[Senate Hearing 106-19]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 106-19


 
                      CAMPAIGN CONTRIBUTION LIMITS

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                        RULES AND ADMINISTRATION
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

                      CAMPAIGN CONTRIBUTION LIMITS

                               __________

                             MARCH 24, 1999

                               __________

    Printed for the use of the Committee on Rules and Administration



                               


                     U.S. GOVERNMENT PRINTING OFFICE
 55-770                     WASHINGTON : 1999



                 COMMITTEE ON RULES AND ADMINISTRATION

                  MITCH McCONNELL, Kentucky, Chairman
JESSE HELMS, North Carolina          CHRISTOPHER J. DODD, Connecticut
TED STEVENS, Alaska                  ROBERT C. BYRD, West Virginia
JOHN WARNER, Virginia                DANIEL K. INOUYE, Hawaii
THAD COCHRAN, Mississippi            DANIEL PATRICK MOYNIHAN, New York
RICK SANTORUM, Pennsylvania          DIANNE FEINSTEIN, California
DON NICKLES, Oklahoma                ROBERT G. TORRICELLI, New Jersey
TRENT LOTT, Mississippi              CHARLES E. SCHUMER, New York
KAY BAILEY HUTCHISON, Texas
                   Tamara Somerville, Staff Director
                     G. Hunter Bates, Chief Counsel
      Kennie L. Gill, Democratic Staff Director and Chief Counsel

                                  (II)



                            C O N T E N T S

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                                                                   Page
Opening statement of:
    Hon. Mitch McConnell, chairman, a U.S. Senator from the State 
      of Kentucky................................................     1
    Hon. Christopher J. Dodd, ranking member, a U.S. Senator from 
      the State of Connecticut...................................     2
    Hon. Rick Santorum, member, a U.S. Senator from the State of 
      Pennsylvania...............................................     4
Testimony of:
    Hon. Dan Coats, former U.S. Senator from the State of 
      Indiana, and Special Counsel, Verner, Liipfert, Bernhard, 
      McPherson and Hand.........................................     5
    Dr. Demaris Miller, McLean, VA...............................    28
    Karen Sheridan, Executive Vice President, SMY Media, inc.....    46
    John R. Lott, Jr., University of Chicago School of Law.......    59
Prepared statement of:
    Hon. Dan Coats, former U.S. Senator from the State of 
      Indiana, and Special Counsel, Verner, Liipfert, Bernhard, 
      McPherson and Hand.........................................    11
    Dr. Demaris Miller, McLean, VA...............................    31
    Karen Sheridan, Executive Vice President, SMY Media, inc.....    51
    John R. Lott, Jr., University of Chicago School of Law.......    64
Appendix 1. Opening Statement for the Record of Hon. Dianne 
  Feinstein, U.S. Senator from the State of California...........    75
Appendix 2. Exhibits to testimony of Hon. Dan Coats..............    79


                                  (III)


                      CAMPAIGN CONTRIBUTION LIMITS

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                       WEDNESDAY, MARCH 24, 1999

                                       U.S. Senate,
                     Committee on Rules and Administration,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:35 a.m., in 
Room SR-301, Russell Senate Office Building, Hon. Mitch 
McConnell, chairman of the committee, presiding.
    Present: Senators McConnell, Santorum, and Dodd.
    The Chairman. This hearing will come to order.
    We are beginning a series of campaign finance hearings that 
will go on, most of them, later in the spring. Today we focus 
on an issue upon which there is growing and widespread 
agreement, and that is the need to increase the Federal or hard 
money contribution limits. This is the one area where there 
seems to be wide bipartisan agreement. As I think almost 
everyone knows, I have not exactly been in a bipartisan mode 
over the years for a variety of good reasons, in my judgment. 
But this is the one area upon which there seems to be a good 
deal of uniformity of opinion.
    I have advocated an increase in hard money limits for 
several years now, but I am encouraged by the recent signs that 
some of the more strident voices for reform of the sort that I 
think would be unconstitutional and inappropriate, are 
nevertheless acknowledging a need to increase the hard money 
limit.
    President Clinton has called for an increase in the 
severely restrictive hard money limits that the parties 
currently live under. Senator John McCain has indicated support 
for an increase in hard money limits. Representative Chris 
Shays, who introduced the House version of Senator McCain's 
bill, said last week that a weakness in his bill is that it 
does not increase the party hard money limits.
    My counterpart at the Democratic Senatorial Campaign 
Committee in a Rules Committee hearing 2 years ago, said that 
the individual limit should be increased. And two groups that 
are adopting a high profile in the campaign finance debate--the 
Committee for Economic Development and Jerome Kohlberg's 
Campaign for America--have recently come out in favor of 
increasing hard money limits. These groups are seriously 
misguided in other aspects, but their wisdom in this respect is 
refreshing.
    I would like to welcome the witnesses who have taken time 
out of their schedules to be with us today. Their testimony 
promises to be edifying for those of us in the room and anyone 
who may be watching on television.
    In the rancor over reform, precious little attention has 
been paid to the existing and seriously outdated regime of 
contribution limits which severely impact the ability of 
candidates to mount campaigns, parties to support their 
nominees, and private citizens to assist the candidates and 
parties of their choosing.
    Soft money utilized by political parties and other 
entities, which is a subject for another day and another 
hearing, is to a great degree merely a symptom of the results 
of the 1974 contribution limits. These limits have been 
whittled away over the past quarter of a century by inflation, 
as reflected in the Consumer Price Index, but also factors 
peculiar to politics, including the growing difficulty of 
reaching an increasingly dispersed electorate. Those 
candidates, such as for the Senate, who must utilize television 
to communicate with our millions of constituents are struggling 
to cope with the demands placed on our campaigns by an 
increasingly complex and expensive medium in which some viewers 
have hundreds of channels to choose from. And, courtesy of 
their VCRs, can tape television shows and later fast-forward 
through our advertisements that our campaigns have paid for. 
Remote controls even give viewers the power to just snuff us 
out.
    On top of all this, as we speak, the world in which 
political campaigns are waged is transforming even more 
dramatically with the advent of the Internet. The growth of 
this revolutionary medium is as stunning as it is exciting. We 
had better consider that all that time spent on the Internet is 
pulling voters away from other activities, namely, television 
viewing.
    What effect that will have on the ability of our campaigns 
in the future to reach voters we cannot know for sure, but I 
will venture to predict that it will not make political 
campaigns any cheaper, causing candidates to work even harder 
to raise funds to communicate with voters.
    Alternately, their campaigns will starve, their voices will 
be quieted, and our democracy will suffer for it. Unless 
contribution limits are adjusted to reflect the realities of 
campaigning in the 21st century.
    On that note, I will see if my colleague, Senator Dodd, has 
any opening observations, and then we go to Senator Coats and 
Dr. Miller.
    Senator Dodd. Well, thank you very much, Mr. Chairman. Let 
me begin. This is our first formal hearing, I believe--well, we 
had one, I guess, sort of a business session, but it is the 
first oversight hearing in your term as Chair, and, again, we 
congratulate you publicly for taking on this responsibility. 
And it is appropriate, I guess, that we are beginning the first 
public hearing on a subject matter that is both near and dear 
to our hearts: the financing of Federal campaigns and Federal 
elections.
    I want to also at the very outset of these brief remarks 
extend a very warm welcome to our former colleague, Dan Coats, 
whom we will hear from shortly, and I had the privilege and 
pleasure of serving with Dan on the Labor Committee for a 
number of years. I don't know how many, but it was quite a few, 
anyway--10 years--and we worked very closely on a number of 
issues together and cosponsored a number of pieces of 
legislation together. And I have read his testimony, and it is 
very thoughtful testimony. I look forward to his presentation 
before the committee.
    I just would like to take a few minutes, Mr. Chairman, and 
share some thoughts. I am really here to listen myself this 
morning. I have sponsored or cosponsored campaign finance 
reform measures during almost all of my years in Congress, but 
I have never been directly involved in a committee other than 
this one in an indirect way on the FEC issues and so forth with 
the campaign finance reform questions. But I am hopeful--and 
you and I have had some very brief, informal conversations. My 
hope is that we may find some common ground on how best to deal 
with the issue of financing our Federal elections.
    Where we may disagree is on how to stop what I call sort of 
the insanity of the money chase without infringing on the 
legitimate rights of individuals and organizations to have 
their voices heard. That is the quandary we find ourselves in. 
There are very legitimate questions on both sides.
    So I welcome the hearing, and I am concerned about and I 
hope the committee will be sensitive to the fact that there are 
important cases moving through the courts that call into 
question key provisions of the Federal Election Campaign Act. I 
would respectfully suggest that it would be, I think, 
inappropriate for the courts to interpret our congeniality on 
this issue today on a question where I think there may be some 
consensus to mean that there is either total bipartisan or 
congressional support for overturning the decision of the 
Supreme Court in Buckley v. Valeo, nor is there yet a consensus 
that contribution limits should be raised.
    So before I give the chairman my proxy on his reform 
efforts here--which I am sure he would love to have, but I will 
reserve that for a while--let me state for the record that I 
view the problem still as one of too much money in the system, 
not too little. There is a fundamental disagreement on that 
point.
    Let me just share, if I can, for a second or so some 
examples of what I consider to be the ridiculous magnitude of 
the money chase.
    The 1997-98 election cycle marked the first time in the 
history of the United States that congressional candidates in 
national parties raised and spent in excess of $1 billion in a 
Federal election. Now, included in this total is the explosion 
in independent expenditures and so-called issue ads. In Senate 
races, winning candidates raised a total of $161 million for an 
average cost of just under $5 million. In fact, our colleague 
Senator Coats goes into this a little bit and talks about the 
rise of these costs.
    To raise that amount, a winning candidate on the average 
would have to raise approximately $12,000 a week per week, 
every week, for the entire 6 years of your Senate career. And 
that number doesn't seem to be abating in any way as we look 
down the road towards future campaigns.
    One of our former colleagues, the former chairman, in fact, 
of this committee and ranking member of this committee, Senator 
Ford, retired from service rather than face the fact, as he 
described it, of the need to raise $100,000 per week during the 
last 2 years of his election cycle. And I know others of our 
colleagues have made similar statements about the problem here.
    I know we will be hearing from witnesses today that will 
share with this committee their view that the answer to this 
problem is to raise hard money limits so that Senators and 
challengers do not have to spend as much time raising money. As 
someone who has been in seven races--eight races, actually, 
forgive me if I am a little bit skeptical about it in terms of 
putting limitations on ourselves in terms of how much we raise, 
knowing what can happen in campaigns and even in the last weeks 
of a campaign, always making sure we have enough in our 
arsenals to be able to handle the crises. The idea of sort of 
self-regulating in terms of how much we actually raise is 
something I am somewhat skeptical about.
    There may be some very good reasons to raise hard money 
limits, and I wouldn't reject that out of hand at all. Doing so 
without other reforms will not end the money chase, nor will it 
substantially reduce the amount of time members spend raising 
money, in my view. It could just increase the overall amount of 
money in the system, and that in itself, of course, is not 
reform.
    However, as I said at the outset, Mr. Chairman, I am very 
interested to sit and listen today and hear some of the 
comments and thoughts of our witnesses, particularly our former 
colleague, for whom I have the highest regard and respect.
    So, with that, Mr. Chairman, I will just ask that these 
remarks be included in the record.
    The Chairman. Thank you, Senator Dodd.
    Senator Santorum, would you like to comment?
    Senator Santorum. Just to congratulate you, Mr. Chairman, 
for holding this, and I, too, want to welcome my former 
colleague and dear friend, Senator Coats, from Indiana, and I 
look forward to his testimony. I have actually read his 
testimony, but I won't be able to stay for it. I have another 
meeting to go to, and I want to apologize in advance.
    I just want to echo the chairman's thoughts on this issue. 
I have a very good basis of comparison, looking at my Governor 
and how he raises money versus how I raise money. Pennsylvania 
doesn't have any contribution limits. I know my Governor 
doesn't spend 10 percent of the time raising money that I 
spend. He just doesn't have to spend that kind of time because 
he is able to raise it in larger chunks and can raise the 
smaller money through direct mail.
    For us to be saddled with a $1,000 limit on individual 
contributions that is worth pennies, almost pennies of what it 
was worth in media buying power in the 1970s creates the 
problem that we have seen. This growth in soft money is a 
direct result of the limitation of hard dollar contributions. I 
mean, let's just be honest about it. That is exactly what is 
going on here. And unless we raise the hard dollar 
contribution, that money that will flow to political campaigns 
will flow in other avenues. It just won't flow directly to the 
candidate.
    I think if you are really concerned about integrity in 
elections, you want the money flowing to the candidate who is 
accountable for disclosure and for the kind of campaign they 
want to run, not flowing to somebody else for them to spend the 
way they see fit outside of the candidate's control.
    So I think the greatest campaign reform we could have would 
be to increase the hard dollar contribution limits. It may not 
completely do away with soft money, depending on how much we 
raise the limit, but it will greatly limit the impact of soft 
money and the need for soft money, which I agree is not the 
best way to run a campaign, and certainly one that is a system 
based on disclosure.
    So I congratulate you, Mr. Chairman. I hope, not just 
because I am up for election--and I don't care whether we do it 
for this time or next, I mean, it doesn't matter to me. Just we 
need to do it because it is the best way to reform the campaign 
system in a bipartisan way, at least to start. We should 
learn--you know, one of the things that is a hard lesson for me 
to learn as someone who wants to do everything yesterday, that 
we take sort of what you can get done and get it done, try to 
improve it incrementally if you can, and then, you know, if we 
want to fight the other battles some other way down the road, 
fine. But let's try to get what we can get done that is 
sensible and that can be done in a bipartisan way done, and I 
think this is one thing we can do. So I would encourage that 
tack.
    Thank you.
    The Chairman. Thank you, Senator Santorum. That is 
precisely what the hearing is about today, the inflation that 
has occurred and the business of campaigning over the last 25 
years since the contribution limit was set.
    We would like to welcome our former colleague and still 
friend, Senator Coats, to come up and, Dr. Miller, you may come 
up as well. We will hear first from our colleague, Dan Coats.

   STATEMENTS OF HON. DAN COATS, VERNER, LIIPFERT, BERNHARD, 
 McPHERSON HAND, WASHINGTON, DC; AND DEMARIS MILLER, McLEAN, VA

    Senator Coats. Well, Mr. Chairman, thank you very much. It 
really is an honor to be back, really my first official time 
back in the United States Senate, a place where I served for 10 
years, culminating 24 years of public service, and a place that 
holds great and fond memories.
    People say, ``What do you miss about the Senate?'' I must 
say I miss my friends in the Senate more than I miss the 
process of the Senate. I couldn't help but tune in last evening 
on my way home from work to the debate going on on the Senate 
floor. The Senate was tied up in a procedural conundrum that 
was all too familiar at 6:30 p.m. on a Tuesday evening where 
the chairman of the Appropriations Committee was desperately 
trying to get to a vote on his supplemental bill and others 
wanted to move the Kosovo issue, and people had been hollering 
about standing and waiting for 3 hours to get their chance to 
talk. And I thought, yes, I miss my friends, but not so much 
the process.
    The Chairman. You were reassured that nothing has changed, 
however.
    Senator Coats. I was reassured that not much had changed.
    It was an honor here to serve, and I think as I reflect 
back on my time of service, probably the frustration that rises 
to the top of the list is the frustration of the crush of 
campaign and elections and the almost insatiable need to raise 
a sufficient amount of money to be competitive in that race, 
and the time that it takes away from what I believe we are 
really elected to do.
    I want to just share some summary thoughts with you. Having 
been on the other side of this table and implored witness after 
witness after witness not to read their full statement but to 
summarize their remarks, sometimes I am tempted to get even by 
coming and sitting and reading the whole statement.
    The Chairman. Your full statement will be made a part of 
the record.
    Senator Coats. Thank you, Mr. Chairman.
    The Chairman. We look forward to your comments. [Laughter.]
    Senator Coats. I will summarize it very briefly, if I 
could.
    Since the passage of the campaign limits in 1974, five 
Presidents have occupied the White House. Four Senators have 
occupied the Senate seat that I occupied in the State of 
Indiana. Time moves quickly. In that time, much has changed.
    I just came from the weekly Senate prayer breakfast. The 
price of breakfast has gone from $2 to $6.50 in just 10 years. 
I still get my haircuts downstairs. That price is now $20. I 
remember the days when people were complaining about Senators 
getting these free or virtually no-cost haircuts. Well, for the 
record, it is now 20 bucks for a trim. And I don't have all 
that much hair to trim. If they charged by the hair, I probably 
would do all right. But they don't do that.
    Now, I make those points to say that prices have changed 
dramatically since 1974 in virtually every commodity that we 
purchase, except the ability to raise money to provide for the 
cost of campaigning.
    If you index that for inflation, you come up with a figure 
that is more than three times the current hard money limit. If 
you add to that the growth in the population that we have to 
serve, which is about a 42 percent growth, you are over five 
times the limit of what is currently imposed, the $1,000 limit 
of contributions, the $5,000 on PACs, and the overall $25,000.
    Now, I think all of us who have run for office understand 
that the costs of campaigning exceed the cost-of-living index. 
You will hear testimony later from media people and others 
about the cost of buying an ad, the cost of putting your 
message on the airwaves so you can reach people.
    When I first ran for office, most communities had access to 
about, if they were fortunate, three TV stations on which to 
get their news and message, maybe four. Today we all sit there 
with our channel changer with up to 100, 150 channels. We have 
our favorites that we can pick and choose through. We are 
looking at commercial ads that are far more glitzy and 
attractive than what we are able to pay for, and the habit of 
people of switching channels on a whim.
    So I think without question--and there are statistics to 
back this up--without question, the cost of purchasing the 
opportunity to provide our message has increased dramatically, 
and I would suggest quite a bit more than just the cost-of-
living index.
    And so as you look back and I look back to my first 
congressional race in 1980--and I did some charts showing what 
Senators spent for statewide races in 1980, and I was astounded 
to learn that not one single Senate candidate in 1980 spent 
more than $4 million. Today, $4 million for a statewide Senate 
campaign is considered an inexpensive campaign. The costs in 
Indiana for running a Senate campaign have increased from $1 
million to $2 million to $4 million to the estimate provided to 
me by those that were advising my campaign for a race had I run 
in 1998 of approaching $10 million.
    When you break that down, as you did, Mr. Chairman, into 
the amount of money that needs to be raised on a daily basis, 
it quickly becomes apparent that we no longer have the luxury 
as Senators of spending 4 years basically attending to the 
duties of the Senate and reserving those last 2 years of our 
term for preparing for our next election. That has been the 
historical pattern of how the Senate operated, and the Founders 
designed it that way so that we would have the opportunity to 
step back from the pressures of campaigning, of raising money, 
of doing all the things that are necessary to run a competitive 
campaign, and focus on the longer-term issues. That is what we 
come here for. That is why many want to move to the Senate, so 
that they have the luxury of taking the broader, longer view.
    But when you break down now the average cost of a campaign, 
which, as I said, not one Senator, not even our former 
colleague Senator D'Amato from New York, probably the most 
expensive State, spent more than $4 million in 1980. And when 
you look at it today and you look at the number of Senators 
that have to spend that $4 million as a floor, not a ceiling, 
you realize the extent of the problem.
    Now, I know the issue of the constitutionality of getting 
our message out, the limitations on that is an issue that I 
assume this committee will address. That is really not why I am 
here today. I am here today to state that at the very minimum, 
this committee and the Congress need to realistically look at 
the limitations that are imposed on the amounts that can be 
raised from individuals, from PACs, and from the total amount 
that any single individual can give for Federal campaigns, and 
make a reasonable adjustment for the increasing costs that have 
occurred since 1974.
    As I said earlier, that cycle of 4 years of primary, almost 
total focus on the work of the Senate and then 2 years of a 
balance of work of the Senate and preparing for a campaign is 
no longer operative. The amount of money that has to be raised 
on a daily basis requires for many a 6-year continuous effort. 
Let's look at the quotes on this chart.
    This is an all-too-common refrain. Senator Dodd referred to 
Wendell Ford's decision to leave. ``I spent $425,000 to run for 
the Senate in 1974,'' he said. ``If I ran for election next 
year, it would cost about $5 million.'' And this is a small 
State. This is your State, Mr. Chairman, Kentucky. ``The money 
chase was the straw not to seek reelection. I have no doubt 
that I could have raised the money, but going across the 
country didn't sit well with me.''
    Our colleague Paul Simon, who served with Senator Dodd and 
me on the Labor Committee--and I thank you, Senator Dodd, for 
the chance to serve with you and your kind remarks and wish you 
success on that committee--``To run again would mean raising 
$10 million,'' Senator Simon said. ``It means also taking at 
least one-third of my time the last 2 years in office to raise 
money. That is not a prudent use of time.''
    Senator DeConcini has a statement. Senator Lautenberg said: 
``The compelling factor was the searing reality that I would 
have had to spend half of every day between now and the next 
election fundraising.''
    Senator Kerry has a quote there also, and on and on it 
goes.
    This is what we talk about in the cloakrooms. This is what 
we talk about at our lunches. This is what we talk about down 
in the gym and when we have private moments, about this ever 
escalating demand on our time to raise these funds.
    So, clearly, I think the case can be made for increasing 
the limits to allow us to free up the time so that we don't 
have to use such a substantial portion of our time doing that.
    Let me just state a couple of other points here, and then 
turn it over to Dr. Miller, and then be available for your 
questions.
    Some have raised the question about raising the limits or 
increasing the amount that any one person can give as a 
corrupting influence. I just have two points to make on that. 
In all my years of service, 18 in the Congress and 24 in public 
service altogether, I have never come across or heard one 
instance in which one elected official used his position or her 
position as a way of extorting funds to run for public office. 
I have never heard of an instance in which an individual used 
his power to change a vote, to modify a position in return for 
a contribution. I just think that is a red herring that is 
raised by those who oppose any changes in the campaign 
financing laws and, in fact, want to tighten them even further.
    I would also state to you in the second point that the 
notion that $1,000 or $5,000 or even $10,000 out of the total 
figure of $4, $5, $8, $10 million is a very small percentage of 
the total. Most of us couldn't even go through and identify 
exactly who gave what, we are so busy trying to do all that we 
need to do, both as elected office holders and as those 
campaigning for office, that at the end of the day pretty much 
say: What is our total? How much do we have? How much money do 
we have to put in the next campaign ad buy or whatever, without 
saying give me the list, I want to know who gave what?
    But even with that, even if you did that, the percentage, 
usually amounts to one-tenth of 1 percent or less of the total 
contributions by any one single entity. It is so small compared 
to the total that it is ridiculous, I think to claim it has a 
corrupting influence.
    The Chairman. Could I interrupt just for a second on that 
point?
    Senator Coats. You sure may.
    The Chairman. I chaired the Ethics Committee for 4 years 
and was ranking, vice chairman, as we called it, for 2 years 
before that. We never got a single complaint on that issue. Not 
one. And being a floor manager on this issue, the broader 
issue--not the issue we are talking about today specifically 
but the broader issue of campaign finance reform--I have 
repeatedly suggested to colleagues who would use the corruption 
argument to give me an example. Never got one in 10 years of 
handling that debate.
    It is truly a red herring, it seems to me, based on my own 
personal experience and, listening to you, Senator Coats, 
apparently your experience as well. So I would just interject 
with that point.
    Senator Coats. That is my experience, and let me just 
conclude by touching a little bit on this independent 
expenditure effort. You are going to hear later from Professor 
Lott, I think no relation to the majority leader, but Professor 
Lott will testify that expenditures are a much less accurate, 
much less desirable, and less efficient way of communicating 
support or opposition to a candidate than lawful direct 
contributions. I think all of us have been faced with a 
situation where we turn on the television or somebody brings 
our attention to an ad, running supposedly in our favor, 
supporting us, and saying, well, wait a minute, that is not the 
message I am trying to convey, that is not what we have chosen 
to be the themes of the campaign. An outside group has decided 
that is what the themes of the campaign ought to be. That 
places the candidate in a situation of saying: Do we have the 
money to clarify what our position is? And then being told by 
our financial people, no, we barely have enough money to run 
what we had planned to run, and now we are faced with this and 
are going to have to divert funds over here or change our 
message or whatever to either counter an issue ad or to clarify 
one even by those well-intended groups that are trying to 
support us.
    Now, the point is here that it is impossible 
constitutionally, and rightfully so, to deny citizens the right 
to state their views about a candidate, or about an issue. I 
think any action that this committee or this Congress would do 
to limit that right would be immediately thrown out by the 
court as unconstitutional.
    But the issue before us today is: How can we obtain more 
control of our own message? How can we garner the resources and 
the funds necessary to direct our own campaigns in a way that 
soft money isn't as influential, doesn't play such a large 
role, isn't so tempting? And how can independent expenditure 
groups or individuals better fund us to make sure that the 
reason why they are supporting us and the message that we are 
advocating is heard?
    Some are frustrated by the fact that we are not able to 
convey the message that we are trying to get out. So my point 
on independent expenditures is that one of the ways--maybe not 
the complete way, but one of the ways that we can address that 
problem is to raise those hard money limits and give us more 
resources in which to make our own message, mitigating the need 
for independent expenditures.
    Mr. Chairman, let me just conclude by saying that I think 
elected representatives spend too much time raising money for 
political campaigns, and the remedy for that problem that is 
achievable is, at a minimum, to raise contribution limits. It 
is not to limit free speech. I think that is a non-starter 
politically, and I think it is a non-starter constitutionally. 
I think it is a non-starter from our ability to enact good 
policy.
    I agree with Senator Santorum. If we can't do the whole 
thing, let's at least do what we can do. A good way to start 
and the very foundation of whatever package comes together 
ought to be a very realistic reassessment of the hard money 
limits.
    With that, Mr. Chairman, I want to thank you for the 
opportunity to come back and testify and be back in the Senate. 
I want to thank both you and Senator Dodd for your friendship 
and support over the years, and even though we are on different 
sides of the aisle, Senator Dodd said we found common ground on 
a number of issues and we did. It was a pleasure and a 
privilege to work with you, Senator Dodd, and, Mr. Chairman, 
with you.
    [The prepared statement of Senator Coats follows:]
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    The Chairman. Thank you, Senator Coats. Will you be able to 
stick around for a little bit?
    Senator Coats. Yes.
    The Chairman. Dr. Miller, then we will hear from you, and 
then we will have questions for both of you. Go right ahead.

                  STATEMENT OF DEMARIS MILLER

    Ms. Miller. Thank you, Mr. Chairman, Senator Dodd. It is a 
pleasure to be here today. I am Demaris Miller. I am from 
McLean, Virginia, which is right across the Potomac River from 
here.
    I would like to submit my remarks for the record, but I 
just want to briefly summarize them now.
    The Chairman. Your full statement will be made a part of 
the record.
    Ms. Miller. Thank you.
    I have been a public school teacher, I have been a 
registered nurse, I have been a research psychologist, I have 
been a wife, a mother and a grandmother, and last year I was a 
candidate for Congress from the 8th District of Virginia. I 
took great pleasure in that. I have never enjoyed anything more 
in my life. And I am not here today to rationalize my loss or 
to criticize my opponent. We ran a very clean campaign, and so 
did he. But I am here to use my experience as a challenger 
candidate against an incumbent to illustrate the hurdles that a 
challenger faces and to make one point very clear.
    Despite the popular belief that campaign financing limits 
make elections more fair and more democratic, the opposite is 
true. Contribution limits increase the advantages of incumbents 
at the expense of challengers. Now, I know incumbents have 
natural and inescapable advantages. I am not trying to do away 
with those. Incumbents are better known. They can legitimately 
claim they have experience in the job, they have much better 
voter contact, they have better press contacts, they can hold 
public meetings, and they are invited to many speaking 
engagements. All of that is natural.
    But there are also some advantages of incumbency that are 
artificial. They have free phones, they have Web sites, they 
have Internet access, they have the frank. And when I had to 
send out mail or put up a Web site or use the Internet, I had 
to pay for it. And for all of those public appearances that my 
incumbent opponent was able to achieve without cost, I had to 
buy my media coverage. My opponent was even a regular on a very 
popular CNBC talk show. And after the election, the host of 
that show said, ``Wow. All of his regulars were re-elected,'' 
and I thought, ``Wow. What a surprise.''
    All of this makes it even more important, if we really want 
to level the playing field, to make it possible for us to be 
unencumbered in raising and spending money because a limit on 
raising money is also a spending limit. Despite all of my 
efforts, cable advertising, targeted mailings, appearances at 
local candidate forums, Metro stops everywhere, and in spending 
almost half a million dollars on my campaign and getting full 
support from the National Republican Campaign Committee, there 
were an awful lot of voters who showed up at the polls on 
Election Day and said, ``Who is this Miller fellow and what 
does he stand for?'' [Laughter.]
    It is true that political scientists generally agree that, 
to have a fair chance of winning, a challenger has to outspend 
an incumbent. So spending limits and campaign fund-raising 
limits are a much greater burden for challengers than for 
incumbents who already have the advantage.
    I believe the 1974 law is an example of good intentions 
gone bad. Anything that makes raising money more difficult, 
particularly from individuals, puts challengers at a greater 
disadvantage.
    In my campaign, I raised almost half a million dollars. I 
came out of a primary $24,000 in debt. My opponent, like many 
incumbents, did not have a primary, but at that time he already 
had $700,000 in the bank. This is a tremendous hurdle to 
overcome, and much of that is carryover. This is quite normal. 
But putting fund-raising limits on me did make a difference. 
Could I have raised more? Yes. I had a number of friends and 
supporters who were willing to give more. One man from Texas 
sent me $5,000, and I called him and said, ``This is wonderful, 
except that I cannot accept $5,000,'' and we had to send money 
back, and that happened time and again.
    I also had a good friend who wanted to contribute to my 
campaign and discovered he could not give me a dime because he 
had already reached his aggregate $25,000 limit. So here was 
someone who agreed with my stands on the issues, and he could 
not support me.
    My major problem, though, was getting my message out. Even 
though we look at the inflation adjuster, I think Senator Coats 
was absolutely correct in pointing out that the cost of 
campaigning has gone up much faster than inflation. Candidates 
on congressional campaigns are spending more than ninefold more 
now than they were in 1974.
    So if we were trying to increase it, we would have to 
increase it faster than the rate of inflation. The major reason 
is the information age, but the growth in the population is 
also a reason. My area was covered by three broadcast stations 
in 1974. It is now covered by four broadcast networks, three 
cable systems and the satellite. That is an awful lot of media 
to cover, and it means that every media purchase you make is, 
first, more expensive because it covers a broader area and, 
second, it covers fewer of your own constituents. So you have 
to make more buys to make up the difference.
    I know that you are concerned about the constant grind of 
raising money. Part of that is because of the 1974 law. If I 
were limited to buying gasoline one gallon at a time, I would 
have to stop 15 times to fill my truck. And because you are 
limited to making individual contributions $1,000 or one gallon 
at a time, it takes a lot longer to raise the necessary funds 
than it did in 1974.
    Also, Senator Coats mentioned the issue of influence buying 
and how much is too much for a campaign contribution. The 
inflation adjuster is certainly one way of looking at it, but I 
think it's the inappropriate way. I think we have to look more 
at the cost of campaigning, as opposed to inflation. Since the 
costs of campaigning appear to have increased for congressional 
campaigns at least ninefold, and possibly more for Senate 
campaigns, assuming the potential for corruption is a function 
of the percentage that each contribution represents of the 
total spending, that ninefold increase means that if a thousand 
dollars was not corrupting in 1974, then surely $9,000 would 
not be corrupting in 1999. And besides that, this is just not 
the way my supporters view elections. Like you, Senator 
McConnell, and like Senator Coats, I have never had anyone 
suggest that a contribution to my campaign was buying a vote 
for any particular issue.
    I am urging you to put aside the popular myths about 
campaign finance and realize that campaign financing limits do 
help incumbents at the expense of challengers, and I admire 
what you are doing to address this issue because, after all, 
you are incumbents, and even though the fund-raising is a grind 
for you, these limits are an advantage for incumbents in 
office.
    I believe that there is a democratic principle here that 
transcends just fairness to challengers. If we do not have fair 
rules for political contests, we risk the effectiveness and 
credibility of our political system. And if I, as a candidate 
from any party, am not able to get my message out, and I think 
that was very clear, if I could not get my gender across, 
surely they were not hearing my campaign message, then there is 
something seriously wrong with the system because I was 
seriously constrained by this 25-year-old spending limit.
    Please give us real campaign reform. Ease the restrictions 
on fund-raising. Do not increase them. If you want to make 
political markets more competitive; that is, more fair and more 
democratic, at least raise the fund-raising limits. My personal 
preference would be to do away with contribution limits for 
individuals. But at the very least, individual contributions 
should be able to be at least as great as those of PACs. And 
there is a differential between incumbents and challengers and 
the ability to raise PAC money. Eighty-five percent of my funds 
came from individuals, almost half of his came from PACs, and 
this is normal. This is natural, and you can see why it 
happens. But it emphasizes the importance of individual 
contributions, especially for challenger candidates.
    I look forward to your serious consideration of this issue, 
and I strongly urge you to seriously consider removing them 
altogether. But if not, please do raise the limits.
    Thank you again for this opportunity to testify, and I 
would be more than happy to answer your questions.
    [The prepared statement of Ms. Miller follows:]
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    The Chairman. Thank you, Dr. Miller. I am not here to 
testify, but I do want to make an observation, just listening 
to both of you about the distorting impact of the 1974 
contribution limit. You mentioned, Dr. Miller, the impact on a 
House race. Senator Coats, you mentioned the impact on a Senate 
race.
    Let us talk about the presidential contest for a minute. A 
candidate running for President of the United States can only 
raise a thousand dollars pre-convention from an individual. It 
has an enormously distorting effect on competition. In my 
party, we are all familiar with the Steve Forbes/Jack Kemp 
matter in 1996, they were the best of friends. Steve Forbes', 
apparently, first choice for President was Jack Kemp. If he 
wanted to help Jack Kemp, he could give him a thousand dollars. 
But if he ran himself, he could do anything he wanted to. So 
Steve Forbes ended up running for President, and Jack Kemp 
ended up not running for President.
    Coming up to the current contest, Bill Bradley trying to 
take on a sitting Vice President. It is a difficult task. The 
thousand dollar contribution limit benefits the well known, 
like the Vice President, or the well off, like Steve Forbes. 
But the candidate who might be coming from behind or just have 
a regional base, because of the contribution limit, has a very 
difficult time pulling together enough resources to be 
competitive.
    On our side, the well-known, favorite candidate, George W. 
Bush, he is probably okay with the contribution limit. Somebody 
trying to come from behind, with a regional base, like our 
colleague, Senator Bob Smith, who might have a corps of 
supporters who would help him pull together enough resources, 
is stuck there under the thousand dollar contribution limit.
    In addition to the problems you have testified to about 
simply the cost of campaigning, it ends up having a big impact 
on who runs. It makes it less open for everyone. And in this 
country, we would like for anybody to feel like, if they could 
get enough supporters, they could get in the game.
    So excuse me for testifying a bit on that, but I think the 
same kind of thing you are talking about impacts not only House 
and Senate races, but the race for the most important job in 
American politics.
    On the corruption question, Senator Coats, I was pleased to 
hear you indicate your view of the corruption issue. It is the 
same as mine. And, Dr. Miller, you said the same thing. It 
simply is not connected with campaign contributions or, if it 
is, neither of us in all of these years we have been in 
politics, in my case 20/21 years, have experienced that.
    I have detected a bit more caution on the part of some of 
the reform groups in regard to just sort of throwing out 
charges of corruption. Increasingly, I hear them stress that 
they are not saying anyone in Congress is corrupt, but there is 
a public perception of rampant corruption that should compel us 
to enact a host of restrictions on the ability of private 
citizens, candidates, groups and parties to participate in our 
democracy. Might one reasonably conclude that such a perception 
is driven not by fact, but by the incessant, cynical and 
inflammatory rhetoric which has been employed on both sides of 
the aisle to propel various reforms aimed at protecting America 
from these evil politicians.
    Do you suppose that if people were told the truth, that 
members' votes are driven by ideology, party, and geography, 
they would be less cynical about elected officials?
    Senator Coats. Well, there is always that tendency and 
propensity, I think, of opposition groups to characterize their 
target in an unfavorable way, and I think the tendency toward 
edging toward the allegation of less-than-a-full integrity, in 
terms of their public service, is too tempting, and groups go 
over the line. I do not find that coming from ordinary 
citizens. I do not find that coming from the people that I used 
to speak to in the Rotary Clubs or the county fairs or the 
candidate forums or the town meetings. I would only find it 
coming from, generally, organized groups that basically wanted 
to cast a negative light on the current system and sometimes 
from people who just had a fundamental misunderstanding of the 
whole nature of fund-raising.
    If I could coin a phrase, I guess, which described that 
what we really needed to do was we need a bias toward hard 
money and hard disclosure. It seems to me that, if that is a 
problem, disclosure addresses that problem better than any 
other way. Let people have the facts. Let them know how much 
money we raised, and who we raised it from, make it a public 
record, make it a timely public record, and then I think people 
see it in its proper context, or at least it can be debated in 
its proper context. It is the innuendo, it is the story 
floating around, it is the rumor that cannot be immediately 
addressed by the facts that I think leads to the public 
cynicism.
    And so hard money, hard disclosure, that is the direction I 
would go.
    The Chairman. I have always been perplexed by the 
corruption argument. Did a campaign contribution ever influence 
your decision to vote on legislation?
    Senator Coats. No, it certainly did not. Because it is just 
folly to think that one campaign contribution would change a 
decision. We make decisions on a number of reasons/bases. 
Obviously, we are looking to do what is best for the country as 
a whole. We are looking to do what is best and the most sound 
public judgment. But we are also conscious of the fact that we 
represent X number of million people in our States and that we 
are there to represent them. And we are also, frankly, 
conscious of the fact that we would like to be re-elected. We 
would like put ourselves in a position where the majority of 
the people we represent say that was a sensible thing to do. 
Nothing more jeopardizes a career, to change a fundamental core 
position, a conviction, a publicly stated position, to go 
against the wishes of the people that we represent than trading 
a vote for a contribution.
    And as I said, the infinitesimal percentage of an 
individual contribution toward the total amount that you raise 
makes the whole question ludicrous.
    The Chairman. And all fully disclosed anyway. So if anybody 
wants to make an issue of it--
    Senator Coats. And all fully disclosed anyway.
    The Chairman. Dr. Miller, I wanted to ask you about the 
Virginia law. You live in Virginia. They do not limit 
contributions at all. They just have full disclosure; is that 
correct?
    Ms. Miller. That is correct, and it is really a delightful 
situation. So much of what Senator Coats addressed, special 
interest money, did not come into the latest gubernatorial 
campaign because we had both candidates capable of raising 
money fully, without any restrictions, and everything was fully 
disclosed. So the public was aware of where the money was 
coming from, but at the same time the campaigns really focused 
on the issues, and you saw very, very little of the negative 
campaigning that is common in other places.
    The Chairman. Is Virginia mired in corruption as a result 
of that?
    Ms. Miller. I think Virginia has far less corruption of any 
kind than most States. We have had very little indication of it 
in campaigns. And we have a very active group, based in 
Virginia, the Voting Integrity Project, that has not found 
major issues anywhere in Virginia that indicate corruption.
    The Chairman. And the absence of a contribution limit in 
Virginia, does it have the effect of making it easier for a 
challenger to pull together enough resources to compete?
    Ms. Miller. Absolutely. I think we have excellent evidence 
of that just in our last three governors. Our current governor 
is the son of a butcher. He ran against a very, very wealthy 
businessman, but he was able to run a good race and raise 
enough money, and people voted for him for the issues. The 
previous governor was the son of a football coach, and the 
governor before that was only one generation removed from 
slavery, and all of this happened under a system where there 
were no restrictions on the amount of a contribution.
    The Chairman. So if you are sort of an underdog in a 
Virginia race, if you have a few people who are for you, they 
can potentially pull together enough resources to give you a 
chance to compete against somebody that might have a broader 
array of support. Is that, essentially, the point?
    Ms. Miller. That is correct. And I think sometimes the lack 
of spending limits allows people to show the degree of their 
enthusiasm for a campaign, as opposed to just their general 
support of a campaign.
    The Chairman. And then, presumably, with full disclosure, 
if a candidate has a large contribution from somebody that is 
controversial, it becomes an issue in the campaign and is 
hashed out by the voters; is that right?
    Ms. Miller. Well, absolutely. The law requires them to 
report it, and the press lets the public know, and the public 
responds accordingly.
    The Chairman. Thank you. Senator Dodd?
    Senator Dodd. Well, thank you, Mr. Chairman. Let me thank 
our witnesses again for their comments and statements this 
morning.
    Just a couple of observations. I think it is probably just 
a fundamental sort of difference of how you look at the 
situation. There is some question, in my view, as to whether or 
not, by raising the limits, we would actually free up members 
of Congress to spend more time on issues. I mean, there is an 
assumption, inherent in the argument, that this is going to 
happen because you will be raising the same amount of money. 
You will just need less time to do it because you can get it in 
larger chunks.
    There is a former colleague of the United States who is 
since deceased, and it goes back to a different era before any 
of us were here in the Congress, but I remember talking to him 
before he passed away a number of years ago, and told me how he 
used to do his fund-raising and was very candid about the whole 
thing, a very fine member, I might add, by anyone's estimation, 
of this body. And, basically, he would have a friend of his 
held his dinner for--this is when a race would run the average 
of about $4- to $500,000 for a Senate seat in the country--and 
he would have a dinner. A friend would host it. They would 
invite ten friends. They would divide up the amount, and they 
would each write a check for it, and that was the entire level 
of his fund-raising activity.
    Now, it saved him a lot of time, and he certainly had a lot 
more time to work on issues, I might argue. And I do not know 
anything that would suggest that this individual, by the way, 
would subscribe to the notion of the corruption piece, but I 
will come back to that in a second. So, in a sense, it is, I 
suppose, the ideal world. He was one individual with 10 or 15 
people who each divided up the amount of money. He was free 
then to legislate freely.
    There is something, I think, that is disturbing, however, 
in the notion today that the idea that, because you can do this 
with 10 people or 15 people or 20 people, that you are 
achieving a more pure environment in the sense of how we run 
our campaigns and how we function as legislators. There is 
something to be said for the notion of involving people in the 
political process through contributions, while the other is 
much more efficient and gives you, as I say, more time.
    My second concern, in this sense, is something that, again, 
you may want to address. But my experience is, with incumbents 
and/or challengers, that people have a tendency to raise as 
much money as they can, not as much money as they think they 
are going to need. I mean, obviously, you have a goal in mind 
of what you think you can raise.
    But we all know, having been in races where you come down, 
and you do not know what is going to happen in October of an 
election year; whether there is some event that occurs that you 
have no control over, happens on the outside, and it skewers 
the political environment and climate for you so that you have 
to be prepared to answer it, to respond to it, to deal with it. 
And so the tendency is to raise as much as you can to prepare 
for that.
    Now, unless you know for weeks out that you have an 
incumbent that is so debilitated or incapacitated as a 
candidate that is not going to pose a difficulty. But in 
competitive races, it is why we see more and more people who 
are elected with treasuries, as was in your case, Dr. Miller, 
where your opponent was left with a previous campaign with 
excess.
    Today, if you look over our colleagues in the Senate, you 
will find the vast majority come out of campaigns, and if they 
do not have an excess amount, they will quickly try to build 
one up.
    So I am concerned that the notion somehow that by raising 
the individual amounts of hard money, that we are somehow going 
to simultaneously restrain the overall amounts that get spent 
in the campaigns. You did not say that directly, but there is 
an implied suggestion here that we will free up more time and 
there will be no more money that will have to be raised. I 
suspect it may be just the opposite. We will find the volume 
being raised in terms of total dollars.
    Let me just say to my colleague, and the Chairman, too, 
when he talks about the presidential race, about how people who 
are not as well known, I remember when Gene McCarthy had a 
wonderful line, in talking about the Senate, but I think it 
also can apply to presidential candidates, he once said that 
the Senate ought to be a place where people of reputation come, 
not where you come to make a reputation. And in a sense, one 
might make the same suggestion about presidential candidates; 
in the sense where there ought to be people of reputation who 
are there, not where you come to seek a reputation as a 
presidential candidate.
    But in a sense, the ability in the presidential race, I 
think one of the problems--maybe we can save this for another 
day--but it seems to me by front-loading the process here and 
requiring that people be in a position to spend a lot of money 
very quickly is probably going to have as much of an influence 
on how much money has to be raised, who can get involved in the 
race. In previous years, it was that stretching out of the 
process so that a candidate who did well in the front would 
have an ability to make a case that they could raise the 
dollars to face a California primary.
    The Chairman. If you would yield, we are sort of testifying 
ourselves here. But you mentioned Gene McCarthy. You have 
probably heard--Gene has testified before our committee on this 
issue a number of times----
    Senator Dodd. I know he has.
    The Chairman [continuing]. And has indicated that he could 
not have brought President Lyndon Johnson down in 1968 had 
there been a thousand dollar contribution limit. In fact, he 
has been one of the most vocal opponents of the 1974 law, under 
which we have been operating. And he tells the story about how 
eight or ten people put together the resources for him to go to 
New Hampshire and to take on a sitting President of the United 
States over an issue of deep conviction, the Vietnam War, and 
has testified before this committee passionately on a number of 
occasions.
    Senator Dodd. Oh, I know.
    The Chairman. And had this law been in effect, he could not 
have carried his case to New Hampshire. So that is a classic 
example of the distorting effect that you all have been 
testifying to.
    Senator Dodd. I quoted Gene McCarthy for a different 
reason--[Laughter.]
    But, also, I would disagree with him. I think, in fact, in 
1968, there was an army of young people--a great trivia 
question, of course, is who won the New Hampshire primary, and 
Lyndon Johnson was a write-in candidate in New Hampshire and 
actually won the primary that year. But, nonetheless, I think 
he would have done very well in the absence of it because he 
did have a cause and an issue, and it was not the finances that 
made him a competitive candidate, it was an issue in which he 
attracted literally thousands and thousands of people who cared 
and decided they felt they wanted to give of their time.
    I want to agree with you on the corruption comment that was 
made here. I never bought into the notion of--as we understand 
corruption that was a legitimate case. I think we ought to be 
careful how we confuse this, though, in a sense, what we 
perceive as corruption. There is a corrosive element to this, 
in a sense, and I do not think you can get away from that.
    To the extent that people have to go to major sources of 
people who can write checks--I mean, there are not many people 
who can write a check for $2-, $3-, $4 thousand, working 
families and so forth out there who cannot participate at that 
level--and to the extent you are going to disregard the $100, 
and $50, and $25 contributor because it just is not worth your 
time to spend on them to ask them to get involved in this, 
because it is easier to go to that person who can, depending on 
what the proposal is here, to go to $2,000 or $4,000 or $5,000, 
then, clearly, we are awfully naive if we do not think the 
American public feel there is not some sense of obligation, 
just as we feel a sense of obligation to people who vote for 
us, organizations that support us and so forth.
    As human beings, when the issue comes down, you have got 
three places you can be, and there is a group that opposed you, 
a group that supported you, a group that helped finance your 
campaign. We all know in a process of politics that your 
attention is drawn clearly to those who have been able to help 
you out, get you to where you are. I do not think that is 
corrupt. I think that is human nature, in a sense.
    And I think to say and suggestion somehow that this is a 
good thing or it is not a bad thing worries me because I do 
think it is unhealthy. As more and more people--last election, 
a billion dollars spent in congressional races, the lowest 
participation and turnout in almost half a century. There is 
something more fundamentally going on in our process of 
politics in this country that needs to be addressed. Again, my 
concern is that what we are going to see is more money come 
into the process here. Eighty percent of the campaign dollar 
gets spent on TV. And I have still always questioned why it is 
not, with licenses and so forth--others have made this 
suggestion, some people do it voluntarily--but TV stations and 
networks that use the public airwaves that we allow them to, 
the privilege of doing so, why they do not have a greater sense 
of responsibility of providing the time so that candidates can 
be heard, other than at 2 a.m. in the morning, so that you, Dr. 
Miller, would have a chance to express your views to the voters 
of this area without having to go out and raise a fortune in 
order to compete effectively for that time.
    I, again, appreciate your testimony here today. It is a 
pleasure always to see good friends like Dan Coats go back up 
and testify and think we need to look at this. There is a 
fundamental disagreement about whether or not we agree there is 
too much money in politics. And if you think there is not, then 
we have a different approach to this. Someone once described it 
as looking at sort of the Mississippi River and the delta. And 
if you just try and deal with the tributaries, then you are 
never--there will always be other tributaries, other ways for 
money to find its way into the process.
    You have to go back and deal, it seems to me, with the 
overall question of flow coming in and ask yourself what is 
this doing to the political process in the country? Are people 
participating more? Are voters engaged more in the process? Is 
there some way in which we can get our message out better to 
encourage people to become candidates, to make it easier for 
people to challenge effectively?
    And, again, I do not know, Ms. Miller, but it seems to me 
that even if you raise these limits, your incumbent is still 
going to have a tremendous advantage. I do not see how this 
gets closer to the incumbent, being able to challenge, in a 
sense, if the incumbent is able to take advantage of this hard-
dollar question, which is always the advantage--and I do not 
disagree with you there--so you are going to have that 
continued disparity it seems. It may even be greater.
    Ms. Miller. May I respond to that?
    Senator Dodd. Certainly. I would like you to.
    Ms. Miller. It is true that the incumbent would always have 
much, much more money, especially starting with three-quarters 
of a million dollars, as he did. My point is that having the 
limits that I had, I never had enough money to reach that 
threshold to even get to the point that people knew I existed, 
let alone know who I was. There were young staff members on the 
staff of this committee living in my district, active in 
politics, and they did not know until they walked in on 
Election Day that there was a Republican running.
    Senator Dodd. What would make you think the TV stations 
would not raise the cost of your ad to go on television now 
that they know you can raise more money?
    Ms. Miller. As an inveterate capitalist, I am willing to 
take that chance that they will take my money if I have enough 
of it. [Laughter.]
    Senator Dodd. Well, I do not suggest they will not. I am 
sure they will. They love to do it. They also do editorials 
about campaign finance reform. But my point to you being is 
that if they continue to raise the amount it costs per unit, 
the fact that you could raise $100 before and not quite make it 
because the TV cost $200, you now raise $200, but they have 
raised the cost to $400. It seems to me, all we have done is 
bring more money into the process, but we have not increased 
your ability to communicate any more effectively with that 
voting population who, as you described, did not know who you 
were when they showed up at that polling booth on Election Day.
    Do you understand my point?
    Ms. Miller. I can guarantee you I could have gotten my 
message out better if I had been able to raise more money from 
those individuals who were willing and ready to support me.
    The Chairman. We have had, I must just say on that point, 
we have had witnesses before the committee, off and on, over 
the years, who have made the point that spending beyond a 
certain point for incumbents really does not make any 
difference. The real point is: Can the challenger get enough, 
as you put it, Dr. Miller, to meet the threshold of credibility 
and to convey an argument for change?
    Senator Coats. Mr. Chairman, if I could on that point, just 
to reinforce you there. I think we have all witnessed, and I 
will not mention any names, several celebrated statewide 
campaigns in recent years, where there was a backlash against 
the incumbent for excess spending of personal money. There is a 
minimum-threshold, however, argument that I think Dr. Miller 
that is irrefutable, and that is, you have got to get in the 
game first before you have a chance to win. And to get in the 
game, there is a minimum threshold level that, in today's 
multifaceted way in which we communicate messages to the 
American people, it is an expensive proposition. And if you do 
not meet that minimum threshold and have the funds to address 
that, you are defeated before you ever start.
    Senator Dodd. Let me just finish, if I can, Mr. Chairman.
    The Chairman. Sure.
    Senator Dodd. What we ought to be looking at, though, is 
how we increase participation of all people in this country. 
And by raising dollar limits, there is clearly one crowd that 
is going to have a larger voice and a bigger voice box in all 
of this, and that is the people who can write a check, not just 
for $1,000 or $2,000, but for $4,000 or $5,000 or $10,000. That 
is very few, small percentage, of the American public that can 
do that. I think that is discouraging to a lot of other people 
out there who cannot even come close to playing in that game, 
who want to contribute and want to support, who are going to be 
disregarded because it takes too much of our time to solicit 
their support. I think that is terribly unhealthy.
    We have got to look at this thing in a far broader, more 
sophisticated way if we are going to reverse the trends of 
people not participating, getting cynical, watching all of the 
negative adds on television, people getting so turned off by 
politics in this country that they do think we are corrupt, and 
properly so, in my view, but it does not seem to be abating at 
all. And so we have got to look at this, in my view, in a far 
broader way.
    If we are going to ultimately achieve, I think, the desired 
goals of increasing participating and making the political 
process accessible not just to candidates, but to the general 
public, if the general public feels they cannot access this, it 
is only about us; how much time we spend, how much money we 
raise, how much they can contribute, it seems to me we end up 
in a very deep hole in this country. So I am deeply worried 
about that.
    Again, I am deeply grateful to both of you for sharing your 
views and thoughts here today. I am grateful to the Chairman, 
and he and I are going to work on this, and I respect him 
immensely for his care and conviction, and his courage. He has 
taken a lot of heat for positions he has taken, over the years, 
on this issue, but he has deep convictions about it, which I 
respect, and I am hopeful that we can find some common ground 
that Dan and I, and this gentleman and I have been able to find 
over the years, despite our political differences.
    But I wanted to express that general concern I have about 
the crowd that feels left out in this country when it comes to 
politics, and we have got to be very careful they do not feel 
further disenfranchised.
    Senator Coats. Senator Dodd, if I could just briefly 
respond to that.
    Mr. Chairman, the Senator raises a legitimate question 
about the public's level of participation and about their 
perception of the political process. But I would suggest there 
are reasons well beyond the contribution limits that are 
responsible for that, and those need to be addressed.
    But in terms of contribution limits, let us not forget that 
establishing a limit based on 1974 prices is no longer 
realistic in 1999. And there has to be a way of addressing 
that. I mean, that would be the same as me saying, ``Well, I 
used to get my haircuts for $4. I am not going to pay $20, and 
so I will no longer get a haircut.'' [Laughter.]
    I mean, that is just the realistic aspect of the way prices 
have increased over that 25-year period of time. And I think 
that, as a minimum, we ought to find common ground on that 
question because the statistics are there to support a common-
ground solution. We all know that the cost of living and all of 
the aspects of providing and purchasing services has risen 
dramatically since 1974.
    Senator Dodd. Would you forgive me, by the way--you will 
appreciate this--and, Dr. Miller. The Banking Committee is 
calling, so I apologize. We have the chairman of the Securities 
and Exchange Commission before the committee today, so I have 
got to get over there, but I apologize to you, and I apologize 
to our other witnesses. But I have read your testimony and 
appreciate your presence very much.
    Thank you.
    The Chairman. One final observation, as Senator Dodd has to 
depart for another committee, Senator Dodd made several 
observations about the overall amount of money in politics. But 
the reform effort the last couple years really has not dealt 
with that issue at all. There have been no spending limits 
suggested for congressional campaigns. And one of the reasons I 
wanted to start off on this subject is we really are not 
talking about spending limits on campaigns any more. And so the 
question is how do we make it possible for people to get enough 
resources to compete? And it seems to me, listening to these 
witnesses, that the contribution limit stuck in the seventies, 
when a Mustang cost $2,700, is a major impediment.
    With regard to turnout, it is quite interesting to note 
that turnout goes up when you have competitive races, and it 
goes down when you have sleepy races that nobody is hearing 
about. And so, clearly, there is no evidence of a correlation 
between vigorous campaigns and low turnout. There is plenty of 
evidence that in a sleepy race, in which you have an incumbent 
sailing to victory and a challenger with no chance that nobody 
has ever heard of, turnout goes down.
    And the other thing that clearly has an impact on turnout 
is just how angry the voters are. We saw in 1992 the voters 
were mad as hell. Ross Perot tapped into that. Overall turnout 
in the presidential race went up 5 percent over 1988. By 1996, 
it was a content electorate out there. People were in a happier 
mood, and turnout went down somewhat.
    So this whole issue of turnout is a quite interesting and 
complex subject. I want to thank my friend, Senator Dodd, for 
being here for the first part of the hearing. Thank you, Dan 
Coats, for coming back and joining with us and sharing your 
views on this issue, and, Dr. Miller, thank you so much for 
being here as well. We appreciate it.
    Senator Coats. Mr. Chairman, thank you.
    Ms. Miller. Thank you.
    The Chairman. Now, we would like to call our two witnesses 
for Panel 2. Karen Sheridan, who is a professional media buyer 
with SMY Media in Chicago, who has bought time for 
corporations, and for labor unions, and for party committees, 
and for candidates, and John Lott, who is an economics 
professor at the University of Chicago, who has testified in a 
number of instances on the subject of interest to us today.
    Ms. Sheridan, why don't you lead off. We will make your 
full statement a part of the record and look forward to hearing 
from you.

  STATEMENTS OF KAREN SHERIDAN, EXECUTIVE VICE PRESIDENT, SMY 
MEDIA, INC., CHICAGO, ILLINOIS; AND JOHN R. LOTT, JR., JOHN M. 
OLIN LAW AND ECONOMICS FELLOW, UNIVERSITY OF CHICAGO SCHOOL OF 
                     LAW, CHICAGO, ILLINOIS

    Ms. Sheridan. Thank you, Mr. Chairman. Thank you for this 
opportunity to be able to participate on this very important 
issue and in this very important process today.
    As you stated, our company has experience in both corporate 
or traditional commercial advertising, as well as associations, 
labor unions and political parties and committees, and I think 
that is important to note today, as I have been asked to give 
my opinion on the rising costs of television media, the 
changing face of that media environment, and I think what is 
very important is to point out some of the differences between 
the traditional commercial advertiser and the political 
advertiser, an area that we understand completely.
    I am going to try and keep this as brief as I can and as 
unencumbered as I can. But, unfortunately, there are a lot of 
numbers that go into media.
    The Chairman. Yes, I understand that. You go ahead. You 
cover the subject.
    Ms. Sheridan. So bear with me on this.
    Senator Coats already talked about how the population has 
increased over 40 percent since 1975 to today. But along with 
that, so has television viewership. In 1974, your average 
household viewed approximately 44 hours of television a week. 
Today, we are viewing over 50 hours of television each week. 
But what has happened in that environment is that it has been 
fragmented. We have seen a 70 percent growth in commercial 
stations in this country between 1975 and today, growing from 
775 to almost 1,200 stations today.
    We constantly see increased variety of cable networks being 
made available. We have seen brand new networks being born: the 
Fox Network, Warner, UPN, PAX Net. All of these have led to a 
decline in viewer loyalty to stations. Where in the mid-
seventies the average household was viewing only 4.5 stations, 
an average of nine hours each per week, today, we are viewing 
12 stations only four hours each per week. And that is even 
more dramatically shown when you take a look at what has 
happened with the three major networks in this country. ABC, 
CBS and NBC, in 1975, garnered 91 percent of all prime-time 
viewing. Last year, that dropped to less than 50 percent.
    What this means for advertisers out there is that you have 
not just increases in the cost of living, but you have this 
fragmentation which makes it much more difficult and expensive 
to reach the viewing population. In your top 100 media markets 
in this country, your costs for prime time have increased over 
300 percent from 1975 to today. And in late news, one of the 
key day parts that is utilized by campaigns, the costs have 
gone up over 400 percent.
    On top of that, even though we, personally, do not get 
involved in all the ancillary services that campaigns require 
as polling and commercial production, we worked closely with 
these people, and we found that the cost of conducting polls 
has doubled in that period of time, and the cost of producing a 
30-second spot has gone up over fivefold.
    All of that aside, though, advertisers continue to 
recognize television as an important means of reaching the 
public, to get their messages out there and get them across. In 
1998, it is estimated that over $46 billion will have been 
spent in television advertising. That is over 60 percent of all 
of the advertising dollars spent in the five major media. Back 
in 1975, that was only $5.2 billion spent in television.
    Television has certain characteristics, intrinsic 
characteristics about it. There is sight, there is sound, there 
is motion, there is color. This makes for a very impactful 
medium in which to put out your message. Television continues 
to reach approximately 80/85 percent of the viewing public 
every day and almost 90 percent of viewing adults each week. 
That is very important, especially for the political advertiser 
who needs to reach his marketplace, to reach his constituency, 
in a very short period of time.
    What I found very interesting was there was a Roper-Starch 
survey conducted recently that showed, as of March 1997, 69 
percent of all adults in this country utilized television as 
the primary place to get information on what is happening in 
the world today. Forty-seven percent get this information only 
from TV, and 53 percent of all adults say that television is 
the most credible source for information.
    There is also a study by the Center for Media Public 
Affairs that found that the major news properties out there 
carried 73 percent fewer election stories during the mid-term 
elections of 1998 than they did four years earlier. So while 
the public is looking to TV for this information, news is 
carrying less of it. This means it is all the more important 
for the political advertiser, the candidate, to continue 
utilizing television as a means of reaching their constituency.
    The Chairman. Could I interject on that point?
    Ms. Sheridan. You certainly may.
    The Chairman. Admittedly anecdotal. But in my campaign in 
1996, as compared to 1990, just in terms of earned media 
coverage, setting aside advertising, there was a dramatically 
less interest on the part of the local television stations 
around Kentucky in covering anything, either myself or my 
opponent, had to say at any point in the campaign prior to the 
last seven days. So we were almost totally dependent on having 
to advertise because there was little or no interest, in terms 
of the News Departments of the various local stations, in 
covering the campaign, putting even more pressure on us to 
advertise as the only way to break through to our voters.
    Ms. Sheridan. Not only is it important for you to utilize 
television to break through to your voters, but it is even more 
important to recognize the other challenges that are out there 
with utilizing it.
    You can no longer just buy a thousand rating points of 
time. A rating point is not just a rating point. Candidates no 
longer look to target just the mass voting-age population. 
There are specific issues which require you to address specific 
segments of the marketplace out there. If women are a key 
element or a key portion of your target market, you can no 
longer reach them by utilizing just daytime television, as 57 
percent of all women are now working outside the house during 
the day.
    Likewise, if your polls indicate that the persons most 
likely to vote are found in news vehicles or in news 
information programming, then it is important that you place 
your spot, your ad, in that environment. But what happens is 
that your news and your news information programming, as your 
60 Minutes and prime time, are two of the most expensive day 
parts to utilize for television advertising.
    Prime time alone, in the top 100 markets, and late news 
range from 44 percent to 198 percent higher than any other day 
part out there you could be using, whether it is daytime or 
early fringe or late night programming.
    But along with these costs and how expensive it is to 
utilize television, there are other differences between your 
traditional advertiser, television advertiser, and your 
political advertiser. Your traditional advertiser has the 
luxury of planning, doing long-range strategic plans. They have 
the opportunity to place their media well in advance of when 
they need to be on the air. That gives them the opportunity to 
take advantage of negotiated rates, to take advantage of long-
term media relationships, to run in the programs they want to 
run in when they need to be there.
    Your political advertiser, on the other hand, is entering 
the market only every two, four or six years. You have a very 
small window of time in which you must tell your story to the 
public, when you must reacquaint them with you and with the 
issues or, in some cases, to introduce yourself for the very 
first time to them.
    Political advertising has a tendency to be very, very 
volatile. It is much more reactive rather than proactive. It is 
constantly changing based upon what your competition is doing, 
what the current events are and what other third-party 
advertising might be doing often leaving you to have to place 
advertising time within 24 to 48 hours, which then forces you 
to oftentimes buy in more expensive programming on more 
expensive stations.
    And that is all complicated further by the fact that the 
majority of your advertising, especially your committee 
advertising, takes place in the 60 days prior to the general 
election in November. That, unfortunately, is some of the most 
expensive media time to buy. From mid-September through 
December--we call this fourth quarter in the advertising 
industry--this is when your new season programs debut, this is 
when people are settling back in after the summer and 
viewership is going up, consequently raising prices on 
inventory, and when your traditional advertisers are out there 
building their sales during the key retail period for them.
    Fourth quarter 1998 was 46 percent higher than ads that 
were placed in first quarter, which is January through March, 
and 10 to 11 percent higher than second and third quarters.
    In addition to that, you also have a wealth of candidates 
all vying for the same time during that same 60-day window 
further making it difficult to purchase time and making it much 
more difficult to distinguish yourself with the public from 
everyone else.
    Corporate advertisers have another very distinct advantage. 
They are not opponents, they are competitors. Taco Bell, 
McDonald's, Burger King, Kentucky Fried Chicken, can all exist 
in the same market. They can all share a piece of the fast-food 
industry. At the end of each advertising cycle for them, they 
do not go out of business because they do not own a 51-percent 
market share. Political candidates, on the other hand, are 
opponents. Only one of them is in business the day after 
election, and it is whoever gained more than a 50-percent 
market share.
    There are also a number of geographic problems that are 
faced with running campaigns. Dr. Miller talked about the 
problems she had and the inability to utilize television. In 
the 8th Congressional District of Virginia in which Dr. Miller 
ran, that district is covered by your Washington, D.C., 
television stations. Those same stations also cover another 16 
districts in 4 States. This means that of the 3.9 million 
adults that are reached by television out of Washington, D.C., 
only 11 percent of them reside in the 8th District. So 89 
percent of all of Dr. Miller's advertising would have been 
wasted.
    Kentucky is another prime example when you get into your 
State races. Media markets do not conform to congressional 
districts. They don't conform to State boundaries. In Kentucky, 
you need to utilize eight different media markets in six States 
to ensure 100 percent coverage of the State.
    What happens with all this overlap in these markets means 
that the person, as Dr. Miller, who needs to buy time in news 
or on ``60 Minutes'' or whatever it is going to be paying the 
same price for that ad as someone else in that district.
    Let's take the case of New Jersey. In New Jersey, you need 
to utilize New York television. You are running in New Jersey. 
If you want to buy a spot on ``60 Minutes,'' it is going to 
cost you $25,000--the same price someone in New York City will 
be paying who can utilize a much larger portion of that target 
audience.
    Finally, corporate advertisers are not bound by artificial, 
mandated limits. Yes, they have stockholders and boards of 
directors to report to, but they also have the luxury of doing 
investment advertising. When they are looking to build their 
brand, they can do what is known as investment spending. And as 
their revenues come in, as their profits rise, they are able to 
reinvest more of that money into advertising to continue 
building their product, to continue building their service. 
They are not limited by this $1,000 limit as your candidate 
advertisers have been.
    Media costs have risen over 300 percent in the last 25 
years, and I find that political campaigns are in jeopardy of 
not being able to utilize television, a vehicle that so many 
people in this country tune to every day to learn what is 
happening, that your candidates will not be able to afford it 
or to afford it at any significant level of presence.
    In conclusion, I would like to state that I fully believe 
that the campaign limits need to be increased to be 
commensurate with the rising costs of television advertising if 
all candidates are going to have the opportunity to utilize 
this very effective medium.
    I thank you for this opportunity today and welcome your 
questions.
    [The prepared statement of Ms. Sheridan follows:]
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    The Chairman. Thank you, Ms. Sheridan.
    We will hear from Mr. Lott, and then we will have some 
questions for both of you. Thank you.

                 STATEMENT OF JOHN R. LOTT, JR.

    Mr. Lott. Thank you very much for the opportunity to 
address the issue of campaign finance reform. My concern is 
that despite the best of intentions, many campaign finance 
regulations have actually accomplished the opposite of what was 
originally intended. In particular, limits on contributions 
have entrenched incumbents, given wealthy candidates an 
advantage, increased corruption in the political process, and 
led to more negative campaigns. Limits on contributions have 
also not been successful in limiting the total amount of 
resources devoted towards political campaigns.
    Let me briefly go through the issues here.
    First, the restrictions on the size of campaign 
contributions have had little effect on the total amount spent 
in campaigns. They result in higher levels of independent 
expenditures that balance off any declines in a candidate's 
resources. The rules attempt to treat the symptoms--the larger 
contributions and higher campaign expenditures--without 
addressing why those contributions or expenditures have been 
increasing. The closest analogy that I can give you with regard 
to policy is the implementation of price controls.
    Gasoline price controls during the 1970s did not reduce 
consumer competition to obtain gasoline, for example, but 
merely changed the form that it took. Consumers may have paid 
less in terms of the dollar price at the pump, but they spent 
more in terms of waiting in line to get gasoline. Likewise, 
limits on campaign contributions may reduce the amount directly 
given to candidates, but if the benefits are there, potential 
beneficiaries and victims of Government actions will find other 
ways of trying to elect candidates who support their positions.
    We have seen price controls producing many undesirable 
forms of competition. For example, anybody who has lived in 
areas with rent control know how you have under-the-table type 
payments to go and get apartments. We even have phrases that 
have entered into our language in terms of ``key money'' for 
getting apartments. And, similarly, for campaign finance rules, 
there are numerous examples in recent years of contributions 
made through ``straw donors,'' for example, people who merely 
served as intermediaries to illegally funnel money to 
candidates.
    As alternative forms of competition for elective office are 
foreclosed, our political system risks forcing more competition 
underground and producing the unintentional result of creating 
more corruption, not less. One problem with these 
circumventions is that voters will find it increasingly more 
difficult to determine who is really providing candidates with 
money.
    The different forms that these contributions can take is 
essentially unlimited. For example, in the extreme case, 
someone could buy a television or radio station in order to try 
to produce news media coverage that is going to be more 
sympathetic to particular candidates. It is difficult to see 
how these types of in-kind contributions could be effectively 
regulated given that it would be infringing on issues involved 
free speech.
    My research indicates that most of the increase in campaign 
contributions that we have observed over the last couple 
decades is simply due to one factor, and that is the increasing 
size of government. As more is at stake, people are willing to 
spend more in order to try to influence the political process.
    I think it also deals with an issue that Senator Dodd was 
bringing up, and that is whether or not we can effectively 
reduce the level of contributions or expenditures by limiting 
things like the amount that can be spent on a race. And I have 
looked at data for State House and State Senate races across 
the United States as well as gubernatorial races, and 
restrictions on campaign contributions have absolutely no 
impact on the total amount that is spent on races. What the 
restrictions do is change the composition of those 
expenditures.
    Because of donation limits, campaign expenditures also risk 
taking less desirable forms. Candidates will have even less 
responsibility over how expenditures will be spent as more 
money is spent by independent organizations. To the extent that 
these are truly independent organizations, the information that 
voters receive will not be as well coordinated as it would have 
previously. Even if the same amount of money is spent on 
campaigns after these reforms take place, voters will learn 
less about the candidates and their positions. We also risk 
even nastier campaigns, more negative campaigns as candidates 
can plausibly deny the accountability for the attacks conducted 
by surrogates.
    A second major issue involves the frequently mentioned 
concern that campaign expenditures involve fears that campaign 
contributions will alter how a politician votes. In part, this 
is also related to a concern that Senator Dodd raised about the 
general public's views on whether politicians will be 
accountable to their interests, also, and not just those of the 
donors.
    Academics regularly find that candidates who receive the 
most money tend to vote most in accordance with the interests 
of those donating the money. Yet the academics who have worked 
on this issue realize that there is an important problem, and 
that is one of causation. Is money being given to candidates 
who essentially value the same things that the donors believe? 
Is that the reason why we see this positive correlation? Or is 
the positive correlation due to the fact that the contributions 
are actually altering how the politicians are voting? This has 
been a very difficult question that economists and political 
scientists have looked at over many decades now.
    My research, I think, provides a very simple method of 
disentangling those two different types of causation there. I 
have a paper that recently appeared in the Journal of Law and 
Economics, and what it looks at is how politicians vote in 
their last term when they no longer risk losing campaign 
contributions that they might be receiving.
    If contributions are causing politicians to vote 
differently than they otherwise would have voted, then when 
they are in their last term and no longer risk losing those 
contributions, if those contributions were really causing them 
to vote in accordance with those donors' interests, then you 
should have seen systematic movements in terms of how 
politicians vote during their last term.
    I looked at congressional voting from 1975 to 1990, and I 
am happy to talk about all the different factors that I 
controlled for. But there were two striking findings.
    The first one is that politicians tend to vote extremely 
consistently over their entire political lives and that you can 
explain how they vote in terms of their constituents' 
interests.
    The second is that there was essentially no relationship 
between how a politician voted in their last term when they no 
longer risk losing these campaign contributions and how they 
voted in the second to the last term. And you can measure 
exactly how much different politicians' campaign contributions 
fell between those two terms and try to see whether that is 
correlated, whether those who were getting the most money might 
have changed the most between those two terms. And, again, you 
essentially find no relationship there between the level of 
contributions, between the change in contributions between 
those periods, and how Congressmen voted.
    Let me give you an example. The average Congressman who is 
receiving labor PAC contributions experienced a reduction in 
labor union contributions of $33,000 between his last two terms 
in office, and yet this did not result in fewer pro-union 
legislative votes.
    You can look at politicians who received labor 
contributions and look at the distribution of that. Even those 
who were in the top 10 percent of the tail--whose labor 
contributions fell by over $100,000 between their second to the 
last term and their last term--did not change in terms of how 
they voted on union issues during that period of time.
    A third area of concern is how limiting the size of 
contributions has differential effects on incumbents and 
challengers.
    How well a candidate does in an election depends not only 
upon his current campaign expenditures, but also on the 
reputation that he has developed over time. This reputation is 
developed due to past expenditures on previous races, as well 
as news coverage, as well as franking and other ways that he 
can communicate with his voters.
    Reducing the effectiveness of current campaign expenditures 
as I have talked about, for example, the rise of independent, 
uncoordinated expenditures, reduces the amount of information 
that both incumbent and challenger can produce. But the 
incumbent already has an advantage because he is much better 
known with the voters. Since each additional dollar spent by a 
challenger is much more valuable in informing voters of what 
his positions are on the issues and how strongly he holds those 
positions, reducing the overall effectiveness of campaign 
contributions has a greater detrimental effect on challengers 
than it has on incumbents.
    There is an additional reason why these types of rules have 
a bigger detrimental effect on challenges than they have on 
incumbents, and that is, it is very costly, very difficult for 
candidates to raise money from many different small 
contributors. It takes a lot of time and effort to find out and 
identify all those small contributions that can be raised. An 
incumbent who has run for office in the past--and, in 
particular, for this office--has already spent many years 
trying to put together a list. He has a much larger list to 
start with in terms of potential contributions than challengers 
do. Anybody who has run initial campaigns can attest to the 
fact that many of the initial mailings that one makes out may 
have extremely low success rates that are going to be 
associated with that in terms of actually locating people who 
are willing to make contributions.
    Contribution limits also increase the influence of those 
who make in-kind contributions. For example, favorable news 
coverage by television and radio stations or newspapers become 
more important. Candidates who are favored by the media will 
benefit from campaign restrictions. It is also impossible to 
regulate these in-kind contributions. In addition, in-kind 
contributions can take many other forms. For example, rock 
stars or other celebrities could attract an audience to either 
listen to or contribute to a candidate. It is not obvious why 
we should differentiate between an appearance that a rock star 
could make in terms of attracting 1,000 possible small donors 
and a rock star who may be able to go and make a large 
contribution themselves directly.
    One consequence of campaign contributions has been to 
increase the number of wealthy candidates running for public 
office. The reason is obvious. They can use their own money, 
and they don't have to rely on trying to get money from a large 
number of small contributors.
    The fourth reason that I would like to talk about--and it 
has been talked about by all the witnesses today, and I am sure 
all the Senators would understand--is that we have had 
inflation over time and that the types of effects that I am 
talking about and have listed out have all been magnified as 
the real value of those contributions has been reduced. Using 
the Consumer Price Index, the Federal Government's $2,000 
contribution limit for individuals and $10,000 for PACs during 
an election cycle are now equivalent to over $6,600, or $33,000 
in 1998 dollars. I won't go into that issue more because 
obviously the other people have spoken on that quite eloquently 
today.
    Finally, I would like to address the issue of whether in 
some sense we are spending too much on campaigns, and I think 
there are several points that can be raised with regard to this 
issue.
    The first issue is simply to note how much money is being 
spent on campaigns relative to the amount that is at stake. The 
last election cycle, for all candidates running for all offices 
in this country, we have over $2 billion being spent. Just 
looking at the money that is being spent by the Federal 
Government, you are talking about approximately $2 trillion. So 
you are talking about one-tenth of 1 percent of the amount 
there.
    Given what is at stake, it is not obvious that by that too 
much is being spent. But I think another measure can also be 
brought up. For example, if you look at Apple Computer when 
they were launching the iMAC, they spent $120 million just 
launching that. Ford Motor Company, when they launched the 
Taurus automobile, the last model introduction they had, they 
spent $800 million advertising that. So, you know, just on one 
car model being introduced, we had approximately a third of 
what was spent on all elective offices in 1998.
    In terms of the relative importance of the issues that are 
going to be affected, surely one would think that all the 
decisions that the Federal Government and State and local 
governments are going to be making over the 2 years after the 
election are probably at least three times greater in 
importance than the introduction of one single automobile by 
one automobile company over that period of time.
    There are other issues I would be happy to get into in the 
question period about that. But, in conclusion, the point that 
I would like to raise is that economists have studied price 
controls for over many decades, and price controls have been 
attempted to be imposed over thousands of years. And this 
common desire is to try to deal with the symptoms of a 
problem--you observe the price going up, whether it is price 
controls involving health care, the types of issues we talked 
about 4 or 5 years ago in this country, or other products--
rather than trying to get at what is causing the demand for a 
product and the prices to go up.
    My concern is that trying to oversimplify it and trying to 
put this band-aid on the symptoms rather than exactly look at 
what is causing the prices or the expenditures to go up doesn't 
solve the problem. It merely changes the form of expenditures, 
the form of donations. It doesn't change the total amount of 
resources that are going to be spent on campaigns, and has 
other undesirable consequences in terms of how well voters are 
going to be informed.
    Thank you.
    [The prepared statement of Mr. Lott follows:]
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    The Chairman. Thank you, Professor Lott.
    Are States that don't have contribution limits mired in 
corruption?
    Mr. Lott. No, I don't think there is any evidence of that. 
I primarily looked at data at the Federal level that I am happy 
to talk about, but I have done work looking at State 
legislators, in particular California, and trying to see 
whether the types of points I was making with regard to how 
Congressmen vote and the level of changes in contributions that 
they had received, whether you could explain State legislators' 
votes over time, and the same type of relationship applies 
exactly there.
    In the case of California, when State representatives or 
Senators are in their last term, you don't see any changes in 
how they vote and their change in contributions that they 
receive between their second to last term and their last term 
also seem to have no impact.
    The Chairman. I was fascinated by your observations about 
your study comparing the voting behavior of retiring members to 
their earlier voting behavior when they were not in a 
retirement mode. It certainly confirms my sort of observations. 
Having served in the Senate for 15 years, I don't recall any 
retiring members dramatically changing their philosophies or--
you know, just anecdotally, I didn't observe that. It is nice 
to hear that you have actually studied this and found that 
there is, I gather, no change in voting behavior in the last 2 
years simply because one is in a retirement mode as opposed to 
an active candidate mode.
    Mr. Lott. Right. I have written eight different papers on 
this topic, and other academics have looked at this issue, too, 
and it is remarkable how consistent politicians vote over time. 
A politician who tends to be the most conservative in his first 
term tends to be the most conservative in his last term when he 
leaves office.
    There are basically two issues here: Do politicians vote 
the way they do solely about the concern of reelection that 
they have? Or are voters putting into office politicians who 
intrinsically value the same things that they do?
    I think the evidence is very strong that voters care about 
having in office politicians who value the same solutions, the 
same views that they do. And one of the reasons why they care 
about that is, for example, when the politician is in his last 
term and he no longer faces the threats of reelection there, 
can we still trust him? And if it is somebody who has 
demonstrated to them over a long period of time that he really 
cares about the same policy concerns that they have, that is 
the type of politician which they can trust and will--if he 
were to vote differently, he would be making himself worse off 
in a sense because he wouldn't be accomplishing the goals that 
drove him to go into office to begin with.
    The Chairman. Since you have found no evidence that 
contributions--that there is a correlation between 
contributions and corruption, I am wondering what your 
observations might be with regard to whether or not it might 
actually be possible that the contribution limit itself creates 
some problems in the corruption area?
    Mr. Lott. Well, I think it does. I think as with all types 
of price controls, since you are not really dealing with the 
underlying reason why people want to spend a certain amount on 
a product, that people will find alternative ways to try to 
obtain whatever good that they value there--in this case, 
trying to help out getting somebody elected who intrinsically 
value voters' positions on the issues.
    And so, you know, people may try independent expenditures, 
they may try expenditures on issue ads, but surely one of the 
other--as you restrict more and more the types of legitimate 
needs that people can go and make expenditures, they are going 
to find, just like with rent controls and other types of price 
controls that you have there, ways around it in order to try to 
influence the election. We see over time an increasing number 
of corruption cases involving straw donors where people will 
funnel money through friends or other people to a candidate. 
And I think it is only a natural consequence of the fact that 
we are dealing with the symptoms again and not the underlying 
reasons which are generating the pressure for these 
expenditures and contributions.
    The Chairman. Ms. Sheridan, given the need of candidates 
for office to reach an electorate, it is not likely, is it, 
that they are going to need to rely on television or new forms 
of communication like the Internet any less with a growing 
population and increasing costs, is there?
    Ms. Sheridan. Oh, no, definitely not. As much as we see 
television viewing being fragmented, I mean, we see media in 
general being fragmented. I am not certain just what role the 
Internet will play in the next election cycle. I mean, right 
now we are only seeing approximately one-third of all adults 
who have access to online services and the Internet, and only 
about 23 percent of all adults actually say they have used 
those services in the last month. Certainly not as compelling a 
way to reach your constituency as television is, but very 
definitely there is still going to be the--you are going to 
have to rely on television to reach the mass market.
    The Chairman. Even though we are not talking about spending 
limits here today, we are talking about contribution limits, I 
am still curious. Could a commercial advertiser succeed if a 
Federal rule limited the amount they could spend?
    Ms. Sheridan. My opinion would be no, he could not; but in 
addition to that, we would see far fewer competitors enter the 
marketplace. If you were the very first person to be in the 
market with a fast-food chain and we enacted some regulation in 
terms of spending limits, that in itself prohibits other 
competitors from coming in and competing against or competing 
with that person. So we would see far fewer competitors out 
there to begin with, and more than likely we would see a lot 
more businesses that are failing.
    Mr. Lott. In fact, if I may add something, we have seen 
experience with this during the 1960s when certain types of 
advertising was forbidden to tobacco companies. One of the 
things that has been looked at is what has happened to the 
stock price of those companies. And at the time when those 
restrictions were put into place, the market value for those 
companies increased. That is because essentially they had 
already made these past investments and reputation for creating 
certain brand names for products that they had there and they 
no longer had to worry about the threat of new products 
entering in to the same extent because it was much more costly 
for people to enter in with new products.
    You have seen that in other areas, but tobacco is--the 
companies benefited a lot from the types of restrictions that 
were imposed there.
    The Chairman. Just hypothetically here, as we wrap up, 
could it be argued that a contribution limit established 25 
years ago, as I said earlier, at a time when a Mustang cost 
$2,700, is effectively a spending limit?
    Mr. Lott. Well, I don't think it is in the sense that there 
seems to be other reasons that are driving why there is a 
certain amount of money spent on campaigns. What it does is it 
changes the composition of how the money is spent. It makes it 
so that people now turn to independent--
    The Chairman. I mean a spending limit on the candidate. As 
a practical matter, a contribution limit, what you can give to 
a candidate stuck in 1974 dollars.
    Mr. Lott. Right.
    The Chairman. Could it be argued that that, in effect, has 
become a spending limit on the candidate himself.
    Mr. Lott. Oh, right, on the individual candidate, that is 
right. I think it reduces the amount--
    The Chairman. Because there are only so many people out 
there you could get that kind of money from.
    Mr. Lott. Right. I think everything else equal, it reduces 
the amount that a candidate is going to spend. But what it does 
is it causes more to be spent on issue ads or other 
independent--
    The Chairman. Turning the playing field over to others.
    Mr. Lott. That is right. It makes it harder--
    The Chairman. To fill the vacuum.
    Mr. Lott. That is right. It makes it harder to coordinate 
the message, and, you know, for a given amount of money that is 
spent, it makes it so that voters are less informed than they 
would have been otherwise.
    The Chairman. And if I heard you correctly, it is not 
unreasonable to assume that a Government that spends $2 
trillion a year is a Government that people are going to want 
to have some influence with by participating in the political 
process.
    Mr. Lott. Right. Not only influence, but we would also want 
people to be informed about the process. And surely just like 
advertising for any other type of product, advertising in 
political campaigns is one way to inform the voters. And as I 
have said, if you compare the amount of advertising that is in 
political markets to any other type of product that is there, 
it is a very trivial amount.
    In fact, my basic concern is that too little probably is 
being spent on campaigns, and I think there is a very simple 
theoretical reason for that and it is something that economists 
call free-riding.
    If you take charity, for example, you and I and everybody 
in this room may value a particular charitable group that would 
be doing good things. But my little amount that I am going to 
be giving to them is relatively trivial in terms of the total 
amount that they would be receiving. I would hope that 
everybody else in the room in some sense would make a donation. 
And I really wouldn't have to make the donation in that case. I 
could benefit from the expenditures that you are making, 
because if you make the expenditures and the charity goes out 
and does good work, I feel better knowing that they are out 
there doing their good cause.
    But if everybody else is waiting for other people to go and 
make the donations to that charity, in some sense hoping to 
free-ride off the altruism of others there, the total amount 
that is going to be given to the charity is going to be less 
than what we would all really like to have the charity receive.
    Well, you have the same type of problem that exists for 
campaigns. You have a large group of voters who would like to 
see a particular candidate win an election, but, you know, the 
other 99 of the 100 people who would like to see the person win 
give their share or the amount that they would like to give to 
the candidate, I mean, you could sit back and still have the 
candidate win the election and get the benefits from him 
winning. If all the potential donors or at least some share of 
the donors feel that way, we are not going to be giving the 
candidate as much money as each person, if they were honestly 
to turn over, tender the amount to the candidate he would 
receive then. And so the candidates will have less to send than 
what each of the voters would privately like to see him get to 
inform other people. It is just that we would like to have 
other people make the donations rather than ourselves.
    The Chairman. As I recall the landmark case of Buckley v. 
Valeo, the Court's rationale in upholding the $1,000 
contribution limit was corruption or the appearance of 
corruption. And I gather, Professor Lott, in your studies you 
found neither appearance not actual corruption.
    Mr. Lott. At least for the range of contributions that I 
have been able to look at, that is the case. And, you know, 
whether you can get past much larger levels, I can't say. But I 
can look at labor union contributions or corporate 
contributions or ideological group contributions for 
conservative or liberal PACs that can go up well over $100,000 
in an election cycle, the change that can occur between a 
politician's second to the last term and his last term, and 
even those large amounts you don't observe being associated 
with changes with how the politician is voting in his last 
term.
    So the types of limits in real terms that we are talking 
about in 1974 come nowhere even close to the amounts that we 
can study here and not see an impact on how politicians vote. 
And in States that you can look at like California during the 
periods of time when they don't have campaign contribution 
limits for State officers, for State House or State Senate, 
where there are some very large individual contributions that 
are made in those cases, you also don't observe changes in how 
politicians vote there, either.
    The Chairman. Well, I thank you both very much. This has 
been a quite enlightening hearing, and I would like to here at 
the close ask that a statement from Senator Feinstein being 
included in the record.
    [The prepared statement of Senator Feinstein follows:]
                               APPENDIX 1

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    The Chairman. I thank you both for your participation.
    This hearing is concluded.
    Mr. Lott. Thank you very much.
    Ms. Sheridan. Thank you.
    [Whereupon, at 11:32 a.m., the committee was adjourned.]

                               APPENDIX 2

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