The Insatiable Appetite of the Regulators

Yesterday, the New York Times gave us a breathless report that, gasp, campaign funds are being raised under the "hard money" limits of the Federal Election Campaign Act, and even worse (shudder!) political parties and their candidates have common interests in winning elections.

The Times concern is that, "enabled by the fine print in campaign finance laws, [some donors] have written checks that far exceed normal individual contribution limits to candidates, to joint fund-raising committees that benefit the candidates as well as their respective parties."

In other words, the Times and the various regulatory advocates quoted in the article suggest that contribution limits, especially contribution limits to political parties, are too high, and that candidates of a party should not be allowed to urge citizens to give money to the party.  This constitutes a remarkable concession from the position argued seven years ago, that "McCain-Feingold" was needed to stop "soft money" and simply to return the campaign finance system to the shape it originally had after the Federal Election Campaign Act amendments of 1974.  It also indicates a desire to radically expand the reach and scope of the regulatory regime.

What has the regulatory advocates up in arms is the use of "joint fundraising committees."  In these, a single fundraiser is held and a donor writes one check to multiple political committees.  Thus, in the presidential race (which is the focus of the article) a donor writes a single check to the joint committee for an amount equal to the up to the sum of the maximum amount that can be contributed to the Obama (or McCain) campaign plus the maximum amount that can be contributed to the Democratic (or Republican) National Committee.  The Committee then divides the money among the two committees (the presidential campaign and the party) subject to the limits on contributions to each.  Or to simplify, rather than write a $2300 check to Obama and a $28,500 check to the National Party, the donor writes one check for $30,800.  More aggressive efforts add still more committees as beneficiaries of the joint fundraising committee – typically state party committees.  Scandalous efficiency!

As is apparent from the article, no one is actually breaking the law here, in raising or spending the funds.  But if all the contributions fall within the legal limits, why all the concern?  The obvious answer is that these regulatory advocates think 1) the hard money limits, especially to parties, are too high; and 2) it is somehow "corrupting" if Barack Obama or John McCain helps state and national parties to raise money within those hard dollar limits.

Each represents a bait and switch from the arguments made for McCain-Feingold seven years ago, and the latter in particular represents a misguided plea to radically expand the scope of campaign finance regulation.

At the time of McCain-Feingold, the claim was that "soft money" – that is, unlimited contributions used for political purposes that stopped short of advocating the election or defeat of particular candidates – was the problem.  "Hard money" – regulated in the amounts that could be given, and used to explicitly advocate for the election of candidates – was the good stuff.  Now the regulators are claiming, in essence, that the limits for hard money are too high.  By putting it in the context of a claim that raising hard dollars is a "loophole," or violates the "spirit" of the law, they simply hope to buttress their case. 

But this runs into a second level of dishonesty. First, at the time of McCain-Feingold it was argued that McCain-Feingold was merely a way to "repair" or "restore" the campaign finance system, to the days before the Supreme Court gave a bit more protection to political speech that did not expressly advocate the election or defeat of a candidate and political parties had not figured out that ads that did not expressly advocate the election or defeat of a candidate could be nearly as effective as ads that did.  But McCain-Feingold did not really seek to restore the original 1974 regulatory system, for doing so would have required a quadrupling of contribution limits for hard money, just to account for inflation.  Indeed, to a substantial extent, "soft money" was merely "1974 hard money" adjusted for inflation – money used so that parties could keep the same purchasing power as the 1974 law had left them.

Needless to say, McCain-Feingold’s supporters in the major "reform" groups did not want that.  They wanted to use inflation to keep screwing down the effective buying power of campaign support.  Nonetheless, eventually, as a cost of gaining enough support to pass the legislation, the reformers had to accept a rough doubling of individual contribution limits, which were then linked to inflation.  Note that this did not restore the 1974 system, as reformers claimed to want to do, as it amounted to about half of what a true inflationary adjustment would have required.  Now the regulatory advocates are renewing the attack on that deal.  In this latest series of complaints, they are simply upset that the hard money limits are too high.

The other claim of McCain-Feingold was that it was needed to "sever the link between office-holders and soft money."  In other words, we didn’t want officeholders out there raising unlimited contributions.  So the law limited them to raising hard dollars.  Now the regulatory advocates are complaining about that – they are complaining that Senators Obama and McCain are raising hard money, subject to the legal limits, for the parties.  Can the complaint really be that they want Senator Obama to raise $2300 contributions for his campaign, and then have a second fundraiser (remember how they complain about the time that has to be spent raising funds) to raise $28,500 contributions for the party.  That seems unlikely.  Rather, the problem they see is that the hard money limits – about half of the effective level of the 1974 limits, and the limits they accepted in order to get McCain-Feingold passed – are too high.

But maybe their complaint does go further.  They seem to believe it is simply wrong for candidates to help the parties raise money, because it means that the total amount solicited by a candidate in a cycle will exceed the amount he could solicit just for his campaign.  If this principle is accepted, this would be a radical expansion of the law, for it would suggest that candidates and parties must operate under a single "solicitation" limit, or more plainly, that no individual could solicit money for two or more campaigns or committees, because the total solicitations would exceed the amount any one campaign or committee could accept.  Such an approach is quite likely unconstitutional, but also strikes us as extremely bad policy.  There is little to be gained by trying to separate candidates from parties in this way.  It will also substantially raise the costs of fundraising, not only by making it harder for parties to raise money, but by making it more difficult for candidates to meet with people and raise money for the party.  It will further entrench incumbents, but party support is usually of greater importance in challengers than to incumbents in any particular race. 

What we see, then, is once again the insatiable appetite for regulation.  Lawful activity – indeed, what it was claimed just 7 years ago was the desired end – is attacked as a "loophole," and a new round of speech regulation begins.