Saving the body politic

Financial Times (London), March 21, 2001

HEADLINE: COMMENT & ANALYSIS: Saving the body politic: Campaign finance reform should concentrate on raising present limits on donations and giving tax credits, argue:

Advocates of campaign finance reform in the US approach the problem like medieval surgeons: having determined that money is corrupting the body politic, they bring razors and leeches to bleed as much money from the system as possible. In fact, they should be doing just the opposite.

At present, individuals are allowed to contribute up to Dollars 1,000 in "hard money" to individual candidates but unlimited sums of "soft money" to political parties. The distinction may have made sense in 1974 when the limits were set but national parties have come to treat soft money contributions almost exactly as they do hard ones. There should be only one kind of contribution with one set of regulations governing it.

Senators John McCain and Russ Feingold, whose reform bill is being debated in Congress this week, are correct in arguing that soft money, which is unlimited and unaccountable, should be banned. By eliminating soft money, we could simplify the campaign finance system.

But this is only part of the solution. Soft money donations have increased exponentially because candidates need more money to compete. Federal hard dollar limits have not been increased since 1974. And unless we raise contribution limits substantially, soft money donors will have a real incentive to exploit new loopholes for funnelling their donations.

We must return responsibility to candidates for their own campaigns, encourage more citizens to get involved and make the system accountable to the general public. There are three radical changes that could improve the system.

First, raise contribution limits significantly, perhaps even as high as Dollars 10,000. One of the unintended consequences of the soft/hard money distinction has been to make candidates dependent on their parties and on "independent" third-party groups for big expenditures. As a result, the national parties have undue influence in the direction, message and priorities of candidates' campaigns. The supposedly "independent" issue advocacy groups often hold candidates hostage to their agenda through threats of broadcast retribution.

Raising contribution limits would return campaigns to candidates and free politicians from eternally chasing smaller cheques rather than governing. It would also allow contributors to channel funds directly to the candidates they support rather than to the national parties' soft money slush funds.

In addition, current limits on individual aggregate donations to Dollars 25,000 a year - Dollars 1,000 per candidate and Dollars 20,000 to the national parties - need to be doubled and changed to allow contributors to spend the total sum in any combination. This reform would give the donors greater control in putting their money where they want it to go.

Second, we need to bring back smaller donors by reintroducing a full tax credit for contributions under Dollars 250. Until the 1986 tax reform, the Internal Revenue Service Code allowed small contributors to deduct donations. Eliminating this deduction had an adverse impact on smaller donations.

Third, we should enforce complete internet disclosure of all contributions within 48 hours of receipt. George W. Bush's presidential campaign website very nearly met this standard. His efforts ought to be mandated. Part of the reason soft money is so unaccountable is that it takes months for donations to be disclosed. Immediate disclosure would create a searchable database of donors that could be accessed by the public.

Disclosure must also apply to donors giving Dollars 25,000 or more to independent issue advocacy groups. Unconnected in any official capacity with candidates, these groups have often taken to running aggressive adverts that, if placed by the candidates themselves, would do them serious political harm.

In 1958, the Supreme Court found in the National Association for the Advancement of Coloured People versus Alabama that associations were not obliged to disclose their membership lists for fear of reprisals against individual members. Citing that precedent, phantom groups today run political adverts, say what they like, and then vanish, unaccountable for their actions, as candidates reap the rewards of their unscrupulous doings. The truth is that disclosure today does not pose the same risks as it did for NAACP members in 1958. A disclosure threshold of Dollars 25,000 for issue advocacy groups

would still allow anonymous contributions under that level.

Each senator who will be voting this week knows the realities of modern campaigning. It takes money to win. It should be money that is regulated and accountable. Eliminating soft money, raising individual campaign donation limits, restoring the tax credit for smaller donations and increasing disclosure would go a long way to reforming the system.