[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
            HEARING ON THE REGULATION OF 527 ORGANIZATIONS

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




                                HEARING

                               before the

                   COMMITTEE ON HOUSE ADMINISTRATION
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 20, 2005

                               __________

      Printed for the use of the Committee on House Administration


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house



                 U.S. GOVERNMENT PRINTING OFFICE

21-160                 WASHINGTON : 2005
_________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government 
Printing  Office Internet: bookstore.gpo.gov  Phone: toll free 
(866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250 Mail:
Stop SSOP, Washington, DC 20402-0001

















                   COMMITTEE ON HOUSE ADMINISTRATION

                        BOB NEY, Ohio, Chairman
VERNON J. EHLERS, Michigan           JUANITA MILLENDER-McDONALD, 
JOHN L. MICA, Florida                    California
CANDICE S. MILLER, Michigan            Ranking Minority Member
JOHN T. DOOLITTLE, California        ROBERT A. BRADY, Pennsylvania
THOMAS M. REYNOLDS, New York         ZOE LOFGREN, California

                           Professional Staff

                     Paul Vinovich, Staff Director
                George Shevlin, Minority Staff Director




















                   REGULATION OF 527 ORGANIZATIONS

                              ----------                              


                       WEDNESDAY, APRIL 20, 2005

                          House of Representatives,
                         Committee on House Administration,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10 a.m., in Room 
1310, Longworth House Office Building, Hon. Robert W. Ney 
(chairman of the committee) presiding.
    Present: Representatives Ney, Ehlers, Doolittle, Reynolds, 
Miller, Millender-McDonald, Brady, and Lofgren.
    Staff present: Paul Vinovich, Staff Director; Chris 
Otillio, Professional Staff; Jason Spence, Professional Staff; 
George Shevlin, Minority Staff Director; and Thomas Hicks, 
Minority Professional Staff. 
    The Chairman. The committee will come to order.
    What we are going to do is begin with our opening 
statements, and that way we can get it out of the way, and when 
Mr. Shays and Mr. Pence come, we will be ready to go.
    The committee is meeting today to examine the role of the 
so-called 527 groups in the most recent election cycle, and 
take a closer look at legislative proposals introduced in this 
Congress that could impact these groups. I think the Senate 
postponed their hearing today. As I said yesterday in the 
media, I think the House has taken a little bit broader look at 
the issue, and that is the purpose of this hearing.
    Three years ago, Congress enacted the Bipartisan Campaign 
Reform Act, BCRA, which the President signed into law. I didn't 
support BCRA, and I along with my friend, Congressman Wynn, had 
an alternative proposal and I fought hard to defeat BCRA.
    I opposed it because its sweeping provisions infringed upon 
fundamental first amendment freedoms of speech, expression, and 
association. Moreover, I believed that BCRA would do serious 
damage to our democratic process by shifting power and 
influence away from the political parties and directing it 
towards unaccountable, ideologically driven outside groups.
    Well, guess what? Unfortunately, I was unsuccessful in my 
efforts to stop it.
    In the McConnell versus FEC case, the Supreme Court upheld 
the constitutionality of most of BCRA's provisions. However, 
although the constitutional questions regarding BCRA have been 
largely resolved, at least for the moment, the question of 
whether BCRA is good policy is still open for discussion.
    To accurately judge the effectiveness of BCRA, we have to 
first examine the promised benefits of the new campaign finance 
legislation and compare that against the actual results. Now, I 
don't intend to sit here and go through the entire bill line by 
line. I would, however, like to tell you that I am not 
proposing that we repeal BCRA. But I think we do have to sift 
out--and that is what the witnesses are here today for their 
proposals; one of the pieces of legislation addresses the 527 
issue.
    Proponents of BCRA predicted that soft money would be 
purged from the Federal electoral process and the overall 
impact of money on politics would be lessened. However, a 
cursory glance reveals that soft money in politics continues to 
thrive in the aftermath of BCRA's passage. According to 
Political Money Line, Federal 527 groups expended nearly $600 
million during the 2004 election cycle. Organizations whose 
primary purpose was to function as shadow political party 
committees--and we know that so well in the State of Ohio--
operated as such with the apparent stamp of approval of the 
relevant Federal officeholders and party officials, thus, they 
were able to solicit and spend soft money in support of the 
party's candidates and agenda. This has been done on both sides 
of the aisle, whether it is Swift Boats, or Soros, or whatever 
groups are out there.
    This development should not have come as a surprise. As I 
stated on the House floor during the debate on this law, BCRA 
does not ban soft money under any definition or under any 
stretch of the imagination.
    Those who allege that the continuing presence of soft money 
in the Federal election process is the fault of the FEC are 
incorrect, for it is not only the opponents of BCRA who pointed 
out the law would not eliminate soft money, but merely redirect 
it to less accountable channels. Reformers themselves 
acknowledged that soft money would still play a role through 
its use by independent groups.
    For instance, one of the Members of the Senate, who was the 
author of a prominent section of BCRA, stated flatly during the 
Senate debate that BCRA ``will not prohibit groups like the 
National Right to Life or the Sierra Club''--not to just pick 
on those two groups, but to mention them--``from disseminating 
electioneering communications. It will not prohibit such groups 
from accepting corporate or labor funds. It will not require 
such groups to create a PAC or other separate entity.''
    BCRA supporters also asserted that the new law would result 
in fewer negative advertisements being broadcast during the 
course of campaigns, and thus, usher in a new era of more 
honest, less negative, politics. Well, you should have been in 
the State of Ohio for the entire year as the soft money ads 
were blanketing the TVs.
    But if anything, BCRA's passage has actually led to an 
increase in negative scorched-earth politicking, as we have 
never seen in the history of our country. The reason for this 
is twofold: Money is being diverted away from the political 
parties, which as broad-based organizations must moderate their 
messages to appeal to the largest audiences possible for their 
candidates and for their ideology, and it is instead being 
given to single-issue ideological groups whose stances are 
often dogmatic, whose communication strategies are often hard-
edged, and who are not accountable to the voters.
    It is now almost a universal political tactic for 
candidates and groups to file complaints against their 
opponents, alleging violations of a vague, complex, and 
difficult-to-understand campaign finance law. Thus, these laws 
encourage political actors to not only attack the policies and 
positions of their opponents, but to tar them as lawbreakers as 
well. So much for an age of more honest debate and fewer 
negative attacks and soft money out of the system.
    The reformers also argue that upon BCRA's passage, public 
cynicism about the political process would abate because 
elections would now be free from the taint of soft money and 
the appearance of improper influence. Actually, I think the 
American people have become more cynical. They are told that a 
law will rid the political system of soft money, see that it 
does not, and then have to listen to the advocates of the law 
crow about what a success it is.
    Finally, we were told that BCRA would enable the average 
person to have a greater influence on the political process. I 
hope we can correct some of the situations with the 527s, 
because I think what you are seeing--and we do it on both sides 
of the aisle--is a few billionaires in this country having a 
political playground at the expense of the average union person 
whose money is now dirty soft money, or the average person who 
works in a corporation. I think that is sad for the United 
States.
    BCRA's complexities and ambiguities combined with its harsh 
penalties have increasingly made the Federal political process 
the exclusive province of the rich, the sophisticated, and the 
well-connected. I recommend to anybody thinking about entering 
into Federal politics today to challenge an incumbent Member of 
Congress. Hire a lawyer, an accountant, and a bail bondsman.
    BCRA was supposed to enhance the voice of the average 
citizen, but instead it has increasingly frozen out the average 
citizen from the political process.
    It is important that we be honest about the consequences, 
and the fact is that we are 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 process.
    We are fortunate to have with us today, four distinguished 
colleagues of ours who will discuss their proposed legislative 
solutions to the problems we currently face. I intend to keep 
an open mind about the laws. Again, I want to say from the 
outset that I have no intentions of repealing or attempting to 
repeal this law. I think we are here today to try to address 
some of the problems that have occurred.
    With that, I will yield to our ranking member.
    Ms. Millender-McDonald. Thank you, Mr. Chairman, and good 
morning to our colleagues. I want to thank the Chairman for 
holding this oversight hearing to consider proposals to impact 
the activities and roles of 527 organizations.
    A little bit of historical perspective: 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. Under section 
527, all political organizations are tax-exempt for purposes of 
Federal tax law. Section 527 was added to the Tax Code in 1975; 
thus, 527s have been legally constituted operating entities for 
nearly 30 years.
    Congress has addressed 527s twice in the last 5 years. In 
2000 we passed legislation requiring that all 527s that expect 
to have gross receipts of over $25,000 during a taxable year 
register with the Internal Revenue Service within 24 hours of 
their formation if 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 the public disclosure and 
review requirements of the FEC as well.
    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 to be 
publicly disclosed under State law. Thus, most State and local 
political organizations are exempt from registering, reporting 
their contributions and expenditures, and filing disclosure 
forms with the IRS.
    The Supreme Court waded in on the issue in McConnell versus 
Federal Elections Commission. The Court clearly stated that 
placing limits on the 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.
    BCRA imposes numerous restrictions on the fund-raising 
abilities of political parties, of which the soft money ban is 
only the most prominent. Interest groups, however, remain free 
to raise soft money to fund voter registration, GOTV 
activities, mailers and broadcast advertising other than 
electioneering communications.
    In January the Federal Election Commission implemented new 
rules requiring more 527s to register with the FEC; 527 groups, 
whose only purpose is to support or oppose a Federal candidate, 
may only do so with hard money. Citizens who give to the hard-
money accounts of these 527 groups will be under the same 
contribution limits as if they were giving to the political 
committees of the Members of Congress.
    527 groups will also not be able to finance their entire 
operation using soft money. They will now be required to use a 
mix of hard- and soft-money contributions of at least 50 
percent of expenses of their activities paid with hard dollars 
subject to Federal limits.
    We are all too familiar with 527 ads run by the Swift Boat 
Veterans and others on both sides of the political spectrum 
that aired during the 2004 Presidential election. While I 
disagreed with the content of the Swift Boat ads, I agree that 
private citizens have a right to say that. Many 527s don't run 
television ads. Their activities include publishing legislative 
report cards on the voting records of Members of Congress and 
conducting voter registration drives.
    Because of the efforts of America Coming Together, Voices 
For Working Americans, and other similar groups, it has been 
reported that the 2004 elections saw the greatest increase in 
voter participation since 1968. Congress should encourage these 
citizen-based activities of informing the public and of getting 
more citizens involved in our democracy. While I may disagree 
with what someone has said or done politically, I respect their 
right to do so and to say it.
    I voted for the Bipartisan Campaign Reform Act of 2002 to 
sever the connection between Federal officeholders and raising 
of soft money. BCRA was necessary to cut the perceived 
corrupting link between officeholders, the formation and 
adoption of Federal policies and nonFederal money, so-called 
soft money.
    After BCRA was challenged, the Supreme Court upheld 99 
percent of the law, clearly demonstrating that it is 
constitutionally permissible to regulate or limit the money 
which Federal officeholders, Federal candidates, and their 
national political parties use for political speech. The 
Supreme Court recognized the government interest in stemming 
the corrupting influence such money can have on Federal policy, 
even though it imposes on free speech.
    Mr. Chairman, you have stated that the Help America Vote 
Act of 2002 should not be amended but should be given a chance 
to work. BCRA was signed into law the same year and has only 
been given one election cycle to work. BCRA also should be 
given the same opportunity or chance to work.
    Congress may choose to impose additional regulations on 
527s if it can clearly demonstrate that the money raised and 
expended by these groups has the same potential corrosive 
influence on Federal policymakers. Since filing for tax-exempt 
status is purely voluntary, some of these groups may decide to 
morph into a different, less accountable form. This point was 
brought to light in the statement of FEC Commissioner Weintraub 
before the committee last spring, predicting that if the FEC 
adopted the proposed changes to the way 527 organizations are 
regulated, some entities spending funds and disclosing that 
spending through a 527 organization would, I believe, 
reorganize and continue substantially the same activities 
through 501(c)(4) or (6) organizations, which do not have the 
same disclosure obligations.
    That was testimony before the Committee on House 
Administration, May 20, 2004.
    I would like to include for the record a letter I signed 
with over 125 of my colleagues to the FEC last year, stating 
that when we voted for BCRA, we voted for more, not less, 
political involvement by ordinary citizens and the associations 
they form.
    [The information follows:]

                                                     April 7, 2004.
Commissioners,
Federal Election Commission,
Washington, DC,

Re NPRM regarding political committee status.
    Dear Commissioners: We are writing to express our concerns about 
the pending Notice of Proposed Rulemaking on ``political committee 
status.''
    We take a particular interest in this regulatory initiative because 
it seeks to raise and address ``soft money'' issues very different from 
those that Congress resolved in the Bipartisan Campaign Reform Act of 
2002. Yet while charting this different course, the proposed rules 
claim as their authority both BCRA and the Supreme Court's decision in 
McConnell v. FEC upholding the new law. We are troubled by the 
suggestion that these proposed rules follow the path we laid out, 
because they would lead to results that many of us voting for the new 
law did not consider or approve.
    We support BCRA because we believe that the link between 
unregulated contributions and federal officeholders, candidates and 
their parties should be broken. We believe that the statute achieved 
this goal, striking a careful balance between needed additional 
regulation of campaign finance, on the one hand, and the protection of 
speech and associational rights, on the other. And we believe that the 
proposed rules severely undermine that balance, with potentially severe 
consequences for vital speech on the central issues of the day.
    Specifically, the proposed rules before the Commission would expand 
the reach of BCRA's limitations to independent organizations in a 
manner wholly unsupported by BCRA or the record of our deliberations on 
the new law. For example, Congress crafted a new term for certain 
election-influencing activities by political parties--so-called 
``Federal election activities''--as part of the BCRA approach to 
limiting party soft money. The proposed rules would appropriate this 
concept of ``Federal election activities'' for the very different 
purpose of regulating ``issues'' speech and other political activity of 
501(c) and other organizations. Congress did not choose to vastly 
extend in this way the concept of ``Federal election activities.''
    More generally, the rulemaking is concerned with new restrictions 
on ``527'' organizations, primarily through the adoption of new 
definitions of an ``expenditure.'' Congress, of course, did not amend 
in BCRA the definition of ``expenditure'' or, for that matter, the 
definition of ``political committee.'' Moreover, while BCRA reflects 
Congress's full awareness of the nature and activities of ``527s'', it 
did not consider comprehensive restrictions on these organizations like 
those in the proposed rules.
    There has been absolutely no case made to Congress, or 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.
    These and other issues go to the heart of how the federal campaign 
finance laws may affect for the worse a host of organizations engaged 
in speech on controversial political issues. The Congress took care to 
act with caution in this area; the Commission should do the same. As 
the Supreme Court noted in McConnell v. FEC:
    Congress's ``careful legislative adjustment of the federal election 
laws, in a `cautious advance, step by step,' to account for the 
particular legal and economic attributes . . . warrants considerable 
deference.''
    124 S. Ct. 619, 645 (2003) (citing FEC v. National Right to Work 
Comm., 459 U.S. 197, 209 (1982)). This is a fair statement of 
Congress's intent to improve the enforcement of existing law, not to 
promote an aggressive expansion of the law in the near-term.
    The FEC should also take into account the dangers of reviewing and 
resolving these issues quickly, on the eve of presidential and 
congressional elections and in a charged partisan environment. These 
are not conditions best suited to the task of thoughtful and credible 
rulemaking on critical issues.
    The dangers associated with rushed judgment in a partisan crossfire 
became apparent in the recent weeks, when the FEC issued its Advisory 
Opinion on ``allocation'' issues to the ``ABC'' Committee. In that 
Opinion, the Commission made changes in existing law, in the middle of 
an election cycle, in response to a request from a sham committee 
formed solely to advance partisan objectives. The Commission should not 
rush more new rules with major impact, in this cycle, such as those now 
proposed.
    Congress, when enacting BCRA, elected to defer the effective date 
to the next cycle. Even in establishing the day after the last general 
election, November 2, 2002 as the effective date, Congress fashioned, 
with great care, transitional rules to allow time for an appropriate 
and manageable change from one set of legal rules to another. The 
Commission would turn this approach on its head by promulgating 
significant and controversial new rules--rules that Congress did not 
consider or enact in its own ``soft money'' reform--in the thick of 
this election year.
    The FEC should take the time necessary to assure that any changes 
it proposes are carefully considered and crafted, with minimum 
disruptive impact on ongoing activities by political committees, 
organizations and candidates.
    For this reason, we ask that the Commission reconsider the nature 
and timing of the current rulemaking initiative.
            Sincerely,
    [In alphabetical order]
                    Abercrombie, Ackerman, Alexander, Allen, Andrews, 
                            Baca, Baldwin, Ballance, Becerra, Bell, 
                            Berkley, Berman, Berry, Bishop, T., 
                            Blumenauer, Boswell, Brady, Brown, C., 
                            Brown, S., Capps, Capuano, Cardin, Carson, 
                            J. Conyers, Costello, Crowley, Cummings, 
                            Davis, D., Davis, L., Davis, S., DeFazio, 
                            DeGette, Delahunt, Deutsch, Dicks, Dingell, 
                            Dooley, Doyle, and Emanuel.
                    Engel, Eshoo, Etheridge, Evans, Fattah, Filner, 
                            Frost, Gephardt, Grijalva, Hinchey, 
                            Hinojosa, Holt, Honda, Hoyer, Israel, 
                            Jackson-Lee, Johnson, Jones, Kanjorski, 
                            Kennedy, Kilpatrick, Kucinich, Lampson, 
                            Langevin, Lantos, Larsen, Larson, Lee, 
                            Lewis, Lofgren, Lowey, Lynch, Majette, 
                            Markey, Matsui, McCarthy, McCollum, 
                            McDermott, McGovern, McNulty, Meek, Meeks, 
                            Menendez, Michaud, and Millender-McDonald.
                    Miller, Miller, Moran, Nadler, Napolitano, Olver, 
                            Ortiz, Owens, Pallone, Pascrell, Pastor, 
                            Pelosi, Pomeroy, Price, Rangel, Rodriguez, 
                            Ross, Rothman, Roybal-Allard, Rush, Ryan, 
                            Sanchez, Linda, Sanders, Sandlin, 
                            Schakowsky, Serrano, Slaughter, Solis, 
                            Stark, Strickland, Tauscher, Thompson, M., 
                            Tierney, Udall, M., Velazquez, Visclosky, 
                            Waters, Watson, Watt, Waxman, Weiner, 
                            Wexler, and Woolsey.

    Ms. Millender-McDonald. Lastly, I have requested letters 
from the Congressional Latino Caucus, the Congressional Asian 
Caucus, and the Congressional Black Caucus. All of these groups 
illustrate how these organizations increased voting turnout in 
2004.
    Mr. Chairman, I look forward to including these for the 
record and look forward to my colleagues' testimony this 
morning.
    Thank you so much for this hearing.
    The Chairman. I thank the gentlewoman.
    [The statement of Ms. Millender-McDonald follows:]



    
    The Chairman. Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. Just a few brief 
comments.
    First of all, when we went through the passage of the 
current law on campaign finance, the Shays-Meehan law, I did 
not vote for it, even though I was in great sympathy with the 
aims of the authors of that bill. I did not vote for it, for a 
couple of reasons, even though I oppose the use of soft money 
and voted for a substitute that totally banned all soft money.
    What concerned me was removing the parties, to a certain 
extent, from the political process. And I knew, I absolutely 
knew, that some alternative would spring up which would be less 
regulated than what we had before, and that is precisely what 
happened.
    Now, I am well aware that there have been some activities 
of the FEC to regulate, but I think it is an abomination that 
the parties, particularly the minority party here in the House, 
immediately jumped on 527s as an alternative and totally 
defeated the intent of the Shays-Meehan act by their behavior 
with those units.
    I sometimes sympathize with Mr. Doolittle's constant 
statement in this committee that let's just require everything 
to be reported; anyone can contribute any amount they wish, but 
all has to be reported.
    I think that goes a bit far, but we have to have the 
controls. And what happened with the 527s the last 2 years I 
think was an abomination of the political process. Regardless 
of their good intent, regardless of their good efforts, 
regardless of their voter turnout, at the very least we want to 
make sure that all contributions given are reported accurately, 
that there are enforcement mechanisms to make certain that the 
laws and rules that we adopt are enforced and are kept in 
place.
    With that, I will yield back. Thank you.
    The Chairman. The gentlewoman from California.
    Ms. Lofgren. Mr. Chairman, thank you. I would ask unanimous 
consent that my statement be made part of the record.
    The Chairman. Without objection.
    Ms. Lofgren. And I would just add a couple things. I did 
vote for Shays-Meehan, and I think in many respects it worked 
as hoped. We had the biggest turnout ever, I think, in the 
elections last year.
    So the questions I have looking at these bills is what 
impact would they have to encourage voters to go to the polls? 
Will they up or depress turnout? Are they allowing average 
citizens to organize on the grassroots level and speak out on 
issues? Will they discourage nonpartisan activities like voter 
registration drives and get-out-the-vote efforts and will they 
level the playing field?
    I will say I have very strong constitutional law questions 
about the efforts to rein in the so-called 527s. Clearly we are 
not required to give a tax break. That is not a constitutional 
issue. But all of the reasoning of the Court really relates to 
regulation of politicians to avoid corruption in the political 
system. I don't think that that line of thinking really extends 
to citizens who are organizing without the request or behest of 
elected officials or candidates. So I also will be looking very 
carefully at that. I have very strong doubts that we actually 
can legislate in that arena.
    I yield back, and I thank the gentleman for recognizing me.
    [The information follows:]

                 Statement of Congresswoman Zoe Lofgren

    Chairman Ney, Ranking Member Millender-McDonald, thank you for 
holding this important hearing today.
    Thank you also to my colleagues, Congressmen Wynn, Meehan, Shays 
and Pence for testifying before House Administration today. I have 
reviewed your testimony and I look forward to hearing from you in 
person today. I also want to ask for your forgiveness for having to 
step out of this hearing today. The Homeland Security Committee is 
considering a Cybersecurity bill this morning that I wrote with 
Congressman Mac Thornberry, so I will need to attend that hearing as 
well.
    A little over three years ago, Congress passed and the President 
signed the Bipartisan Campaign Reform Act of 2002 (BCRA). This 
enactment of this bill was the culmination of years of work by many 
Members of Congress I and in particular Congressmen Shays and Meehan.
    As you may recall, it took some time to get this bill considered in 
the House. It only came to the floor after Congressmen Shays and Meehan 
filed a discharge petition in support of the bill. I was the 22nd 
Member to sign the petition. Of course, this bill ultimately passed by 
a vote of 240-189 on February 13, 2002.
    I strongly supported this reform effort and was proud to vote in 
support of this legislation along with 198 of my Democratic colleagues. 
I will note that my friends Congresswoman Millender-McDonald and 
Congressman Brady also voted for this bill.
    Shays-Meehan had a clear purpose: it took members of Congress out 
of the business of asking lobbyists and special interest for large 
unregulated donations. There was something unseemly about a Senator or 
Congressman asking a donor for a $100,000, or $250,000 or even a 
million dollars--and BCRA outlawed that practice.
    This legislation went into effect on November 6, 2002, had a major 
effect on the way that the 2004 elections were conducted. Both 
political parties were able to wean themselves off of soft money and 
were successful in raising funds through many small dollar 
contributions.
    According to the Committee for the Study of the American 
Electorate, the 2004 elections say the greatest increase in voter 
participation since 1968. Voter turnout was over 60%. Turnout last year 
rose by 6.4 percentage points over 2000, the biggest election-to-
election increase since 1952.
    In 2000, 105 million people turned out to vote. In 2004, 
approximately 122.3 million voted.
    Voters were motivated like never before to get involved and vote. 
This is a good thing for our democracy. This Committee and this 
Congress must not do anything that would discourage these trends.
    Of course, I wish that more of these voters would have voted for 
Democratic candidates!
    I have only begun to review the legislation today and I plan to 
analyze it to make sure it does nothing to discourage voter education 
and turnout efforts. I think all of us can agree that we want to see 
even more voter interest in the 2006 midterms and the 2008 Presidential 
elections.
    Some of my questions are as follows:
          Will these bills encourage voters to go to the polls or will 
        they depress turnout?
          Will they allow average citizens to organize on the 
        grassroots level and speak out on issues?
          Will they discourage non-partisan activities like voter 
        registration drives and get out the vote efforts?
          In the tradition of the original Shays/Meehan legislation, 
        will these bills discourage large donations directly to 
        candidates and political parties, thus reducing the legitimate 
        concerns by the public about special access for large, super-
        donors?
          Will these bills level the playing field so corporate, union 
        and non-profit groups can compete fairly in elections?
          Will donations continue to be transparent through reporting 
        requirements?
    I am all for campaign reform as long as it is true and authentic 
reform. I don't want to see a bill rammed through Congress that is 
reform in name only. In addition, this reform must not undermine the 
progress that has been made under BCRA.
    As we begin the process of looking at these proposals, let's make 
sure that this reform effort does nothing to discourage voters and 
takes positive steps to improve our democracy.

    The Chairman. The gentleman from New York.
    Mr. Reynolds. Thank you, Mr. Chairman.
    I look forward hearing the testimony in this hearing today. 
As you well know, I did not support Shays-Meehan, but it is the 
law of the land, and we have to see what has transpired that 
works well and what doesn't. I have heard all sorts of 
different things: Whether 527s were meant to be included; they 
weren't meant to be included. I think we have a number of 
different aspects or examples of where maybe some of that has 
gone awry, and this is an important hearing for us to begin to 
take a good self-examination of a law that is on the books and 
has been sustained by the courts, as to where we continue in 
the direction of campaign finance and any of its potential 
reforms.
    Thank you.
    The Chairman. The gentleman from Pennsylvania, do you have 
a statement?
    Mr. Brady. No, Mr. Chairman. 
    The gentlewoman from Michigan.
    Mrs. Miller. Thank you, Mr. Chairman. I want to thank you 
for holding this very, very important hearing on this subject.
    During the past election cycle, it was certainly clear to 
everyone that 527 organizations had a tremendous and I think an 
unforeseen impact on the 2004 elections, and it is important 
that this committee does examine these issues.
    In 2004, politically active individuals and organizations 
found a new avenue to influence our election process. Those who 
previously would have donated funds to political parties, which 
operate under strict disclosure requirements, are now funneling 
money to largely unregulated, unsupervised 527 groups. No clear 
rules govern these operations. It gives 527s a tremendous 
latitude in the political process.
    So the question becomes, who exactly is supporting these 
527s? And the answer is, no one really knows. Certainly one of 
the possibilities is that foreign citizens are actually 
supporting these 527s. For example, at the end of 2003 it 
became known that retired U.S. Air Force General Wesley Clark's 
campaign website was offering a link to Canada for Clark. 
Canada for Clark in turn advised Canadians that ``nonAmericans 
can't, by law, give money to any particular candidate's 
campaign, but we can support prodemocracy progressive 
organizations like MoveOn.org which do their best to spread the 
ugly truth about Bush and to publicize the Democratic message. 
Click here to donate to MoveOn.org.''
    According to that same report, Clark's official campaign 
website was the top traffic referrer to CanadaforClark.com. 
After this was exposed, MoveOn.org announced they would not 
accept any more overseas contributions. However, they refused 
to say how much money they had already collected abroad or if 
they would return any of the funds that they had received; and, 
of course, because 527s are not required to disclose 
contribution to the FEC, we do not know yet how much of 
MoveOn.Org's receipts might have come from foreign citizens.
    To a certain extent, 527 organizations themselves have 
taken the place of wealthy donors in the election process. For 
example, according to the minority leader's spokesperson, in 
recent published reports, the distinguished minority leader or 
her staff meets with representatives of MoveOn.org on a very 
regular basis. In an e-mail that MoveOn.org sent out to members 
earlier this year, they said ``Now it is our party. We bought 
it, we own it, we are going to take it back.''
    What it comes down to is that no matter how many laws 
Congress passes or how many regulations the Federal Elections 
Commission hands down, people will find ways to contribute to 
candidates that they support. And when limits were placed on 
donations to individual candidates, people began directing 
funds to State and national party organizations. And when the 
government banned those contributions, the money began to flow 
to the 527s.
    In 2004, the best I could tell--I tried to do a little 
research on this--federally focused 527s spent over $550 
million. By contrast, George W. Bush and John Kerry combined to 
spend $655 million on their own campaigns. The numbers are 
strikingly similar. The only difference is the Presidential 
candidates had to disclose every contributor and expenditure to 
the FEC, and, the 527s had to do neither. Both political 
parties enjoyed the largesse of the 527s, and our election 
process and all Americans suffered as a result.
    This certainly brings us to a crossroads. We can either 
force all groups that operate for political purposes in an 
election cycle to play by the same set of rules. Or we can 
remove the contribution limits and allow individuals to 
contribute their funds however they choose, to whomever they 
choose, but require full disclosure and let the voters decide 
what is appropriate. Whatever route we do choose to go, I think 
we must insist upon having strict disclosure requirements for 
any and all of these political organizations.
    As a former chief elections officer from the great State of 
Michigan, I have been an advocate of many, many years of full 
transparency in our electoral process. Those who wish to 
exercise their free speech by contributing to a particular 
cause must also recognize that their speech will be heard by 
anyone who wants to listen. People who desire to find out who 
is paying for the cost of these campaign activities should be 
able to readily access that information.
    The alternative is what we have now: groups who are 
operating literally under the cover of shadows in hopes of 
hoodwinking voters to support their candidate or their cause. I 
think if we fail to act now, the ugliness that we saw in 2004 
will only intensify in 2006 and elections beyond. We must 
protect our democratic electoral process and prevent the 
distortion of our process by individuals who support these 527s 
and try to set the political agenda for our Nation.
    Thank you, Mr. Chairman. I look forward to hearing from our 
colleagues.
    The Chairman. I thank all the members.
    I mentioned before we have four distinguished colleagues 
with us today, Members of the House, to discuss their proposals 
and dealing with the issue. We have Congressman Christopher 
Shays of Connecticut, Marty Meehan of Massachusetts, 
Congressman Mike Pence of Indiana, and Congressman Albert Wynn 
of Maryland.
    We will start with Mr. Shays.
    Mr. Shays. Mr. Chairman, could I defer to my colleague Mr. 
Meehan?
    The Chairman. We will start with Mr. Meehan.

  STATEMENT OF THE HON. MARTIN T. MEEHAN, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF MASSACHUSETTS

    Mr. Meehan. Thank you, Mr. Chairman, Ranking Member 
Millender-McDonald, and members of the committee. Thank you for 
the opportunity to speak with you today about H.R. 513, the 
``527 Reform Act.'' I will speak briefly and then ask the 
committee, Mr. Chairman, with your permission, to insert my 
full testimony into the record.
    Over the last few years, we have made enormous strides in 
reduce the corrupting influence of soft money. I am here today 
to emphasize the importance of continuing to move forward, not 
backward. The Bipartisan Campaign Reform Act, or BCRA, written 
by Congressman Shays and me, and, in the Senate, Senators 
Feingold and McCain, signed into law by President Bush in March 
of 2002, is working. The law has succeeded in its central 
purpose, severing the link between Federal candidates, Federal 
officials, and unlimited soft money contributions.
    Despite some misperceptions, BCRA's intent was never to 
eliminate money from politics. The intent was to reduce the 
disproportionate corrupting influence of six- and seven-figure 
donations to Federal campaigns and to give ordinary citizens a 
greater say in the political process. BCRA has done exactly 
that.
    This increased citizen involvement in the 2004 cycle was 
fueled by small dollar, Internet, and individual contributions; 
and that is a positive trend, a trend enabled by the end of the 
soft money system.
    Unfortunately, during an election cycle when grassroots 
activities flourished, a small set of organizations were 
allowed to play by a different set of rules. 527 groups became 
the preferred vehicle for large donors to steer enormous 
amounts of soft money into Federal elections. 527s, by their 
definition, have the primary purpose of influencing Federal 
elections, and therefore are required to register with the 
Federal Elections Commission. Yet the FEC has refused to do its 
job and regulate them.
    The 527 loophole was not created by BCRA in 2002. It was 
created by the Federal Election Commission years ago through 
its failure to enforce the Federal Election Campaign Act of 
1974. With the FEC looking the other way in the 2004 cycle, 
record amounts of soft money was steered into 527s, a total of 
more than $400 million; $146 million, $146 million in soft 
money, came from just 25 wealthy individuals. Ten donors gave 
at least $4 million each, and two donors gave more than $20 
million. The Swift Boat slander campaign against Senator Kerry 
was financed by two wealthy Texans who contributed $6 million 
each.
    The danger in allowing 527s to continue to evade the law is 
the risk of bringing back the soft money system, where 
corporations, unions, and wealthy individuals could buy 
influence with million-dollar checks. There is no common sense 
or legal basis to allow 527s to ignore the rules that apply to 
every other political committee.
    There is a simple solution to the question of 527s that 
ensures fairness and prevents abuse of the law: Make them play 
by the same rules that everyone else has to.
    In September, Congressman Shays and I filed suit against 
the Federal Elections Commission for failing to enforce the 
law. But it is essential that we resolve this problem in a 
timely manner. That is why we have introduced bipartisan, 
bicameral legislation that has a simple, straightforward 
purpose. The 527 Reform Act clarifies and reaffirms that 527 
groups spending money to influence Federal elections must 
comply with the same laws that apply to every other political 
committee, including the soft money ban.
    I would like to address some of the things that have been 
said about the 527 Reform Act. I am confident that when members 
look carefully at the issues, it will become clear that many of 
the concerns are groundless.
    First, the 527 Reform Act is not intended to shut down 527 
organizations; 527s have a constitutional right to organize and 
participate in elections. It simply shuts down the 527 soft 
money loophole.
    Second, the bill explicitly exempts State and local 
candidates and their campaign committees, as well as any 527 
organization involved exclusively in State or local elections.
    Third, the 527 Reform Act simply does not apply to 
501(c)(3)or 501(c)(4) organizations. We have made it explicit 
in the bill, and I will make it clear again today, we have no 
intentions to propose changing rules that apply to 501(c) 
organizations.
    I have not heard a substantive argument that the 527 Reform 
Act will have an impact on 501(c)(3)s, but if our bill can be 
made even clearer on that issue, Mr. Chairman, or any other 
potential concerns relative to 501(c)s, we would love to work 
with you to try to tighten the language.
    In closing, it is essential that legislation to close the 
527 loophole not be used as a vehicle to backtrack on BCRA or 
undermine any existing campaign finance laws. We must not usher 
the return of the soft money system only 3 years after Congress 
put an end to it.
    Again, Mr. Chairman, I thank you for this opportunity and 
look forward to working with you on this legislation.
    The Chairman. I thank the gentleman.
    [The statement of Mr. Meehan follows:]



    
    The Chairman. Mr. Shays.

 STATEMENT OF THE HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CONNECTICUT

    Mr. Shays. Thank you, Mr. Chairman. And to members of the 
committee, thank you for your concern about this very important 
issue. I recognize this is both personal and also, obviously, 
we care deeply about our country and we want a system that 
works. So, congratulations for having this hearing.
    I want to be as clear as I can be that the campaign finance 
law that passed has worked tremendously well, and I don't think 
you can really dispute that. What it did is it enforced the 
1907 law which banned the use of corporate treasury money. No 
corporate treasury money came into the process, to the 
political parties, or to individuals.
    It enforced the 1947 Taft-Hartley Act that banned union 
dues money, and union dues money didn't come into the political 
process through the mechanism of our law.
    And it enforced the 1974 law that said you can't have 
unlimited contributions by individuals to candidates.
    It reinforced a very important element that Marty has 
mentioned, and that is we can't ask for corporate money, union 
dues money, ``we'' being Members of Congress, union dues money 
or unlimited funds. It achieved that objective.
    We were told by the critics that we would hobble the 
political parties, that they would not be able to do what they 
needed to do, and that we would be seeing no money coming into 
this process. That flies in the face of the facts.
    The facts are that about $1 billion was raised in 2000 and 
in the 2004 race, and that was a combination of hard and soft 
money, about $1 billion; $1.2 billion was raised just in hard 
money. In other words, no corporate money, no union dues money 
and unlimited funds. So we can just put that one way out the 
window. It just is a false charge that never happened.
    What we also said was that this bill would force the 
parties to go in a different direction. We used to reach out to 
many people, and what we started to do is we started to just go 
for the big and most powerful, wealthy, corporation, unions and 
individuals, and we stopped reaching out, we stopped building a 
base.
    But we went from hundreds of thousands of supporters to 
millions and millions and millions of supporters. I believe the 
Democratic list is almost 100 million. It is astonishing what 
has happened. So we have involved more people.
    The one problem is when we gave this law to the FEC, after 
we won in court, after it was declared constitutional, the ban 
on corporate money, the ban on union dues money, the ban on 
unlimited sums, the ban on having Members seek this money after 
it was declared constitutional, the Federal Elections 
Commission writes regulations that basically gut it.
    Then what they do is they say, well, we are going to split 
the difference between opponents and proponents. That was done 
when we passed the law. Their job was to implement the law. The 
Court reinforced the 1974 law that said if you are involved in 
a campaign activity, you come under the campaign law.
    But what did the Federal Elections Commission do? They 
decided they would allow 527s to operate outside the law. So in 
came the corporate money, in came the union dues money, in came 
the unlimited sums.
    I would just say to you, Mr. Ehlers, you can say that there 
will be a loophole, but it really hurts when the Commission 
that is supposed to enforce the law doesn't enforce the law. 
You would not have had that loophole if they simply did one 
thing. You are under the law because you are trying to 
influence Federal elections.
    Now, I congratulate Democrats for being the primary 
supporters of campaign finance reform and a whole group of 
minority Republicans who supported it. But I want to say, in 
reverse, the irony is Republicans agreed to abide by the law. 
They didn't move forward with the 527s, they didn't promote the 
527s. There were four or five that came into play. And after 
hundreds of millions were spent, we saw one group that stepped 
in, the Swift Boats, and all of a sudden we find that this is a 
problem. That speaks volumes, and I mean no disrespect. 
Congratulate Democrats for passing this bill, congratulate 
Republicans once it passed for trying to live by it.
    The bottom line is this. The bottom line is this: All you 
need to do is deal with the 527s. Out goes the corporate money, 
the union dues money, and the unregulated money, and in comes 
527s that will do what the political parties have to do: reach 
out to more people.
    The NRA, for example, has 4 million members. If it got $10 
from each member through its political action committee, it 
would have $40 million to spend. We are not tripping, we are 
not preventing 527s from doing what they want to do.
    I will say this, and I am impressed by this. MoveOn.org is 
going after me left and right. I have already had six calls 
telling me to calm myself, to stop terrible things I want to 
do. But they are using hard money. I have no complaint with 
that. I have complaints with what they say, but I have no 
complaints with their right to say it.
    So in the end, do understand this in conclusion: The 
presentation by Pence and Wynn, both extraordinarily capable 
and wonderful colleagues, they totally ignore the 527s. So you 
will still have the corporate money, the union dues money, and 
the unlimited fund. It is still going to be there, because they 
totally and completely ignore it.
    What they then do is they just say, well, the political 
parties can raise more money. They still have the regulations, 
they still have the law in place, they lift the caps. The 
political parties would be able to raise about $1.1 million; 
and the Senatorial candidates and the House candidates, you 
would see the local candidates would be able to raise $2 
million; and one Member of Congress could raise that $3 
million. They would be able to go right back into the system.
    So I view their proposal, frankly, as continuing with their 
view that you shouldn't have regulation, you should let the 
marketplace do its thing. But that is the debate we had when we 
passed the law, and they really would be undoing the law. I 
think what they should be doing is focusing on how they get 
527s into the process.
    Thank you.
    [The statement of Mr. Shays follows:]




    
    The Chairman. Which gentleman would like to go first? Mr. 
Pence or Mr. Wynn?
    Mr. Pence.

STATEMENT OF THE HON. MIKE PENCE, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF INDIANA

    Mr. Pence. Thank you, Mr. Chairman. I want to thank my 
colleague Albert Wynn for his extraordinary leadership on this 
issue. It is an honor to work with him on the Pence-Wynn bill.
    I also want to thank my friends Chris Shays and Marty 
Meehan, who are passionate advocates of a point of view about 
campaign finance that while I disagree with strongly, I respect 
their sincerity, Mr. Chairman, and respect them personally.
    By way of full disclosure, I think it is only fair to say 
that I did oppose the bill that they continue to defend, and I 
take very strong issue with their statements on the record 
today. I think Mr. Meehan said BCRA is working. I think Mr. 
Shays just saidit has worked tremendously well.
    Well, for millions of Americans who lived through what I 
like to refer to as the summer of 527s, there might be a 
different opinion. What we saw in the summer of 2004, as the 
natural consequence of bipartisan campaign finance reform and 
the heavy regulation of political parties and traditional 
third-party groups like the AFL-CIO, the NEA, National Right to 
Life and the National Rifle Association, was the major 
political parties and the most respected institutions in this 
country standing literally on the sidelines while these strange 
and opaque and new organizations--to most Americans--were 
taking up all the time on the playing field in American 
Presidential politics.
    Now, Mr. Wynn and I understand that their response is as 
the title of this hearing suggests, more regulation, more 
regulation of the political economy in America; and we do take 
a dramatically different view. It is a view that I believe is 
borne of the best traditions of our Nation's founding. And 
while our proposal in the Pence-Wynn bill, which is essentially 
an effort to level the playing fields between major national 
political parties, outside groups and the 527s, while that is a 
little bit messier because it invites more competition in the 
political marketplace than simply clamping regulation down on 
the 527s, I think it is more consistent with what Thomas 
Jefferson said when he said, ``I would rather be exposed to the 
inconveniences attending too much liberty than those attending 
too small a degree of it.''
    There are inconveniences in a wide-open, free-wheeling, 
political economy of ideas, and the Pence-Wynn bill is simply 
our modest effort to address the summer of 527s with more 
competition and more freedom for the two great political 
parties in this country, and also for the long-established 
third-party organizations that have millions of members, labor 
unions, teachers unions, right-to-life organizations, 
organizations committed to a woman's right to choose, and every 
other one imaginable.
    I am from Indiana, Mr. Chairman, so I like basketball 
analogies. This one seems to me to be a good one. In terms of a 
basketball game, you can imagine a two-on-two game on a 
playground where one of the four players is dramatically taller 
than the others because he is permitted to stand up and the 
other three play on their knees. Now, it does seem to me that 
some of the proposals about regulating 527s is about getting 
that player on their knees.
    Mr. Wynn and I come to this approach with a different view, 
and that is let the other players stand up and let the major 
political parties compete. We do that in a couple of different 
ways. I would like, before I close, to say what we do in Pence-
Wynn and what we don't do, because I read this morning in one 
of the Washington, D.C. newspapers about my bill, and I didn't 
even recognize it; which, Mr. Chairman, may have happened to 
you in the past.
    First, what Pence-Wynn does, the 527 Fairness Act, we 
remove the aggregate contribution limits on contributions to 
Federal committees; basically let Americans with hard dollars 
give whatever they want to give to whatever campaigns and 
parties they want to give, but hard dollars. There is no change 
in the rules about soft dollars in our proposal with regard to 
Federal campaigns.
    We lift the spending limits on parties. We end this dance 
that goes on between what is coordinated and not coordinated 
funding. We say to the Democratic Party and the Republican 
Party, support the candidates that you believe need supporting 
with the resources, the hard dollars that you raise from your 
constituencies.
    Thirdly, we allow State and local parties to spend 
nonFederal dollars, but State-regulated dollars, on voter 
registration and sample ballots. These are just good government 
initiatives right now that are regulated with State money. But 
BCRA I will say, I believe inadvertently, impacts voter 
registration expenditures on the State level and the mention of 
Federal candidates.
    Lastly, we appeal the Wellstone amendment to BCRA, which I 
hasten to add, Mr. Chairman, the Wellstone amendment that we 
seek to repeal in Pence-Wynn was opposed by Senator McCain and 
Senator Feingold during the Senate debate.
    If I can put it in plain English--and the experts will 
correct me on this--basically what they managed to do was 
everything that Mr. Shays points out. They managed in the bill 
to say to organizations, the AFL-CIO, the NRA and others, that 
you can only use individual dollars. But then the Wellstone 
amendment came in and said no, you can only use individual 
dollars, but you have to create a PAC. It pushed it into even a 
smaller box. Some political pundits said at the time the 
Wellstone amendment was a ``poison pill,'' that groups on the 
left and right would end up opposing the bill if it passed.
    Well, whatever the reason for opposition, Senator McCain, 
Senator Feingold, opposed forcing third-party groups to raise 
money inside of political action committees as the exclusive 
means for participating in the political process during the 
affected period.
    Nevertheless, it became a part of the law, and all Pence-
Wynn does is simply say, in effect historically, Senator 
McCain, Senator Feingold, on that point you were right, and we 
repeal the Wellstone amendment and simply go back to an America 
where--to reference Ms. Lofgren's testimony earlier today--
where we are encouraging citizen participation. We are saying 
that organizations--not treasury funds, not soft money--but can 
use individual contributions to that organization to operate 
otherwise under BCRA during the affected period.
    Lastly, what this bill does not do, what Pence-Wynn does 
not do, number one, we do not repeal any limits on individual 
contributions to national parties or committees. All the new 
limitations, the new hard-dollar limits are in effect.
    Number two, we do not change any other major provision of 
BCRA. Candidly, it is not helpful to refer to Pence-Wynn as a 
gutting of BCRA when Mr. Wynn and I are really bringing 
measures that we believe are very modest, go not nearly so far 
as I would choose to go--which candidly, Mr. Chairman, would be 
the repeal of BCRA I would vote for. We are making some modest 
changes to promote greater liberty in the system.
    What also Pence-Wynn does, it does not allow soft money to 
the national parties. I see a headline today that talks about 
the battles over soft money. We are simply saying in this bill 
that we do free up State parties to use State-regulated money 
for voter registration and sample ballots. But there is no 
discussion, no proposal in Pence-Wynn, that would allow soft 
money to any Federal campaign entity or political party.
    Lastly, we don't have elements in this bill that attempt to 
regulate 527s. On that point, Mr. Shays is precisely correct. I 
believe the answer to challenges in a free system of politics 
is more freedom, not less freedom, and the Pence-Wynn bill 
brings that approach forward.
    As Thomas Jefferson said, I would rather be exposed to the 
inconveniences attending too much liberty than those attending 
too small a degree of it. And I am grateful for the committee's 
consideration of our legislation.
    The Chairman. Thank you.
    [The statement of Mr. Pence follows:]







    
    The Chairman. Mr. Wynn.

   STATEMENT OF THE HON. ALBERT R. WYNN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MARYLAND

    Mr. Wynn. Thank you, Mr. Chairman, Ranking Member 
Millender-McDonald, members of the committee, I appreciate this 
opportunity to appear before you.
    Let me begin by thanking my colleague Mr. Pence for his 
leadership, his common sense, and his vision in terms of 
developing this bill. I am pleased to join with him in 
sponsoring the 527 Fairness Act.
    Most of us envision the national political party committees 
as dominant players in the American political process, 
supporting candidates and promoting a national political 
philosophy. However, following BCRA, the role of the national 
political committees was dramatically reduced.
    Currently, the parties are subject to aggregate limits on 
their hard-money contributions from individual donors. On the 
other hand, 527 organizations can raise unlimited amounts of 
hard money as well as unlimited amounts of unregulated soft 
money in the form of corporate donations and contributions from 
labor unions.
    Since the 527s were allowed to raise unregulated soft 
money, it was easier for them to raise and spend huge amounts 
of money on media and other campaign activities, and they 
emerged as a dominant force in the 2004 national elections.
    To help restore the balance between the national parties 
and the 527 organizations, Congressman Pence and I have 
coauthored the 527 Fairness Act. This bill would allow national 
parties to more effectively raise hard money for campaign 
contributions to their candidates and to promote their parties' 
agenda.
    Let me emphasize, as my colleague Mr. Pence said, this bill 
would not allow Federal candidates or parties to raise or spend 
soft money.
    In support of the bill, I would like to make a couple of 
points. First, the bill does not address the operations of or 
the rules affecting 527s in any way. Instead, Congressman Pence 
and I decided that our bill should make it easier for the 
national party committees, such as the DNC, the RNC, the DSCC, 
the NRSC, the DCCC and the NRCC, to raise and spend hard money. 
Contrary to what my colleague Mr. Shays says, we are not 
gutting the BCRA bill. The indictment they made in BCRA was the 
corrosive effect of soft money. Our bill only deals with the 
raising and spending of hard money. We don't affect soft money.
    Under current law, during the 2006 election, the next 
cycle, an individual would be allowed to contribute $26,700 to 
each national party committee. That is his aggregate limit. 
However, that person would be limited to a total of $61,400 to 
all Federal party committees and Federal PACs combined. This 
aggregate limit means that an individual must choose between 
national party committees and Federal PACs to determine which 
organizations he will support, because the aggregate limit does 
not allow that individual to contribute the maximum amount to 
each party committee and Federal PAC.
    The 527 Fairness Act repeals the aggregate limits on 
contributions to party committees and Federal PACs. Thus, a 
donor could contribute the maximum of $26,700 to each of the 
national party committees and $5,000 to the Federal PACs; that 
is, leadership PACs, Black Caucus, Hispanic PAC or others, as 
he or she saw fit.
    Second, the national State party committees are now limited 
in how much hard money they are allowed to contribute to their 
candidates. In the 2004 cycle, House campaigns were only able 
to receive up to $76,000 in combined contributions from their 
national and state Party committees, a maximum of $38,300 from 
each committee. Aggregate combination limits to Senate races 
are determined by a more complex formula determined by State 
population.
    Our bill would repeal these limitations on House and Senate 
raises and allow the national and State party committees to 
contribute an unlimited amount of hard money to their Federal 
candidates.
    Third, BCRA's reach extended down to restrictions on local 
and State party committees. These committees were created to 
foster the basic voter registration, voter education and 
mobilization activities, such as creating and distributing 
sample ballots. Last year, local parties were forced to create 
Federal PACs to raise hard money in order to accomplish this if 
they included a Federal candidate on the sample ballot.
    According to a local party chair in my State, this 
restriction places a great burden and a cumbersome burden on 
State and local parties. To relieve the State and local 
committees of this burden, we included a narrow provision in 
our bill to allow local and State party committees to spend 
soft money on sample ballots, only if the sample ballot listed 
all of the candidates for Federal office, regardless of party 
affiliation.
    Next, the current contribution limits for national parties, 
State parties, and individual campaigns are indexed to 
inflation. In order to assure continued fairness for all 
Federal political action committees, this bill would index all 
Federal PAC contribution limits to inflation rates.
    Let me conclude, Mr. Chairman. In terms of public policy, 
we believe that the party committees provide more transparency, 
more accountability, and more diversity than the 527s through 
their connections to both grassroots party membership and 
elected party officials. In order to have a level playing 
field, party committees should be allowed to raise and spend 
hard money for political campaigns, without unnecessary 
restrictions on aggregate contributions and spending.
    I hope you and the committee members will consider the bill 
favorably. Thank you for allowing me this opportunity.
    [The statement of Mr. Wynn follows:]





    
    The Chairman. I thank all the members today. I have a 
couple questions, and then everybody can ask questions. Of 
course, you are on a panel.
    I want to go back to the letter that has been placed in the 
record, which I was also going to place in the record, Mr. 
Meehan is not on this letter to the FEC, and neither is Mr. 
Wynn.
    I guess I am addressing this to my colleague, Mr. Shays. 
This is where--and this is no criticism of you--but this is 
where I think the House is very divided----
    Mr. Shays. Sir, I don't know what letter you are looking 
at.
    The Chairman. I am sorry. This is the one to the FEC by 128 
Democrat Members.
    Mr. Shays. Okay.
    The Chairman. It was April of 2004. I will get you a copy. 
The letter, which Mr. Wynn and Mr. Meehan didn't sign, but 
which 128 BCRA-supporting members did sign, was sent to the FEC 
urging them not to regulate 527 groups in a manner similar to 
what yours and Mr. Meehan's current bill would propose. This 
was signed by, like I said, 128 members.

          [T]he proposed regulation would lead to results that 
        many of us voting for the new law did not consider or 
        approve and would expand the reach of BCRA's 
        limitations to independent organizations in a manner 
        wholly unsupported by BCRA or the record of our new 
        deliberations on the law. And while BCRA reflects 
        Congress's full awareness of the nature of the 
        activities of 527s, it didn't consider comprehensive 
        restrictions on these organizations.

    At the end of the day, frankly, Mr. Shays, this whole thing 
is irrelevant because we have to look at what your bill is 
doing. I think there is some confusion about whether or not the 
FEC should have regulated 527s. Then Members who voted for it 
say, ``Well, wait a minute, the FEC shouldn't do that.'' So 
clearly these members, when they voted for it, wanted 527s not 
to be regulated by the FEC.
    If we could reverse time and go back to the vote on BCRA 
and magically have the regulation of 527s placed in that law, 
that would have been ideal. We can't go back to that day.
    Some of the confusion occurs when Members sign letters like 
this, and then realize, ``We voted for this bill and we didn't 
intend to have these regulated by the FEC.'' I think, that is 
where some of the confusion comes into play.
    Mr. Shays. I was pretty clear, but I am going to emphasize 
it again. Congratulations to Democrats primarily leading the 
charge on campaign finance reform, but frankly, a plague on 
their house, once it is implemented, to basically gut it. And I 
can't be any clearer than that. And congratulations--I wish my 
fellow Republicans, the majority who supported the law--they 
didn't--but I congratulate them for once the law was in place 
to say we need to live by it. Democrats only stepped in once 
you saw this counterforce, frankly, and I am speaking in 
generalities, I admit, but they only stepped in when the Swift 
Boat ads came in. There was a puny amount of money in contrast 
to the amount that had already been spent.
    My point to both sides is that is going to happen. That is 
why you needed to step in, because the Democrats thought they 
had a big advantage, all these 527s, and now all of a sudden 
you have this counterforce that comes in and then there is 
interest in changing it.
    When we passed the law, we had no doubts. The law is clear: 
The Federal Elections Commission is to bring anyone under the 
law that is involved with trying to influence a Federal 
election. I can't be clearer than that. But you can't make six 
commissioners do what they have got to do, even if the law 
requires, unless you go to court. We have taken them to court 
already on one issue, on their implementation of the 
regulations. And 14 of their regulations were thrown out, out 
of 19, because they didn't want to abide by the law that 
passed.
    I make the same claim here. The succinct answer is I regret 
my colleagues signed that letter, because basically what they 
do by doing that is allow for corporate money, union dues, 
money in unlimited sums, to come in the back door through 527s. 
They should have written a letter that said enforce the law and 
make sure 527s are under it. Simple. Case closed.
    The Chairman. That is why I wonder what would have happened 
if the law had said we will be regulating 527s. I wonder if we 
would have had their vote. I am wondering if the whole thought 
wasn't, ``Okay, we limit these people, but not the 527s''.
    And I want to ask one other question about the strength of 
the political parties. I believe that with Mr. Wynn and Mr. 
Pence, we are looking at having strength in political parties. 
I personally don't fear 527s. Frankly, there was a deal in our 
State, and anybody that would get around George Soros in my 
district, it is a political death sentence. There was an issue 
to let drug dealers run up and down the streets in Ohio. It was 
beaten back significantly with no money. Ohio is not the type 
of State where letting people run around the streets with that 
issue is going to pass. It is not a fear of all this 527 money. 
The 527 money was all over the State and people have a right to 
their opinions on issues. And it is not that George Bush lost 
the State of Ohio.
    I think Mr. Shays makes a valid point. Nobody was saying 
anything about 527s. Then up came the Swift Boat ads with a 
small amount of money, and the whole country got electric about 
527s. Somebody else got ``gored,'' not in a pun of the first 
candidate, but somebody else got hit. And as a result of that 
527s became a household word.
    I don't think it is about ideology, but I do think--Mr. 
Shays, when you look at the bill of Mr. Pence and Mr. Wynn, I 
do think it will give strength back to the political parties. I 
am bothered by some flaws that cut down both party lines, 
whether it be George Soros or whoever put the money into the 
Swift Boat ads. Whether you are limiting union workers because 
it was soft money, or limiting people that work in a 
corporation, or a couple of rich people, or one Republican and 
one Democrat, it doesn't make sense. Eventually there will be a 
Republican George Soros who will come around or a couple of 
rich people can really just put in what they want and play 
around with our system. I just don't think it is a level 
playing field.
    Taking into account that we would need something of a 
regulatory nature with your bill to correct the situation, what 
would be wrong with Pence and Wynn propping up the political 
parties of our country?
    Mr. Shays. Let me first respond by saying one of the 
reasons that we wanted to enforce the 1947 law was that union 
dues are forced contributions for collective bargaining. My 
wife was a member of the teachers union in Connecticut. Her 
money was given to a Democratic Governor who was running 
against the candidate she supported. What would have been okay 
is for that union to say, contribute to a political action 
committee that allows us to contribute to the candidate of our 
choice. That would have been voluntary.
    Mr. Pence's description is of a basketball player on his 
knees and one standing up and playing, and he wants the rules 
fair. My view is different. The only ones who got to play in 
the game were the millionaires. And if you weren't a 
millionaire, you didn't get to the floor.
    To respond to the question, the Pence-Wynn bill doesn't 
deal with 527s at all. So clearly that would allow the union 
dues money and the corporate money and unlimited funds to 
continue.
    With regard to the second part of your question, what they 
do--and I don't think they intended to do--they didn't release 
the limits. They raised the limits to what you can contribute 
to the political parties from 61,400 in a cycle to $1 million. 
And they would allow one individual to do that. The RNC could 
get 53,400; the NRCC could get 53,400; the NRSC could get 
53,400; and each political party could get 20,000. That adds up 
to actually 160,200. And one candidate could go to a wealthy 
person and say please contribute, because it is legal under 
their law. And then what they allow is they allow unlimited 
amounts to every candidate.
    So instead of this total limit of 101,400 that a wealthy 
person could contribute, they would allow $1,974,000 to go to 
every candidate, Senate and House. And this is the thing that 
really blows me away is we have no restrictions about 
transferring the funds. So I could go to one individual and say 
give that money to the parties and to all those candidates, and 
then I could just ask them to make sure it is sent to one 
place, no restriction under their proposal. So I think it guts 
our bill.
    Mr. Wynn. Mr. Chairman, I think he has distorted this bill. 
Right now under the current system, George Soros--just to pick 
a name, not to pick on the individual--can give millions to 
MoveOn.org. He can only give $26,700 to the DNC. That is all he 
can give to the DNC. That is all he can give to the DCCC. That 
is all he can give to the DSCC. And all we are saying is at 
that point, he is limited. He can only give $61,400 in total. 
He has to pick and choose who he wants to give his money to. 
That means he can't give anything to the CBC PAC, can't give 
anything to the Hispanic PAC, can't give anything to the other 
leadership PACs, because he is limited on an aggregate basis to 
$61,400 to all Federal committees and PACs.
    What we are saying is keep the individual limits, the 5,000 
for Federal PACs, the 26,700 for party committees, but just let 
him give to as many as he would like. We are talking about 
thousands, rather than the millions that are being spent under 
the current system. He can still only give me or to any other 
candidate $2,000 per cycle. That limit still exists. The 
difference is he can give to more candidates, but he can only 
give me 2,000 in hard money, only give the DNC 27,600 in hard 
money, et cetera, et cetera.
    This is a dramatic change from what my colleague is 
describing, dramatically different from what my colleague is 
describing. It helps the political parties. It helps the 
Federal PACs, but doesn't open the doors. And I think that is a 
reasonable compromise to strengthen the role of the parties 
when you consider the millions that are being given now, with 
the paltry thousands that are given to the political parties. 
It seems reasonable to lift the aggregate limits, not the 
individual limits.
    Mr. Pence. I can't add to the clarity of Mr. Wynn's 
explanation of what our bill does and doesn't do. But it would 
be specifically important to reinforce. Pence-Wynn repeals the 
aggregate limits. It ends the choice people make between 
supporting one arm of their political party and not the 
senatorial committee versus a congressional committee, and 
allows them to reach those existing statutory maximums under 
the law in each of those areas.
    I wanted to speak, Mr. Chairman, to Mr. Shays' comment. I 
have been a Democrat and now I am a Republican. I have been 
active in both political parties, which may make it in some 
gossip column tomorrow.
    The Chairman. Not here on the Hill.
    Mr. Pence. I mean, not this week I was a Democrat.
    Mr. Shays. It is called ``a born again Republican.''
    Mr. Pence. I was a youth Democratic party leader in 1975 in 
Bartholomew County, Indiana, and became a Republican around my 
college years when I became enthralled with the ideals and the 
leadership of Ronald Reagan. Many millions of Americans 
followed me on this path. My experience in both political 
parties makes me a fan of political parties. They are 
accountable to their constituency. They are accountable to the 
public. Election Day, voters know where to find you if they are 
not happy with what your group has been up to lately.
    And as a lot of this debate focuses on the choice between 
money going into political parties versus money going into 
wholly unaccountable organizations like 527s that never face 
voters. Their candidates never face voters, presumably. They 
can dissolve the organization tomorrow and be gone and 
reconstitute tomorrow under a different name. It does seem to 
me we would want to--which is all Pence-Wynn does, to level the 
playing field, at a minimum, between the existing 527 
organizations and the major political parties, which in my 
judgment have so well served this Nation over its----
    Mr. Shays. One quick response. I want to point out under 
the Pence-Wynn bill, Soros could give $1,160,200 to the 
political parties, and, under their bill, to the candidates 
$1,974,000, for a total of $3.1 million. That is what Soros 
could do. He has a lot more money than that, obviously.
    But let me make this last point. The political parties 
raised last year $1.2 billion. I want to say billions, not 
millions. These parties aren't hurting. They raised $200-plus 
million more than they did when they could use hard and soft 
money. I am hard-pressed to know how the parties have suffered.
    The Chairman. Mr. Soros gave $3 million. That would be $19 
million less than he gave to ACT, if you look at it that way. I 
am not worried about $3 million to the Democrat or Republican 
Party. That doesn't bother me. But he can give $19 million more 
to ACT.
    Mr. Shays. They don't correct that, and we do.
    Mr. Pence. Mr. Chairman, without referring to any one 
particular American, my bias toward liberty, and yours and 
everyone on this panel, makes me uncomfortable in using 
examples; but it does strike me that using Mr. Meehan's number 
of $400 million being spent by 527s exclusively, if memory 
serves, in the Presidential contest as compared to--again using 
Mr. Shays' numbers that I am certain are correct because I 
trust his veracity and competence--if a political party in this 
country raised a billion dollars to support every candidate all 
across the country in 535-some-odd different jurisdictions at 
virtually every level, it is not exactly a comparison; and it 
demonstrates the enormous impact that the 527s had in the last 
political debate.
    I say again, BCRA is not working and we have to use the 
principles of liberty to put our political parties and third-
party organizations on the right and the left back on a level 
playing field. And that is what Pence-Wynn does.
    The Chairman. I am going to move on with the other members. 
You look at our own state, which was nuclear this past year. 
And if you look at, what actually happened in the State of 
Ohio, you'll see that all of this money, which the State had 
never seen before, helped our economy a little bit as 50,000-
some people that came from around the States and lived there 
for 6 to 7 months.
    But I think what happened with this huge amount of outside 
money is that the 527 organizations, as opposed to the Democrat 
Party, in the State of Ohio, ran the show. There were no grass-
roots organizations like they used to have for a Presidential 
candidate in the state. And so I think with the money, huge 
amount of money in the system, you saw a weakened political 
party, frankly, which hindered their ability to register people 
to vote. And it was all done by a couple of people's money 
versus the party structure. I think it is a weakening of the 
structure. We saw it in Ohio, and I think it will happen across 
the Nation.
    The gentlelady from California.
    Ms. Millender-McDonald. Thank you, Mr. Chairman. Mr. 
Chairman, by no means were the political parties weakened, they 
flourished tremendously in this Presidential election of 2004, 
raising a record $1.2 billion--that is in ``b''--and attracting 
millions of new smaller donors. So they did not sit by the 
sidelines as some of my colleagues have mentioned today; they 
were out there raising big money like all other groups.
    I would also say to my colleague, Ms. Miller, there is 
transparency with 527s. They have to disclose their donors so 
it is unlike the 501(c)(4)s that perhaps Mr. Pence and Mr. Wynn 
are talking about, where they don't have to disclose their 
donors at all.
    As I hear Mr. Shays speak about BCRA and ordinary citizens 
getting involved in the political process and he stated that we 
have involved more people, what is wrong with that? What is 
wrong with involving more ordinary people, rather, in this 
political process?
    I can say to you that my district, by the Christian Science 
Monitor, is the most diverse district in this Nation. I was 
fortunate to meet with various groups who had been left out of 
this political process, who had no thoughts of thinking that 
they would have any say in this debate in this Presidential 
election. And yet those 527s came into our communities and were 
there for a year, stayed with these folks, gave them the 
education that they needed to make sound decisions.
    I don't see anything wrong with that. I don't see anything 
wrong with young African Americans, who, for the first time, 
really get to know what the Voting Rights Act of 1965 really 
meant to them, and now engaging upon the reauthorization of 
that Voting Rights Act. I don't see anything wrong with young 
folks who, for the first time, went out and got small 
donations, and there was an infusion of small donations as well 
as the Soros infusion of money that got these young folks 
involved on college campuses.
    Now, we do recognize that the Supreme Court upheld the 
notion of any rich person, any individual who can and who will 
and can use their money to go out and do ads solely on their 
own, they don't need the 527s to do that. And the Supreme Court 
in 1975 upheld that.
    What we are saying is why are we now trying to effectively 
abolish the independent constituency organizations at the 
expense of these political parties and to bring back these 
political parties' raising of hard dollars and soft dollars 
through the efforts of Mr. Pence and Mr. Wynn's bill and to cut 
down the 527s that we have come to know that provide the 
activities and the political muscle that this democracy has put 
forth here for them to do?
    Independent 527 organizations ensure that we heard from 
those folks and from the people who have been left out of this 
political process for decades. And I know that, because I was 
with them.
    Now questions to you, first of all, Mr. Shays. Doesn't your 
bill treat nonpartisan voter registration in getting-out-to-
vote activities the same as it does partisan activities?
    Mr. Shays. I think it may, and it shouldn't. We have to 
distinguish between the partisan and something that is not 
partisan.
    Ms. Millender-McDonald. Indeed, you must.
    Mr. Shays. I think that is a valid concern.
    Ms. Millender-McDonald. So given that, then, why should an 
organization have to use a Federal PAC for nonpartisan 
activities?
    Mr. Shays. If it is nonpartisan. And the question is what 
constitutes nonpartisan and partisan. For instance, if you have 
a get-out-the-vote and just encourage people to vote, that is 
not partisan. But if your purpose is to get out and vote for a 
particular vote, it is partisan.
    Ms. Millender-McDonald. That is correct. And 527s can't do 
that.
    Mr. Shays. And there should be a distinction. The challenge 
I think I am hearing from you on 527s is you seem to speak well 
of the campaign finance law and the fact that the political 
parties haven't been weakened. And I agree with that, but I 
think you are ignoring the fact that you are allowing corporate 
money and union dues money and unlimited sums to go to 527s.
    And if you don't deal with that issue, if you saw $400 
million spent this last time, the next time around if you in a 
sense legitimatize this by failing to act against it and say to 
the FEC that the will of Congress is not to deal with this 
issue, I think you will see billions go right to these 527s. 
And I would plead with you to understand that, just as the 
political parties were able to raise significant dollars 
without needing soft money, these 527s can do the same thing, 
and MoveOn.org is doing that. They are using hard money now. So 
let them reach out and get more contributors.
    I don't want to see 527s not play a role, and a major role, 
but I want them to play by the same rules that everyone else 
has to pay.
    Ms. Millender-McDonald. Aren't they implementing your bill 
precisely, Mr. Shays?
    Mr. Shays. 527s is a total abrogation----
    Ms. Millender-McDonald. You do not tell them to restrict 
their fundings to only certain donors. You just said to 
implement 527s and participate in the political process.
    Mr. Shays. We said the 527s--we said that any organization 
that is involved in political Federal activity comes under the 
law. The Federal Elections Commission decided that 527s would 
not come under the law. They made this arbitrary decision. And 
therefore, you have the 527s engaged in Federal elections, 
partisan elections, not playing by any of the rules. They are 
totally outside; corporate money, union dues money, unlimited 
sums.
    Ms. Millender-McDonald. Partisan elections, but not 
particular candidates?
    Mr. Shays. Oh, no. The swift Boat ad was clearly directed 
against your candidate. I thought it was frankly an effective 
ad, but it should have been run with hard money, not soft 
money. There shouldn't have been unlimited sums.
    Ms. Millender-McDonald. There was still implementation of 
the bill that you put out there.
    Mr. Shays. 527s totally ignored our bill, totally and 
completely. Didn't abide by it. They were out there on their 
own.
    Ms. Millender-McDonald. This bill prohibits State and local 
PACs set up by individuals and independent groups from spending 
even $1,000 on registering voters and getting them to the 
polls. They do do things in a nonpartisan manner.
    Mr. Shays. Political action committees is hard money. They 
can spend it any way they want. It is the soft money, the 
corporate money and union dues money and unlimited sums that we 
are focused on. We want political action committee money 
because that is limited contributions of $5,000 or less.
    Ms. Millender-McDonald. Seems to me like your bill also is 
an intrusion substantially on the State regulations of their 
own elections.
    Mr. Shays. We can't and we don't attempt to interfere with 
their own elections for State and local candidates. Where you 
and I have an agreement is when they seek not--when they seek 
to have a get-out-the-vote that is neither--not promoting a 
Federal candidate. We need to be clear in our law that they 
would not be impacted.
    Ms. Millender-McDonald. But you are not that clear on that, 
though.
    Mr. Shays. We need to be clear.
    Ms. Millender-McDonald. Why would you bring forth anything 
that is still convoluted here?
    Mr. Shays. The reason why you have a hearing is to look at 
a bill and say, where is there a need to make it clear? I am 
conceding to you that is one area that needs to be clear.
    Ms. Millender-McDonald. So this is what we are doing, kind 
of going through the exercise of looking at this.
    Mr. Shays. Right. You are going through a process. And I 
think Marty acknowledged it in his statement. I didn't.
    Ms. Millender-McDonald. Mr. Pence and Mr. Wynn, what you 
are asking for is to really roll back all of this of the BCRA 
and to come in with 501(c)(4)s, it seems to me, with your bill 
and to raise the limits on what the political parties can 
accept in terms of funding. But what you are doing is opening 
up 501(c)(4)s which do not have to report their donors to 
anyone.
    Am I correct on that? No? Yes? Can I hear someone.
    Mr. Pence. I am happy to speak to that. I know that what 
our provisions are with regard to the 501(c) organizations and 
you are going to have a panel--the gentlelady from California 
will have a panel in a few minutes of legal experts a lot 
smarter than me. But BCRA did make the advance that 
organizations like the AFL-CIO or the National Education 
Association would have to use individual money from members to 
engage in the acceptable political speech during the affected 
period of the 30 to 60 days.
    All we are asking for is that that not--that the law that 
then stepped in through the Wellstone amendment, to making all 
that happen within a PAC in the form of separate segregated 
funds not be required in the law. The current law, I am sure 
some of our experts can explain to you, the current law or the 
interpretation of the laws, if we repeal Wellstone as to the 
requirements of those organizations, would be largely as it was 
prior to BCRA.
    I would encourage my colleague--Mr. Wynn has done some 
extraordinary work on the issue of what BCRA did to State-level 
voter registration efforts. And inasmuch as you have admirably 
raised that issue in the context of 527s, I wanted to encourage 
my colleague, who has been a champion on voter registration on 
this issue, to speak to that.
    Ms. Millender-McDonald. Mr. Pence, it was $1.2 billion that 
were used by these record-breaking amounts of hard money used 
in this 2004 election. Why do we need legislation to unleash 
still more hard money? Why do we need that? Isn't enough money 
being spent in these elections?
    Mr. Pence. Well, I don't think Congress has any business 
deciding how much money is enough money to be spent.
    Ms. Millender-McDonald. You are talking about that in your 
527s.
    Mr. Pence. I am speaking philosophically. All we do in our 
bill is lift the aggregate limits, the current limits that are 
in effect, hard-dollar limits to candidates, and then the 
$26,000 limits to parties all remain in effect.
    But I am just someone who believes that in a country that 
spends hundreds of billions of dollars selling soap during 
``Desperate Housewives'' can afford a few billion dollars of 
the free people's money in having a vigorous debate over the 
men and women that will lead the Nation at every level.
    That being said, I think, candidly, most Americans, even 
many outside of Ohio, would agree that that summer of 527s was 
a peculiar time for proud Democrats proud Republicans and proud 
Bush and Kerry supporters. Many millions of Americans felt the 
political parties and organizations they had been associated 
with throughout their lives and professional careers were 
standing on the sidelines watching 527s dominate the American 
political debate.
    Ms. Millender-McDonald. It is amazing you say that and you 
are talking about the American people dominating the political 
process. Isn't that what we want?
    Mr. Pence. If you exclusively define the American people as 
the people that contributed to the 527s, then your point would 
be well taken. I think the American people would also want to 
be defined by the major political parties that they are 
associated with, the organizations like National Right to Life, 
the NEA, AFL-CIO.
    Ms. Millender-McDonald. Mr. Pence, come on. You and I know 
both that a lot of Americans do not feel good in either one of 
these political parties. Forty percent of Americans are not 
even voting because they do not feel attached to either one of 
these parties. So they really do not feel--they feel better 
being independent, out there debating the issues.
    And why would we restrict these rights as they exercise 
those through those 527 organizations? Why are we trying to 
restrict these folks?
    Mr. Pence. I wouldn't know. Our bill actually includes no 
restrictions on the 527s. It is actually a point that Mr. Shays 
made that is completely correct.
    Ms. Millender-McDonald. They will stay as they are and you 
will raise the limit on the national parties?
    Mr. Pence. Yes. As a point of clarification, the Pence-Wynn 
bill addresses that summer of 527s by greater freedom to 
political parties in the existing third-party groups, not less 
freedom for 527s.
    Ms. Millender-McDonald. Once you allow that to open up, 
then those small-time 527s, irrespective of what you say these 
big guys put in, they will be left by the wayside; because then 
the money will go back to these national political committees, 
and this what we were trying to circumvent in this BCRA bill.
    Mr. Wynn. If I could just make a couple of observations. 
When we started with BCRA, the indictment was soft money. 
Everybody thought hard money was fine. It is your money and 
individual contributions; you should be able to spend it in the 
political process. We don't deal with that issue at all. We 
don't deal with soft money. We don't bring soft money back into 
the system. We are dealing only with hard money to the 
political parties. We don't make that great a change. You are 
still only allowed to give the DNC 26,7. And the same thing 
with RNC. And this is what happens.
    Ms. Millender-McDonald. But I think Mr. Shays' bill is 
trying to make it 50/50, where you give both hard money and 
soft money, which then becomes a difficult problem.
    Mr. Wynn. I am very concerned about the parties and the 
hard money that used to be called good money. And we want to 
say that the political parties ought to be able to take more of 
that good money.
    I want to make one quick point. What really happens is 
people under this limit, this aggregate limit of $61,400, tend 
to give to the DNC or give to the DSCC and not the DCCC, 
because you have the DNC raising 394 million with the DCCC only 
raising $93 million. What happens when you have a hard 
aggregate limit of $61,000, people have to choose between 
giving to the DNC, the DSC, the DCCC or the CBC PAC, your 
leadership PAC, or whatever the case may be. You are not 
limited. That is not right, because it is the citizens' 
individual hard money. You ought to be able to give to your 
PAC, my PAC, the DSCC, the DCCC, the DNC, the Congressional 
HISPANIC PAC if that is what they want to, and on and on.
    We are not changing the amounts they can give, but only 
expanding it to people they can give it to. And I go back to 
the fundamental and underlying premise; we are talking about 
hard money and individual contributions. And we do nothing to 
the individuals who want to contribute to 527s. We don't touch 
them at all under the Pence-Wynn bill.
    Ms. Millender-McDonald. But you are bringing in 501(c)(4)s.
    Mr. Wynn. To allow 501(c)(4)s to participate without having 
to form a Federal PAC, the bureaucracy and the paperwork 
involved in the Federal PAC. They are still limited to just 
hard dollars. And please correct me if I am mistaken on that. 
It is still hard dollars, but just a hard-dollar account as 
opposed to the reporting requirements connected to setting up a 
Federal PAC. That is unduly burdensome, but it doesn't make any 
further fundamental changes. And you still are not allowed to 
advocate the defeat or the election of an individual. You are 
allowed to comment on that individual's record.
    Ms. Millender-McDonald. Mr. Wynn, wasn't the purpose of 
this Shays-Meehan legislation to get rid of a lot of hard 
dollars--soft money?
    Mr. Wynn. It was to get rid of soft money out of the 
political process as to the parties and to individual Federal 
candidates. And we don't do anything about that or change any 
of that in the Pence-Wynn bill. We do not touch the soft money 
issue at all.
    Ms. Millender-McDonald. Just increase the hard dollars?
    Mr. Wynn. Just increase the hard dollars by lifting the 
aggregate limits on hard dollars.
    Mr. Shays. May I voice one quick concern with a comment 
that 501(c)(4)s would not be under PACs; that the political 
action committees have to report like everyone else to the 
Federal Election Commission, and they have to make sure they 
are abiding by the laws. And I raise a concern about that. And 
the only concern I raise is, if you allow one individual to 
effectively contribute $3.1 million--and admittedly it is not 
more to any one group than is allowed now, but collectively to 
so many--you have effectively created hard money that almost is 
the equivalent of soft money, because it is $3 million and you 
can still transfer from one to another. And those transfers 
will occur.
    The Chairman. Mr. Doolittle.
    Mr. Doolittle. Mr. Chairman, I find this whole hearing 
disheartening in that here is where we are; we are in the 
regulatory state. Our Supreme Court, sadly, has upheld this 
amendment to the Federal Election Campaign Act known as McCain-
Feingold or Shays-Meehan, and what was a bad law has only been 
made worse. No personal offense meant to anyone, but that is 
just my opinion.
    Apparently the only form of speech that can be regulated by 
the government in any significant way is political speech, 
which clearly, in the reading of our history in the Federalist 
Papers, was the highest form of speech that was deserving of 
the greatest of protection. And we are going to sit here in the 
committees of Congress and make minute adjustments, what is 
that absurd figure $26,400, and next year it will be $27,300.
    I must say that all that has happened in my own personal 
experience is we spend a lot more on counting the lawyers' 
fees. We don't make a major move without checking with an 
attorney first. That has raised our expenses. We are taking 
these limited hard dollars that we have and we are spending 
more on professional services to try and help us stay within 
the law. I don't think it is just Mr. Shays' law or proposed 
law, but the Senate one as well. There is some new standard 
that these groups can't be involved in any partisan activity 
for a year out. Now we have a new term. I don't know, it is 60 
days or 90 days, a year over here. I can't keep these numbers 
straight in my head. And what is unfortunate is if we make a 
mistake, we could be held liable for a crime. Didn't used to be 
a crime and now it is a crime. And I just find it appalling.
    I can only hope, like certain bad Supreme Court decisions 
of the past, that it will be flat-out overruled someday. I 
would like to reintroduce my bill to deregulate everything and 
just require reporting. It never bothered me that a corporation 
could contribute money to a Federal candidate. I never bought 
into that Teddy Roosevelt-era law that started us down this 
whole slippery path. It would never bother me if a labor union 
gave money directly to a candidate, as long as I can give to 
anybody I want to give, or to the political party I believe can 
give to anybody and in any amount that we want to give.
    So here we are down the slippery slope and I find it 
depressing. Let me ask the panel here what happens? Suppose we 
tighten up on the 527s? Doesn't that mean that somehow this may 
move out another rung to a less accountable structure to do 
basically the same thing? That seems to me that is likely to be 
the case. Anybody disagree with that?
    Mr. Shays. Well, I would just respond Mr. Doolittle, you 
are wonderfully consistent and passionate for your position. 
And I need to tell you, I respect you for that. There is no 
doubt where you stand and you have been very consistent on 
that. I would just suggest that if you have campaign finance 
law, it would be helpful that the Federal Elections Commission 
then enforce it.
    Mr. Doolittle. In my bill I did accept it in part of 
ensuring we have the disclosure. What about the answer to my 
question? If we tighten up on 527s, does this problem go away 
or are we still going to see it manifested?
    Mr. Shays. I think what happens is there becomes efforts to 
try to introduce a loophole. And my view is that the Federal 
Elections Commission would have the capability to kind of nail 
it down. But, you know, but it would take a period of time. The 
1974 act worked well for years and years and years. It only had 
a challenge when the Federal Elections Commission introduced--
they introduced the concept of soft money. They created that 
loophole. Not only do they not enforce the law, they helped gut 
it.
    Mr. Doolittle. As I recall, the Congress itself responded 
and passed a law guaranteeing that, because the political 
parties were being starved of enough money. Didn't that happen 
in the mid- to late seventies? That was a congressional act, I 
believe.
    Mr. Shays. I am not sure about that. But one thing I can 
tell you, the political parties are alive and well. They raised 
$1.2 billion last year under BCRA. It was always determined to 
be McCain-Feingold if it was constitutional. And if it was 
unconstitutional, it was going to be Shays-Meehan. So McCain-
Feingold is what we call it.
    Mr. Pence. I think the gentleman from California raises a 
practical and important question, because to the extent that we 
accept the direction of my friend from Connecticut and our 
colleagues in the Senate, we are taking one more step down the 
road of regulation of political speech and discourse in 
America. And we will eventually find ourselves on the doorstep 
of the individual.
    Now, the Supreme Court of the United States has said that 
is a barrier we can never cross. We can never tell an 
individual what they can individually do or say in the public. 
And I know Chris Shays' heart, not as well as some of his close 
friends and family, but this is a good man sitting next to me. 
He would never intend for the Federal Government to grow 
straight up to the front porch of the average American, but 
this is the route we are on. We are headed to that front 
doorstep where our Federal Government is going to be in a 
position to regulate the speech of individual Americans. I 
believe this with all of my heart. And it is the reason why 
enshrined in the Constitution was the principle that this 
institution, Congress, shall make no law abridging the freedom 
of speech. I believe our founders understood the inherent 
danger of consolidated government power and its tendency to 
erode the rights of individuals. So it gave Congress--and I 
know the Supreme Court certified this. I was sitting next to 
Chris on the day of the Court challenge, and I believe you were 
on the other side of me.
    But the Supreme Court of the United States opened up the 
first amendment for debate. And I hope for the day that we go 
back to the principle that Congress, through all of its 
agencies and its own acts, shall make no law abridging the 
freedom of speech, and we bathe our campaign finance system in 
full and immediate disclosure, follow the hard-dollar route of 
individuals, and then allow freedom to reign.
    Mr. Doolittle. Thank you, Mr. Chairman.
    The Chairman. Thank you. Mr. Brady.
    Mr. Brady. Thank you, Mr. Chairman.
    Mr. Doolittle, you might find this hard to believe, but I 
wholeheartedly agree with you. I didn't know what a 527 was 
until we passed the Shays-Meehan bill. I don't think a lot of 
people knew what it was either until they figured out how to 
work it. And I, as chairman of a party in the city of 
Philadelphia, am completely confused. I had to spend for two 
attorneys to interpret this bill, and no attorney could give me 
an answer. Not one attorney could tell me what I could or could 
not do, what was within or without the law. All they said was 
it had to be tested. And if I was to be the test case, I would 
be facing criminal punishment. What an embarrassment that would 
be, to go to jail for taking hard or soft money or distributing 
hard or soft money. So I am confused on that.
    But I do agree with Mr. Pence and Mr. Wynn. I do appreciate 
you looking out for the local parties and looking out for 
sample ballots because that is the grassroot operative, the 
local parties, the local politics that drive this great big 
city, government, and now Nation. And I believe they should be 
heard and be allowed to contribute, how they need to contribute 
and to what amount they need to contribute to.
    What effect does this have on our local parties and labor 
organizations when there is a Federal election, which happens 
more than twice, sometimes more than twice, more than every 2 
years because sometimes you have the Senator in there and every 
2 years we run? What do we allow or what do they allow or what 
are the local parties allowed and labor unions allowed to do 
when there is a Federal election? And on the Federal election, 
there are local elections. There are State and local offices. 
If I am on the ballot, that makes it a Federal election. All 
these other organizations under this 513, or even under this 
Shays-Meehan or McCain-Feingold, what are we allowed to do 
because our name was on the election? Does that mean we are 
limited on supporting our mayor candidates or Governor 
candidates or local office candidates?
    No one can give me an answer. I had to figure out how to 
put out a ballot in my town, figure out how I could pay for a 
ballot, hard, soft, whatever, because my name was on it as a 
Federal candidate. And that needs to be cleared up, because I 
am not going to test any of these attorneys that can't give me 
an answer. Maybe the next panel can, and I don't want to be the 
test case taking a trip to Federal prison. We aren't clear on 
any of this. And ongoing, it is being changed as we bring 
another court case or bring another appeal or attorney that we 
have to pay for out of our hard money that we are losing, that 
we have to pay to give us an opinion, and we haven't gotten a 
clear opinion yet. I don't break laws and I want to follow the 
laws. I would like to know what the heck the law is.
    Mr. Wynn. Probably the next panel has much greater 
expertise than I.
    Mr. Brady. I have been through panels of legal people and 
none of them gave me an answer. I am waiting for the next 
panel.
    Mr. Wynn. I would like to say by way of intent, what we are 
trying to do is say we have a similar background in terms of 
working with sample ballots, that the sample ballots is like 
the backbone. And if you have a sample ballot, you have local 
candidates, State reps, county council, and your Federal 
candidates. And the State party or the county party or maybe 
the city party or the ward organization is putting this ballot 
out. And under current law, as I understand it, subject to the 
panel's correction, they would have to have a Federal PAC in 
order to finance that portion of the sample ballot that is 
reflective of your presence or the Presidential or any other 
Federal candidate, U.S. Senate candidate, that might be on that 
ballot. And for small city, county, and some State parties, 
that is burdensome, to have a separate political Federal PAC to 
do that.
    This bill would say if you are giving out a sample ballot 
that has all of the candidates on the sample ballot, regardless 
of affiliation, and maybe you highlight the party you want or 
circle it or whatever you do, that they could do that with soft 
money, the money they already have, their money, and that would 
be allowable. It wouldn't be a ballot you could put out using 
soft money as a Federal candidate, but your name or picture 
could be on that ballot, and they could pay for it using their 
soft-money funds, so long--as I said--any candidate that was 
running was on it, although you might be the candidate that 
might be highlighted or the preferred candidate.
    That is my interpretation of what my bill is trying to do.
    Mr. Brady. I don't like that interpretation. Couldn't be a 
partisan ballot? I couldn't put a ballot out there that said--I 
am a Democrat. I am a partisan guy. I want to put a ballot out 
that--and my party dictates if I put a ballot out on a 
Republican candidate--no disrespect--that I could be in 
violation of my party rules. Now, I can't put a ballot out that 
just has partisan, pure Democrats running against--either in a 
primary or in a general election--against Republican 
candidates? I couldn't do that?
    Mr. Wynn. Under current law you have to have a Federal PAC 
to do that for your share.
    Mr. Brady. My share?
    Mr. Wynn. Your share.
    Mr. Brady. How about candidates? How about a mayor? You 
have to juggle this?
    Mr. Wynn. Right. What we try to do is open a very narrow 
exception. And our styles may be different in terms of what we 
do, in terms of sample ballots, where you have the official 
sample ballot and then you highlight or circle the Democrats or 
the Republicans, as the case may be. You hand it out but all 
names are on it.
    We tried to carve out something that was narrow enough to 
help us. I would assure I would support what you just 
described, which is the ability of the local party to put out a 
sample ballot and fund it with local funds or State funds that 
included Federal candidates. I would be happy if the committee 
expanded that and it is common sense.
    Mr. Brady. In Philadelphia, you put out a 4:00 ballot, a 
6:00 ballot.
    The Chairman. There is one other issue--and I could be 
wrong, but I called the FEC myself this year--and it is 
shocking. It deals with hard money, not soft money. But I was 
told that if it is 120 days before the election and a State rep 
candidate asks ``Bob Ney, can I use your picture and a quote 
from you to support my candidacy?'' and I were to say ``yes'' 
but I don't pay for it with hard dollars from my campaign 
committee, I would have violated the law. I told this to a 
Member the other day who said,'' You got to be kidding me,'' 
and went running.
    Think about this for just a second. If a candidate comes to 
any of us and says, ``Can I use your picture, or can I use a 
little quote,'' and it goes into their brochure--nothing to do 
with soft money--we have to pay for that, or a portion of it. 
Now, I am told that is the law of the land. So you start to 
think about it. Now I am----
    Ms. Millender-McDonald. State candidate or a Federal 
candidate?
    The Chairman. County commissioners, city council. If the 
candidate doesn't seek your permission but kind of knows you 
would support them, then they can do it. And if you coordinate 
with them it is legal. But then, of course, somebody is going 
to go to the FEC and say, I know you coordinated with them, 
didn't you? You winked and you nodded. I have to sit there and 
do eye signals and say it is okay to do it.
    Do you know what this means? Any State Senator in your 
district, Democrat or Republican in my district, can go help 
candidates all they want, but the local candidate is going to 
turn around and say, ``Why you won't help me up the ladder? 
Other people helped you to get where you are, but you won't 
help me. My State Senator helps me.'' I think that is another 
thing. I think it is absolutely against the nature of the 
Constitution; we cannot use our name to say I think you are a 
good candidate.
    Ms. Millender-McDonald. This is why, Mr. Chairman, that 
these bills to me are rather short-sighted at this point, 
because it really does not do anything, unlike Mr. Doolittle. 
You get rid of 527s, there is going to be another run of the 
mill of groups. These things are so convoluted that we are busy 
trying to go through this stuff and now you are coming with 
more convoluted laws.
    I really do think, gentlemen, we should keep our powder dry 
and let this stuff percolate for a little while and not bother 
with it. I don't know the 527s. I have never dealt with them. I 
know the results were my constituents were more informed and 
more involved. They came to me with different things that 
someone had educated them on. And for that reason I appreciate 
whoever-it-was 527s.
    And I have never talked with MoveOn.org and none of these 
527s and, of course, I can't get involved with them. But I am 
saying at this point, we should allow them to continue that 
freedom of expression, the first amendment rights that is given 
them, like Mr. Pence said, and allow these groups to flourish.
    Mr. Brady. I don't know whether there are some labor 
experts out there, but a labor PAC, Federal versus nonFederal, 
a local labor PAC versus a Federal PAC. The differences you 
just mentioned about your wife being a teacher; if you allow or 
force a local labor PAC to have to get a Federal PAC for every 
contribution, or for any contribution, or make them have a 
Federal PAC to conform with the law, then you have people that 
are putting the money all over the country that they don't even 
know the name, let alone supporting an opponent.
    And the difference between that is the local labor PAC know 
their local people. And if they have a Federal PAC, they have 
to get sanctions. They have to get agreements by their Federal 
people, and it is harder, and they start losing that touch, 
that local touch that they could have by distributing and 
funding candidates that they like. And they are not partisan 
completely.
    I am still a member of a labor organization that supports 
not only just Democrats but support good people, and they have 
that ability to do how they want, where they want, and the 
amount that they want to do, depending upon on how much they 
have been served or how much they think they are going to get 
served.
    When you go to a Federal PAC, they lose that complete close 
hands on, touching hands on appeal, and they also lose the 
respect of the people that they are supporting because it comes 
out of Federal PACs in Washington and people start losing their 
local touch even if--and candidates know they have the support 
of the local people. They still say thank you to the Federal 
PACs, and they don't want to lose that, and I think we should 
preserve that for our local labor people also.
    The Chairman. I have one final question, and if anybody 
else has anything----
    Mr. Pence. Mr. Chairman, if I may, I would point out that 
the gentleman from Pennsylvania's attention to section 6 of the 
Pence-Wynn bill, not only do they--which by repealing Wellstone 
that we would allow labor organizations and other outside 
groups greater flexibility in using individual dollars to 
participate politically, but we have a small provision that has 
to do with prior approval that corporations and labor 
organizations have to acquire before they can communicate with 
their members on specific issues.
    So our bill is truly a bipartisan bill and Mr. Wynn has 
done an extraordinary job trying to help me understand that 
round of American politics and public life that I don't 
appreciate. But we have been trying to bring more freedom into 
this process for all outside organizations, including labor 
unions. But section 6 may be of interest to you.
    Ms. Millender-McDonald. Mr. Chairman, your bill is a 
bipartisan bill, but hard money does advantage one of our 
political parties. And we know that. When you bring in hard 
dollars, it does advantage the Republican Party as opposed to 
the Democratic Party, it has been shown by data.
    Mr. Pence. And that, again, the gentlelady's point. I can't 
help but feel that you and I are not terribly far apart. And 
one of the concerns about BCRA and one of the reasons I opposed 
it was my belief that, much consistent with what Mr. Doolittle 
said, that the antidote and challenges in the political economy 
of a free society is more freedom, we ought to allow the 
resources to flow in the direction of the candidates and ideas 
of their choice as long as there is complete disclosure of the 
source of those revenues, and that information is made 
available to the public in a timely way.
    So I am not here really to defend the broad scope of BCRA 
that eliminated soft money, but it is important for me and Mr. 
Wynn to make sure the committee understands that nothing in our 
bill brings soft money back to Federal candidates or parties. 
We do, however, say to local parties with regard to sample 
ballots and voter registration that you may utilize State-
regulated dollars in ways that make reference to Federal 
candidates without violating the law.
    The Chairman. Mr. Wynn, and then Mr. Shays.
    Mr. Wynn. It is interesting in terms of who is advantaged 
by hard money. According to the FEC, the DNC raised $394 
million. The RNC raised $392 million. The DSCC raised $88 
million. The NRSC raised $78 million. Our deficit was with the 
DCCC which raised $93 million compared to the NRCC which raised 
$185 million.
    So I think it is not necessarily that hard money benefits 
the Republican Party. It seems that the fact that you have 
these aggregate limits suggests that the money is going toward 
other committee parties and not the DCCC.
    Ms. Millender-McDonald. You must be speaking from a 
quarterly basis not----
    Mr. Wynn. 2003, 2004 report.
    Mr. Doolittle. Would you yield for just a moment?
    Ms. Millender-McDonald. Yes.
    Mr. Doolittle. I think, Mr. Wynn, you will find that while 
the NRCC raised considerably more money, they did that in large 
part because of a direct mail program which was extremely 
expensive. I suspect that a good deal of that advantage would 
be lost after you calculated in the cost of raising that money. 
But on paper--so I am saying it looks more significant than it 
really is, even in the case of the twoHouse-based partisan 
organizations, the DCCC and the NRCC.
    Mr. Shays. If I could, I would like to submit for the 
record an article David Broder wrote on Thursday, February 3, 
in which he had said he had been a skeptic and opposed McCain-
Feingold. And then in this one paragraph he said, ``The 2002 
law, which insiders refer to as BCRA, did not, as many critics 
fear, weaken political parties or stifle political debate. 
Instead, it played a supportive role in the greatest upsurge in 
the number of small contributions.''
    [The information follows:]

                       A Win for Campaign Reform

    As one who has been skeptical of the claimed virtues of the McCain-
Feingold campaign finance law, I am happy to concede that it has, in 
fact, passed its first test in the 2004 campaign with flying colors.
    The 2002 law, which insiders refer to as BCRA (for Bipartisan 
Campaign Reform Act, pronounced bick-rah), did not, as many of us 
critics feared, weaken political parties or stifle political debate. 
Instead it played at least a supportive role in the greatest upsurge 
ever recorded in the number of small contributors.
    Those conclusions were, in effect, forced on me by listening to a 
bevy of experts present their evidence at a recent forum sponsored by 
the nonpartisan Campaign Finance Institute in Washington.
    Michael Malbin, the institute's executive director, reminded 
listeners at the outset that, when it was passed in 2002, BCRA, which 
he called ``the most important change in a generation'' in campaign 
finance regulation, had drawn vehement criticism.
    While some argued that it did too little to stem the flow of money 
into politics, Malbin said, the main complaint was that ``it did too 
much.'' Its ban on unlimited ``soft money'' contributions to the 
parties would weaken their role, critics said, and its restrictions on 
outside groups' ads during campaign time would harm free speech.
    The prediction about the parties turned out to be flat wrong. As 
Anthony Corrado of Colby College showed, the national party committees 
together raised $1.2 billion in hard money (regulated contributions) in 
the 2004 election cycle, $140 million more than they had raised in hard 
and soft money combined for the 2000 contest.
    The were helped by a boost in the maximum permitted hard-money 
contribution but even more by a vast increase in the number of small 
donors. Republicans had been working away at that goal for years, but 
they still were able to expand their donor base in 2004 by 1.8 million.
    For Democrats, the change was dramatic. From a dependence on soft 
money for more than half the budget in 2000, said Jackson ``Jay'' Dunn, 
the DNC's national finance director, Democrats switched to a reliance 
on small donors. They expanded their list of direct-mail prospects from 
1 million to 100 million and their Internet contacts from 70,000 to 1 
million.
    While Republicans held an overall fundraising advantage, Democrats 
narrowed the gap to the smallest in two decades and, for the first 
time, the Democratic National Committee actually outraised the 
Republican National Committee.
    But there were significant differences in the way the two sides 
spent their money. Democrats emphasized TV ads, filling in for John 
Kerry during times in the campaign when their nominee was running low 
on funds. Republicans put the bulk of their funds into grass-roots 
organizing.
    Jack Oliver, a principal fundraiser for the Bush campaign and the 
RNC, said that difference paid off for the president in closely 
contested states such as Ohio. There and elsewhere, he said, local 
volunteers recruited by the Bush campaign proved more adept at turning 
out voters than the out-of-state workers hired by independent groups to 
whom the Democrats ``outsource'' much of their precinct work.
    Despite these differences, all three of the experts--Corrado, Dunn 
and Oliver--agreed that the emphasis in coming campaign cycles will be 
on face-to-face contact with voters.
    Corrado complimented the Democrats for recruiting 233,000 
volunteers who made 11 million phone calls. But he said he was even 
more impressed by the way those in the Bush campaign linked candidate 
appearances and scheduling decisions to voter mobilization efforts.
    Because they knew that the president, the vice president and the 
first lady could draw crowds, they offered seats and standing room at 
their events as rewards for people who had volunteered time on the 
campaign. And the Bush-Cheny rally attendees were recruited on the spot 
to go back out to the precincts and work on their neighbors.
    BCRA, the experts said, clearly did not eliminate the influence of 
big-money contributions. Some of the gifts to independent advocacy 
groups--the so-called 527s--dwarfed in size any sums ever given to the 
parties in past soft-money contributions. That issue remains to be 
resolved.
    Oliver and others cautioned that the new campaign finance system 
must still be tested in a cycle when there is no close presidential 
contest to stir public interest. But a solid start has been made in 
expanding the financial base of both parties and using the resources to 
bring more people into the electorate. That is all to the good.

    Mr. Shays. Which leads me to this point. We sometimes bring 
in God in issues and sometimes bring in freedom of speech in 
these issues, I want to argue as profusely as I could that I 
believe the campaign finance reform protected freedom of 
speech. And the Court acknowledged the fact that it 
guaranteed--and our law was based on the fact of guaranteeing 
that the wealthy don't drown out the voice of those who have no 
money. And if we equate dollars with freedom of speech, we are 
saying that those who have more money have freedom of speech.
    The whole intent and the whole reality of the campaign 
finance law was to move the political parties to more people, 
less larger contributions. And if you don't deal with 527s, you 
will now create an incredible loophole that will allow 
unlimited individual money, unlimited corporate money, 
unlimited union dues money, to go into these 527s at the 
expense of all other groups, and you can't do it. And if you 
take out the 501(c)(4)s and say they can get soft money 
contributions, corporate union dues, you are just creating the 
problem and making it worse.
    Mr. Shays. So, I would also just say, Mr. Brady, I believe 
very strongly that unions should participate and corporations, 
but they do it through a political action committee so that 
their members do it voluntarily and it is not forced. The 
corporate folks are not forced, the union guys are not forced, 
and it is done through a political action committee. I think 
that is the way you do it, and that is the way you build a 
stronger base of activities.
    So, I am for freedom of speech. I just don't want the 
wealthy to drown out the poor.
    The Chairman. Mr. Doolittle.
    Mr. Doolittle. Well, Mr. Chairman, I am for freedom of 
speech.
    Mr. Shays, I know this goes right to the heart of our 
disagreement, but first of all, we are not creating any 
loophole. It was your law that created the present loophole. It 
specifically did not address 527s. Now you are asking us to 
come in and address 527s. It was quite clear 527s were never 
included within the law, they are expressly not included within 
the law, and the law never would have become law had they been 
included in the law. Now you are asking us to do that, and we 
are on the slippery slope of regulation.
    I personally am in favor of doing it, but I don't feel good 
about doing it, and I don't believe for a minute it will do 
anything of any lasting consequence. We will simply have a new 
level farther out that will be doing the activities of 527s, 
that they are doing today, and as Mr. Pence said, eventually I 
guess the courts are going to decide they can regulate, the 
government can regulate everything, and they will be knocking 
than on the door of the individual.
    But I don't see that the present law did anything about 
balancing wealthy people. The only people that can give 
unlimited amounts of money are wealthy people. Everybody else 
is regulated by your law. George Soros is a mega-billionaire. 
Right now, even if we passed the 527, he could give all the 
money that is his own to candidates that he wants to. If we 
pass your 527 law, then there will be some additional 
regulation that kicks in.
    But I find it frustrating, and I found it frustrating 
during the debate over the law that passed, this talk that 
somehow we are taking the money out of politics. That is utter 
nonsense; was utter nonsense, is utter nonsense and will always 
be utter nonsense. Money will flow downhill like water does, 
and it will flow any way, around any obstacle it has to, to get 
to its intended point.
    To sit here and pretend that we have contained the 
influence of money or special interest with political parties, 
everybody sort of knows what a Democrat is or a Republican or 
an American Independent or Peace and Freedom. We have a few 
smaller parties. When you get into 527s and these little 
groups, whatever the successors to 527s are, we don't have any 
idea what it is. Far from disempowering special interests, this 
law that we presently have has turbocharged special interests, 
and that is going to continue to be the case until and unless 
we repeal your law, we repeal the preceding law, and we strip 
away every last vestige of this until it is truly deregulated.
    I will stipulate for an FEC to allow us to file reports for 
how much money we are contributing. But I think that would give 
full effect to the first amendment, which says Congress shall 
make no law abridging the freedom of speech.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Pence.
    Mr. Pence. A very small point. The provision of the Pence-
Wynn bill that repeals the Wellstone amendment would not permit 
soft money to go into 501 organizations. All we would do is 
return to the original language of the Bipartisan Campaign 
Reform Act or permit individual funds, organizations, labor 
unions, the National Education Association, National Right to 
Life, NRA, to raise money from individuals that they could then 
use in otherwise appropriate ways during the affected period.
    The question as to the limitation of it, I will let the 
lawyers' panel answer about what the internal effects of the 
current law are on 501s, but it would not constitute corporate 
money, in my judgment. Neither would it constitute allowing 
unlimited labor union money in. But BCRA in its original draft 
allowed individual members to participate in that, and that is 
the intention of Pence-Wynn.
    It is so important to me to say, Mr. Chairman, and I am so 
grateful for this thorough hearing, that particularly with the 
headlines today that say that we differ on soft money, apart 
from the issue of whether or not State and local parties can 
mention candidates in sample ballots, candidates for Federal 
office, there is no soft money implications in Pence-Wynn at 
all. Ours is simply an effort to level the playing field using 
hard dollars and individual contributions, is specifically what 
we would empower in the 501s.
    Mr. Shays. Could I also thank you for giving us such time, 
you have been very generous, and all the members have. And to 
say one little concern with the next panel that follows, they 
are all esteemed individuals, but all three, I think, oppose 
the campaign finance law. So, Mr. Brady, I am a little 
concerned that you may get a view that will appeal to you, but 
won't have that different side of the equation.
    The Chairman. I will note on this topic that we did invite 
people that had both opinions. Unfortunately, two or three of 
the people simply could not make it. I did want to mention that 
for the next panel, we had what we consider balance, but 
unfortunately, and it is not their fault, two or three of the 
people couldn't make it.
    I have one final question that I want to ask you directly, 
because you authored BCRA, and because I have been reading 
about this recently. Do you believe BCRA requires the 
regulation of blogs and other Web sites that engage in online 
political speech?
    Mr. Shays. No, I don't believe it does.
    The Chairman. Thank you. I want to thank our colleagues. 
You did a wonderful job and it was a healthy debate. Thank you.
    We will move on to the second panel. I want to thank the 
panel. In our second panel today we are fortunate to have with 
us a number of leading scholars and practitioners in the field 
of campaign finance law; Cleta Mitchell, a partner in the law 
firm of Foley & Lardner; Bob Bauer, a partner in the law firm 
of Perkins Coie; and Larry Gold, Associate General Counsel of 
the AFL-CIO.

  STATEMENTS OF CLETA MITCHELL, PARTNER, FOLEY & LARDNER; BOB 
BAUER, PARTNER, PERKINS COIE; AND LARRY GOLD, GENERAL COUNSEL, 
                            AFL-CIO

    The Chairman. I want to thank you for being here. We will 
start with Ms. Mitchell.

                  STATEMENT OF CLETA MITCHELL

    Ms. Mitchell. Thank you, Mr. Chairman, members of the 
committee. I, first of all, want to say that I believe that 
this committee under your leadership, Mr. Chairman, has done 
the best job of anybody in Congress over the last several years 
of looking at these issues and considering them carefully. We 
really appreciate your leadership.
    I appeared before this committee in June of 2001, and Mr. 
Shays is correct, I did appear in opposition to BCRA. I opposed 
it then, but it is now the law of the land. But the fact is 
that in my testimony in 2001, I referred to a situation, I drew 
an analogy. I said that I was reminded of a situation a number 
of years ago when Jim Jones took his People's Temple from San 
Francisco to Guyana and got hundreds of people one day to drink 
poisonous Kool-Aid in a mass suicide, and I have always 
wondered why someone didn't look up and say, ``Hey, what is in 
this Kool-Aid?''
    I remember at the time that then ranking member Steny Hoyer 
took me to task and assured me that BCRA, Shays-Meehan, had 
been thoroughly studied, was well understood by the Members of 
Congress, and certainly Congress would not be considering, 
enacting, a piece of legislation with which it was not 
thoroughly familiar.
    Well, I don't want to say I warned you, but the fact is I 
think that many Members of Congress really did not understand 
the true implications of BCRA. And I would caution you today to 
not allow the very same people who brought you BCRA to now 
bring you a whole new regulatory regime with the assurances 
that they know what is in it and just to trust them, because I 
have already heard, sitting here today, at least two different 
amendments that they are prepared to offer of things that they 
had not thought about when they drafted it.
    I would also like to point out one other thing from my 
testimony from several years ago, which was that I introduced 
as part of my testimony into the record a report that I had 
done entitled ``Who is Buying Campaign Finance Reform?'' it 
talked about tracing the funding of the campaign finance reform 
movement.
    But Chapter 7 of that report, which was in the committee's 
record, was a look ahead at what would happen if BCRA became 
law or if McCain-Feingold-Shays-Meehan became BCRA. The title 
of that chapter was, ``Okay, Fine. Let George Soros Replace the 
DNC.''
    Congressman Doolittle is exactly right, that the 527s were 
not a creation of the Federal Election Commission. The FEC was 
not responsible for this ``loophole.'' It was clear that they 
were not intended to be covered. I think the Chairman was 
someone who was concerned about the possible implications.
    Having said all of that, let me turn to the pending 
legislation. I do think it is a mistake for the Congress to go 
into a completely new regulatory regime, because, I promise 
you, you will be back here in 2 years trying to fix the things 
that the Shays-Meehan authors are telling you today are 
completely simple and easy to understand.
    I would urge the committee to actually, if it does 
anything, to do something that is simple and easy to 
understand, that we know exactly what the implications are, we 
know exactly what it means, and that is to enact the 527 
Fairness Act of 2005, the Pence-Wynn bill, House Resolution 
1316.
    Let me just briefly go through the bill--I don't have time 
to go through all the provisions, although the bill is pretty 
simple, it is pretty quick. The legislation does a couple of 
important things.
    It does strengthen the political parties. Again, I come 
back to the things that Congressman Wynn and Congressman Pence 
said repeatedly. It does not, it does not, raise the hard 
dollar limits. What it does allow, and I think that one of the 
points that was not alluded to at any length in the earlier 
panel, is something that is one of the most important pieces of 
Pence-Wynn, and that is the repeal of the limits on the 
coordinated spending that political party committees can spend 
on behalf of their candidates.
    Because political parties raise only hard dollars now, this 
bill would let the political parties make the decision as to 
how much they want to spend on behalf of any of their 
candidates. It would enable parties to recruit people who 
aren't independently wealthy, because the party committees 
could say we will be able to help you, and then the parties 
would be able to spend the money where they choose to help 
their candidates.
    One of the things that happened in BCRA was that Shays-
Meehan and McCain-Feingold put into place a provision that 
would have required the political parties to choose between 
making independent expenditures on behalf of their candidates 
or making coordinated expenditures. One of the very few 
provisions that was struck down by the Supreme Court in the 
McConnell case was that particular provision. The Supreme Court 
said that the parties should not have to choose between making 
independent verus making coordinated expenditures.
    Therefore, what we have in the last cycle was this charade 
that has grown up where the parties have to set aside money and 
give it to independent expenditure units, over whom they can 
have no control, and no control over the message because that 
might be deemed to be coordinated. So we have this fiction of 
people going into and out of separate doors or building 
partitions inside campaign headquarters where party people may 
be so they can pretend that this side over here is independent 
and this side over here is coordinated with the candidates. Why 
not get rid of that? The party coordinated spending limits are 
an anachronism, they were put in place in the 1970s.
    The Supreme Court said about the other spending limits that 
were also included when the court in Buckley struck down 
spending limits that being free to engage in unlimited 
political expression subject to a ceiling on expenditures, is 
like being free to drive an automobile as far and as often as 
one desires on single tank of gasoline. The court was right 
then. I would urge the committee to enact Pence-Wynn and repeal 
the coordinated expenditures limits by political parties.
    I see my time is up. I think the other provision of Pence-
Wynn have been addressed fairly thoroughly in the first panel, 
but I did want to address the coordinated spending limits, 
because I think that is a very important aspect of Pence-Wynn.
    I will be glad to answer questions when my time arrives.
    The Chairman. Thank you.
    [The statement of Ms. Mitchell follows:]




    
                     STATEMENT OF BOB BAUER

    Mr. Bauer. Thank you, Mr. Chairman, and to members of the 
committee, for inviting us to testify. I would like to open, 
first of all, by saying I am confident my colleagues here and I 
on this panel could constitute ourselves as a bipartisan law 
firm to provide clearances to Congressman Brady on the 
questions that he had, except that he should know that it will 
not come cheaply.
    Mr. Brady. I know that.
    Mr. Bauer. But you won't be a test case. You will just be 
poorer for being safer.
    In any event, what I would like to do is very briefly 
summarize my testimony here within the time allotted and ask 
that the full statement be incorporated into the record.
    A number of reasons have been given for the bill before the 
committee at the moment to regulate 527s, and I would like to 
distinguish between and among those reasons which I think have 
in common only that they are all bad reasons.
    First of all, it is denied on the part of those who support 
this bill that they are seeking to limit money in politics, but 
they are, in fact, precisely seeking to do that. There is no 
other explanation for the continuous reference to the amount of 
money spent by 527 organizations, or for that matter, we hear 
is also said of 501(c)s. If the amount of money these 
organizations spent were not a rationale for this bill, why are 
those figures continuously being cited as they were repeatedly 
today?
    There is a view that if these organizations are spending in 
money and if they are, in fact, influencing elections, their 
activities ought to be restricted by this Congress.
    Secondly, there is an argument that everybody should play 
by the same rules; that if political committees and party 
committees raise and spend money to influence elections, so too 
should these 527s.
    I think that Congresswoman Millender-McDonald expressed 
extremely well the point of view that we have to distinguish 
between and among groups by who they are and what functions in 
our political process they discharge. Placing restrictions on 
groups that seek to express themselves on issues or to conduct 
issue-based voter mobilization drives is not an appropriate 
action of this Congress. It depresses activity our citizens 
should be able to freely engage in without confronting the 
kinds of complexities we have heard discussed today by, among 
others, Congressman Brady.
    It is being said that this is a result of the FEC's 
enforcement failure. This is simply incorrect. The issues 
presented by BCRA are complex, as Congressman Doolittle has 
said repeatedly here today, and I think quite correctly. The 
FEC wrestles with a question which is both complex as a matter 
of regulatory law and complex as a matter of constitutional 
law. The decisions that they reached were hard-fought 
decisions. It is a mistake to say that they defaulted on their 
duties. I view this as a talking point that has been 
substituted in this debate for reasoned discussion of the 
issues.
    Last, but not least, it is said this is good public policy 
without partisan impact. This is a bill with partisan impact. 
As I say in my testimony, no campaign finance reform is ever 
neutral. It typically works at some particular time in history 
to one side or the other. The Democrats understood this in the 
1970s and were, in fact, rebuked for it from time to time, 
including, by the way, ironically by The New York Times in 
1971.
    It is true, I believe, of the Republican Party today that 
there is a desire to take advantage of this debate to move 
regulation in the direction of partisan advantage.
    There are good reasons, and I am going to summarize them 
very rapidly with 1 minute 37 seconds to go, why this bill 
ought not to pass.
    Number one, it goes without saying that there are 
significant rights of association. Again, I go to the 
Democratic ranking member because I could not say it better, 
and those rights of association are significantly threatened by 
this bill.
    Number two, the passage of this bill will enlarge the 
sphere of regulation and add to the mind-numbing complexity 
that the members of this committee have discussed this morning. 
Congressman Pence rightly worries about moving regulation 
closer to individuals. It will move regulation closer to 
501(c)s. It will enhance the role of the Federal Election 
Commission, which will be called upon as an instrumentality of 
the government to continue to issue opinions, I might add, like 
the one you cited, Mr. Chair, that makes contacts within 120 
days between groups and members subject to the coordination 
rules, and render even endorsement ads illegal.
    It will adversely affect State and local regulatory 
activity or make it so some complicated that State and local 
parties, like Congressman Brady expressed the concern about, 
are unable to discern what they can legally and not legally do.
    It will invite, as I said, continuous FEC involvement in 
controversy. It will place restrictions on voter drive 
activities by dramatically increasing the amount of hard money 
that allocating committees, registered political committees, 
have to spend to get out the vote and register voters.
    So, in summary, let me say that these bills, as I conclude 
in my testimony, that is to say S. 271 and its House 
counterpart, are not needed by any coherent rationale, have 
been argued on weak grounds, are technically deficient, are 
likely to invite still more unneeded regulation in the future, 
are threatening to State and local activity of a particularly 
lawful nature, are inappropriately partisan and are dangerous 
to party health and development.
    Thank you very much.
    The Chairman. Thank you.
    [The statement of Mr. Bauer follows:]




    
    The Chairman. Mr. Gold.

                    STATEMENT OF LARRY GOLD

    Mr. Gold. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify today on behalf of the AFL-CIO, the 
national labor federation whose 13 million members in 57 
national and international unions work in innumerable 
occupations throughout the 50 States and have a great stake in 
both the rules that govern how we engage in politics and what 
we do under those rules.
    Over many years, unions have come to look at governmental 
restrictions on political participation very warily and to 
appreciate the genius of the First Amendment as a guarantor of 
both individual liberty and group self-realization in the 
political sphere, because we trust the common sense and 
independent judgment of ordinary people to make up their own 
minds without arbitrary controls over what and who they can 
hear, read or engage with.
    The labor movement was actively engaged in the legislative 
consideration of BCRA in 2001 and 2002, and we pressed at the 
Supreme Court our deep-seated objections to having that statute 
criminalize certain union broadcast speech and redefine certain 
coordination with Federal candidates and political parties.
    Congressman Shays is incorrect that I or the AFL-CIO just 
out and out opposed BCRA. We supported the restrictions on the 
soft money contributions to national political parties, but we 
feared that if the novel speech and coordination restrictions 
were codified and held to be constitutional, then the path 
would be laid for much broader restrictions, either in the 
interest of further protecting incumbents as a class, at the 
insistence of a lobby of self-styled campaign finance 
``reformers'' whose regulatory agenda has no bounds, or in the 
particular service of a political party, that unlike the 
situation in 2001 and 2002, but the situation today, firmly 
controlled the Executive Branch, House and Senate at the same 
time; and now, all three could be coming to pass.
    We believe that Federal election law should foster, through 
relatively less regulation, the political activities of 
membership groups, at least insofar as they derive their income 
from individual dues and contributions, regardless of whether 
their status is a union, an unincorporated association or a 
nonprofit corporation.
    We also believe that the law must recognize the fundamental 
distinction between contributions to politicians and political 
parties on the one hand, and speech, activism, advocacy and 
mobilization that occur independently of politicians and 
parties on the other hand, even if they do influence their 
official conduct and/or legislative and electoral fortunes.
    Contributions plainly have directly corrupting potential 
and their deregulation favors those enjoying the greatest means 
to give directly, without necessarily reflecting proportion of 
popular support. But civic engagement cannot corrupt 
officeholders. It us undertaken by the powerful and powerless 
with unpredictable impact, and it is what the First Amendment 
most fundamentally protects.
    For decades, independent non-Federal section 527 
organizations, whether freestanding or sponsored by tax-exempt 
section 501(c) groups like unions, trade associations and 
advocacy organizations, have involved citizens in public life 
and increased voter participation, again, since long before the 
recent efforts to turn an obscure, three-digit Internal Revenue 
Code designation into a four-letter word.
    Since the 527 amendments in 2000, before BCRA, all of these 
527 entities have publicly disclosed their income and spending. 
Congressman Miller, I believe, is incorrect to say that they 
are not transparent. They are. There is nothing secret or 
shadowy or unaccountable about 527 organizations. In fact, many 
of them are the separate segregated political funds that 
section 501(c) groups create and control due to explicit 
requirements of Federal tax law and explicit advice of the IRS 
since 1975, as old as the modern Federal Election Campaign Act 
itself, that establishing and using these accounts for 
electoral activity is necessary in order for the section 501(c) 
group to remain tax exempt.
    So, unions and trade associations and advocacy groups do 
use these accounts for non-Federal contributions, for 
independent advocacy, for voter mobilization, registration, 
get-out-the-vote, for donations to allied organizations and for 
other purposes.
    In all that has been written about the 527 issue in the 
last year-and-a-half or so, there has been virtually no 
complaint about how section 501(c) groups use their section 527 
funds, and yet H.R. 513, the so-called 527 Reform Act, treats 
those 527 accounts just as harshly as it does the independent, 
non-connected section 527 groups. In fact, we believe Congress 
should reject any new restraints on any of these groups.
    Let me just summarize quickly what we think the bill would 
do and why it is undesirable. H.R. 513 would sharply curtail 
the ability of individuals and groups to associate in their 
pursuit of political and policy goals, even completely 
independently of candidates and parties, posing no risk of 
corruption and with full public disclosure of the receipts and 
spending, because it outlaws many non-Federal section 527 
organizations.
    The bill would force unions and advocacy groups and trade 
associations and nonprofit corporations to finance 
substantially more of their communications about Federal 
officeholders and voter mobilization, either through Federal 
PACs or through taxable general treasury spending.
    It would mandate for the first time that independent groups 
use hard money merely for references to Federal candidates and 
political parties in their public communications and in voter 
registration and GOTV activities, going far beyond current law.
    It would skew Federal election law in favor of business 
corporations over unions and other nonprofit groups because 
businesses can typically continue to spend for political 
purposes in tax-neutral ways while nonprofits, which are denied 
the use of their 527 accounts, will be taxed at the highest 
corporate tax rate.
    Finally, it would override State laws almost everywhere to 
turn State and local PACs into Federal PACs if they spend over 
$1,000 to publicly comment on the office conduct of Federal 
officeholders, having nothing to do necessarily with any 
election, or undertake most partisan or nonpartisan voter 
registration or get-out-the-vote activities.
    My written testimony explains these consequences and others 
in more detail, and I appreciate again the opportunity to 
appear today.
    [The statement of Mr. Gold follows:]




    
    The Chairman. I want to thank the panel. The more I listen, 
the more I do become confused. Mr. Bauer is identical to Mr. 
Doolittle in a sense, not politically, but in his opinion.
    You know, we have thrown names around here today, and 
although I don't agree with him, I give credit to George Soros 
for his willingness, frankly, to spend his money on what he 
believes in. I wish there could be a Republican who would have 
the same attitude, and then you would have an equal playing 
field.
    I don't think I would even be sitting here thinking about 
doing something for 527s if it wasn't for the fact that BCRA 
went in and took away the voice, in my opinion, of so many 
people. I represent, as you know, 128,000 union people in my 
district. I very proudly have accepted the support of those 
unions and those union rank and file over a period of 20-some 
years.
    I just look at it, and I see what this Congress did, and I 
am coming to the conclusion that two wrongs don't make a right. 
That is a question that has to be asked. Although I could 
probably tell from your testimony, let me just ask directly: Do 
you support BCRA itself?
    Mr. Bauer. Well, let me put it to you this way. Perhaps I 
will answer the question this way, which is it is the law of 
the land. I completely agree with Cleta Mitchell that there are 
aspects of this bill that were not thought through, that it is 
not crafted in a fashion that carefully tailors the activity 
that maybe Congress ought legitimately to think about 
restricting. So I have grave reservations both about the way it 
is structured and the way it is operated.
    I would also like, as long as Congressman Doolittle and I 
are marching side-by-side here, I would like to say one other 
thing in support of the comment he made earlier, and that is 
this 527 activity is not, let me stress, is not a loophole. 
There are specific references to 527 activity in BCRA. Congress 
was well aware when it considered and passed the legislation 
there were political committees of this kind whose activities 
might influence elections, and, for that reason, there are 
restrictions in BCRA on the transactions between 527s on the 
one hand and Federal officeholders and parties on the other. So 
Congress was well aware that this was a problem.
    Moreover as Congressman Doolittle correctly said, to the 
extent anyone believes this is a loophole, it is a federally-
statutorily created loophole. In other words, it is thereby, 
frankly, mandate of the government to protect these and permit 
them to operate in this fashion. Calling it a loophole, I 
think, again, is a rhetorical trick.
    The Chairman. I take from that that you, the primary 
sponsor of the 527 Reform Act, believe that 527s are regulated 
not by BCRA, but by the FEC.
    Mr. Bauer. That is inaccurate. What happened in this 
legislation was that as soon, and this is unfortunately the 
history of some aspects of the so-called reform movement in the 
United States, the 527 issue, for political reasons, was set 
aside and Congress encouraged not to have to worry about it. As 
soon as the bill was passed, the FEC was told it was required 
to step in and deal with the problem.
    That is not a publicly accountable way to deal with a 
political spending issue. It should have been addressed or not 
addressed by the Congress. But it is certainly not the fault of 
the federal regulatory agency that it refused to do that which 
Congress deliberately elected not to do.
    The Chairman. We are in this predicament here, and I call 
it a predicament, because you have average people out there in 
districts, and they sit there, Republican, Democratic, 
Independent, Libertarian, whatever they are, and know, if they 
are members of labor unions, that their money is the dirty, 
tainted money. And they sit there, and in their opinion, a few 
rich guys in this country are running the show, because soft 
money didn't end.
    That was the point I said on the floor of the House, and 
what I will say today. Look at the transcripts of the floor. 
Soft money will end as we know it. And it didn't. That is all I 
am saying. I am not saying it is good or bad, but it didn't 
end. That is my point, it didn't end. And if that language or 
that 527 provision had been in that bill, that bill would never 
have passed the floor of the House, in my opinion.
    Ms. Mitchell. Along those lines, Mr. Chairman, you are 
absolutely correct, and along those lines I sat here and 
listened to the sponsors of the 527 regulatory regime saying, 
oh, but we are not touching 501s. Not now they are not. But I 
promise you, that they will be back. This is, as George Will 
says, metastisizing Federal regulation. It never stops.
    That is one of the reasons I say that if for a change 
Congress were to take the Pence-Wynn approach, which is let's 
adjust, let's roll back some of the regulations, that that, in 
fact, would be a very new day in Congress.
    One of the things that bothers me tremendously is exactly 
what you, Mr. Chairman, just alluded to, the idea that the 
reformers always say we don't want the wealthy people to have 
control. We are going to take the big money out of politics.
    What BCRA did and what we are proposing, what hopefully the 
Pence-Wynn bill, if enacted, would do, is to take the situation 
that currently exists, where one guy can write a check for $1 
million and say whatever he wants, buy whatever ads he wants, 
do whatever he wants, but 1 million people giving $1 in their 
dues to the NRA or the AFL-CIO or any membership organization, 
cannot have that organization speak for them.
    So what we have really done is the exact opposite of what 
the reformers say they intended and continue to say is their 
objective. We have taken the ability of people to associate 
together who cannot themselves afford to buy radio and TV ads, 
but to pool their resources through their organizations and to 
be able to have the same speech rights as one wealthy 
individual. That is very distressing, I think, in terms of a 
model for the system.
    The other piece of it is with the parties, to be able to 
say that a political party has to be restricted in how much it 
can spend to support its candidates. Congress did recognize in 
the millionaires' amendment that there is a value, there is a 
public policy objective, to saying, okay, well, if you have a 
really rich guy running against you, then we are going to let 
you raise your contribution limits and the party coordinated 
limits are off and increased contributions don't count against 
the aggregate. So Congress has already recognized the idea of 
repealing or not counting coordinated and aggregate limits.
    I think that if we can take that and just get rid of those 
and get rid of the complexity, I mean, I finally couldn't 
explain aggregate contribution limits, so I did a picture, and 
I would defy any Member of Congress, without using a picture or 
a crib sheet, I would defy any Member of Congress to be able to 
explain the aggregate contribution limits. I don't mean that in 
any pejorative way, I am just saying it took me months and 
writing this down before I could do it. So anything that that 
is that complicated, we ought to get rid of.
    The Chairman. I want to have the other members ask 
questions. I just have one brief question, and it deals with 
BCRA. I think about my campaign 25 years ago, when I ran 
against a former Member of Congress that had been elected in 
the legislature, in other words, an incumbent. At that time the 
Republican Party said, ``We are going to help you.''
    We look at the Republican and Democrat parties and any 
other party that could come on the scene, and say, ``Well, wait 
a minute, they are pretty healthy; they raised X amount of 
money.'' But I don't think I would be here today had it not 
been for the Party's help. I might have an easier life or a 
less complicated one, but I don't think I would be here today 
if it wasn't for the party being able at that time to say, 
``Okay, we are going to give you a chance. Nobody else thinks 
you can win, but we are going to give you a chance.''
    That was my argument with BCRA. What are we doing down the 
line? Why do we restrict the two parties? Or, hey, if there is 
a third party, Independent Party, Natural Law, whatever, just 
in a nutshell, what will BCRA do to the political parties? Do 
they get stronger somehow, do they stay the same, or do they 
weaken?
    Ms. Mitchell. I believe that the intent of BCRA was in no 
small part to weaken the parties. I think the people who 
proposed it were not necessarily party people, probably think 
that people who walk around with donkey pins or elephant hats 
are slightly nuts. And the fact is it is another associational 
right of the American people, and I think BCRA really has, vis-
a-vis external groups, it has weakened the parties.
    I think you cannot look at 2004 and draw any conclusions 
from it in terms of the financial health of the parties going 
forward, and I think that is a very big mistake, to say, oh, 
the parties raised this $1 billion and saying everything is 
fine.
    I don't think everything is fine, and I don't think the 
parties ought to have to compete with each other to be able to 
raise funds within the hard dollar limits. So I think it is 
important to take a scalpel--I would like to take a sledge 
hammer, but it is the law of the land. Nobody has the stomach 
for taking a sledge hammer to BCRA. So it is take a scalpel and 
let's fix a couple of things that need to be fixed and then 
give it a chance to work.
    The Chairman. Mr. Bauer.
    Mr. Bauer. I entirely agree. I think BCRA was unhelpful to 
the parties. I think a good bit of the data being supported 
about the salutary effects on parties in 2004 is bogus data, it 
is being misruled, the numbers are not being properly or, 
frankly, rigorously used.
    I think it will take some time for us to account for the 
effects of BCRA. You cannot assess a reform piece of 
legislation of this kind in one cycle, because you have to 
adjust, control for so many factors.
    So I believe as a piece of legislation, it targets parties, 
and I agree with Cleta, it is supported by many that simply 
don't agree that parties play a healthy role in the political 
process. BCRA, in that respect, was unhelpful.
    Mr. Gold. Well, I think BCRA certainly had an approach on 
parties that, in part, unions supported with respect to 
limiting soft money directly to them. On the other hand, unions 
totally and completely support a very potent party system, and 
believe that wherever we go, it should not be in the direction 
as this bill, that is, H.R. 513 goes, which is to say let's 
protect our parties and others perhaps by suppressing other 
activity.
    The instinct here we think is in a pretty dangerous 
direction, and unfortunately was opened up by some of the 
aspects of BCRA that we did oppose and opposed very strongly.
    One thing that is happening here I think is that the 
classification of speech and associational activity is being 
federalized. You hear Congressman Shays refer to ``Federal 
527s.'' He wasn't talking about Federal PACs, he was talking 
about organizations that register with the IRS, do a lot of 
things, address a lot of issues, registered a lot of people, 
and reported everything they did to the IRS. But he has cast it 
under this notion of ``Federal.'' Everything is ``Federal.''
    That started in BCRA. That was an unhealthy aspect of one 
of the party provisions which we did not support, the notion of 
Federal election activities, anything that is voter 
registration within 120 days of an election, anything that is 
an attempt to get out the vote generally. Well, if it happens 
in a Federal election year, it is Federal activity all of a 
sudden. That is a terrible override really of State and local 
elections, but it is also an invitation, unfortunately, to 
pushing everybody and shoehorning all political activity within 
these very rigorous kinds of restrictions. That is unhealthy.
    This bill pushes that way further. Hard money now can only 
be used for references to Federal candidates in all spheres at 
all times if you are a 527. This whole notion of promote, 
support, attack and oppose which was introduced in BCRA, again 
only for State and local parties, now has, to use Cleta 
Mitchell's term, metastasized in this bill, now it applies to 
all 527s, whatever that means, if you do that. Whatever it 
means, we don't know what it means, but whatever it means, all 
of a sudden that becomes Federal activity.
    We view this as just, you know, marching in the wrong 
direction, and really intimidating organizations and just 
engaging in ordinary activity, talking about issues, 
legislation and public officeholders.
    The Chairman. I thank you.
    The gentlewoman from California.
    Ms. Millender-McDonald. Thank you, Mr. Chairman.
    Thank you all for being here. It is great to hear from you 
and to get the real experts talking to us about this issue.
    Ms. Mitchell, in your statement, you said that the first 
and truly most important provisions of the Pence-Wynn bill are 
those which strengthen the political parties. How much more 
strength do we need to give them from $1.2 billion? That is a 
lot of money that they raised. What other strength should we 
seek, outside of what has already been validated by the largest 
amount of money being spent in an election?
    Ms. Mitchell. Well, as I said earlier, Congresswoman, I 
think it is a mistake to conclude from the 2004 election that 
the parties are doing just fine. I think that that is a 
mistake, because I do believe that this election was somewhat 
unique, and we don't know going forward. That is one response.
    I would also add that when we say $1.4 billion was raised, 
my question is, is that enough? As compared to what? Is 
Congress going to be in the business of saying this is the 
right amount of money for parties to be able to raise to spend 
to help their candidates?
    It seems to me if we put that into a context, and I have 
seen many people do that before, comparing how much money is 
raised and spent in political campaigns, and compare that to 
how much money is raised and spent for advertising of potato 
chips, it is a minute amount. And what is more important, a bag 
of potato chips or who is going to be serving in Congress and 
elected to the presidency? So I think that is just not a right 
gauge.
    Let me go to the more practical aspects. I serve as outside 
counsel to the Republican Senatorial Committee this cycle, and 
it is very clear--I mean, I heard Congressman Shays talking 
about people could give, and I was trying to figure up where he 
was coming up with these numbers.
    Well, I suppose it is conceivable that somebody might give 
$26,700 a year to all six national party committees, but I 
would sure like to meet that person, because I don't think that 
that person really exists.
    You might have a few people, and we are talking about a few 
people, who want to be able to help the Republican Senatorial 
Committee and the RNC and the NRCC, all three, and they have 
the means to do that. Today, under current law, the NRCC, the 
NRSC and the RNC have to compete with each other for those 
donors. There aren't that many of them, but they have to 
compete with each other. The Republican Committees are not 
competing with Democrats for donors at that level, they are 
competing with one another.
    So I suppose there is somebody in America who would want to 
give $10,000, the maximum an individual can give, to the 
Federal accounts of a State political party and would want to 
give that to every Democratic State party and every Republican 
State party. Again, I think that is where those numbers had to 
be coming from--Congressman Shays' testimony.
    But I don't think that person really exists, and I don't 
know any person, any donor, who is likely to give the maximum 
to every State Republican party, to their Federal account.
    But I do think that if we have these hard dollar limits in 
place, we have already rationed those, let donors give to as 
many Federal candidates as he or she wants within the hard 
dollar limits and to as many parties. Why should one donor have 
to decide I can only max out under current law to nine 
candidates for Congress, and I can give the primary amount to 
one more.
    Now, it seems to me that that makes no sense. If what we do 
is say, all right, if you are a big rich guy, and you want to 
do more, rather than giving it over here to 527s, we will make 
it possible for you to give it within the system. We are not 
going to try to shut down the 527s, because that is going the 
wrong direction, but what we are going to do is we are going to 
make it possible for you to stay than with the regulated 
system.
    Ms. Millender-McDonald. You said, and if we go on the 
premise of what you said that this was a unique situation in 
terms of a $1.4 billion or whatever it was, then perhaps one 
could argue the point that the 527s were the unique situation 
at this time and perhaps would not have that type of money 
flowing in the next election. So we can talk about that on both 
sides of the spectrum and really come to the conclusion that 
both strengthen the political process, irrespective.
    Ms. Mitchell. I am not here to argue that 527s should be 
subject to all of this regulation that Congressmen Shays and 
Meehan are proposing. Let me be very clear: I do not think 
Congress should do that. I think that is following the same 
pattern that was followed under BCRA, and that we should stop 
doing that.
    I do think that as a means of encouraging people to stay 
within the regulated system, to support candidates, to support 
parties, to support Federal PACs, if we really believe and 
worship at the alter of hard dollars, let's allow people to 
give the hard dollars, let's allow the parties to not pretend 
that part of their support for candidates is coordinated and 
part is independent. Let's get rid of some of these silly 
things.
    Let individual members' dues money to the NRA and the AFL-
CIO and other organization be used--not money from corporations 
but from individuals, let people speak through their 
organizations, leave the 527s alone, do a couple of slight 
changes that encourage people to stay within the hard dollar 
system, support the parties, help the membership organizations, 
and then forget it. Let it be for a while.
    Ms. Millender-McDonald. BCRA's whole notion was to sever 
the links between politicians and soft money. It seems that the 
Pence-Wynn bill, unless I am not reading it correctly, opens up 
new opportunities for State and local parties to spend soft 
money, even on voter registration. Is that correct, my 
assessment of that?
    Ms. Mitchell. It allows State and local parties to spend 
their State-regulated money. Let me give you an example. I am 
from Oklahoma. I really resent--I object to referring to State-
regulated money as soft money. Some States have more 
restrictive laws and some States have less restrictive laws.
    I am from Oklahoma, and Oklahoma, a person can give, a 
family can give $5,000 to the political party in Oklahoma in a 
year. Well, the State party would be allowed, under Pence-Wynn, 
to spend its State-raised money, money raised under State law, 
not its Federal account money, but its State-raised money, to 
be able to do voter registration, even when their Federal 
candidate is on a ballot, even within 120 days of the Federal 
election, going back to what Mr. Gold referred to, that now 
under BCRA, all voter registration within 120 days of a Federal 
election has to be paid for with hard dollars, Federal dollars.
    Ms. Millender-McDonald. But given that, as you have just 
indicated, that certain States have differences in terms of the 
amount of money that they use, soft money that they receive, 
then there is still a disadvantage of one State over the other.
    Ms. Mitchell. Everybody is welcome to move to Oklahoma, if 
you like. Actually, California allows corporate dollars to be 
given, which Oklahoma doesn't allow. My point is it takes a 
little bit of the restriction that BCRA imposed, not a lot, but 
some of the restrictions away, allows State and local parties 
to spend their State dollars for voter registration, it allows 
them to spend them for sample ballots. If they mention a 
Federal candidate, whether or not they like it, they have got 
to have all of the Federal candidates for that office.
    These are very minor changes, but they are meaningful to 
State and local parties.
    Ms. Millender-McDonald. I suppose the Pence-Wynn bill tends 
to inject more PAC money into the political process by indexing 
the contribution limits for PACs, which BCRA did not do, and I 
have some concerns about that.
    Ms. Mitchell. See, I am not one of those people that thinks 
PACs are a bad idea, because, again, I believe in the notion 
that somebody who cannot write a $5,000 check to a candidate 
ought to be able, as a member of a union, or a member of a 
501(c)(4) organization or somebody who just wants to give to 
the Green Earth PAC, that if you can get a group of people to 
give small amounts of money, that is the whole idea of a PAC, 
is that a lot of people give small amounts of money can compete 
and be on the same level as somebody who can write a $5,000 
check.
    What will happen if PAC contributions are not indexed, is 
that within a few years the indexed amounts for individual 
contributions will exceed the amounts that PACs can give, and 
therefore, relatively diminishing the role of the small donors 
to the PACs vis-a-vis the wealthy individuals.
    Ms. Millender-McDonald. And bringing more special interest 
money in.
    Ms. Mitchell. Well, I don't see how that happens.
    Ms. Millender-McDonald. Really? It appears to me like it 
would.
    The other two gentlemen, is it fair to restrict 527 
activities and activities of other political committees 
organized by activists and ordinary citizens while removing 
restrictions from corporate interests and party organizations 
controlled by officeholders? What are your thoughts on that?
    Mr. Bauer. I have to say this is where I part company with 
Cleta. I think that the juxtaposition of Pence-Wynn with the 
proposed 527 regulation makes no sense as a matter of policy. I 
don't think it is a neutral as a partisan matter. I think it is 
just bad public policy, precisely for the reasons you suggest.
    Mr. Gold. I would agree. I think that, again, as I have 
said, we oppose further restrictions on independent, fully-
disclosed political activity by individuals and groups, 
particularly membership organizations, unions and others. That 
is exactly what the law ought to be fostering and encouraging, 
and the 527 bill is directly targeted against it and against a 
lot of nonprofit organizations.
    Pence-Wynn has a number of proposed changes that have been 
described today, and as I said in my prepared testimony, there 
may be some elements that would be worthwhile to consider. But 
in the context of, I think, a different approach to this, it 
will be hard for us to say we support this, we oppose that with 
respect to that bill. We think we would have to take a broader 
approach to this.
    Also we are very mindful of the fact, as I said before, 
that unlike every other time when campaign finance legislation 
has been enacted, when there was some divided party control, 
some checks, something that is really, really important to the 
fortunes of those who are voting here, we are in a one-party 
control situation now, and whatever happens really ought to be 
bipartisan, significantly so.
    Ms. Millender-McDonald. The Supreme Court has really upheld 
this bill, 99 percent of it. Why are we trying to change it at 
this juncture? Why don't we let this bill continue to work 
itself out, given all of the nuances of it? Why are we trying 
to correct something in the middle of a process working itself 
out? Why do we have to deal with BCRA at this point?
    Mr. Bauer. If I may say, I don't think we should, and I 
think there are two reasons why not. First of all, I think we 
ought to allow more experience with the bill before people rush 
to judgment about what is wrong with it, about what needs to be 
``fixed.'' One cycle is simply not enough.
    Second, and this is a theme that I think has been sounded 
consistently throughout this hearing by the other side here, 
when the Members of Congress said we are simply adding to an 
awesome degree of complexity in these laws. I was struck here 
that repeatedly the Members of Congress here in this Chamber 
who are part of the body responsible for passing the law, kept 
on referring to how they looked forward to having the private 
lawyers come to a panel to explain to them what the law was all 
about.
    Ms. Millender-McDonald. Unfortunately.
    Mr. Bauer. That seems to me to be an unfortunate state of 
affairs.
    Ms. Millender-McDonald. This is one of the reasons why Ms. 
Mitchell said, I think, if I am not misquoting you, that 
perhaps next year or the next year, we will be coming back up 
to maybe amend this again. So I think we need to allow this to 
percolate and not just constantly be coming back doing knee-
jerk reaction types of amendments.
    Ms. Mitchell. I don't disagree with that, but let me say 
this: The history over the last several years, and I have 
testified before this committee and before other committees on 
campaign finance proposals, my favorite was being the 12th 
panelist on the House Ways and Means Committee on the 527 
regulation bill of 2000. I was the 12th panelist out of 12, and 
I was the only one on the panel who opposed the bill. I said 
then and I believe what happens is because the media is never 
covered by any of these provisions, they can spend full-time 
stampeding Congress into enacting new regulatory provisions on 
everybody else's speech. That is what we really have: We have 
legislation by headline.
    But I also think that even beyond that, that Congressman 
Ney really touched upon a nerve that goes to a lot of 
Republicans, and that BCRA was passed with a solid majority of 
Democrats and a few Republicans, such that a Republican-
controlled Congress enacted it and it was signed by a 
Republican President and then upheld by the Supreme Court, but 
there were a lot of Republicans who opposed BCRA who watched 
with dismay as these 527s outside the system flourished and had 
all of this money, and the money flowed out to them. So that 
the very people, with all due respect, people who voted for 
BCRA and said we are going to get rid of these big money checks 
and blah, blah, blah, and now then are thrilled to death to 
have the 527s flourishing out here.
    I think there was a sense of wait a minute, guys, you are 
not playing by the rules you set for us. My view is it is Lucy 
and the football. You know, don't let Lucy pull the football 
again now. We can go back and rehash BCRA, but don't make the 
same mistake today.
    The Chairman. We will move on to Mr. Doolittle, but before 
we do, I would like to answer one of your questions. In my 
opinion, the reason why we are here, and the reason 527s--
MoveOn.org, et cetera--became an issue all of a sudden, is 
because along came a Swift Boat ad. If I am correct, the 
presidential candidate for the Democrat said, ``Mr. President, 
shouldn't we stop these things?''
    I am not saying that he was wrong to take that tack. I 
would say it too if I was out there. I am not blaming it on the 
Democrats. Republicans and Democrats alike had problems with 
527s. Initially, nobody in our districts knew what a 527 was. 
Then the Swift Boat ads came along, and the next thing you 
know, everybody is starting to say you had better do something 
about it. Both presidential camps I think said, ``Yes, we have 
to do something about it'', because people were saying, ``What 
are these entities?''
    I think that is how this discussion came about, because 
then the authors of the bill received the pressure of media 
scrutiny. ``I thought you stopped soft money. And here we go.'' 
And that is why I think we are having this discussion. I don't 
know what is right or wrong on this issue, but this is why I 
think we are here, and the authors of the bill have a lot of 
pressure to say, ``Well, we have to correct this component 
now.'' That is my opinion.
    Mr. Gold. I think the focus on the public discussion of 
527s has long preceded the Swift Boat ads. The reason that this 
Congress in June, 2000 passed a disclosure law, the amendments 
to section 527 was because there was a hue and cry at the time 
about so-called ``stealth PACs.'' That is where I think it 
started and it was talking about these very same groups that 
did not disclose and that did things that influenced public 
policy and elections and the like. So Congress required 
disclosure very much like FEC disclosure except to the IRS. 
Then BCRA happened and there were specific references in BCRA 
to 527s, but no suggestion that there was anything wrong about 
them that had to be controlled.
    And even after BCRA in November, 2002, Congress changed 
that disclosure law to relax it a bit because it had 
overreached. In 2004, there was, of course, you know, more 
activity, a new election cycle. And I think the public press 
attention to 527s arose well before Swift Boats. It was really 
a year ago when that letter that you cited earlier was sent. 
The FEC was considering itself beyond its statutory authority I 
believe.
    The Chairman. I agree with you that it occurred before the 
Swift Boats became prominent. It was out there, and then Swift 
Boat ignited it and everybody knew the term ``Swift Boat.''
    Mr. Gold. I think my real point is not to quarrel over when 
there might have been public attention, but the fact is that 
Congress should not be led by sort of the fads of press 
reporting of politics. The fact is that if you look at the 
activity and the relative amount of money that was spent in the 
advertising, most of it was candidates and political parties. 
That is just the reality of it.
    The Chairman. You get a headline and everybody wants to 
revise the entire world.
    Mr. Gold. That is a very dangerous thing to do when you are 
regulating politics.
    Mr. Doolittle. Would you care to speculate, assuming that 
the law stays as it is without enacting new law for the next 
few years and that probably is an unwarranted assumption, but 
for the sake of argument, let us say that is the case, what do 
you think the effect is on political parties as we move farther 
into the future. What do you think happens?
    Mr. Gold. Under the current law, if current law remains, I 
think parties at the national level are pretty healthy. Clearly 
they raised a lot more money than they had in previous cycles. 
I think State and local parties are under excessive kinds of 
restrictions on what they can do. I thought that during BCRA--
and that hasn't changed.
    Mr. Doolittle. You talking about making them spend 
federally-qualified money in voter registration.
    Mr. Gold. And this whole notion that we haven't discussed 
on the restrictions on how they raise it and that sort of 
thing. You know, I think they are unduly complex and only very 
indirectly get at what Congress was after. It is very hard to 
predict how people are going to associate and spend their money 
and talk about politics and engage in the future just based on 
what happens in the past. No election cycle has been the same 
as it was before. And that was true during that 27-year period 
between FECA in 1975 and 1976 and BCRA in 2002. No 2 years were 
the same, because things change. And every election has 
different pressures and different circumstances.
    So I don't think we should be jumping heavy-handedly into 
changing the law, especially if we are putting in further 
restrictions just based on what happened last week or what the 
press, which as Bob Bauer mentioned, is utterly unrestricted in 
these laws, chooses to focus on.
    Mr. Doolittle. Isn't it still in the law that the only 
rationale for impinging on core First Amendment rights of 
expression would be to prohibit corruption or the appearance of 
corruption? Is that still the test?
    Mr. Bauer. Yes, it is.
    Mr. Doolittle. And if that is the test, how does--how do 
you evaluate the effort to regulate 527s according to that 
test? What would be the corruption they are trying to prevent?
    Mr. Bauer. From my point of view, it is an extremely 
exaggerated argument. It isn't consistent with Buckley. And not 
consistent with McConnell, but McConnell was written in such a 
way, it has given life to the thought that even independent 
activity of this kind can be restricted. I don't believe it has 
a constitutional basis and I don't believe it relates 
appropriately to the anti-corruption rationale which is still, 
in theory, the constitutional law of the land.
    Mr. Gold. I think it is a troubling notion that independent 
groups that do things that influence legislation and policy, 
comment on public officeholders, that Members of Congress, 
which is what we are talking about, those are the individuals 
who the campaign finance laws are supposed to be preventing 
from being corrupted, that Members of Congress are going to 
somehow be corruptly influenced by the fact that they observe, 
just observe uncoordinated activity by ordinary citizens, or by 
people banning together, or even wealthy individuals acting on 
their own.
    That is why the Supreme Court 30 years ago, and it is still 
the law today, said that one could not lawfully restrict 
independent expenditures by individuals and by many groups as 
well. And the notion that we are going to start legislating 
against independent activity, political activity for fear that 
somebody in Congress might be grateful, is a bad turn to go. 
And it doesn't address certain things. What about where Members 
of Congress do coordinate and do deal overtly with groups? You 
have individuals, your constituents, unions, NRA, who you are 
politically compatible with and you work together with to pass 
legislation. The entire Social Security debate is a good 
example of what is happening where the AFL-CIO is involved and 
working with legislators from both parties on this issue.
    I don't view it as corrupting to you, that is to say you 
Members of Congress, I don't believe it is corrupting that we 
are working hand in hand towards common political goals and we 
are saying things, in fact, about what you do. Nor is it--and 
the sponsors of H.R. 513, the groups that support their 
legislation, they work hand in hand and extol their virtues. I 
don't believe that is corrupting. If that is not corrupting, 
how can it be corrupting to have uncoordinated political 
activity going on that you just observed?
    Mr. Doolittle. I don't believe it is corrupting either, but 
I thought it was a silly rationale when it was put into 
Buckley. What do you think is the--what is your concern for the 
future about the independent political operations? Do you think 
there is cause for further concern based on the McConnell 
decision?
    Mr. Gold. I think as Bob Bauer mentioned, I will let him 
expand on it, because he has written a lot more than I have on 
it. There are aspects of the McConnell decision that clearly 
give encouragement to those who want to regulate independent 
activity further. It is not well-thought through or expressed, 
and not necessarily the holding in the case, but I think it 
would be a mistake for Congress to act as if some of the very 
aggressive interpretations of that decision were correct and 
mandated or really supported strongly in a further restriction.
    Ms. Mitchell. In that regard, I think we should not 
overlook what has transpired as a result of the Supreme Court 
decisions in 1996 and 2001, and then the McConnell decision 
related to coordinating spending by the political parties. We 
can now have--parties can make unlimited expenditures, but the 
question is how does a party corrupt its candidates and vice 
versa. I think we all agree that that is not possible. And the 
lower courts found that. But because the Supreme Court has 
already ruled that parties can make unlimited independent 
expenditures, we have this fiction where the parties have to 
set up these independent programs which are less accountable, 
they are not accountable for the message and can't be 
accountable for the message, they can't coordinate it with the 
candidates. It seems to me that is something Congress ought to 
address.
    Mr. Brady. Just quickly, Mr. Chairman, I was told to wait 
for the experts and the experts tell me do nothing.
    Ms. Mitchell. I am not saying that. I think there are small 
things you need to do that would be important, because Congress 
has already legislated in this area and only Congress can 
correct it.
    Mr. Brady. We have a Pence-Wynn that I think may address 
the local and State parties and relieve them with some 
restrictions, but I am told you are not supporting that.
    Ms. Mitchell. I support Pence-Wynn, but they don't.
    Mr. Brady. I am back where I started from. Not knowing what 
I can and cannot do and wait and find out how much it is going 
to cost you for attorneys and they tell me they don't know 
either.
    Mr. Bauer. We absolutely do know. We know, we can be 
helpful.
    Mr. Brady. I will wait for that.
    The Chairman. Any other questions? I want to thank the 
panel. I think this was a good hearing and well worth 
exploring. And I want to thank our ranking member Congresswoman 
Millender-McDonald and her staff, as well as our staff and the 
other members and their staff for participating. I ask 
unanimous consent that members and witnesses have 7 legislative 
days to submit material into the record. Their statements and 
materials will be entered in the appropriate place in the 
record. Without objection, the material will be so entered. I 
ask unanimous consent that the staff be authorized to make 
technical and conforming changes on all matters considered by 
the committee at today's hearing. Without objection, so 
ordered. And thank you for your time.
    Ms. Millender-McDonald. May I compliment on a really well 
run hearing today? I thought it was informative, both the first 
panel and the second panel. And while we perhaps further look 
at this before taking action, at least we had the experts and 
the members come forth.
    [Whereupon, at 1:06 p.m., the committee was adjourned.]

                                  
