On December 10, 2003, the U.S. Supreme Court, in a case called McConnell v. Federal Election Committee (2002), upheld the Bipartisan Campaign Reform Act of 2002 (BCRA), in which the U.S. Congress banned unlimited contributions — known as “soft money” — to political campaigns.

The act is commonly known as the McCain-Feingold law, named after the two chief Senate sponsors, John McCain, Republican of Arizona, and Russell Feingold, Democrat of Wisconsin, who sought to remove soft money as an influence on candidates running for national office.

“Soft money” is a contribution made by individuals, corporations, unions and other entities to political parties rather than directly to political candidates. Soft money can only be spent on civic activities such as voter registration drives, “party-building activities” and administrative costs, and in support of state and local candidates.

Prior to the passage of the McCain-Feingold law, these donations were not subject to regulation and were often viewed as a loophole in campaign finance law. In contrast, “hard money,” the term used to describe donations made directly to political candidates running for federal office, already was regulated by law. The law specifies hard-money dollar amount limits on contributions from individuals and groups such as corporations and political action committees, and other entities.

The major question that the Supreme Court deliberated over was whether soft money has a potentially corrupting influence on elections. “The idea that large contributions to a national party can corrupt or create the appearance of corruption of federal candidates or officeholders is neither novel or implausible,” the court ruled. “Both common sense and the ample record in these cases confirm Congress’ belief that they do.”

In a January 23 interview, Jan W. Baran, a private sector lawyer and expert in election law and campaign finance, as well as an author of several books on the subject, spoke with Washington File writer Alexandra Abboud about campaign finance and its effect on the 2004 presidential election.

The following is a transcript of the interview:

Question: The Supreme Court in McConnell v. FEC has upheld the tenets of the Bipartisan Campaign Reform Act (BCRA), commonly known as the McCain-Feingold law, that restricts the use of soft money in campaigns. How will the Supreme Court’s findings affect the 2004 presidential election?

Baran: The most immediate effect of restricting the use of soft money is that the political parties will not be able to raise or spend it. During 1999-2000, the two major parties raised approximately $500 million in soft money, almost evenly divided between the Democratic and Republican parties. That’s half a billion dollars that they will not have this year, and the question is, will they be able to raise more “hard money” this year to make up for the loss?

Q: You’ve just mentioned “hard money.” What exactly is hard money?

Baran: Hard money is money within certain dollar limits from individuals or from political action committees who are registered with the Federal Election Commission.

Q: The McConnell decision covered a wide range of campaign fundraising issues. One such issue was the role of political action committees or PACs. What role do PACs play during an election year, and also, how have these organizations been affected by the McConnell decision?

Baran: Political action committees are committees that are registered with the Federal Election Commission who raise voluntary contributions from individuals. Usually these PACs are associated with either corporations or unions or trade associations or various national groups like the National Rifle Association or the Sierra Club, for example.

These organizations are permitted to have these committees, but they must be funded with individual voluntary contributions, and no individual can contribute more than $5,000 a year to a PAC. The PAC, in turn, is allowed to make contributions to candidates for the U.S. House or U.S. Senate or president in amounts not to exceed $5,000 per election.

Q: The Supreme Court has also limited the use of “issue ads” in a federal campaign. What is the role of issue ads in elections and in campaign finance reform?

Baran: Issue ads are a controversial practice that increased over the last decade, and the McCain-Feingold law regulates a certain type of advertising in a new way. First, it defines a certain type of issue ad as an ad that’s run on television, radio or cable, which mentions a candidate and does so either within 30 days of a primary election or 60 days of a general election. If an ad satisfies that description, then there are two things that occur.

First, a corporation or a union may not sponsor or pay for that type of an ad. Second, if an individual or a group of individuals wish to sponsor or pay for such an ad, they must file reports with the Federal Election Commission if they spend more than $10,000, and these reports must disclose how they spent the money and which individuals donated more than $1,000 to pay for these ads. And these reports must be made within 24 hours of the advertising.

The Supreme Court upheld both the prohibition on corporate and labor union issue ads of this sort and the requirement that individuals file reports with the government.

Q: It’s estimated that $3.9 billion was spent on elections in the U.S. in 2000 compared with $540 million in 1976. What role do you think such numbers played in the movement towards campaign finance reform? And do you think McCain-Feingold will result in less spending in the 2004 election?

Baran: It is undeniable that election campaigns are increasingly expensive. There are several reasons for that, perhaps first and foremost, the means of campaigning in a modern society tend to be primarily television, which is expensive. But the same would be true if one were in a metropolitan area running for Congress and would not be able to afford television. The candidate would have to use mail, perhaps billboard advertising and other alternatives that also might be expensive in order to reach and hopefully gain the attention of growing numbers of citizens. The average congressional district has approximately 600,000 citizens, and of course states are generally much larger.

So that’s one reason for the increased expense. The reason for McCain-Feingold was more focused on the relationship between money that is given to candidates and to political parties and not necessarily on the total amount of money that’s spent either by the campaigns or by the parties themselves.

And in that regard, while, for example, political parties may wind up having less money to spend because of the ban on soft money, the expectation is that the 2004 election is going to be more expensive than the 2000 election, because the candidates have raised more money. For example, President Bush has already raised more money than he did for his 2000 campaign. In 2000 he raised approximately $105 million. At the end of 2003, he had already raised over $130 million.

But the expectation is also that the other groups may participate and spend money outside of the campaigns and outside of the political parties. There are several groups, including political action committees, that are already organized for that purpose. There’s already been significant publicity about substantial contributions to some of these groups, either from major organizations like organized labor or from wealthy individuals, and the numbers that have been reported are in the tens of millions.

So, clearly, that so-called soft money is going elsewhere besides to the political parties who no longer may legally accept it.

Q: Finally, former Vermont Governor Howard Dean, Massachusetts Senator John Kerry, and President Bush have opted out of public financing. What does that mean, and how does that affect their fundraising efforts?

Baran: When a candidate opts out of the public funding system for presidential campaigns, the campaign is not subject to a spending limit. That means that the candidates may continue raising and spending private contributions, subject to contribution limits, until they either drop out of the race or until the party’s convention, at which time a nominee is formally nominated.

If the candidate accepts public funding, then he or she also accepts a limit of how much money can be spent. And that would mean that they couldn’t spend money after that limit is reached, which was a problem for Republican Senator Bob Dole in the 1996 campaign. His campaign basically ran up against the spending limit by March of that year, and the convention was not until August.

So it’s a strategic decision that these campaigns have to make. Ultimately, I think the decision for the campaigns depends on whether the candidate believes that he or she can raise all the money necessary and basically give up the public money that he or she would earn by participating in the public financing system.

Senator Kerry, Governor Dean and President Bush made these decisions because they believed they could raise more than the approximately $40 million spending limit that would accompany public funding.

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