[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
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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
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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.]