The Trouble With 527s

What should be done about 527s -- those new organizations used primarily by Democrats (so far) to skirt the McCain-Feingold legislation passed in 2002? Republicans and Democrats have been tussling over this for months, with the GOPers ludicrously pretending to be the voice of reform and clean government. But what the fate of 527s should be is no easy question. And the dispute may not be resolved immediately -- a good thing for Democrats and perhaps even the right decision.

First, some history. When Congress passed McCain-Feingold, advocates of true reform -- as well as Democratic partisans -- had reason to worry. The measure included a much-needed provision prohibiting the donation of "soft money" to political parties. For years, corporations and unions had been cutting six- and seven-figure checks to both major parties. Wealthy individuals -- limited to $1,000 donations to candidates -- had been doing the same. These contributions became party slush funds for the benefit of particular candidates. The soft-money scam undermined the intent of campaign law: to prevent an individual or entity from buying access to or favors from elected officials. But the price for the soft-money ban was high: Republicans insisted on doubling the amount of permissible hard-money contributions -- the much smaller donations that individuals send directly to a candidate.

With soft money zeroed out and hard-money limits raised, it wasn't too hard to foresee what McCain-Feingold would yield: Republicans raking in the hard money, and Democrats scrambling. In recent years, Democrats and Republicans were nearly even in bagging soft money, but the GOP, with its appeal to high-income donors, greatly outpaced the Democrats in hard-money donations. As of late March, the George W. Bush campaign had a $108 million cash advantage over John Kerry's.

Seeing the hard-money writing on the wall, Democratic activists in late 2002 began pulling together an assortment of groups unconnected to the party or any candidate. These "527" outfits (named after a provision in the tax code) could accept soft money and run the sort of ads previously produced by the Democratic Party -- spots that would attack Bush and hail the attributes of the Democratic nominee without specifically recommending a vote for anyone. Since under the law they are not permitted to coordinate their efforts with the party or the Kerry campaign, they have been dubbed the "Democratic shadow party." Naturally, Republicans complained.

In March the GOP, usually looking to sabotage campaign finance reform, asked the Federal Election Commission, which is considering new rules for 527s, to determine that the anti-Bush 527s -- including the Media Fund, America Coming Together and MoveOn.org -- have been illegally coordinating their actions with the Kerry campaign. Several of these groups are managed by people with past ties to the Democratic Party and the Kerry campaign. But are such links the same as coordination? The Democrats, of course, say there's no coordinating going on. But the need to render such a determination shows that complex campaign finance laws are open to legal manipulation, if not to abuse.

The GOP complaint was a move to score PR points and protect its financial advantage. It even asked the FEC to dismiss its complaint immediately, so it could appeal to the courts for faster action. Meanwhile, the FEC has before it proposed rules for 527s that are so broad they would prevent nonprofit organizations that rely on tax-exempt funding from commenting on proposed policies of an elected federal official. More than 400 charitable groups have rightfully opposed the proposed rules.

The subject of 527s, however, should be addressed. Fred Wertheimer, a longtime campaign reform advocate who wants to see the new 527s wiped out immediately, is right when he says that if pro-Democratic 527s are given "free rein to make soft-money campaign expenditures against President Bush," then "there is no doubt this will quickly be followed by pro-Republican 527 groups also operating outside the campaign finance laws...and it's back to the soft-money races." The existence of 527s does provide an avenue for purchasing influence -- albeit one not as direct as the old soft-money scheme.

But a major rule change mid-campaign season would be a bit suspicious. The FEC has displayed little past interest in being a watchdog or curbing such end runs around the law, as when billionaire Sam Wyly financed pro-Bush attack ads against John McCain in 2000. Any new rule must be carefully constructed to avoid choking off legitimate issues-oriented speech that happens to mention a candidate. In addition, as Common Cause and the Brennan Center for Justice have argued, Congress, not the FEC, should be the body to handle the tricky matter of legislating 527s (though no doubt its members are hardly eager to enter that fray).

The 527 controversy demonstrates that critics of the piecemeal McCain-Feingold measure were to some extent right: Try to dam the stream of campaign dollars and it will flow elsewhere. It also shows, yet again, the need for comprehensive reform -- like public financing of federal primary and general elections -- that can level the playing field for candidates and keep special-interest money from dominating politics. The 527s are a problem, but not the only one in a system overrun and contaminated by big money. As much as members of Congress may hate to hear this, they need to get back to work on campaign finance reform.

David Corn is Washington editor of The Nation and the author of The Lies of George W. Bush: Mastering the Politics of Deception (Crown Publishers).

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