Finance reform bill on a fine line

WASHINGTON – When compiling a list of genuine reformers in the United States Senate, a name that does not spring automatically to mind is that of Trent Lott of Mississippi. But the Republican former majority leader has seized the role and is driving hard to end the worst abuses of the last presidential campaign.

Those abuses stemmed from the expansion of so-called 527 groups, nominally independent political organizations that collected $400 million in essentially unregulated funds and poured them into TV ad campaigns, often of the nastiest variety.

Democrats were the main abusers, with billionaire George Soros and friends financing a network of groups run by longtime party and labor activists. But Republicans drew even more blood, thanks to the Swift Boat Veterans for Truth ads questioning John Kerry’s service in Vietnam.

One of the unexpected aftereffects of this bipartisan excess is a resolve by senators of both parties, led by Lott, the chairman of the Rules Committee, to clamp down on the 527s before the next election.

John McCain, the Arizona Republican, and Russ Feingold, the Wisconsin Democrat, who teamed up to sponsor the major campaign finance reform bill enacted in 2002, can hardly believe the support they are getting for their new legislation restricting the 527s. McCain-Feingold became law only after years of fierce battles, with Republican regulars fighting it every step of the way and some Democrats quietly hoping for its demise.

That law essentially shut down the unregulated “soft money” contributions to the political parties, which had ballooned into the principal source of funding on the Democratic side and a major revenue stream for Republicans.

Despite the restrictions, both parties found they could finance the 2004 campaigns on an even larger scale, thanks primarily to a flood of small contributions, solicited by phone, mail and (for the first time) the Internet.

But just when the reformers were about to see their dreams realized – a campaign fueled by relatively small and fully visible contributions – the 527s moved in and basically attempted to swamp the airwaves with their lavishly financed and mostly negative ads. More than one-third of the 527s’ money – $146 million – came from 25 wealthy individuals.

Because the outrage was bipartisan, establishment figures like Lott, who opposed earlier measures, now have joined McCain and Feingold in pushing the next step in campaign reform. On Tuesday, Lott held the first hearing of the year in his committee on legislation to curb the 527s and stacked the witness list with proponents of action. He announced at the end of two hours that he hoped to mark up a bill soon after the Easter recess and move it to the Senate floor quickly enough that it might take effect for the 2006 campaign.

The bill would basically require 527s to comply with the same contribution limits that any other political committee now faces. As McCain put it, “a George Soros could give $25,000 per year … as opposed to $10 million.”

The 527s were able to escape the restrictions of McCain-Feingold in 2004 because of some fancy legal maneuvering by their lawyers, who gained a tax exemption from the Internal Revenue Service by arguing they were engaged in exempted political activities, then turned around and persuaded the Federal Election Commission that they were not political committees as defined by the Supreme Court.

The legislation being drafted for the Senate has to thread a narrow constitutional line because the reformers, including Lott, do not want to inhibit communication to voters by more traditional advocacy groups pushing particular issues or causes.

But that’s a matter of drafting, which can be solved. Tuesday’s hearing included warnings from some campaign finance experts that if the 527s are restricted, that money may be shifted into some other, less visible political channels. But Michael Malbin, the head of the nonpartisan Campaign Finance Institute, said such warnings should not deter action against a visible evil. “Observe what happens,” he counseled, “and then see if further steps are needed.”

That is precisely what Lott has determined to do. His goal, he said, is to pass “a pretty sensitive, targeted bill,” one that will not infringe on the freedom of advocacy groups but also will not satisfy those who would, if the Constitution permitted it, restrict the campaign dialogue to the candidates and the political parties.

Early Senate action will put pressure on the House, where reform sentiment does not have the same reach into the Republican leadership.

That will be another story.