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The Longest Campaign — Part Five

When it comes to money in presidential politics, is the sky the only limit?

All it took was a single clever idea. As a result, the federal financing of presidential campaigns, which was showing signs of decrepitude a quarter-century after the Watergate scandals that inspired it, is all but dead.

Political operatives call the clever idea “bundling.” Supporters of a candidate round up lots of individual contributions as large as law allows and deliver them in a “bundle” that can amount to hundreds of thousands of dollars. The technique was introduced in the 2000 Republican presidential primaries by George W. Bush.

Bush capitalized on bundling as a way to get around the post-Watergate limit of $1,000 that any individual may contribute to a presidential candidate for a primary election. It worked so well that he raised $95.5 million in hard money and easily won the GOP nomination.

The Bush campaign organized bundling teams, usually of wealthy backers who tapped their friends and business associates to “max out” on their individual contributions. Bush ended up accepting federal funds for the general election, but his rejection of matching funds in the primary season signaled the beginning of the end of the public-financing system for all but the neediest candidates, who typically lack the resources and connections to play the bundling game.

The share of campaign funds raised by bundlers rose from 8 percent in 2000 and 18 percent in 2004 to at least 28 percent of the $379 million that had been raised by October 2007 for the 2008 election, according to a study by Public Citizen, a nonpartisan reform group. The same study found that the number of bundlers in all campaigns had risen from 269 in 2000 to 2,045 by October 2007.

While this development was unfolding, a new round of campaign-finance reform became law. In early 2002, in the wake of new money-in-politics scandals and the bankruptcy of the energy-giant Enron Corporation, Congress finally ended years of debate and revision by passing reform legislation championed by Senators John McCain of Arizona, a Republican, and Russ Feingold of Wisconsin, a Democrat. Their Bipartisan Campaign Reform Act, commonly known as the McCain-Feingold law, barred national party committees, federal candidates, officeholders, and their agents from raising and spending unregulated or “soft” money in federal elections.

Anticipating that such a prohibition would impose a new hardship on campaigns, the law increased the ceilings on regulated or “hard” money that individuals can give to a federal candidate to $2,000 for a primary or general election. It also set limits of $10,000 on contributions to a state party and $25,000 to a national party committee. Most of these amounts, and the ceilings on total contributions by an individual to candidates, parties, and political committees in an election cycle, were made subject to adjustments for inflation.  For the 2008 election cycle, for example, the ceiling for individuals’ contributions to a candidate became $2,300.

The new law was challenged almost at once on constitutional grounds. A coalition of liberal and conservative groups sued, and in 2003 the case, McConnell (Republican Senator Mitch McConnell of Kentucky, public financing’s most resolute foe) v. Federal Election Commission, reached the Supreme Court. The justices substantially upheld more specific prohibitions on solicitations of soft money by national party committees, federal candidates, and officeholders as well as a “millionaire’s provision” designed to help candidates running against wealthy, self-financed opponents. They also upheld a broadened definition of what constituted “electioneering communications” on behalf of a candidate in an issues-advocacy ad, abandoning an earlier decision’s requirement of explicit “magic words” to define prohibited candidate support or opposition. Finally, it upheld banning party committees from raising soft money for certain committees and interest groups operating under Section 527 of the Internal Revenue Code.

This and other sections of the tax code have provided various nonprofit religious, political, and social welfare organizations with exemptions from campaign-finance regulation. The so-called 527 committees, which blossomed in advance of the 2000 election season, function under an IRS exemption for “political organizations” that do not “expressly advocate” the election or defeat of specific candidates for federal office. 

Such committees became a major factor in the 2004 presidential election, with groups supportive of the Democratic ticket and other candidates for once leading the way in pouring money into these new repositories of unregulated campaign activity. Looking to 2008, reformers were already contemplating the need for further legislation in this area.