loophole Lets Parties Raise Millions from Firms,Unions," Washington Post, 17 Apr. 1984; idem,’’’Soft Money’ Will Finance Voter Sign Up," ibid.,12 Aug. 1984; Maxwell Glen, "Republicans andDemocrats Battling to Raise Big Bucks for VoterDrives," National Journal, Sept. 1984,pp. 1618-22; "Soft Money," Washington Post, 31Aug. 1984; "The Soft-Money Loophole," ibid., 1Nov. 1985; Ed Zuckerman, "Lobbying and Cam-paign Ethics: The Ethical Implications of ’SoftMoney’

"

(Remarks delivered at George Wash-ington University, Washington, DC, 28 Oct.1985); idem, "Democrat ’Soft Money’ Nets Catch$30 Million," PACs & Lobbies, 21 Nov. 1984;idem, "’Soft Money’: A New Life for ’Fat Cats,’"ibid., 16 Jan. 1985; and idem, "More DNC ’SoftMoney’ Accounts Found," ibid., 6 Feb. 1985.

37. U.S., Congress, Senate, Congressional

98

is also a significant component of theBoren-Goldwater PAC-limitation

amendment.38

Soft money

In federal elections the amounts thatindividuals and PACs may contributeare limited; direct contributions fromcorporations and unions are completelybarred; and all contributions in excessof $200 are subject to public-disclosurerequirements. In many states, however,parallel regulations do not exist. In the1980s, so-called soft money has increas-ingly been funneled to state partyorganizations. Soft money funds are

contributions from sources-corpora-tions or unions-that are not permittedto make any direct contributions infederal elections, and contributionsfrom individuals or groups in amountsabove the federal limits.

While soft money is purportedly foruse in party-building activities at thestate and local levels, there is increasingevidence that these funds are in fact

being spent in connection with federalcandidates, particularly presidential can-didates, in violation of federal law. Thisis one of the most serious problems inthe campaign finance area today. Thispractice seriously undermines the integ-rity of the contribution limits and pro-hibitions contained in the federal law,including the limits on contributions bypolitical parties, the expenditure limitsin the presidential public financing sys-

tem, and disclosure requirements of thefederal election law.39

In 1984, Common Cause proposed tothe Federal Election Commission (FEC)that new regulations be adopted to

control the use of the soft-money sub-terfuge. Under these regulations,national-level political party commit-tees, including party congressional cam-paign committees, and federal officialswould be prohibited from establishingsoft-money accounts or from otherwisechanneling to state parties for use infederal campaigns contributions thatwould be illegal under federal law. 40A number of additional campaign

finance issues have arisen in the 1980s

Record, 99th Cong., 1st sess., 131(80):8267; seealso Congress, Senate, Committee on Commerce,Science and Transportation, Hearings on S. 1310,the Clean Campaign Act of 1985, 99th Cong., 1stsess., 10 Sept. 1985; ibid., 8 Oct. 1985.

38. U.S., Congress, Senate, CongressionalRecord, 99th Cong., 1st sess., 131(146):14361.

39. See, for example, Brownstein, "SoftMoney," p. 2828; Center for Responsive Politics,Money and Politics: Soft Money; CommonCause, "Comments of Common Cause with

Respect to Its Petition"; Drew, Politics and

Money; Edsall, "Loophole Lets Parties Raise";idem, " ’Soft Money’ Will Finance Voter SignUp"; Glen, "Republicans and Democrats Bat-

tling," pp. 1618-22; "Soft Money," WashingtonPost; "Soft Money Loophole"; Zuckerman, "Lob-bying and Campaign Ethics"; idem, "Democrat’Soft Money’ "; idem,

" ’Soft Money’: A NewLife"; and idem, "More DNC ’Soft Money’Accounts Found."

40. In a 5 Nov. 1984 letter to Lee Ann Elliott,chair of the FEC, Common Cause urged the

commission to take the following steps regardingsoft money practices: (1) to initiate on a prioritybasis its own broad-ranging factual investigationinto soft-money practices, with a view towardprosecuting actual past violations; (2) to initiate arule-making proceeding to establish the broaderadministrative tools, such as additional disclosurerequirements, needed to facilitate the commis-sion’s effective enforcement of the current laws;and (3) to undertake a review of the current laws todetermine what additional statutory remedies maybe required to assure that soft-money abuses aremost effectively curtailed. On 4 Feb. 1985 Com-mon Cause submitted to the FEC "Comments ofCommon Cause with Respect to Its Petition forRulemaking Regarding ’Soft Money’

" and

thereby set out its formal proposal for rule makingon soft money.

99

that require legislative action. Congressshould address delegate committeespending, candidate and officeholder

PACs, presidential candidate founda-tions, bundling, the grandfather clause,and the FEC.

Delegatecommittee spending

While presidential candidates whoreceive federal matching funds do so inreturn for a commitment to limit theiroverall and state-by-state spending,individuals who are seeking selection asdelegates to a party’s nominating con-vention are presently not subject to

these limitations. Expenditures by thecommittees of these delegates create thecapacity to bypass these spending limits,particularly if the expenditures aremade at the direction of, with the encour-agement of, or in conjunction with acandidate’s campaign.4’ Federal elec-tion law needs to be amended to applythe limitations on contributions and

expenditures to convention delegates.42

Candidate and

officeholder PACs

A growing number of presidentialcandidates and members of Congressare establishing their own PACs. These

PACs, like others, may make campaigncontributions. In many cases, particu-larly in the case of presidential hopefuls,these PACs are also used to finance acandidate’s political travel and relatedexpenses, expenditures that at this pointdo not count against the spending ceil-ings of the presidential public financingsystem. These PACs also allow largerindividual and PAC contributions to bemade to the candidate or officeholderinvolved than could be made to his orher candidate campaign committee.They also place officeholders and officeseekers in the position of using PACmoney to curry favor. Congress shouldban the creation of PACs by members ofCongress and by prospective candidatesfor president or vice-president. 41

Presidentialcandidate foundations

An increasing number of public fig-ures, particularly prospective presiden-tial candidates, have set up tax-exemptfoundations. Unlike campaign commit-tees, these foundations may acceptunlimited amounts of money, includingcontributions from corporations andunions, and they are not required toreport the source of their funds. Dona-tions to these foundations, furthermore,are fully tax deductible.

These foundations, established to doresearch on issues and to undertakeother educational activities, in theoryare not linked to any individual. In

practice, however, they can pay andhave paid for travel by presidentialhopefuls and have provided informa-tion that forms the basis of campaignposition papers-activities that appear

41. Similarly, delegate committees enable indi-viduals and PACs to override the contributionlimits to a presidential candidate by makingmultiple contributions to numerous delegatecommittees, all of which are intended to benefitdirectly a single presidential candidate’s campaign.Such contributions serve to undermine the effec-tiveness of the existing contribution limits.

42. Thomas Edsall, "Candidates Find It Easyto Give Spending Curbs the Runaround," Wash-ington Post, 3 June 1984; Brooks Jackson,"Loopholes Allow Flood of Campaign Giving byBusinesses, Fat Cats," Wall Street Journal, 5 July1984.

43. See Maxwell Glen, "Starting a PAC MayBe Candidates’ First Step Down Long Road to1988," National Journal, 16 Feb. 1985, pp. 374-77.

100

to help promote the public officials whocreated them.44 At a minimum, tax-exempt foundations that are controlledby or maintained for a political candi-date should be required to disclose thesource and amount of contributionsreceived.45

Bundling

Another development on the cam-paign-financing landscape that Con-gress must address is bundling, apractice by which a PAC puts together,or bundles, numerous individual checksmade out to a particular candidate’scampaign and provides them to the

candidate. This practice presently is

being used by PACs effectively to evadethe contribution limits of the federalelection laws. By aggregating these indi-vidual contributions a single PAC canprovide to a candidate amounts far inexcess of the current $5000-per-electionlimitation. A Wall Street Journal story,for example, noted that one insurancecompany PAC was able to funnel contri-butions of more than $168,000 to onesenator’s reelection campaign throughbundling.46

Under current FEC regulations, thebundled contributions are not treated asa contribution by the intermediary PACunless it actually controls the choice ofthe recipient. The result is a loopholethat is increasingly being exploited byPACs to expand their capacity to exertinfluence and to undermine the contri-bution limits.

The bundling loophole should be

closed by amending federal election lawto provide that bundled contributionswould count against the contributionlimits of both the individual contributor

and the intermediary person or PAC.That is, if a PAC collects or otherwiseaggregates contributions that are ear-marked or directed to a particularcandidate’s campaign and assists in

transmitting these contributions to thatcampaign, the contributions will be con-sidered contributions to the candidate

by the conduit PAC as well as by theoriginal individual contributor.

Grandfather clause

In 1979 Congress amended federallaw to prohibit candidates from con-verting surplus campaign funds for per-sonal use. Under a grandfather clauseincluded in that amendment, however,any member of Congress who was inoffice on 8 January 1980 is permitted tokeep his or her surplus campaign con-tributions for personal use after leavingCongress. Members who qualify underthis provision may thus take campaignmoney upon retirement. These surpluscampaign funds, in some cases, nowrange to amounts as high as $600,000.While House and Senate rules prohibitconversion of these funds for personal

44. As David Spear, a spokesman for formerSenate majority leader Howard Baker, has noted,"If it’s not a violation of the law, it’s certainly aviolation of the spirit of the law ... candidatesought not to be able to raise campaign funds underthe guise of a tax-free foundation." Bryan Abas,"Hart Has a Better Idea," Westword, 13-19 Nov.1985, p. 8.

45. See Report of the Commission on NationalElections, Executive Summary, p. 8; Paul West," ’Foundations’ Are Promoting Politicians," Bal-timore Sun, 29 Sept. 1985; and Thomas Edsall,"’88 Candidates’ New Tricks Stretch Federal Elec-tion Law," Washington Post, 20 Oct. 1985.

46. Brooks Jackson, "Insurance IndustryBoosts Political Contributions as Congress Takesup Cherished Tax Preferences," Wall Street Jour-nal, 10 Oct. 1985. See also idem, "GOP GroupUses Cash Creatively," ibid., 13 Sept. 1984; and

Michael Wines, "Bundling: A New U.S. Cam-paign Custom," Los Angeles Times, 3 Oct. 1981.

101

use while members remain in office,several members who have retired havein fact converted surplus funds for

personal use. Other members, still in

Congress, seem to regard building upcampaign surpluses as a new form ofpolitical individual retirement account. 47

Congress already has recognized theproblems inherent in allowing retiringmembers to convert contributions into

personal funds by banning this activityfor many members. It should completethe task started in 1979 and remove the

grandfather clause, which allows somemembers to escape the ban.

FEC

While it is important to examine therules for congressional and presidentialcampaign financing, a careful assess-ment must also be made of the FEC, thebody responsible for enforcing federalelection laws.

The commission has failed the publicin several important respects. Most sig-nificantly, it is ponderously slow in itsenforcement proceedings and is often

prone to concentrate on technicalitiesrather than major issues of rule making.While the FEC’s efforts at promotingdisclosure of the receipts and expendi-tures of PACs and candidates have beena major success, lax enforcement by the

commission threatens to undermine theeffectiveness of the prohibitions, restric-tions, and limits of the federal electionlaw.

Both external and internal organiza-tional factors act to undermine theeffectiveness of the FEC. Congresscreated the commission with a partisansplit and has never clarified the roles ofthe staff director and general counsel,the two statutory officers of the com-mission. Consequently, the FEC hasfailed to have management and policydirection. Congress also consistentlyunderfunds the agency, making it moredifficult for the commission to carry outits various responsibilities.

The performance of the FEC is criti-cal to the effective implementation offederal election laws. Congress needs toconsider changes in both the structureand the administration of the commis-sion to ensure the proper implementa-tion of federal election laws.48

CONCLUSION

In the spring of 1973, CommonCause chairman John Gardner told theSenate Commerce Committee that &dquo;thereis nothing in our political system todaythat creates more mischief, more cor-ruption, and more alienation and dis-trust on the part of the public than doesour system of financing elections. ,,49Despite major progress in improving thepresidential campaign-financing system,

47. At the end of the 1984 election cycle, forinstance, members of the House who could con-vert surplus funds upon retirement had averagecash-on-hand figures of $106,935; their colleagueswho were not grandfathered averaged $50,421.See Lee Norrgard, "You Can Take It with You,"Common Cause Magazine, p. 9 (May-June 1985);Maxwell Glen, "Finishing a Campaign in theBlack Becoming More Prevalent in the House,"National Journal, 22 June 1985, pp. 1467-69;Kevin Chaffee, "Money under the Mattress: WhatCongressmen Don’t Spend," Washington Monthly,pp. 32-38 (Sept. 1984).

48. See generally Common Cause, Stalled

from the Start (Washington, DC: CommonCause, 1981); see also William C. Oldaker, "OfPhilosophers, Foxes, and Finances: Can the Fed-eral Election Commission Ever Do an AdequateJob?" this issue of The Annals of the American

Academy of Political and Social Science.49. Statement of John Gardner, in U.S.,

Congress, Senate, Commerce Committee, Hear-ings on S. 372, 93rd Cong., 1st sess. 1973, p. 1.

102

that observation remains true todaywith regard to the congressional cam-paign-financing system. As formerWatergate special prosecutor and cur-rent Common Cause chairman Archi-bald Cox has observed, inaction hasresulted in &dquo;a Congress still more deeplytrapped in the stranglehold of specialinterests which threatens to paralyze theprocess of democratic government.’,50Congress needs to complete the reformsbegun in the wake of Watergate byfundamentally transforming its own

campaign-financing system and by mak-ing other adjustments needed to preservethe integrity of presidential public finan-cing, campaign reporting requirements,and limitations on contributions byindividuals and PACs.A consensus has been reached in this

country that PACs are inimical to our

system of representative government . 51The question now remaining is whetherthat public consensus can be translatedinto congressional action.No solution that may be adopted will

be final and perfect. We will always needto reevaluate and adjust any campaignfinance system. The presidential publicfinancing system demonstrates the needfor periodic adjustments. But more impor-tant, the experience of presidentialpublic financing shows us that funda-mental improvement in our campaignfinance laws is indeed attainable.We can and must have a better system

for financing congressional campaigns.Representative government is at stake.

50. Archibald Cox, Address before the Com-monwealth Club of California, San Francisco,CA, 7 Jan. 1981.

51. A May 1984 Harris survey, for example,found that "a 70-20 percent majority of all likelyvoters across the country feels that candidates forfederal office should refuse to accept PAC funds." Louis Harris, "PACs: Good or Bad Influence,"Harris Survey, 31 May 1984.