[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
HEARING ON FEDERAL ELECTION COMMISSION AND 527 GROUPS
=======================================================================
HEARING
before the
COMMITTEE ON HOUSE ADMINISTRATION
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, MAY 20, 2004
__________
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COMMITTEE ON HOUSE ADMINISTRATION
BOB NEY, Chairman
VERNON J. EHLERS, Michigan JOHN B. LARSON, Connecticut
JOHN L. MICA, Florida Ranking Minority Member
JOHN LINDER, Georgia JUANITA MILLENDER-McDONALD,
JOHN T. DOOLITTLE, California California
THOMAS M. REYNOLDS, New York ROBERT A. BRADY, Pennsylvania
Professional Staff
Paul Vinovich, Staff Director
George Shevlin, Minority Staff Director
FEC AND 527 GROUPS
----------
THURSDAY, MAY 20, 2004
House of Representatives,
Committee on House Administration,
Washington, DC.
The committee met, pursuant to call, at 4:30 p.m., in room
1309, Longworth House Office Building, Hon. Robert W. Ney
(chairman of the committee) presiding.
Present: Representatives Ney, Ehlers, Mica, Doolittle,
Larson and Brady.
Staff Present: Jeff Janas, Professional Staff Member; Paul
Vinovich, Staff Director; Matt Petersen, Counsel; George
Shevlin, Minority Chief of Staff; Tom Hicks, Minority
Professional Staff Member; Charles Howell, Minority Chief
Counsel; and Matt Pinkus, Minority Professional Staff Member.
The Chairman. The committee will come to order. I want to
thank the Chair and the Commissioners for coming today. The
committee is meeting today to hear from four members of the
Federal Election Commission about the legal and regulatory
framework governing nonparty political organizations, more
commonly known as the 527s, so called because of the section of
the Tax Code under which they are registered.
Earlier this year the FEC commenced a rulemaking to
determine whether its current regulations needed to be revised
so as to apply to political organizations like 527 groups that
had heretofore claimed to be exempt from Commission rules.
The committee does look forward to hearing directly from
the Commissioners regarding last week's developments on the
rulemaking, but before we do, I first want to look back at the
developments, I think, that led to the proliferation of 527
groups in the first place.
Over 2 years ago Congress enacted, as we all know,
Bipartisan Campaign Reform Act, or BCRA, which the President
signed into law. Among other things, BCRA prohibited the
national political party committees from soliciting and
receiving soft money, the unlimited and largely unregulated
contributions from labor unions, corporations and wealthy
individuals. In addition, BCRA placed restrictions on issue ads
mentioning candidates for Federal office that run in the days
leading up to an election.
Those who champion BCRA on both sides of the aisle asserted
that the new law was necessary to cleanse the Federal campaign
finance system from the allegedly corrupting influence of soft
money. I say allegedly, because obviously I didn't support BCRA
then, and I wouldn't support it today, and wouldn't support it
tomorrow.
And in fact, I worked with my friend Al Wynn, a Democrat
from Maryland, to block its passage. We had an alternative, I
think, that was fair and balanced, and gave the political
parties, with some limitations, the options to use soft money
for overhead and still allow for voter registration and a lot
of other things that I happen to believe. You can call me old-
fashioned, but I kind of like the first amendment freedom of
speech, expression and association.
Moreover, I believe that BCRA would do serious damage to
our democratic process by weakening the political parties and
shifting more power and influence to unaccountable,
ideologically driven outside groups. And again, if they are
operating, and the parties can operate, then I think it is a
level playing field.
As I point out repeatedly during the floor debate, BCRA
does not ban soft money, notwithstanding repetitive claims to
the contrary by the law's supporters; rather BCRA merely
redirected soft money to less accountable groups.
Unfortunately, I was unsuccessful in efforts to defeat BCRA.
Before the ink on the President's signature had dried, new
groups had begun to act like vacuum cleaners, picking up soft
money as possible situations began to proliferate, I think,
right before our eyes.
Immediate reports indicated that organizations whose
primary purpose was to function as a shadow political party
committee were being established with the apparent stamp of
approval by relevant Federal officeholders and party officials
to solicit and spend soft money in support of parties,
candidates and their agendas. Most of these groups were
established for the express purpose of defeating President Bush
in November of 2004, which is particularly stunning,
considering that many Democrats, and some Republicans, had
championed the efforts to, quote, ban soft money.
However, data compiled by the Center For Responsive
Politics notes that the top 24 individual soft money donors of
the current election cycle are giving exclusively to Democrat-
leaning 527 groups, but, I think, after today you probably will
also see them giving it to Republican soft money-leaning
groups. I am trying to be fair and balanced, not to steal
something from that show on TV. [Laughter.]
But the committee held a hearing last November to provide
an opportunity for representatives from prominent 527 groups to
explain their activities, and to gain a greater understanding
about the extent to which BCRA has reallocated political power
and resources in the United States.
The representatives of the Republican-leaning groups showed
up. The representatives of the Democrat-leaning groups who had
been invited refused to attend. Those who refused to testify
then stonewalled, I think, the committee's legitimate attempts
to receive more information about the activities of the groups
that they head.
Eventually after the committee had to consider exercising
subpoena power to gain a measure of cooperation, these groups
gradually produced a limited number of documents, almost all of
which were already publicly available on the Internet and
elsewhere.
At about this same time, the FEC initiated a rulemaking to
examine whether its rules ought to be amended so as to regulate
527 groups, especially in wake of the Supreme Court's McConnell
v. FEC opinion that upheld most of BCRA. I welcome this effort
by the FEC to bring clarity to an area of the campaign finance
law where there has been a great deal of confusion. The
committee decided to postpone its inquiry into the activities
of these 527 groups and their efforts to influence Federal
elections to allow the FEC an opportunity to thoroughly look
into the issue.
Over the past few months, the FEC has addressed proposed
rules, held hearings at which interested parties commented on
the wisdom or the defectiveness of the proposed rules, and
received over, I believe--and correct me if I am wrong--100,000
written comments from concerned groups and citizens. Comments
were submitted by approximately 130-some Members of the House
on the Democrat side. One of the passages from the letter
reads: ``there has been absolutely no case made to Congress or
a record established by the Commission to support any notion
that tax-exempt organizations and other independent groups
threaten the legitimacy of our government when criticizing its
policies. We believe instead that more, not less, political
activity by ordinary citizens and the associations they form is
needed in our country.''
Let me say, first of all, it sounds like I probably should
have signed that myself, but I am glad to see that members of
the other party have discovered the importance of protecting
the free speech and the associational rights of our citizens.
This is certainly a far cry from some of the rants about the
evils of soft money and special interests that were made during
BCRA by members of both parties. However, I wish that we would
have found this voice to support Congressman Wynn and I at that
time, then maybe we could have gotten more votes for our
proposal.
Nevertheless, we are now stuck with a complex and
convoluted law that doesn't ban or even reduce soft money in
the Federal political system, but does impose significant
burdens on individuals and groups seeking to be involved in the
political process, and especially, I think, in the area of
voter registration, which is one of the largest problems I had
with BCRA, especially since public communications encouraging
people to register are cut off so close to the election when
people are really interested in registering to vote.
So we commend the FEC's efforts to inform the regulated
community regarding what activities BCRA permits and what
activities it forbids, especially with respect to 527 groups. I
must confess that my friends on the other side of the aisle
aren't the only ones who have had a sudden change of heart
about the merits of various campaign finance regulations.
Members of my own side of the aisle who oppose BCRA now wish to
see it applied broadly so as to hobble the groups that are
supporting their political opponents.
It is a strange day indeed when you find the Democrats
defending unfettered spending as a legitimate political right
and the Republicans want to prohibit it by a regulatory agency,
yet that is where I think we find ourselves.
Accordingly, last week's FEC decision to forego regulation
of these groups with the election cycle was jeered by some, and
obviously cheered by others. I hope the FEC process will
provide guidance to the regulated community, some of whom may
have felt paralyzed to act because the legal landscape remained
too murky for them to operate comfortably, or operate in a
pattern they felt might have potentially been illegal.
Though the 90-day delay leaves open the questions of what
the rules will be in the next election cycle, there should be
no mistake that a decision has been made for this cycle (by the
fact that no decision was made), and I will ask some questions
on that today. Therefore, I am anxious to hear from the
Commissioners themselves regarding the rulemaking. Furthermore,
I look forward to hearing the Commissioners' talk on the
permissible range, frankly, of activities in which 527 groups
may engage.
I understand, of course, that the Commissioners won't be
able to comment on the specific actions of particular groups
currently subject to ongoing FEC enforcement actions, and I
respect that, and obviously yield to the proper nature of not
asking you to do that.
One final comment before I recognize our other Members:
some of those who support campaign finance reform have argued
that last week's action is a demonstration of the deficiencies
of the FEC and provides evidence of the need to restructure
that agency. These supporters are understandably chagrined by
the soft money groups that have made, I think, a mockery of the
law that they championed. They are faced with two choices:
Admit, number one, that they were wrong and the bill was a
mistake, or it is a failure; or number two, that they have to
attack the FEC.
Number one probably, I think, is the appropriate response,
not the attack of the FEC. Instead, I think they will choose
number two, to attack the Federal Election Commission. We
should be clear, though, that the deficiencies of this law are
the responsibility of the authors and the Members who have
voted for it.
I want to thank you again for coming here today. I also
want to thank our Ranking Member, Congressman Larson for
agreeing to the hearing and our Members for being here today.
And with that, I am going to yield to our distinguished
Ranking Member, Mr. Larson.
Mr. Larson. Thank you very much, Mr. Chairman. And I want
to thank you and also thank our distinguished panelists for
being here this afternoon and for holding this oversight
hearing to review the Federal Election Commission's rulemaking
process regarding 527 groups.
I know in conversations with the Chairman the need for
additional hearings related to this issue under the committee's
jurisdiction, and especially given the Chairman's major role
and the outstanding role he played in the passage of HAVA, and
also concerns that I think a number of Members have about the
Presidential public financing fund. I am interested in hearing
from the Commission about the role 501(c)(3)s may be playing in
influencing elections.
To that end I would ask unanimous consent to ask that this
article from the Washington Monthly be inserted as part of the
record, which explores at length the----
The Chairman. Can I read it first?
Without objection.
Mr. Larson [continuing]. The both 527s and as the
relationship between 527s and 501(c)s, and the potential for
one to sort of meld into the other, which I found both
interesting reading, and also, I am sure, made for the
complexity involved in the decisionmaking that all of you on
the Commission have been asked to give.
The news media for the most part has been able to focus on
527s, because they have disclosure requirements, which makes
information readily available. But some groups are using 501(c)
status as a way not to disclose their donors' activities, and
these groups may be a bigger influence on elections than 527s
are perceived.
One group, Americans for Job Security, by all appearances
is raising millions of non-Federal dollars for the sole purpose
of defeating Democrats. This is done without the same donor
disclosure rules that 527s follow. While we are here to talk
about the FEC rulemaking process, I am interested in hearing
from the witnesses how they can bring these groups that have
been called the shadow Republican Party into the light as well.
Again, as I have indicated, I would like to submit this
article for the record.
[The information follows:]
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Mr. Larson. 527s are named after a section of the Internal
Revenue Code that specifies the tax treatment accorded
political organizations and tax-exempt organizations which make
political expenditures. Congress, as was pointed out by the
Chair, addressed 527s twice in the last 4 years. In 2000, we
passed legislation that required all 527s that expect to have
gross receipts of over $25,000 during a taxable year to
register with the Internal Revenue Service within 24 hours of
their formation. They were not required to report to the FEC.
These 527s are then subject to the public disclosure and review
requirements of the IRS, and if they meet additional
requirements, they are subject to public disclosure and review
requirements of the FEC as well.
I note that our distinguished colleague Mr. Doolittle has
just arrived, and Roll Call on May 17, he said, I appreciate
today's FEC decision which applied a strict constructionalist
approach to the law and rendered this decision in a fair and
impartial manner.
I agree with Mr. Doolittle.
He went on to say, the ruling did not attempt to make law
as the petitioners had sought, but instead followed the law as
it was written by Congress. He then added, as abysmal as that
law may be.
Mr. Doolittle. Which it definitely is.
Mr. Larson. I just want today to make sure I gave you full
credit, but I wanted you to know that in the spirit of what you
had to say, I was in agreement, not necessarily with your final
comment.
But in 2002, we passed legislation which was intended,
among other things, to reduce unnecessary and duplicative
Federal reporting by certain State and local political
committees where the information was already required to be
reported and be publicly disclosed under the State law.
Federal courts have not been silent on the matter of 527
disclosure requirements. On Christmas Eve of last year, the
U.S. Court of Appeals for the Eleventh Circuit unanimously
reversed the district court ruling. In Mobile Republican
Assembly v. U.S., the court of appeals held that the disclosure
requirements do not impose an unconstitutional penalty on 527s.
The disclosure requirements are merely a condition precedent to
receiving a Federal subsidy by way of a voluntary tax
exemption.
Last December in McConnell v. The Federal Election
Commission, the Supreme Court clearly stated that placing
limits on raising of unregulated corporate, union and large
individual contributions donated by organizations and
individuals with general or specific legislative objectives
would not have the same application to broader citizen-based
interest groups. Any entity that believes, feels that these
disclosures requirements are too severe may choose to organize
differently. While they may be subject to higher corporation
taxes and additional regulations, it is their choice.
Congress is free to impose additional regulations on 527s
if it can be clearly demonstrated that these groups have the
same corrosive influence on the electoral process.
I would encourage a cost approach to the imposition of
additional restrictions. Political free speech, as has been
noted by the Chair, is the lifeblood of any vibrant democracy.
Congress should not restrict individuals from donating money to
groups like the NRA for use in publishing a legislative report
card on the voting records of Members of Congress, nor restrict
the National Association For the Advancement of Colored People
from spending contributed funds to conduct voter registration
drives. Arguably these types of activities amount to public
service functions, and Congress should encourage these citizen-
based activities and not stymie groups from informing the
public about their position or from getting more citizens to
participate in our democracy.
I supported BCRA because it severed the link between
undisclosed and unregulated political contributions known as
soft money and the corrosive effect such contributions have on
the credibility of government, on Federal officeholders, on
candidates and their parties.
To say that the law, as the Chairman pointed out, is
difficult to interpret and gray and vague in many areas is an
understatement and, too, I think, further complicates the task
that the FEC has at hand, but, again, is why I would urge
caution in moving forward.
The FEC voted unanimously last week to accept the general
counsel's recommendation to act within the next 90 days. I am
interested in hearing from the Commissioners on what will
happen in that time frame, and if that is enough time to issue
any changes.
I would like to bring to the Commission's attention that
when Congress enacted BCRA, we chose to defer the effective
date to the following election cycle. This decision allowed all
affected groups and parties to have sufficient time to
transition from existing rules to the new rules under BCRA
without distorting the electoral process in midcycle, where we
find ourselves currently.
The FEC should continue to take whatever time is needed to
adequately consider and craft any proposed changes, but with an
eye toward avoiding disruptions during the present election
cycle which would affect political committees, organizations
and candidates.
I look forward to hearing how the Commission reached their
decisions and what the future may hold for 527s. Thank you,
Chairman.
The Chairman. I want to thank the Ranking Member.
[The statement of Mr. Larson follows:]
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The Chairman. Mr. Mica.
Mr. Mica. Thank you, Mr. Chairman. I thank you for holding
this meeting. We talked about it very shortly after the
decision of the Federal Election Commission not to further
regulate the 527s. I was disappointed by their action, because
I have always viewed the Commission as being responsible for
Federal elections, and they all seem to act in the past in the
best interest of the electoral process.
I did not support the so-called campaign reform legislation
basically because of what some of us predicted would happen,
and unfortunately in our worst nightmarish dreams we couldn't
have predicted a greater distortion of the Federal election
process. So therefore, I am very disappointed.
I don't know if the Members have been blindfolded and kept
in a dark room and fed mushrooms in the past few months, but--
and just my background, I come from a bipartisan family. I have
a brother who served as a Democrat for 10 years, he was an aide
here for 10 years; another brother a Democrat, aide to Lawton
Chiles. I have been around the process for 40 years, and I have
never, ever seen anything like this, such an undermining of the
Federal elections process. The campaigns have started with the
527 in the most vicious approach, and people are just totally
dismayed, not just people in politics, but the average person
on the street, by what has taken place.
We did not regulate soft money. We moved it around, and we
have created a horrible vacuum and undermining of the process.
I have never seen, again, anything like what we are
experiencing now, totally out of control, and then a third more
money--I read the other day a third more money into
congressional races, so pouring more money in soft monies by
finding circuitous routes and the Federal election process
being made a sham.
I share some of the sentiments of Mr. Doolittle. The only
thing you can really do is have full disclosure, and we have
less disclosure of huge amounts of money being spent already.
The 527s have made a complete joke of the process and the
attempts to curtail soft money.
We were shown some charts here of the predicted
expenditures, and I thought a half a billion dollars might be
far-fetched, but I am told now that it may reach a half a
billion dollars, which is absolutely outrageous, and the people
do not have a clue as to where these funds are coming from. The
disclosures--and if they aren't involved in a Federal election,
somebody wake me up and tell me it isn't so. Again, I can't
totally blame the Federal Election Commission, even though you
have responsibility for regulating and overseeing the elections
and also interpreting your responsibility.
I would have voted for a stricter approach to regulation
without a--I can't tell you how disappointed I am. It may be
too late for the 2004 elections. That is the sad part of this.
And the worst part about all of this is I think that the so-
called reform measure and your actions to not take a stricter
approach to regulation of an out-of-control chase and display--
blatant display of unregulated money in a Federal election, the
worst part about this is this is undermining people's faith in
our democratic process, and that is the saddest part about what
Congress has done and what you haven't done.
So with that, I yield back.
The Chairman. I thank the gentleman.
The gentleman from California, do you have an opening
statement?
Mr. Doolittle. You know, Mr. Chairman, I really came to
hear the Commissioners, and I will make any statements I have
in the context of the back and forth.
The Chairman. Thank you.
The gentleman from New York.
Mr. Reynolds. No, thank you.
The Chairman. Thank you.
I want to thank again all the Members and Commissioners for
coming.
Today we have the Honorable Michael Toner, Commissioner,
Federal Election Commission; the Honorable Scott E. Thomas,
Commissioner, Federal Election Commission; the Honorable Ellen
L. Weintraub, Vice Chair, Federal Election Commission; and the
Honorable Bradley A. Smith, Chairman of the Federal Election
Commission.
And with that I guess it is like Marvin Gaye's song
``What's Going On.'' [Laughter.]
We will start with you, Mr. Toner.
STATEMENTS OF MICHAEL TONER, COMMISSIONER, FEDERAL ELECTION
COMMISSION; SCOTT E. THOMAS, COMMISSIONER, FEDERAL ELECTION
COMMISSION; ELLEN L. WEINTRAUB, VICE CHAIR, FEDERAL ELECTION
COMMISSION; AND BRADLEY A. SMITH, CHAIRMAN, FEDERAL ELECTION
COMMISSION
STATEMENT OF MICHAEL TONER
Mr. Toner. Thank you, Mr. Chairman, Mr. Ranking Member,
members of the committee. Thank you for inviting us to testify.
It is always a pleasure to be here.
Under the Federal election laws, a political committee is
defined as any group that receives more than $1,000 of
contributions or makes more than $1,000 of expenditures in a
calendar year.
Prior to the Supreme Court's ruling in McConnell, many
people believed that for independent groups not controlled by
candidates, expenditures for political committee status were
limited to those that were made for express advocacy,
communications that on their face expressly advocate the
election or defeat of a clearly identified Federal candidate.
The Supreme Court concluded in McConnell that the express
advocacy test is not constitutionally mandated. The Court
further concluded that the express advocacy test in practical
application is functionally meaningless in the real world of
politics, and the Court emphasized that political consultants
long ago shaped political advertisements with no consideration
of express advocacy; that many campaign commercials paid for by
Federal candidates did not contain express advocacy; and that
political consultants had generally agreed that express
advocacy was not the way to move voters in America.
Despite all of this, for over 20 years the express advocacy
test has played a major role in the Commission's determination
of whether an organization is a political committee that must
abide by the hard-dollar limits of Federal law.
In this rulemaking the Commission is confronting the basic
question of whether we are going to continue to use a legal
test that has largely been discredited by the Supreme Court or
whether the Commission is going to develop a regulatory test
that might actually be effective and might have meaning in the
political world.
I strongly believe the Commission should take the latter
course, and it was in that spirit that Commissioner Thomas and
I sponsored a set of regulations that would have turned on a
different regulatory test for 527 organizations, namely whether
they promote, support, attack or oppose a Federal candidate in
their public communications.
This promote, support, attack, oppose standard was crafted
by Congress and enacted into law in BCRA. The standard
currently applies to public communications made by State and
local political parties and candidates. The standard was upheld
as constitutional in McConnell against a vagueness challenge.
The Court concluded there that the statutory provisions,
``provide explicit standards for those who apply them, and give
the person of ordinary intelligence a reasonable opportunity to
know what is prohibited.''
The Court further went on and indicated that this standard
provides clear notice as applied to political parties since,
``every actions they take are presumed to be in connection with
election campaigns.''
We believe political parties--Commissioner Thomas and I
do--that political parties and other campaign organizations and
527 groups have many of the same characteristics, particularly
because 527 groups operate as a matter of law for the purpose
of influencing or attempting to influence the selection,
nomination, election or appointment of individuals to Federal,
State or local office.
527 organizations voluntarily choose to organize under
section 527 of the Code. They gain substantial tax benefits as
a result of that voluntary choice, and they also hold
themselves out as operating to influence elections to public
office. Given this, it is very clear that 527 organizations are
fundamentally partisan political organizations, which is fine,
but the conclusion that flows from that is that they are very
synonymous with the types of groups that the Supreme Court has
made clear are appropriate for campaign finance regulation.
In McConnell the Court made clear that in terms of 527
organizations, the Court views them as organized for the
express purpose of engaging in partisan political activity and,
``by definition engage in partisan functions.''
With all of this, Commissioner Thomas and I believed it was
appropriate for the Commission to develop a broader standard
for political committee status that did not turn on express
advocacy in terms of 527 groups, but instead turned on several
key elements: first, whether or not they are running
commercials that promote or attack Federal candidates. In our
view, if they do, they clearly are for the purpose of
influencing a Federal election and, therefore, should be
required to be classified as a political committee and abide by
the hard-dollar limits of Federal law.
Second of all, our proposed regulations would have made
clear that 527 organizations that engage in partisan voter
mobilization activities, activities that include communications
that attack or promote Federal candidates, also should be
treated as political committees required to abide by the hard-
dollar limits. In our view that is the scope of a practical,
meaningful set of regulations for 527 groups that, after all,
at bottom are partisan organizations.
We also strongly believed that it was critical that the
agency take action for the 2004 election. The McConnell case
came down in December of 2003, and so the timing of these
questions arising was not of our choosing, but the magnitude of
the issues is enormous.
A Presidential election is going to be conducted in 6
months, and there is no question that hundreds of millions of
dollars are going to be spent by 527 organizations on
activities that will directly affect the Presidential election.
With all of that in mind, Commissioner Thomas and I sought to
develop a narrowly tailored approach that would have
effectively regulated this type of conduct.
With that, Mr. Chairman, I see that my 5 minutes has
elapsed, and I will yield back my time.
The Chairman. Thank you.
[The statement of Mr. Toner follows:]
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The Chairman. Commissioner Thomas.
STATEMENT OF SCOTT E. THOMAS
Mr. Thomas. Thank you, Mr. Chairman and members of the
committee. I will try to pick up to deal with the latter part
of the proposal that Commissioner Toner and I cobbled together.
It relates mostly to the so-called allocation issue.
For groups that cross the political committee threshold,
the FEC's Federal/non-Federal allocation regulations have long
required the use of a funds-expended formula under which a
share of the groups' administrative expenses and generic voter
driving expenses must be paid for from federally restricted
funds. The Federal share is determined by dividing the amount
contributed to or otherwise spent on behalf of specific Federal
candidates by the total Federal and non-Federal disbursements
for specific candidates. The formula can be easily manipulated
if only contributions and express advocacy are counted as
candidate-specific outlays.
For example, a group could contribute $1 to a Federal
candidate and $99 to a non-Federal candidate and avoid express
advocacy and thereafter work with a 1 percent Federal, 99
percent non-Federal ratio for all applicable expenses. Indeed,
we have seen evidence of political committees seemingly focused
on the current Presidential race treating the vast majority of
funds raised and spent as non-Federal, nonrestricted dollars.
If the news accounts are close to accurate, tens of millions of
dollars are likely to be spent by these groups to influence the
upcoming Federal elections outside the Federal funding
restrictions.
Part of the Toner-Thomas proposal that would have modified
the allocation rules really had two purposes. First, for
purposes of calculating the funds-expended ratio, political
committees involved in both Federal and non-Federal elections
were to use the promote, support, attack or oppose standard for
calculating funds disbursed for candidate-specific purposes.
This would assure that a public communication by a political
committee saying, ``Bush is wrong'' or ``Kerry is right,''
would count as an expense on the Federal side of the formula.
No longer would registered political committee agents be able
to claim that only the cost of ``defeat Bush'' or ``elect
Kerry'' messages count toward the Federal portion. This legal
approach, by the way, already had been approved by four members
of the Commission in Advisory Opinion 2003-37.
Second, this proposal was designed to prevent the same kind
of gamesmanship that seems to have emerged using the
contribution and independent expenditure concepts when
calculating the Federal share. A group that really wants to
focus vast soft money resources on a Presidential race could
simply include nominal references to several non-Federal
candidates in its communications and thereby skew the ratio.
The Toner-Thomas proposal builds in a 50 percent minimum
for the Federal share in the allocation ratio to prevent such a
result. It was similar to the 65 percent minimum Federal
percentage that has been applied for years to the parties'
House and Senate campaign committees.
With my remaining time, I will take a crack briefly at just
addressing some of the most obvious concerns that have been
noted.
Really, there is a valid concern about getting involved in
the middle of an election cycle, but I come back to the basic
proposition it is really entirely dependent on how big of a
problem we are facing. Here, after BCRA's passage, new groups
sprang up or expanded greatly and began openly raising and
spending tens of millions of dollars to influence Federal
elections outside the Federal campaign finance rules. Their Web
sites and other communications sometimes state expressly they
are designed to defeat a particular Federal candidate. Hard-
hitting attack ads or lofty messages of praise regarding
candidates seem to be their only function in some cases.
These groups are being run in many cases by well-connected
political operatives with easy direct or indirect access to
elected officials. The major purpose of these groups seems to
be influencing elections and use of the express advocacy
shield, and weak FEC allocation regulations seems to be leading
them to use huge donations to influence Federal elections.
That is what the political committee rules are designed to
prevent. Only by acting quickly could the FEC hope to stop this
problem before possibly hundreds of millions more were going to
be raised and spent this way.
Now, there are some problems, in essence, that you don't
want to wait on. I like to use the analogy these days, if I
have a fire that is starting in my house, I am not going to
wait 90 days to call the fire department. To me and to
Commissioner Toner, we felt that the problem we had seen was
concrete, it was present, and it was something we needed to
address sooner rather than later.
With that, I will cut off. I see my time is up. Thank you.
The Chairman. I thank the gentleman.
[The statement of Mr. Thomas follows:]
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The Chairman. Commissioner Weintraub.
STATEMENT OF ELLEN L. WEINTRAUB
Ms. Weintraub. Thank you, Mr. Chairman and Ranking Member
Larson and members of the committee. Thank you for inviting us.
I have always found that our discussions have been productive.
I did not support the Toner-Thomas proposal. I had a lot of
substantive problems with it. I respect the efforts of my
colleagues. Maybe that was the best proposal that could be put
together on the time line that they insisted on following, but
I don't think it was a realistic time line. I never believed
that it was. We received tens of thousands of comments. We
haven't had adequate time to take all of them into
consideration.
The proposal was not based on any elaborate--or any
developed factual record at all. It wasn't supported by our
general counsel. It wasn't supported by the recommendations of
the tax experts who testified before us, and I think it
embodied oversimplified notions of tax law.
Albert Einstein once said everything should be made as
simple as possible, but not simpler, and I think that is what
this proposal attempted to do. It lacked key definitions. The
allocation formula lacked any supporting data other than an
impressionistic reaction to what a couple of well-publicized
committees are doing, but we have to remember that when we are
regulating political committees and political organizations
across the country, there are thousands of them, and they are
all going to be subject to the same rules. This isn't an
enforcement action.
We received some very persuasive testimony from tax experts
as to the differences between the tax law and the election law
and how they have been construed over decades by courts and by
agencies. The IRS is unconstrained by first amendment concerns
that we have to take into account, and 527 was described by one
of our tax experts as the kitchen junk drawer of regulations.
The IRS just sort of piles all sorts of things into it.
Another one in written comments pointed out that it is
meant to be sort of a mirror image of 501(c)(3), and the IRS
drew a very wide circle around 501(c)(3) activities, because
those you get a tax deduction for, and they didn't want
anything that was remotely political to come under 501(c)(3).
So anything that was even tangentially political got dumped
into 527, and it encompasses a lot of activities that this
agency has not traditionally regulated and that I think a lot
of people don't think we ought to be regulating.
There were concerns that were expressed by the nonprofit
community as to how this would affect them, and I think that
they were valid concerns. There is a legitimate role for people
to criticize the government. A lot of nonprofit entities use
criticizing elected officials close to the election as a
primary form of advancing their legislative and policy agenda,
and they have the first amendment right to do that, and we have
to be very, very careful if we are going to be intruding in
those areas.
Now, while my concerns about some of the specifics of the
proposal could be addressed given the extra time that our
general counsel has asked for, perhaps as Congressman Larson
has suggested, perhaps even more time, there is one problem
that is sort of fundamental, and I just am having a hard time
working around that, and that is the fact that Congress has
acted in this specific area. Congress passed legislation
directly addressing the problem of unregistered 527
organizations, 527 organizations that didn't register with the
FEC. And what Congress decided to do in 2000, and again they
amended the law, you amended the law in 2002 after BCRA was
passed, and the route that you chose was to have disclosure to
the IRS.
A proposal was suggested. A bill was introduced in the
Senate that would have gone along very similar lines to what
Commissioners Thomas and Toner have proposed in terms of making
527 entities, for the most part, into political committees.
That was not the proposal that was enacted into law, and if we
were to adopt this proposal, we would substantially nullify the
law that Congress actually did pass.
I would think that you guys would be kind of angry at us if
we did that. It would be like the FEC saying to Congress, you
had various policy options in front of you when you decided to
act legislatively on the 527 issue. You chose one route. We
think you made a mistake. You should have chosen this other
route, and that is the one that we are going to apply.
As an administrator, I don't see how I can--maybe it is my
background as a House staffer years ago that I just can't quite
shake these ``deferential to Members of House'' instincts of
mine, but I think that you guys would probably be kind of upset
with us if we tried to initiate the kind of choice that
Congress made.
I also paid very close attention to the letter that
Chairman Ney alluded to from 128 House Members. We got a
similar letter from 19 Senators as to what they intended when
they passed BCRA. Mr. Larson, you signed that letter, and I
read it very carefully, and I paid a lot of attention to it. It
was very persuasive to me. I don't see how we go and do
something in interpreting a law that the Members of Congress
who voted for it have told us was not their intention.
There are definitional problems in this proposal that I
think are very, very troubling. There is no definition of major
purpose. There is no definition of promote, support, attack or
oppose. I know the Supreme Court has upheld the latter standard
with respect to political parties, but we had reams of
testimony from members of the regulated community that they
don't understand what it means, and I don't want to push
forward any kind of regulation that is going to confuse the
regulated community.
People in the regulated community need to understand what
the rules are so they can comply with them. I want them to
comply with the rules, but they have to understand them. And I
don't think we ought to be shooting from the hip just to put
some kind of a quick fix out there without adequately
considering what the impact is going to be on the regulated
community.
I see my time is up, so I will stop.
The Chairman. Thank you.
[The statement of Ms. Weintraub follows:]
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The Chairman. Chairman Smith.
STATEMENT OF BRADLEY A. SMITH
Mr. Smith. Thank you, Mr. Chairman, members of the
committee.
I have to say I don't know that I have ever seen so much
excitement over a decision which simply maintains it is status
quo, because that is what the Commission did. The law has long
required that a group must engage in express advocacy before it
is considered a political committee. Now, some have argued that
that interpretation of the law is incorrect, but they have
admitted that it is the interpretation of the law.
For example, in January 2003, 10 months after BCRA was
passed, 2 months after it took effect, representatives of
Public Citizen, Democracy 21, Common Cause and the Center for
Responsive Politics wrote to the IRS, quote, for well over a
decade, independent groups learned that by simply avoiding the
magic words of express advocacy as defined by the courts, these
groups were no longer required to register as PACs with the FEC
and fell outside of Federal campaign finance laws.
Now, in BCRA Congress did not change the definition of
political committee, nor did it change the definition of
expenditure or contribution, which are the predicates for
defining a political committee.
In the regulations that we considered, not once did any
witness come before us and say, if you are going to properly
implement this law, you need to address the definition of
political committee or expenditure. In a lawsuit that the House
sponsors filed against our regs saying they didn't properly
implement the bill, they did not suggest anywhere in that
lawsuit that we should have changed or added new definitions
for expenditure, contribution or political committee. The
legislative history, I think, shows very clearly that Congress
understood this definition when it passed BCRA, and it
understood the activity would gravitate to 527 groups.
My written testimony, as with the written testimony of the
Vice Chair, includes a large number of quotes primarily from
Senators, but there were also many Members of the House who
understood this, including members of this committee. For
example, Congressman Linder said, ``Shays-Meehan is merely
diverting and channeling soft money into an ever-growing number
of parties, while allowing corporations and unions to spend
unlimited and unregulated dollars on electioneering. This does
not and will not change the amount or type of money in the
system, and it certainly does not alter the ability of outside
groups to influence elections.''
Or, Congressman Reynolds, you, too, anticipated exactly
this result. You said, ``we would be fooling ourselves if we
believed the notion that the Shays-Meehan legislation
represents a complete ban on soft money. Let us be honest. In
this bill there is no such thing as a ban on soft money. This
bill creates even bigger loopholes than before, loosening even
further the loopholes that allow party committees to shift
their current soft money over to nonprofits, who in turn could
use 100 percent soft money for issue advocacy.''
And Representative Shays, when they were amending the 527
disclosure bill that the Vice Chair referred to a few months
later, said, quote, the one thing we know with our campaign
finance reform bill is 527s are going to proliferate. We know
that. Special interests will have a greater say. We know that.
That is what people on both sides of the aisle argued for. Let
Americans have their say.
In response to this argument, supporters of the bill tended
to argue four things. First, if a committee of a 527 were
established, financed, maintained or controlled by a party, it
would be treated like a party.
Secondly, they required us to write a tougher definition of
coordination, making it tougher for these groups to work with
candidates and parties.
Third, they prohibited Members from soliciting funds for
these groups with one exception that is somewhat important that
we may get a chance to talk about later.
And fourth, they put on the electioneering communications
ban, which you are aware of: the ban on an ad 60 days before an
election.
By the way, this argument was also made by the Republican
Party before the Supreme Court. Its very able litigator Bobby
Birchfield, began his oral argument by pointing out to the
Court--he said, if you uphold this law--I am not quoting him,
but he said, if you uphold this law, here is what is going to
happen. George Soros is going to give millions to 527s, and all
same activity is going to continue. They did not say, if you
uphold this law, it is going to limit the speech of all these
527s. They said exactly the opposite.
Now, how did the Supreme Court respond to this? Well, the
Supreme Court said, if I can find these quotes here--the
Supreme Court said, ``BCRA imposes numerous restrictions on the
fundraising abilities of political parties of which the soft
money ban is only the most important. Interest groups, however,
remain free to raise money to fund voter registration, get-out-
the-vote activities, mailings and broadcast advertising other
than electioneering communications.''
The Supreme Court also noted in response to the argument of
the Republican Party that--they said, well, that argument is
wrong, and they said, you might as well say it is
overinclusive. They said, reform can take one step at a time.
And here is what they wrote: ``One might just as well argue
that the electioneering communication definition is
underinclusive because''--here is the point I want you to
hear--``because it leaves advertising 61 days in advance of an
election entirely unregulated.'' And they continue, ``the
record justifies Congress's line-drawing.''
Now, the Toner-Thomas proposal would have regulated
advertising 61 days in advance of the election, thereby making
nonsensical this Court's statement.
So as I see it, the comments about what the Court said in
McConnell and so on are very interesting. They might be
interesting if I were a Member of Congress and I had asked for
a report as to what it might be constitutional for me to do,
and I might weigh those factors in, but they are not very
relevant to us on the Federal Election Commission because it
was not what was passed by Congress. The Court did not say that
you can apply ``support, promote, attack, oppose'' to nonparty
groups because it wasn't in the law. They didn't have a reason
to discuss that issue, and, therefore, again, it is not really
relevant to us.
Ultimately, then, this is an issue that is for Congress.
There are still some constitutional restraints out there, which
is one of the reasons it is better that Congress attempt this
expansion of regulation than that we do it. As my time is up, I
would urge you to simply refer to my lengthy written statement
for a detailed explanation of this legal analysis. And, of
course, I am happy to take your questions. Thank you.
[The statement of Mr. Bradley A. Smith follows:]
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The Chairman. Well, I thank everyone for their testimony.
I am going to keep my questions brief and under the time,
because I want everyone to have a chance. And if we have a
little bit more time I will allow more questions, but if not, I
will submit it for the record.
I want to go to the role of the FEC. Considering the
important constitutional freedoms at stake, when you as FEC
Commissioners are making rules or carrying out your
responsibilities that impact speech and associational rights,
how broadly or how narrowly do you believe you should interpret
the law? Broadly, narrowly or in between?
Mr. Thomas. Well, I will jump in first, Mr. Chairman. I
guess I've had somewhat of a philosophical disagreement with
some of my colleagues over the years. I am someone who feels
like the words Congress puts in the statute are my direction.
Those are what I am supposed to follow, those are what I am
supposed to defend, and those are what I am supposed to try to
make work. And I have over the years tried to discourage my
colleagues from trying to anticipate what constitutional battle
might emerge if we adopt a certain construction of the statute.
I have tried to encourage my colleagues to try to implement the
statute as Congress intended it.
And it is interesting in this particular dispute, because
as I see it, what we have got here is a question about
interpreting statutory provisions Congress passed back in the
1970s about what is a political committee. That term is a term
of art that has been there since the 1970s, as has the word
expenditure. And so when I see arguments that, well, the effort
to amend the legislation to require IRS disclosure of some 527s
in 2000 or the BCRA legislation in 2002 somehow was a signal
that the Commission should steer clear of getting into this
issue we have in front of us today, I go back and say, look,
the statute has been there for years and the FEC is supposed to
figure out what is supposed to be, what is required to be
regulated as a political committee. So I feel like I am trying
to adhere to Congress's wishes when I go back and apply the
entire statutory scheme.
The Chairman. Also, as a follow-up point, how do you
determine intent? What was your intent? You determine just what
was written in the law or the opinions of those who voted for
it? Now, we have talked about this letter with 140 Members
stating what they thought the intent of BCRA was, but you have
the authors of the bill of the Senate and the House (the two
authors respectfully, Mr. Shays and Senator McCain) saying,
that wasn't our intent.
Do you go with the 140 because there are more numbers to
decide intent, or do you go with the two who wrote the bill, or
is it not a factor?
Mr. Thomas. Well, any expression of congressional intent by
a Member of Congress is relevant to me, but I would say that
the dispute that we see coming from these alternative
constructions from Members themselves demonstrates that it is
an almost impossible question for the FEC to resolve, what was
the intent. And so it is in my mind, again, better to go back
and really try to opine and make the statutory words work and
function together.
The Chairman. Yes, Commissioner.
Ms. Weintraub. Mr. Chairman, if I might, I think that we
all try to interpret the words of the statute. I don't think
Commissioner Thomas is alone in that. We also need to take into
account what courts have said about the statute, as indeed
Commissioner Thomas did when he tried to import a major purpose
test into his regulatory proposal, because that is not part of
the statute anywhere. That is strictly coming out of Buckley v.
Valeo and the MCFL decision. So that is entirely a judicial
construct. And we have to take into account if the Supreme
Court says something is unconstitutional, that is obviously
something we have to pay attention to.
In terms of intent, I think it is entirely plausible that
different Members of Congress had different intent when they
voted for the law, but I suppose that I do find some weight in
numbers, in that, as you know, you need a certain number of
votes to get a law passed, and if more of the people who voted
for that law who provided that majority had one view of the
law, that I think is somewhat influential to me. We go back to
the legislative history, look at what was said on the floor
when people were debating, what was their understanding at the
time. I think all of these factors are important.
The Chairman. Any other opinions?
Mr. Smith. Well, I would echo the Vice Chair that all of
us, I think, attempt to apply the statute. I know that 4 years
ago I appeared before the other body at my confirmation
hearing, and the point I made at that time, I promised Members,
was that I would attempt to apply the law that they had written
and not to apply my own preferences, and that is a vital
consideration for us.
I feel that part of the reason I was appointed to the
Commission was because of a sense of many Members that the
Commission had frequently overreached in the past, that it had
far too often found its interpretations of the law struck down
as unconstitutional by the Court or as being contrary to the
statute by the various courts.
And so I think one should not make the mistake of thinking
that following the law involves constantly trying to push the
envelope to the furthest possible limit. I think following the
law means looking at the language of the statute, looking at
the relevant court decisions that interpret that language,
looking at what Members of Congress said at the time and what
they might say in comments, and other expert witnesses, and
applying that in a consistent way and in a way that does not
step on the prerogatives of Congress.
The Chairman. Gentleman from Connecticut.
Mr. Larson. Thank you, Mr. Chairman. And let me start by
saying, again, the profound respect that I have for the
difficulty of the task that you have at hand as witnessed by
the testimony and the answers that you all have given. I find
it interesting, too, that the four of you represent Republican,
Democrat, Democrat, Republican as well, and I do believe that
the task at hand is a very difficult one and provides caution.
I was struck by what Mr. Thomas had to say about wanting to
go in and put out a fire, but I wanted to ask you, what kind of
a fire do you think is raging with respect to 501(c)(3)s? And
if we are going to put out a fire, shouldn't we put out the
entire fire?
Mr. Thomas. Congressman, that is a great point, and I think
we should, if we find the same kind of abuse in the 501(c)
area, basically apply the same legal analysis ultimately. If
the major purpose of the organization could be shown based on
reasonable objective analysis to be influencing elections, then
I say you can apply the same tests.
Now, Commissioner Toner and I in our proposal were
attempting to focus initially on the 527 phenomenon, because
those folks under the tax laws have that special ``for the
purpose of influencing'' kind of construct that they have to
follow in the first place.
But we were intending for these other groups, the 501(c)
groups, to allow for appropriate regulation either by the IRS
or by the FEC, based on a whole body of current applicable law.
So I hope you will appreciate that we are hoping to be vigilant
in that area if the case arises.
Mr. Larson. Well, I think the reason I raise that and there
strictly in looking at the broader picture, and again this is a
task that you have as well, but it does occur to me that in
this article that I have asked to be introduced for the record,
they talk about, well, look let's be honest about this. If you
really pare down these issues, aren't we talking, you know, the
term ``shadow Democratic party,'' the shadow Democratic party
and shadow Republican party, I suppose you could apply to 527s
or 501(c)s, depending upon how you look at these organizations
and their intent.
I want to read you a comment that the author makes. I
thought it was kind of profound. He said should the Republican
shadow party give Bush the extra artillery he needs to prevail
against Kerry, the newspaper editorialists and good government
activists may someday regret the fact that they decried the
Democratic shadow party while blankly ignoring the Republican
version. Not because it may get Bush elected, but because it
will drive the whole soft money political economy deeper
underground. Should Kerry lose the democratic operatives
running 527s may conclude that there is little value in
declaring themselves openly as electioneering outfits. Instead,
they will likely--that is a good word--transmogrify their
groups into 501(c)s.
Nobody will be able to see how much money George Soros gave
this quarter under that scenario, or figure out who sponsored
that $500,000 ad campaign in the St. Louis suburbs. Soft money
would disappear, or rather it would just become invisible. And
isn't that the equally troubling problem that we face that will
probably require legislation. My broad question is, what kind
of remedy and I am particularly sensitive to the fact that both
the chairman and vice chairman have said from a definitional
standpoint what do we have to be working at in terms of
definition that will both be broad enough to not want to
override or prevent the free speech concepts that we have
talked about, but one that will provide more disclosure, more
light shedding on both 527s and 501(c)(3)s.
Ms. Weintraub.
Ms. Weintraub. Congressman, if I knew the answer to that
question, we could have passed a regulation last week. I think
it is in part because it is such a difficult task of line
drawing that our counsel asked for another 90 days in
participate to take a stab at it. We--the 501(c) issue raises,
I think, some very troubling issues that are the ones that you
alluded to. That there is--if we pass this kind of a
regulation, there is going to be real pressure to push a lot of
this activity into 501(c)s, and there will be no disclosure.
Congress acted to obtain disclosure from 527s and we would be
defeating that purpose by sort of pushing that whole area
underground. And people say oh, no, no that is got going to
happen for this reason or that reason.
We had testimony from some sophisticated players, political
players and they said, you know, we have complicated
organizations. We have 501(c) aspects. We have 527 aspects. We
have been using the 527s, but you know if that doesn't turn out
to be a good deal anymore, we will just shift as much of this
as we can into the 501(c)s and there won't be that kind of
disclosure. At the same time, we have to be very sensitive to
the advocacy needs of nonprofit community who are clearly very
alarmed at some of the proposals that were put forward, as well
as the sort of voter registration activities that the chairman
alluded to earlier, which I am equally concerned about.
The Congressional Hispanic Caucus sent us a letter
expressing are their concern about the need to mobilize voters
in their communities and how that is affected by 501(c)
organizations, and they don't want to see limits to that
activity and frankly, beyond what is in the current law, I
don't either. We have barely a majority of people who vote now
who are eligible to vote, and that is a very troubling
phenomena in and of it self. I would like to raise one other
point on the fire issue, though, on how big the fire is. I
think to some degree a lot of this has been hyped. And you
don't have to take my word for it.
Read Tom Mann and Tony Corrado in today's Roll Call.
Hundreds of millions of dollars are being raised in perfectly
legal disclosed hard money contributions to the two major
presidential candidates and to their parties. Hundreds of
millions of dollars. It is a fund-raising operation, the likes
of which has never been seen before. It is clearly going to be
the most expensive election ever known in the history of the
world. Some people think that is a good thing. Some people
think that is a bad thing. But the amount of money that is
being raised in the few organizations that people seem to be
most concerned about I think is really going to be a drop in
the bucket. And that was the perspective of Professor Mann and
Corrado as well.
Mr. Larson. I did read the article and I thank you. Yes.
Mr. Toner. Mr. Ranking Member, just two brief points. I
think it is a critical question you raise. There is no doubt
under the MCFL rulings that a 501(c)(4) organization under
extraordinary circumstances could be a political committee. The
Supreme Court there was dealing with a plaintiff group that was
a (c)(4). The upshot of the opinion was if that organization
did enough campaign-related activities, that it became its
major purpose, the Court indicated it could become a political
committee.
So I think you are absolutely right, that the law has not
precluded a 501(c) from becoming a political committee. I think
that being said, it would be extraordinary because the primary
purpose of those types of organizations cannot be politics. If
they do cross the line, I think the MCFL decision makes clear
that jurisdiction could exist. But I think it would be
extraordinary. The other thing I want to note for the record is
that Mr. Larry Norton, the FEC's general counsel, did not
oppose the proposal that Commissioner Thomas and I advanced. I
think he really adopted a stance of neutrality. He didn't
oppose the proposal, nor did he advocate its passage, but
instead indicated that he would like to have some more time, he
and his staff, to examine the factual record, read the comments
and then come back to us with recommendations. So I think it
really is a stance of neutrality in terms of our general
counsel in terms of this proposal.
Mr. Larson. Is it neutrality or caution?
Mr. Toner. I think it is probably both. And I think
rightfully so. These are major issues that we are dealing with
here. My fundamental point is that the test that we have used
for determining political committee status has turned on
express advocacy. I think the law has changed after McConnell.
Before McConnell, I think a very strong argument existed that
the express advocacy test was required in this area and I
respected that for many, many years. But I don't believe that
is the law any longer, and I think we either engage in this
issue and develop a new framework that could actually be
effective or we push on based on how we have handled this in
the past. I don't think that is a pathway for effective action.
Mr. Larson. Well, I know the chairman is going to--want
everyone to ask some more questions. I am not an attorney, but
I am so impressed by what all of you had to say and the
sharpness of your arguments. I am just reminded of Judge
Leonard Hand's comment that liberty and freedom is that which
leaves you not too sure you are right.
The Chairman. The gentleman from Florida, Mr. Mica.
Mr. Mica. Just a couple of quick questions. If, in 90 days,
I guess there is an 90-day review period, is there a likelihood
of--if the counsel comes back and says that we can go down this
path, of further regulating, is that still possible? The two
dissenting--I saw an affirmative head, Ms. Weintraub.
Mr. Smith. Well, it seems as chairman, perhaps it would be
most appropriate for me to answer that I guess.
Mr. Mica. Well, she already nodded in the affirmative. I
want her to say it on the record. Would you say that on the
record, Ms. Weintraub?
Ms. Weintraub. Yes, absolutely.
Mr. Mica. Okay. Sir, you are recognized.
Mr. Smith. I think there would be a possibility, but I
would add a couple of caveats on that. First, I think even had
we acted on May 13 it would have been highly unlikely, given
the legislative calendar and the procedures for enacting
regulations that any regs would have had effect for much of
this cycle. If we act in August, I think it is highly unlikely
that any regulation could be effective in the 2004 election.
Secondly, speaking for me, I have pretty much reached a
conclusion. I am open if somebody comes up with an argument.
But the sense I have got is I have heard their best shot, and I
just can't find anything that suggests to me that when Congress
passed BCRA, they thought--you thought--the majority that voted
for it thought--and the minority that didn't vote for it
thought that this was a good idea to regulate 527s in this way
or that the bill would. I think the legislation, the
legislative history is overwhelming that it was understood that
if BCRA passed these 527 groups would remain largely
unregulated, as I noted in my opening comments, and that it is
not really appropriate for us then to jump in and suggest that
you should have done something else.
Mr. Mica. But if the majority of you voted to get into this
area you could do that.
Mr. Smith. If my colleagues were to reach that decision or
something came that were to convince me that, you know, things
have been wrong, but, you know, that is something we will have
to see.
Mr. Mica. All right. Sounds like, Ms. Weintraub, you were
influenced by this 119. I have looked through this. I didn't
see any Republicans. It looks like all Democrats. If I send you
a letter with 120 Republicans, will that influence you?
Ms. Weintraub. It might. But I have to--I am not sure you
could find 120 who actually voted for the law that could tell
me what their intent was on that.
Mr. Mica. Well, here's the sponsors. Today Senators McCain
and Feingold issued this statement on FEC. Today the FEC proved
once again why it is necessary to fundamentally restructure
that ineffective and irresponsible bureaucracy. I am quoting
him. I didn't say that.
Ms. Weintraub. I appreciate that.
Mr. Mica. By refusing to take action today on the soft
money activities of 527 groups, the Commission has failed to
close a loophole that dangerously undermines the purpose of the
Federal Election Campaign finance laws. I didn't write the
bill. It is authored by--I thought--maybe we are not in the
same world because we are maybe not watching the same TV that
has all this stuff on it dealing with Federal elections. But
this is McCain and Feingold. I think they were involved. Then I
have got this statement with Shays because I have heard
sometimes Shays mentioned as a sponsor, regardless of what side
of the campaign finance reform debate you are on, everyone
agrees that the FEC decision will only encourage the continued
proliferation of so-called 527 groups and the soft money will
continue to influence--he goes on here.
So you know, maybe I will get 120 Republicans. And you have
heard from these two. And, I mean, and, you know, we try to put
faith in institutions to act in the best interest of the public
in the elections process. And subjectively, you could go
forward and do something about a situation that is obviously
out of control. Where do you live Ms. Weintraub?
Ms. Weintraub. Maryland.
Mr. Mica. Okay. Well maybe I just--I turn the TV on in
Orlando and it is day and night, night and day and has been so.
I have seen them up here too, but----
Ms. Weintraub. I am not in a swing State. I guess I don't
get that much advertising.
Mr. Mica. Somehow I believe that these folks are, in some
way, trying to influence the Federal elections process.
Ms. Weintraub. Congressman, I think that it would be a
mistake and an effort to, you know, put a finger in the dike to
go forward with the regulation that I think is fundamentally
flawed. I really don't know how people would comply with the
regulation as drafted by my colleagues. I know they gave it
their best shot. I think some of the terms in there are
undefined because they couldn't agree amongst the two of them
as to what should go into a major purpose test for example. If
we are going to look--we put forward four different proposals
in the notice of proposed rulemaking, and none of them are
incorporated in this proposal. I have been told that it would
use a 51 percent test, but I don't know what goes into the 51
percent.
Mr. Mica. Well, that is why we have you all to figure it
out and to try to make the process work and try to keep faith
in the Federal elections process. Thank you, Mr. Chairman.
The Chairman. Thank you. The gentleman from California.
Mr. Doolittle. Thank you, Mr. Chairman. Let me express to
the commissioners in person what I did in my press release.
Thank you for following the law in your decision. You see, it
is my belief that McCain and Feingold and others wanted to
regulate 527s when they passed their horrid law, but they
didn't have the votes to include them within their law and have
the law pass both Houses. So they had to leave them out, and
then they are hoping you will be dumb enough to get a letter
signed by 127 or whatever it is, and use that as congressional
intent.
I mean, congressional intent has got to be discerned from
the statute itself, first and foremost. I mean if you give any
weight whatsoever to extraneous matters, and if you do, it
should be very carefully considered because people are doing
all kinds of things to achieve a certain result, and the truth
sort of falls by the board sometimes.
When I first came here to the Congress, I was elected in
1990 and it was the ridiculous position the Republican party at
that time, at least in the House, that we should ban PAC
contributions. Why? Because Democrats were in the majority and
they got more PAC contributions than Republicans did. Now,
there's a great principle. And that is the problem with this
law, with the whole history of campaign finance regulation in
my opinion. Principle or truth has almost no bearing
whatsoever. The law has been used right from the beginning as a
way by one partisan group to gain advantage over the other.
Right now the Democrats succeeded in hood winking a few
Republicans into voting for this disastrous McCain-Feingold
that has become the law. And they should feel good about that.
I congratulate them. They have always been great at acquiring
and maintaining power. They are better than we are at that, and
you know, you must have had a good laugh behind the scenes
about how dumb we were. You know, we control, as the
Republicans, the House and the Senate, and yet Congress put
this law out and a Republican president signed it. I mean, is
this a wonderful world or what? I deliberately put out that
press release and I am complimented you quoted from it, Mr.
Larson.
And I meant what I said. It was a fair-minded decision. And
anything other than that, in my opinion, would have been making
law. It is quite clear, this is 30-some pages of relative fine
print in this McCain-Feingold 527s aren't in here. And I tell
you why I believe they are not in there. There was no--they
didn't forget about it. You heard somebody quote Mr. Shays
earlier that you know he openly acknowledged that they were not
intending to include 527s. So you did the right thing. I guess
what I would like to ask you is a question, just as an
American, with a particular familiarity with how all this stuff
works, since you are FEC commissioners, do you really believe
that our campaign law has reduced the influence of special
interests in the election? I would invite any of to you
respond.
Mr. Smith. Well, Congressman Doolittle, I--I think
sometimes it is important to go back and perhaps look at first
principle. Sometimes this debate gets so tied up that nobody
stops and says is what we are doing working. I won't try to
answer that question directly, but I will say this. I sometimes
note that some states, for example, Maryland, have fairly
complex laws, versus Virginia which allows unlimited corporate
contributions, they just have to be disclosed. New Mexico
allows corporate contributions. Arizona has all taxpayer-funded
campaigns pretty much now.
I don't know anybody that thinks that when you drive across
the Potomac going south, all of a sudden the mountains are
barren of trees, or everything's been strip-mined, people have
their teeth falling out from scurvy. I mean, I don't see
anything that indicate that States that do not apply these
rigorous regulations are more poorly governed as a general
matter or more prone to political scandal than others. Now that
is a very simplistic analysis. But I just think on the face of
it, one might look and not see, if we look at the States as
laboratories, where we are gaining a whole lot by the general
approach. Obviously, however, our job at the Commission is to
enforce what Congress passes. But I think it is always good for
Congress to go back and not try to keep building on what is
there, but sometimes look back and say do we want this edifice
at all and consider starting over.
Ms. Weintraub. Congressman----
Mr. Doolittle. Please.
Ms. Weintraub. In the first place, thank you for your
comments, I think about our decision. You know, I think that
BCRA had some laudable goals, but I echo what Congressman
Larson said. The goal was to sever the link between office
holders and raising these huge chunks of money, this soft
money. Does that solve all the problems? No, it doesn't, but I
think a lot of people think that is does serve a good purpose
and it creates at least--it serves at least the goal of
eliminating the appearance that Congressmen or other office
holders are being influenced by those very, very large dollar
contributions.
I also think that the electioneering communications
provision is simple. It is clear, it is going to be a dream to
enforce. I am really looking forward to it. And I am looking
forward to seeing how it works. I think it is too soon to tell
whether exactly what BCRA accomplished because we haven't even
been through one whole cycle with it yet. And I think maybe we
ought to wait until the end of the cycle at least before we
decide.
Mr. Doolittle. Yes, but do you believe--and I don't just
mean BCRA, but I mean the campaign--you could even answer
without reference to BCRA. Do you believe personally, based on
your knowledge and experience that campaign finance regulation
law has reduced the influence of special interests? I don't
mean the appearance of this or that. That is such a phony
absurd standard in Buckley versus Vallejo. Throw that out
completely. I just want to know your personal opinion. When you
go home at night and talk to your family, you know, do you feel
like you are more--we are more secure in our republic because
of all this campaign regulation, that it has somehow reduced
the influence of special interests?
Ms. Weintraub. I try not to talk to my family about things
like this.
Mr. Thomas. Well, Congressman, briefly, I come from the
perspective that these campaign finance laws are effective.
They do really improve the body politic. I think my philosophy
has always been that we are all sort of weak soldiers. If you
dangle something that we really want in front of us, chances
are we will be willing to do a favor for you down the road. And
that is natural human nature.
And so I think these laws, to the extent they do put some
reasonable limits and prohibitions on sources of huge amounts
of money, will insulate elected officials and other players in
the political process from that natural human kind of, set of
transactions. And so I do think that these laws are making
things, in essence, better than they would be without them. I
think that the prohibitions on corporate and union
contributions do stop some folks from putting money into the
process, the election process and I think that BCRA restraints
on Federal officials being involved in raising soft money are
helpful. My view. My philosophy.
Mr. Doolittle. My time is up, but I would love to ask you
why you think it is better under the present system than it
would be if corporations and unions got directly involved.
Let's really go back. Let's go right back to good old
Republican Teddy Roosevelt, who signed the first piece of
campaign regulation. Why is that such a great hallmark of
wisdom? What is the matter with corporations and unions getting
involved?
Mr. Thomas. Well, again, my view is that it sets up that
awkward situation where those folks who are trying to get
something accomplished through government will use their
ability to influence elections or to help elected leaders get
elected, to basically secure those kinds of governmental ends.
And----
Mr. Doolittle. And they are not doing that now?
Mr. Thomas. Well, they are certainly restrained
significantly by the current set of laws in my opinion.
Mr. Doolittle. I really wish we could have. I would love to
have a lengthy discussion, but I will be infringing on the
other members' time.
Mr. Smith. Congressman, if I may just briefly add, since
you brought it up----
The Chairman. We will have to hurry because I do want to
get to Mr. Ehlers, and then we will go through another round.
Mr. Smith. I do note that Teddy Roosevelt was elected with
large corporate contributions, unlike, say, George Wallace, who
was elected with small individual contributions.
The Chairman. Mr. Ehlers.
Mr. Ehlers. Thank you, Mr. Chairman. I am sorry that my
colleague from California was so restrained in his comments. If
I said what I really thought, I might be more outspoken, Mr.
Doolittle. But--and I will be honest. I voted against the law.
I voted for all the alternatives that were presented to us
because I thought they were better. But I knew that what has
happened would happen under the law that we passed. And I think
it is the height of idiocy that we prohibit these types of
contributions going to political parties, which for centuries
have been the political force in this country, and have the
responsibility to do this precisely, to express opinions and to
get people elected. You say no, you can't do that. But at the
same time we have this back door open, the back doors I should
add.
There are other ways of doing it, which we knew existed and
which, in fact, now have come into play. And I am very sorry
that we passed the law. I felt that way when it passed. I voted
against it as I said, because I knew it was unworkable. It
would not accomplish the goals and I thought it was a
reasonable goal to limit soft money. I think everything should
be accounted for and traced. And that is fine with me.
But what a cobbled up mess we have ended up with now. The
law, per se, I think, might work well in certain areas, but
certainly restricting the ability of political parties to do
what political parties are supposed to do, I thought was
terrible. But we did it. And then we opened back doors, as I
said, which would allow people to do other things. I would also
mention that one of you in the comments a moment ago, mentioned
the Arizona law, which provides public financing. And I find it
fascinating that that proposal was a referendum by the people.
That was going under big time until Mr. Soros anteed up huge
amounts of money, using the existing campaign law and solely
because of that, it was passed.
And that seems to be precisely counter to what the
advocates, including Mr. Soros, are trying to do when they
passed that law. So he certainly doesn't have clean hands on
this matter either. I just think it is most unfortunate. I hope
that we have the ability and the sense to pass another law
clarifying this, whether it is Mr. Doolittle's approach of
anyone can contribute anything they want as long as they report
it, or an approach I have suggested, that we have some limits
on contributions, but no cash, everything reported, names
addresses phone numbers, everything and so that we have a
detailed record of who contributes to what.
And I would also impose the limits, whether it is
contributions to the 527s or the--any other form or to the
political parties. We have got a horrible animal out there now
and it is an artifice that seems to mislead people into
thinking that they have accomplished their goals and they
haven't. They have made the situation worse with this law that
has been passed. With that, Mr. Chairman, I will yield back.
The Chairman. Thank you. We will go to a second round of
questions. I wanted to answer Mr. Doolittle's question for a
second real quickly. And the most disturbing thing is we can
pretend that--the question of influence and money, and I
understand, under the United States Constitution, you can't
tell a person with independent wealth that they can't spend
their money. I understand that. But we have told people they
can't counter that. So what we are creating is a millionaires
club; and you are a self-funder and you can put in 50 million.
You know what, money is money is money in the elections. So
somebody can put in 50 million dollars of their own money, but
you know, you can't go out and, you know, have union or
corporate contributions. In my opinion, it has done nothing
except consolidate power in this country into the hands of a
few. Right now, it happens to be that there are a couple of
Democrats leaning toward supporting 527s. Hopefully we will
find a Republican like George Soros who can do so as well. But
anyway, I think it consolidates power into the hands of a few.
And it really guts the fairness in our election system--and I
think what you are seeing happen has happened.
So to answer your question, I think BCRA just took
influence and said here it is for a few people at the table.
Also, I still think that clarifications will be needed down the
road. I still think that it will be needed, because now it is a
winding road where we have the money in our campaign accounts
(all of us do) to have the necessary assets and tools to ask
the questions of the attorneys.
Now, if you are a regular challenger to a member of
Congress, you know, you'd better get an attorney, an accountant
and a bail bondsman. I think that is what this system has
evolved to, so I just want to express my answer, I think to
your question: it is consolidated power in the hands of a few.
I have got a quick question on legality of 527 activities. In
February of this year, the FEC approved an advisory opinion, I
think you call it the ABC advisory opinion, that related to
Federal political committees that also have 527s that raise to
spend soft money. I just want to ask a few questions about that
advisory opinion.
First of all, the group that requested that opinion was a
political committee, with both Federal and non-Federal, in
other words, soft money accounts. That is correct, right?
Ms. Weintraub. Well, that is what it said. It actually has
not yet raised or spent any money so we are not exactly sure.
Mr. Smith. But that was the condition of the----
The Chairman. That was the condition.
Mr. Smith. It would not apply in a group that was not in
that situation.
The Chairman. Is the scope of that opinion limited to other
political committees that also have both Federal and non-
Federal accounts?
Mr. Smith. It is limited to committees that are Federal--
that are already Federal political committees. It is not an
opinion that is relevant to the determination of whether you
become a Federal committee.
The Chairman. Whether you become one. In its advisory
opinion request, ABC asked whether it could use soft money to
pay for voter registration and get-out-the-vote public
communications that promote, support, attack or oppose a
Federal candidate. I believe the Commission answered that only
hard money could be used to fund those communications. Is that
correct?
Mr. Smith. Yes.
The Chairman. Okay. That is correct. I believe the
Commission also concluded that solicitations that promote,
support, attack or oppose a Federal candidate may not be used
to raise soft money even if the voter drive activities
eventually financed by those funds do not mention a Federal
candidate. I think that is correct, isn't it?
Mr. Thomas. That was--yes on the contribution side that was
the analysis.
Ms. Weintraub. I believe that the opinion said that if the
solicitation stated that it was going to be used for promoting,
supporting, attacking, or opposing that candidate, that there
was a sort of a fine legal point, that they had to actually say
that in the solicitation.
The Chairman. In the solicitation. The reason I am asking
this is because, ironically, part of Belmont County, Ohio where
I live, is the 18th district, and part is the sixth district.
And in the sixth district, America Coming Together has a
horrific controversy, which I had nothing to do with. These are
all Democrats. And they are raising questions about the
organization. ACT has now fired one set of the coordinators.
They then turned around and fired another coordinator, and
specifically, two former employees are claiming that they were
required to sign a confidentiality agreement stating they would
not reveal any information they learned as part of the job.
But one of the employees said that ACT's attacks were
partisan and they were asked to do political activity that they
couldn't talk about because they signed that they wouldn't.
Based on the conclusions the FEC reached in its ABC advisory
opinion, I am concerned that maybe we will find out that ACT
Ohio may be funding, almost exclusively with soft money,
particular vote drive activities that should be funded,
frankly, with hard money. Now, if someone were to file a
complaint about this matter, would it be before the FEC or the
Justice Department? That is my question. Where would they file
the complaint, FEC or Justice Department?
Mr. Smith. You would normally file the complaint at the
FEC. If the FEC determined that it was a knowing and willful
violation at the appropriate juncture based on the evidence as
it became available to us, we could defer it to the Justice
Department for criminal prosecution as well. But the FEC is the
primary enforcement agency.
The Chairman. Are there any normal time frames by which
this would be resolved, or is there an expedited procedure, or
is there a certain time frame?
Mr. Smith. We don't have any formal expedited procedure.
The commission activates cases as resources allow. You know we
talked about that last fall. We continue to make great progress
in that area. And you know, if a case seems important enough,
it will be activated more quickly. Typically the median case
now is activated within 23 days, so it would happen fairly
quickly, much, much faster than it was just a few years ago.
Ms. Weintraub. Mr. Chairman, if I might qualify something
that we said before. It occurs to me that the rule that you
have to use, that a political committee has to use hard money
for a communication that promotes, supports, attacks, or
opposes a clearly identified Federal candidate is modified by
the principle that that is only the case if that Federal
candidate is the only person mentioned. So if it promotes,
supports, attacks, or opposes a number of candidates, some of
whom are Federal and some of whom are non-Federal, then the
expenses could be allocated between Federal and non-Federal
accounts.
The Chairman. Soft money and hard money, you mean?
Ms. Weintraub. Yeah.
The Chairman. Well, Ohio's case would be--the State doesn't
allow soft money, corporate contributions. Or would it be
allowed in this case, because they were going to use it for
voter registration? Is that what you are saying, depending on
the State law?
Mr. Thomas. Depending on State law, yes. The non-Federal
share would be subject to whatever restrictions State law had.
The Chairman. Okay. Yes. Mr. Larson.
Mr. Larson. Thank you very much, Mr. Chairman. I feel
compelled to say a good word about my colleague, Mr. Shays. And
you guys still including McCain as one of yours? But I do feel
inclined to say that at the heart of their proposal, would it
be that any piece of legislation was handed down to us from Mt.
Sinai and might be different than legislation constructed by
humans intent in the kind of atmosphere that we exist in in
coming to compromise. Or as Mr. Bismarck is quoted as saying,
two things shouldn't be observed; sausage being made and a bill
becoming law. That is our job, to perfect as we go forward. Mr.
Thomas, I appreciated your comments as well.
And I do think that there is a corrosive nature of the
influence of money in government. And if we go back to the
first attempt to regulate this, it was called the corrupt
policy act, again, trying to eliminate the corrosive nature and
the impact that that has in the potential for that impact it
has on legislation. It is certainly a debate that is rich and
one that we should have more often. And I agree with Mr.
Doolittle on that. I want to ask just a few quick questions
here. One is just a practical one.
In your dealings, and that is what is the practical
implication of adopting a new rule mid cycle for these
organizations? Care to respond? We will start with the chairman
and work right down.
Mr. Smith. Well, let me--I will let those who supported
that notion I guess respond to how it practically would have
worked out. I think it would have, at least for some groups, at
least caused some chaos because they would have been allocating
expenses for example over a lengthy period of time, and some
would have to shift some of those allocation rules. But I want
to use that concern to address something that I think hasn't
really been made clear.
And Congressman Ehlers mentioned a little bit about
clarity, and Congressman Mica was talking about could we come
back in August and do something. I voiced my opinion that
nothing that would be done would be effective this cycle. And I
think it might be worthwhile for the point of clarity that
everybody seems to want to get at to see if my colleagues agree
with me that nothing is going to change in this cycle, just as
nothing changed on May 13. The rules that everybody understood
were going to be in effect right up to December or January.
Mr. Larson. That is an excellent point. Is that the
agreement of the----
Mr. Thomas. I think as a practical matter we are now
basically stuck, for lack of a better word, with the mish mash
of the law as it exists without the Toner-Thomas proposal.
Mr. Toner. And I think that is a very important point
because I believed it was critical that the agency make an
affirmative decision on what the law will be for 2004 and we
have done that. I didn't agree with the decision, but I accept
it and respect it. And so now, I think in the 90-day period
that has been alluded to, we are going to have to take up what
the law is going to be for the 2005-2006 cycle. And I think
that is what we are working on now.
Mr. Larson. And you say that that holds true for both 527s
and 501(c)s?
Mr. Toner. Yes, I believe the legal status quo will be in
place for this cycle, yes.
Mr. Larson. Madam Vice Chair.
Ms. Weintraub. I agree with that, and I appreciate the
opportunity to clarify that, because I said in response to an
earlier question that we could pass a regulation in 90 days
when our counsel comes back with a recommendation. But I don't
believe from a practical standpoint that we could put it into
effect for this election cycle. I mean, if you count the days,
we would have to let it sit for 30 or 60 legislative days,
after we approved it, and after it was published in the Federal
Register. And I think, given the congressional calendar, you
just can't get there from here. And for myself, I am not
terribly troubled by that because I think that the regulated
community needs notice. They need to be able to make plans.
They need to know what the rules are in advance of when they
are enacted.
That is why BCRA didn't go into effect until the next--the
beginning of the next cycle and it wasn't because the people
who voted for it were happy with the status quo then. But you
do need to provide notice to the regulators.
Mr. Larson. I am struck by how all of you are struggling
with definitions. And if minds of your capability are
struggling with these definitions, and I mean no disrespect to
the minds assembled up here, then in terms of making--and I
understand in 90 days you are going to take another shot at it,
but I take it from the Chair's comment, that even in taking a
shot like that, given the cycle that we are in and given the
practical application of that, that any recommendation would
probably be put off for legislative consideration in the next
session. Is that the intent of this?
Mr. Smith. I think that is right. And Congressman, if I may
use the opportunity to go on a bit. Nobody, prior to December
or January past, was saying that any changes here were
required. Everybody understood that 527s were going to run wild
in this campaign. That was known. And when this issue first
came up, we have moved very, very quickly to handle it. We have
had, in 3 months, to get comments. People need time to submit
comments as you well know. They had--we had--over 150,000
comments. We had a 2-day hearing with over 30 witnesses, the
vast majority of whom argued that these rules were improper and
should not be enacted.
I mean, we have moved very rapidly on this as it is, and I
want to point out that this has not come up all of a sudden
because the Commission was just sitting around for 2 years. It
has come up all of a sudden because until January nobody--you
know, Shays wasn't saying anything. Senator McCain wasn't
saying anything. Congressman Meehan wasn't saying anything.
None of these people were sitting there saying, ``why you are
not addressing the 527 issue,'' and they weren't saying that
because Congress did not address it in BCRA, and everybody
understood that.
The Chairman. But they are saying it now, are they not?
Mr. Smith. They are saying it now. But it is a January 2004
invention.
Mr. Toner. And if I might, I think Chairman Smith makes a
very good point about the fact that this agency considered
these major issues on an expedited basis. And any suggestion
that the agency didn't use due diligence, didn't aggressively
look at these issues, so it could make a decision on time, I
just don't share. I didn't agree with the decision on May 13,
but I really appreciate all the effort that was made within the
agency to make a decision in an expedited manner as these
issues required.
Mr. Larson. And I share that. I share your opinion. I want
you to know that. I do. I think that you have given it due
deliberation, and I am impressed.
Mr. Thomas. Well, Congressman, I was just going to add that
I think there would have been some folks who would perhaps have
had some difficulty feeling comfortable with imposition of what
I refer to as the ``promote, support, attack or oppose'' test.
That was really the heart of the proposal. But I would just
note that the Commission already adopted that approach in the
advisory opinion. And four of us at least felt comfortable back
then saying, look, the Supreme Court's indicated this is pretty
clear.
And we are talking about groups, the major purpose of which
is to influence elections. So although there might have been
some folks who would have kicked and screamed, I think most of
the players out there we are aware of that are in the news all
the time, could have fairly quickly adhered to ``promote,
support, attack or oppose'' standards. So I would have been
willing to give it a go.
Mr. Larson. Madam Vice Chair.
Ms. Weintraub. Thank you. I would like to address that
point because I introduced the draft that we--with some
amendments from Commissioner Toner that we ultimately ended up
adopting in that advisory opinion. It wasn't my first choice,
but it was the best choice that I thought we could get four
votes for. And in response to that, there was an outcry, not
just from, you know, whiny people that didn't want to have to
comply with it, from people who are dispassionate observers of
the process, George Will on the right, Rich Hazen who is a
fairly liberal law professor in Los Angeles.
Mr. Smith. I think I know Rick better than you do. He is
very liberal.
Ms. Weintraub. You probably do. I won't contest that. And I
don't think he would be insulted by the appellation either. But
people on both sides of the political spectrum who were
dispassionate observers of the process said that advisory
opinion did not give clear guidance. So now that we know that
and we have heard this from a wide, wide range of people, I
think it would be irresponsible for us to just glom onto that
and say okay, we already voted for one thing that we have been
told is confusing to people.
Now let's put it into a regulation without giving it
further clarification. I am not opposed to codifying it, but I
think we have to define it and clarify it.
Mr. Larson. Thank you.
The Chairman. Before we go on to Mr. Mica, Mr. Doolittle
and Mr. Ehlers, I do want to say one thing about the FEC. I
think Commissioner Weintraub and Commissioner Smith have been
attacked and I know we have heard statements from the authors
of the bill and the Senator and the House Member, and I know
people fought for your appointment that might not be happy with
you now, but might be more happy with you and your decision,
Commissioner Toner. So it is a strange, wild world. You have an
R and a D, and an R and a D in opposite directions. So I guess
it is kind of good at the end of the day. But on this reform
bill--and I just want to go on the record on this. If you
looked at it, I think most of you couldn't serve, although, I
think Commissioner Smith could serve, although you didn't--
you----
Mr. Smith. Well, had the law been--had this bill been in
effect when I was nominated, I would have been eligible for
appointment, whereas I think Commissioner Weintraub would not,
Commissioner Toner would not have been. I think that is----
The Chairman. But you didn't agree with the author of the
bill on their terms and they have been attacking you. But I
guess with the reformation bill, you would be the only one
sitting here. So I find this all ironic. I, in no way, think
that this whole, now, movement, because of a decision you made
or you didn't make or by not making the decision you made a
decision on an obviously bipartisan basis, it is nonsense to
think that you have to have a reformation bill of the FEC
because you had your own free thoughts. I just wanted to state
for the record, I think that is all nonsense, and after all,
the only one who would be here is the one they are mad at for
not making a certain decision. So I just thought I would add
that.
Mr. Mica.
Mr. Mica. Well, I don't really have a question. I will just
wind it up. I am disappointed because I can be as partisan as
anybody. I will show you some of my wild partisan statements
and--but I think that we empower certain individuals and here
the Federal Election Commission to put in place the rules for
conducting the Federal elections. And maybe Congress did not
address this properly. But at least two of the commissioners
could subjectively determine and maybe they didn't have all of
the approaches that needed to be taken, everything defined. But
I think there are things that transcend politics, and I think
there are things that should be done for the good of the
political process and for the country.
And I think that people in your position don't have to
listen to the George Wills or the others, or the Members of
Congress, but just to do the right thing. I disagreed with the
law. I knew there would be loopholes. But I don't think you did
the right thing. I think two of you did, and--in this case, but
this whole mess, again, the worst part of this is that it
further undermines people's faith in this electoral process
because it has gotten worse instead of better. The whole
purpose everyone thought of making Feingold or Shays-Meehan,
whatever you call it, was to regulate soft money and to try to
get this process out of control under some control and make
some sense out of it.
So I am saddened really that again there is further loss of
faith in this most important process, and I just think that
people need to do the best thing, regardless of who is saying
what when you are given a charge as important as yours. No
question, just sort of my final comment.
Mr. Ehlers [presiding]. The gentleman from California, Mr.
Doolittle.
Mr. Doolittle. Thank you. Well, Justice Scalia, I think in
his dissent in the McConnell case said it pretty well. This is
the first act, referring to BCRA, of a long series of acts in a
tragedy. I mean it is only going to continue to get worse. Look
at this. Mr. Larson's party figured out early on that the 527s
couldn't be in this. They were going to organize, get those up
and running and they are ahead of us, way ahead of us in this
election. So that is a short-term advantage for the Dems.
We have gotten clarification today from all of you, which I
appreciate. It is clear that in 90 days, nothing is going to
change for this election. I hope everyone listening to this
hearing on the Republican side will immediately instruct their
lawyers to form 527s and to raise as much money as possible.
And by the way, the testimony we heard today was that we are
spending more money in this election than in any election
before.
So I mean it is not like all this wonderful regulation we
have already got has reduced the influence of special
interests. It is greater than ever. And we will get our 527s
and we will be ready for the election where it is really going
to count, which is 2006 where we won't have our own incumbent
president running, we will be naked, carrying the load by
ourselves and it will really be an interesting test of the
process, whether the Republican party can survive or not. I
predict they will, but we are going to have to work hard to
catch up with the Democrats. We have got to quit using the law
as a partisan club against each other. We have got to base this
on principle.
And the principle ought to be, in my judgment, that free
speech is important in this country and should be encouraged
and rewarded, not discouraged by regulation like we have now.
This should be unconstitutional. But it isn't. And I think
increasingly it won't be. Some day, somebody's going to go
after 527s and after they go after 527s and the decision makers
go for that, they will go after the 501(c)s and they will keep
going in this quixotic pursuit of perfection, trying to weed
out this special interest money.
The problem is, as long as we have any semblance of a
constitution, you will never achieve that utopia that they
desire and you will just drive the so-called unregulated money,
or soft money, you will drive it deeper and deeper and deeper
into the system. I would just like to observe and then get your
reaction for my question on this, increasingly, the effect of
campaign regulation is to move speech away from the candidates
and the parties, the entities that have the most
accountability, shall we say in our system and to push it
farther and farther out into less accountable groups. We are
not talking about 527s.
Down the road, if those are regulated it will be something
else. Is this desirable in your minds? Why isn't it better to
have the candidate doing the speaking? It is the candidate that
wants your vote. He has some self-imposed constraints because
he can't offend the voter as he seeks your vote. So truth will
be a little more important and not saying the horrible things
that can't be verified will be a little more important. When
some funny 527 over here that nobody's heard of starts doing
its thing and making these claims, they are not asking for
anybody's vote really. Doesn't this trouble you that we are
basically creating incentives and moving the focus of the
campaign away from candidates and parties and more into these
third party special interest groups?
Ms. Weintraub. I will take a stab at that one. I think that
I disagree with some of your premises. I think that if your
premises were correct, then you would be right to be very
troubled by that and I would share that. But there is--I think
if anything this election cycle is proof that candidates have a
lot of money available to them to get their message out. It is
hard for me to imagine that there is any group out there that
could drown out the $200 million that the President has raised
in absolutely legal hard money contributions fully disclosed to
get his message out. And Senator Kerry has also raised, last--I
haven't looked at the numbers lately, but I read it was in the
range of $100 million. That is an awful lot of money to get a
message out.
Mr. Doolittle. What happens, do you think, next time
though, after this election, when we don't have a presidential
election? Then how do you think it is going to work?
Ms. Weintraub. Well, I think that there could be a little
bit of a shift there. I think you are right. I think the
presidential election does normally draw a lot more
contributions than perhaps congressional candidates would have
available to them. But I do think that when the electioneering
communications provisions there is going to be more disclosure
of all communication. So if there is an organization out there
that is running ads within 60 days of the election, you are
going to know who is running it and you are going to know who
their backers are because that information is going to have be
disclosed. And that is a positive affect of BCRA.
Mr. Smith. Congressman if I could--obviously I share more
of your premises, but at some level, of course, that is not
that important, at least to my job. If you are asking me, as an
expert witness like I used to come before this and other
committees as a law professor, I would say one thing. But now
my job is to enforce what you and your colleagues, your
colleagues over your objection, enact into law.
Mr. Doolittle. It is a very sad job. I am sorry for you.
Mr. Smith. I do think though it is a matter of considering
the proposal that was before us on 527s. You raise an important
issue because to the extent that 501(c)(3)s would have been
given more play--and by the way, they would not have been
excluded by the proposal--I think they would have had potential
problems and a great deal of uncertainty. But to the extent
that they would have been driving activity into 501(c)s I don't
think we would be accomplishing anything. We would keep
continuing to drive it one step further at each stage.
I also want to mention or comment on just one other issue
that you raised and that your colleague from Florida had raised
just in his last comments relating to the loss of faith and
certain levels of partisanship and I do think it is a problem.
One thing that has caused some loss of faith here from the
thousands of comments we got was a lot of people viewed this as
a blatantly partisan effort to silence their political
opponents. Now that is something I have said is often a problem
with campaign finance regulation, but in this particular case--
and there may have been some truth to that. I do want to point
out that it was a bipartisan majority, a majority of both the
Republican and Democratic commissioners that voted against the
Toner-Thomas proposal. I also would note that the proposal that
was there, that was being urged on us by the RNC, for example,
would not only hit Democratic groups.
I mean, it would have impacted Republican groups like the
Republican Lawyers Association and the College Republicans and
the Federation of Republican Women. It would have affected all
kinds of conservative groups as well and limited their ability
to participate in politics as well. And sometimes that wasn't
being put out there. Some of the folks who were supporting it,
I think, were actually trying to drum up partisan passions. I
think it is worth noting that in the end, the Commission, I
think, did not act on partisan grounds and I think, you know,
we--I think we pushed those to the background and I think all
of us including those of my colleagues with whom I disagreed on
this issue attempt to do what we think is right and correct as
a matter of interpreting the law and where we have leeway as a
matter of good policy.
Mr. Toner. Congressman, if I might, I agree with Chairman
Smith. I think he makes a very important point. It was a
bipartisan two of us who offered the proposal and it was a
bipartisan four of us who voted against it. I think that is
important. This is not a situation in which three Republicans
were opposing three Democrats which has occurred over the years
occasionally at our agency. I think that is an important point.
But in terms of the partisan fallout, if the proposal would
have been adopted, I thought that that was one important reason
why I wanted to make clear that I would vote for the
regulations for this cycle.
But I would also vote for them for the 2006 cycle, not
knowing whether the George Soroses of the world are going to be
out there, or the Republican equivalent of George Soros,
doesn't really concern me. I viewed this approach to the law to
be the appropriate approach for 2004 and for 2006, and not
based on short-term political gain perceived one way or the
other. [But I think the other point you made was a very
fundamental one concerning the fragmentation of our politics.
There is no question it is occurring.]
And so we have national parties that are financed by hard
dollars. And they are doing fairly well raising those types of
funds. But now we have parallel organizations that are doing
the exact same things the national parties used to do with
unlimited soft money funds run by operatives who are very
sophisticated, such as Mr. Ickes and others who used to work at
the Democratic National Committee and now interestingly are not
working there, but are doing a lot of the same things that used
to occur there.
And so I think you are absolutely right. You are seeing a
fragmentation of politics and the question is when
organizations are doing the exact same things that national
committees used to do, what type of money is appropriate for
them to underwrite their activities? I think it is a major
issue. It obviously is something that we are grappling with at
the agency. It may be something that Congress decides that they
want to try to address. But I think your point is absolutely
right. We are seeing a fragmentation of politics.
Mr. Larson. Would the gentleman yield?
Mr. Doolittle. Yes, sir.
Mr. Larson. Just for a quick comment. Only that it seems in
listening to you, that only Democratic operatives are--have
this expertise and strategy that somehow Republicans are babes
in the woods, and that they have not applied any of these
strategies, whatsoever. Or is it outrage that Democrats
discovered 527s because 501(c)(3)s have been in effect for so
long and so successful. I mean, that is what, you know----
Mr. Toner. I think you make a very good point and I think
Republicans are hardly babes in the woods, and I think they
have been and will get into this arena aggressively, given how
we have come out on this. And I think you are going to see a
dramatic escalation of Republican-oriented organizations you
mentioned and you read into the record an organization that is
out there. And that is why I think it is critical to be clear
that under current law, and under the Supreme Court precedent,
501(c)(4)s can be political committees. And to argue that they
should be exempt as a matter of law from being a political
committee, I don't think adds up under Supreme Court precedent.
Admittedly that might be an extreme case. But you make a
very good point. Republicans, I believe, will aggressively be
in this arena. Who could blame them if there is going to be
wide running room here, I think it is only to be expected.
Mr. Larson. This isn't a place to make wagers, but if I
were a wagering man, which I am not, I think if we totalled up
what the 501(c)s have been able to raise, but of course we
wouldn't know that because of disclosure, I think you would
find the Democrats dramatically dwarfed, but that is a
discussion for another day.
The Chairman. Well just to comment before we move to Mr.
Ehlers. You know, I think after no decision, which is in a
sense a decision, fortunately the babes are going to mature
into adults very quickly. Mr. Ehlers.
Mr. Ehlers. Thank you, Mr. Chairman. I was going to make a
remark something to the same effect. And the issue, Mr. Larson,
I just want to get this in quickly before I make my comments.
The issue is not that so much as the perceived duplicity of the
party that fought very hard to get this passed and the majority
of whose members voted for it, immediately began forming the
527s, whereas the party that I think was more responsible on
this thought it was improper and waited for a ruling. So I
guess I resent the aspersion that somehow your hands are
perfectly clean. Let me just comment----
Mr. Larson. If I made that, I didn't mean to.
Mr. Ehlers. I am not yielding time. We have spent enough
time on that. I do have to respond to a couple of things first
and then a question. Several times, including your comments,
Madam Vice Chair, about the money raised by the presidential
candidates implied somehow that money is evil. And I am a
charter member of Common Cause, and it has always bothered me
that they seem to regard campaign money as illegal. And I hear
it from the public, too. All that money. All that money. And I
simply remind them that if you add together all the campaign
money spent by every candidate in the United States, from dog
catcher through President in an election campaign, it is less
money than is spent advertising aspirin, Tylenol and other pain
killers.
Mr. Ehlers. You have to keep this into perspective. General
Motors, when they try to sell a car, they spend an average of
$300 for every car that they sell on advertising. Multiply that
by the 15 some million cars sold per year, you realize what
kind of money is spent on advertising.
The point is political advertising is a very small part of
the mix, and it is not a corrupting part. And that is, again,
where I disagree with Common Cause.
I have been a charter member and sometimes I am ashamed of
the membership because of the information they send out. But I
have stuck with it, and I am just curious why we haven't heard
more of them, at least I haven't, about the use of 527s, which
I think totally negates what they were trying to achieve and
what the sponsors of the bills were trying to achieve through
the passage of the law, which is to get rid of soft money.
It is the lack of accountability that is the issue. It is
not the amount of money that is out there, and that is what is
disappointing about your opinion, simply because there is a--
there was a possibility there of saying, look, the bill
intended to impose accountability, and we now have some
organizations that are not accountable, you don't know where
the money is coming from and how much was given. And I
understand the legal arguments, and as Mr. Toner said, I accept
your decision, but unlike him, I cannot respect it because I
think it was contrary to the intent of the law.
I hope that we can write another law, and I just want to
comment, too, about the sponsors of the bill. Their names have
been pulled into this fairly regularly, and I think they are
very disappointed with what happened to the law. At the same
time, I know from conversations with them during the course of
it that they were very disappointed at how the law emerged, and
they just had to give to this group and to this group and to
that group in order to get the law passed and they thought it
would be better to have something passed than nothing.
I just frankly think it is a disappointment for all of us,
including myself, who really wanted to get rid of soft money.
That was the real objective, and we should have centered in on
that and not done some of the other foolish things.
I would just like to ask you--and this does not--you can
just take off your FEC hats, if you will, and just express your
opinion as citizens. What is the best means by which we can
bring full accountability and get rid of soft money? Just
bring--full accountability of the money, both for the benefit
of the candidates or parties and for the citizens of this
country. What approach would you take? You know a lot about
campaign law, so take your FEC hats off and say what--if you
wanted us to write a law, what do you think it should
emphasize?
Mr. Thomas. Well, I will start if you would like,
Congressman. I think that this approach that Commissioner Toner
and I were working toward was an effort to try to really put a
clearer standard out there so that people would know what
should be deemed political activity and what should not, and
the idea would be that only the political activity should fall
subject to these limits and prohibitions and campaign finance
disclosure requirements.
I think that would be very helpful, because we do need to
make these kinds of distinctions, it seems. We do have to
acknowledge that there are some organizations that are going to
be very interested in an upcoming piece of legislation and they
are going to put out ads that say, ``This is a very terrible
bill that is going to be very harmful to us as Americans. Call
your elected Representative and tell him to vote no.'' We have
got to allow that kind of communication, but we have got to
find a way, maybe, the ``promote, support, attack or oppose''
standard, to make that delineation. But once you come up with a
clear standard like that I think that you can apply it pretty
much across the board, and people will know. And you can apply
the limits, the prohibitions and the disclosure requirements
based on that one clear standard.
We have a mess right now, I will concede. We have got
language in the statute that talks about whether something is
``in connection'' with an election. We have got language that
turns on whether it is ``for the purpose of influencing'' an
election. We have got the ``electioneering communications''
standard now that talks about whether it makes reference to a
Federal candidate within flat time frames before the elections.
I think it would be very helpful, ultimately, if Congress
wanted to back up and take another run to try to develop one
clear objective standard and apply it across the board.
Mr. Ehlers. That is a very important comment, I really
resent a law that puts incredible restrictions on my ability to
endorse colleagues or individuals in my State or to work on
their behalf, which is what this law does, and yet someone else
can give $20 million to influence that election.
I can in fact go to jail under this law for misbehavior,
and George Soros certainly has not gone to jail. Anyone else
want to respond? Ms. Weintraub.
Ms. Weintraub. I would like to respond to what you had
initially said, because if I conveyed the impression to you
that I think that a lot of money being spent on political
advertising is evil, that was not my intent. My point was just
to convey that the amount of money that is being raised by
these 527s has to be seen in the context of how much other
money there is in the system.
I think that a lot of people have gotten more involved in
politics this year. There has been an awful lot of new donors
created, and that is a good thing. It is good to have people
involved in politics. I hope we are going to see a lot more
voters this year, too, but it is certainly not my position that
a lot of people making legal hard money contributions is in any
way a bad thing.
I take issue with what my colleague said. If I thought that
his proposal provided clarity I might have voted for it.
Unfortunately, I didn't think that it did. I thought it would
muck it up even more and confuse people even more, but people
can disagree on that. I think that the more disclosure that we
have, the better, and we have to make sure that we don't do--
take actions that would have the effect that Congressman
Doolittle alluded to of driving the money underground to where
it is not disclosed at all. I think that would be the worst
possible result.
Mr. Ehlers. Any other comments?
Mr. Smith. I would say only, Congressman, that I have
written a book on it, literally.
Mr. Ehlers. Maybe we should send copies to the sponsors.
Mr. Smith. I think people have, and I don't think they got
much attention. My general sense in the end is that to some
extent this is just a dog chasing its tail. You say what can we
do to get rid of soft money. People always ask me what is soft
money, and I say, well, soft money is just unregulated money.
Any money that is not regulated is soft money, because that is
the only way you can really define it. That is why it has
been--you know, when people say the purpose of BCRA was to get
rid of soft money, well, soft money to whom? Just to political
parties? To State political parties? That was spent by 527s?
That is spent by individuals?
Nobody has even talked about the fact that if we ban 527s
George Soros could just go hire all these guys, put them on his
personal payroll and keep doing the same thing. And at some
level again, you know, people have to participate in politics,
and it could be that there is some limit. I mean, I have argued
that we shouldn't have limits on contributions, but I am not
unduly concerned about certain limits on contributions if they
are set at high enough levels.
I am concerned now we have ridiculous parts of the law,
like if a wife gives money to the husband, that is considered
corrupting and we can't have that, and, you know, there are a
lot of elements like that. We have disclosure requirements so
low that if the college Republicans have a couple of car washes
and raise $300 and run some radio ads in your district
supporting you, they have got to start filing reports with the
Federal Election Commission. I think that kind of thing
suffocates grassroots politics. So I don't think anybody is
going to be corrupted by a $2,500 corruption. Maybe you are. I
don't think you are.
I like to note to students that their parents will spend
$80,000 to send them to college, but if 3 years after
graduating from college they decide to run for Congress and
their parents offer to give them $5,000 they can go to jail. I
think we could address some of those things that would sort of
loosen the rules for true grassroots politics, while maybe
still keeping caps on the really big donors. It would be
something, perhaps, not dissimilar along the lines suggested by
the Ney-Wynn bill but also maybe loosening some of the
disclosure requirements.
Sometimes people say we need to know every penny, instantly
on the Internet. Well, we don't. We don't need to know every
penny spent. We don't need to know it instantly. We don't need
to know if some kid gives some money. You know, one thing--one
of the few parts of McCain-Feingold that was struck down was
the ban on minors giving. Kids now can give money, and I think
that is a much more important first amendment right than adults
giving money, and what I liked about it was that bill taken
literally, which I presume it was intended to be taken
literally, had the court upheld that ban would have meant that
if, for example, the county Democratic Party set up a booth at
the county fair selling cotton candy it would have made it
illegal for a child to go buy cotton candy from them. It had to
be an adults-only zone, you know.
So I think we need to go back and look at these laws and
quit taking this approach that everything is a loophole and
start looking at it as, you know, let's be realistic here and
talk about what is really creating a potential problem.
Mr. Ehlers. I very much appreciate that comment, because I
think that is the real issue here, and that is why I was so
disappointed in this bill. We strained so mightily at it for
several many years and came out with something that is a long
ways from what you have just described.
And I want to add something I have observed in the last 5
years. We are developing a new generation of young people who
have a much deeper interest in politics than the previous
generation, whether it is the generation X or something, and I
hope we can encourage that because that is really the future of
our country. These are good kids, well-meaning kids, really
working hard, and for the first time in my life it looks like I
am going to have as many volunteers as I need on my campaign,
largely of young people, and I think that is absolutely
wonderful.
I shouldn't say this publicly, I am not sure I even need
that many volunteers, but I am very happy to put them to work
and make them part of the process, and that is what America is
really all about. And I wish we could develop--and maybe this
committee has to develop it jointly, jointly develop a bill
that would help encourage that and regulate the things that we
really believe have to be regulated.
And I just want to thank you very much for being here. I
hope we didn't beat up on you too much because we shouldn't do
it. You are trying hard to do a difficult job, and I am sorry
we handed you a law that is so hard to administer. Thank you.
I yield back, Mr. Chairman.
The Chairman. Other questions or comments?
Mr. Larson. Thank you, Mr. Chairman, and again thank you
for your insight and leadership in this area and my other
colleagues as well. I have enjoyed immensely the discussion
this afternoon, especially thanks to the panelists. There is
much work to be done always in a democracy that needs constant
pruning and attention.
Mr. Chairman, I would ask that the--because two of my
colleagues had conflicts with legislative business of their
own, if the record could be kept open to enable them to send
questions to the Commissioners so that you might be able to
respond to their questions and other questions that any member
may not have had a chance to get to. I know that is always your
practice and procedure, and I just again wanted to thank you
and the Commissioners for your thoughtful deliberation.
The Chairman. With that, I would ask unanimous consent that
members and witnesses have 7 legislative days to submit
material into the record and for those statements and materials
to be entered in the appropriate place in the record. Without
objection, the material will be entered.
I want to thank Congressman Larson, his staff, our staff,
members that participated in this and, most importantly, the
Commissioners. And also I would like to ask unanimous consent
that staff be authorized to make technical and conforming
changes on all matters considered by the committee in today's
hearing. Without objection, so ordered.
Having completed our business, the committee is adjourned.
Thank you.
[Whereupon, at 6:40 p.m., the committee was adjourned.]
Additional Statements for the Record
__________
Testimony of Congressman Christopher Shays
The Federal Election Campaign Act of 1974 (FECA) requires 527
groups whose major purpose is to influence federal elections, and who
spend more than $1,000 for this purpose, to register as federal
political committees and comply with federal campaign finance laws.
The Federal Election Commission (FEC), however, has for 30 years
improperly interpreted FECA to allow 527 organizations to spend
millions of dollars to influence federal elections without complying
with federal campaign finance laws.
Since the Bipartisan Campaign Reform Act (BCRA) was passed and
signed into law in 2002, certain 527 groups have actively exploited the
loophole created by the FEC's interpretation of FECA, spending millions
of dollars to influence federal races.
This upsurge of outside groups expressly created to support or
oppose candidates for federal office has magnified the long-standing
lack of regulation that has allowed 527 groups to operate beyond the
realm of federal campaign finance law, and has underscored the need to
substantially reform the FEC.
On May 13, the FEC met to consider new regulations for 527 groups.
They had an opportunity to bring 527 groups under federal election law
by adopting a proposal put forward by Commissioners Michael Toner and
Scott Thomas to correct long-standing misinterpretations of the 1974
FECA, but instead they voted to do nothing.
The Commission had a clear obligation to act on this issue and it
failed.
Their inaction tacitly endorsed continued abuses of federal
election law and opened the flood gates for the raising and spending of
millions of soft money dollars to influence this year's federal
elections.
Commissioner Toner got it right when he said, ``Delaying a decision
is making a decision--namely, that we are not going to issue any
regulations for the 2004 elections. We are going to see a new `soft
money' arms race for the 2004 election.''
During our seven-year battle to pass BCRA, most Democrats supported
our law and many Republicans resisted reform--but, until last week, the
Democrats were operating outside the law and the Republicans were
trying to abide by it. Justified by last week's decision, Republican
groups will now use the same tactics in seeking to defeat Democratic
candidates for federal office.
We will see huge amounts of soft money flow back into the political
process, despite the intent of Congress in passing the Bipartisan
Campaign Reform Act (BCRA), President Bush's intent in signing it, and
the Supreme Court's intent in upholding the law.
To ensure free and fair elections, it is essential that federal
election law is fully implemented and fairly enforced. It is imperative
that the FECA execute the will of Congress with respect to all campaign
law, but they have consistently failed to do so.
The bottom line is, groups on both sides of the aisle primarily
seeking to influence federal elections should be regulated by federal
election law.
We need to overhaul the inefficient, ineffective FEC and replace it
with a reliable enforcement body, and we have introduced legislation to
do so.
The Federal Election Administration Act would replace the existing
six-member Commission with a three-member Federal Election
Administration. By improving the way the campaign law enforcement body
operates, this legislation will ensure federal election law is fairly
implemented and fully enforced.
The FEC is charged with enforcing election law, but has failed to
do so. It is time to rethink their fitness for the job.
______
Answers of Chairman Bradley A. Smith, Vice Chair Ellen L. Weintraub,
Commissioner Scott E. Thomas, and Commissioner Michael E. Toner to
Written Questions Submitted June 1, 2004
We are in receipt of your letter dated June 1, 2004, and appreciate
the opportunity to clarify further some of the issues that we discussed
during our oversight hearing before the House Committee on
Administration. We will address each of your questions in turn.
527 Fundraising by Federal Officeholders and Candidates
You have asked whether the FEC's regulations should be amended to
reflect statutory language that you believe indicates that federal
officeholders and candidates may solicit up to $20,000 from individuals
on behalf of 527s.
You correctly note that 2 U.S.C. Sec. 441i(e)(4)(B) provides that
officeholders and candidates may make explicit solicitations for
donations aggregating up to $20,000 per donor per year for funds to
carry out voter registration, voter identification, get-out-the-vote,
and generic campaign activity or for an entity whose principal purpose
is such activity. As you further note, FEC regulations at 11 C.F.R.
Sec. 300.52 contemplate such solicitations only where the funds are for
entities organized under 501(c) of the tax code. Although not
explicitly excluded by the regulation, entities organized under
Sec. 527 of the Internal Revenue Code are not included. Your concern is
that the Commission's regulations may misinterpret that statute.
Your question arises out of a discrepancy in the statutory language
between paragraphs (A) and (B) of Sec. 441i(e)(4). Paragraph (A),
permitting certain general solicitations, is specifically limited to
501(c) organizations, while paragraph (B), permitting certain specific
solicitations, is not. It can be argued, therefore, that the
Commission's regulation, in restricting the specific solicitation
provision to 501(c) organizations, is inconsistent with the plain
language of the statute.
Alternatively, the regulation can be seen as giving effect to
Congressional intent that the 501(c) restriction be read to encompass
both paragraphs. This intent is evidenced by floor statements during
the BCRA debates by Senator McCain, who said:
``Proposed new section 323(e)(4)(B) of the Federal Election
Campaign Act authorizes the only permissible solicitations by Federal
candidates or officeholders for donations to a 501(c) organization
whose principal purpose is to engage in get-out-the-vote and voter
registration activities described in new section 301(20)(A)(i)&(ii) of
the Federal Election Campaign Act. The new section also authorizes the
only permissible solicitations for a 501(c) organization that can be
made by Federal candidates or officeholders explicitly for funds to
carry out such activities.
``In these instances, a Federal candidate or officeholder may
solicit only individuals for donations and may not request donations in
an amount larger than $20,000 per year. Section 323(e)(4)(B) applies
only to 501(c) organizations. The section does not authorize any such
solicitations for other entities, and it does not authorize
solicitations for funds to be spent on so-called `issue ads.' \1\''
---------------------------------------------------------------------------
\1\ 147 Cong. Rec. S2140 (daily ed. Mar. 20, 2002) (Statement of
Sen. McCain) (emphasis added). See also id. (``Finally, the purpose of
section 323(e)(4) is to permit only individual candidates or
officeholders to assist, in limited ways, section 501(c) organizations.
This permission does not extend to an officeholder or candidate acting
on behalf of an entity--including a political party.'')
---------------------------------------------------------------------------
The apparent tension between the regulation and the statute is
addressed in the Commission's Explanation & Justification for the
regulation, which states that the Commission intended for the
regulation to be read to limit the described solicitations to 501(c)
organizations, citing the views of BCRA's sponsors and one other
commenter.\2\ Regardless of one's view as to whether the regulation
represents the best possible interpretation of the statute,
officeholders are put on notice that the Commission did construe both
paragraphs (A) and (B) of Sec. 441i(e)(4) as limited to solicitations
for 501(c) organizations.
---------------------------------------------------------------------------
\2\ ``BCRA's sponsors and the same public interest commenter also
pointed out the proposed 11 CFR 300.52(b)(2) . . . did not make clear
that the specific solicitations permitted for Federal election activity
or organizations principally engaged in such activities applies only to
501(c) organizations and not to other tax exempt organization, such as
527 organizations. The Commission agrees. Accordingly, the introductory
language in the final rule specifically states that the requirements
for solicitations in the rule apply to 501(c) organizations.'' Final
Rules on Prohibited and Excessive Contributions: Non-Federal Funds or
Soft Money, 67 Fed. Register 49081, 49109 (Jul. 29, 2002).
---------------------------------------------------------------------------
You also expressed concern that only 527s appear to fit the
description of an entity whose principal purpose is to conduct voter-
drive activities. However, a 501(c) would qualify as long as its voter-
drive activity were non-partisan.
Coordination
We have not seen a copy of the memorandum written by Larry Gold
which you reference as a predicate for your second question. We cannot
and do not draw any inferences as to the legality of any activities of
the ``Grassroots Democrats.''
As a general matter, our coordination regulations are set forth at
11 C.F.R. Sec. 109.20(a) et seq. These regulations set forth both
conduct and content standards that must be met for a communication to
be considered a ``coordinated'' communication. Assuming all other
criteria for finding illegal coordination are met, coordination is
generally defined, in pertinent part, as activity that is made ``in
cooperation, consultation, concert with, or at the request or
suggestions of a candidate, candidate's authorized committee, or their
agents, a political party committee, or its agents.'' More
specifically, 11 C.F.R. Sec. 109.21(e)(1)(ii) states that a
communication may be deemed to be coordinated it it ``is created,
produced, or distributed at the suggestion of a person paying for the
communication and the candidate, authorized committee, political party
committee, or agent of any of the foregoing, assents to the
suggestions.'' (Emphasis added.)
The Commission's investigation into coordinated activity have been
legally complex and highly fact intensive. Whether or not a candidate,
authorized committee, or political party, or agent of the foregoing,
had ``assented'' to a suggestion would have to be determined based on
specific facts.