The Hardening of Soft Money

Derek Cressman

May 25, 2004

The campaign-finance bill may have banned unlimited party donations, but it set the new limits at about twice what donors were giving when no limits existed. And the rules against unlimited giving to parties have directed money to political groups instead. Derek Cressman, a money-in-politics expert, explains why the 2002 reform bill might be one step forward and two steps back.

Derek Cressman directs  TheRestofUs.org, a new project dedicated to raising awareness of campaign finance issues.

Sometimes Congress has a way of twisting the best of intentions into the worst of realities.  As The Washington Post's David Broder pointed out in a May 20 column, the Bipartisan Campaign Reform Act of 2002 (BCRA) is beginning to look like a case in point.

After failing to pass comprehensive campaign finance reforms in the early '90s, many inside-the-beltway reformers decided upon the more pragmatic approach of winning small incremental victories and then building from there.  Step one was to ban the unlimited soft-money contributions going to political parties.

At the time, soft money only comprised about 20 percent of funds raised by federal candidates and parties, but it came in eye-popping amounts.  For instance, at the 2000 Republican National Committee black-tie fundraising gala, nearly 1,600 of the wealthiest donors in the country gave a total of $21.5 million. That's an average contribution of about $13,400—far more than most of us could ever fathom.  Since the money was technically not to be used to influence federal elections, there were absolutely no limits on the size of these contributions. In 2001—not even an election year—the RNC broke its own record by raising $24 million in one night.

By then, the soft-money ban had built considerable momentum—but not enough to overcome Sen. Mitch McConnell's filibusters.  In need of a victory, reformers chose to accept a compromise that would prevent federal parties and candidates from raising soft money in exchange for a near-doubling of the hard-money limits.  One donor would be allowed to give up to $95,000 to all federal candidates and parties every two years, up from $50,000.

The compromise worked, and by spring of 2002, President Bush had signed BCRA into law.  Shortly thereafter, and before the law went into affect, Bush again broke the fundraising record at a soft-money gala that raised $33 million. 

Reformers withstood this final insult confident that better days were ahead.  Fred Wertheimer, the chief architect of BCRA, said it was merely an "Oklahoma land rush going on to squeeze the last huge dollar out of the soft-money donors."  Politicians agreed.  Republican officials thought the $33 million record "could stand in perpetuity" due to the soft money ban. 

But earlier this month, the RNC gala raked in more than $38.5 million from approximately 1,500 people.  That's an average contribution of about $25,000—nearly double the pre-BCRA average in 2000.  Not coincidentally, $25,000 is also the new maximum amount that a donor can give a federal party in a given year.

So BCRA may have banned unlimited party donations, but it set the new limits at amounts roughly double what donors were giving when facing no barriers at all.  BCRA's hard-money figures may now serve more as a target toward which donors strive than a limit that constrains them in any meaningful way.

There are other problems, too.  Much of the soft money that previously went to parties has found its way to outside groups. Broder says that BCRA's supporters did not anticipate this, but they should have.  Critics on both the Right and Left pointed this out as a key flaw in the law during the congressional debate.  While the FEC has passed up an opportunity to tackle this issue, it is now disingenuous for BCRA's apologists to blame regulators for failing to close loopholes that BCRA left open.  Meanwhile, the parties (the original BCRA target) are raising more hard money now than they used to raise in hard and soft money combined.

Under the doubled hard-money limits, candidates, too, are raising record amounts of cash.  While some of this is due to a welcome infusion of small donors brought in by the Internet and the hotly contested presidential race, most of it comes in amounts far beyond the reach of most Americans.  In the first quarter of this year, presidential primary candidates raised 45 percent of their funds from contributions at or above $1000—up from 31 percent in 2000.

Meanwhile, the momentum that was supposed to be gained from this incremental victory has dissipated.  There is promising talk of revamping the presidential public financing system, but reforms that would put congressional races back in the hands of ordinary citizens are largely off the table.  Best intentions aside, BCRA may have been one step forward and two steps back.  We can do better—and we must.