The Fat Cat and Incumbent Protection Act of 1998: The House Leadership's Sham Campaign Final Reform Bill

March 23, 1998

Dear Representative:

In re: The Fat Cat and Incumbent Protection Act of 1998 House Leadership's Sham Campaign Finance Reform Bill

As the House begins its long-awaited debate on campaign finance reform this week, we believe it is critical that meaningful bipartisan legislation emerge from this process. Therefore, we strongly urge you to oppose the sham and repugnant House Oversight Committee "reform" bill (H.R. 3485) and vote for a rule permitting debate and votes on options for real campaign finance reform. Should a substitute bill or a motion to recommit with instructions be made in order, we urge you to vote for the proposal by Representatives Shays and Meehan which is similar to that sponsored by Senators McCain and Feingold in the Senate.

Some leaders in Congress continue to obstruct bipartisan efforts to bring about real reform. Last month, a bipartisan Senate majority of 45 Democrats and 7 Republicans supported the McCain-Feingold reform bill (including the Snowe amendment) which banned all "soft money" contributions outside federal campaign law and restricted corporate and union financing of phony issue ads. Unfortunately, this constructive and incremental reform measure was defeated by a Senate filibuster.

Individual members of the House of Representatives, Democrats and Republicans, deserve credit for having spent considerable time developing various bipartisan options for campaign finance reform. Yet as the House prepares to take up the issue later this week, the House Oversight Committee is putting forward a partisan bill that is the exact opposite of reform. Moreover, there are disturbing reports that some House Republican leaders are planning to structure the debate so that significant amendments to the proposal and alternative Democratic and Republican proposals, such as the House version of the McCain-Feingold bill, will not even be considered. These leaders seem to be betting that the American people will not see through their phony "reform" proposal when they go to the polls this November. This is a serious underestimation of the political sophistication of the electorate, its disgust with the current, corrupt campaign finance system, and its thirst for real, bipartisan reform.

The so-called "Campaign Reform and Election Integrity Act of 1998," approved by Chairman Bill Thomas's (R-CA) House Oversight Committee last week, pretends to offer meaningful reforms. To the contrary, its predominant thrust is to:

* open the floodgates for large financial contributions to candidates for Congress;

* weaken support for Democratic candidates by encouraging union members to withhold dues used to finance labor's get-out-the-vote and political education programs;

* impose unnecessary and costly regulations on corporations and non-profit groups; and

* discourage Hispanic-Americans, Asian-Americans and other minorities from voting through an unreliable and arbitrary process of citizenship verification.

A Phony "Soft Money" Ban

The Thomas bill bans unregulated and unlimited soft money contributions to the national political parties. But unlike the McCain-Feingold bill, supported by the majority of the Senate, it permits state and local parties to continue to receive soft money for federal elections. Under this provision, the $262 million in soft money that the national parties raised in 1996 -- mainly from corporations and wealthy individuals -- could now be collected by state and local parties. Indeed $115 million of these funds were directly transferred to state and local party committees in 1996. Nor does the legislation prohibit exchanges of soft money between states. Thus there is ample scope for the parties to continue to do what they have been doing and for large donors to continue to curry favor with the national parties. This bill does virtually nothing to close the loophole responsible for the big soft money scandals.

Opening the Floodgates for Big "Hard Money" Political Contributions

In fact, the Thomas bill actually widens the opportunity of the wealthy to influence elections. It triples the total amount an individual can contribute under federal election law to candidates, political action committees and parties from $25,000 to $75,000 a year. It also raises the amounts an individual can annually contribute to a candidate from $1,000 to $2,000, to a state or local party from $5,000 to $15,000, and to a national party from $20,000 to $60,000. Furthermore, it allows all of these amounts to rise in subsequent years along with the consumer price index. Today, one tenth of one percent of the population -- donors of $1,000 or more -- provides nearly half of all individual contributions to federal elections. Now this small group will be free to spend a lot more hard money in its quest to influence public policy.

Reducing Labor Union Contributions for Federal Elections and Other Political Activities

The Thomas bill requires labor unions to obtain prior consent from their members before they can collect any dues used for "political activities." These activities include get-out-the-vote and political education programs for members, establishment of political action committees to receive voluntary political contributions, advertising on political issues and lobbying on federal legislation and regulations. Under this provision, the federal government would abandon its historic practice of letting individuals freely associate and determine their own political priorities. Ironically, "Big Brother" would intervene uniquely in labor associations. However, under existing federal labor law, nearly all unions are already required to have democratic procedures.

The McCain-Feingold bill's provision on this subject is far superior. It focuses on the narrower goal of protecting the rights of employees who are not members of labor unions but pay "agency fees" to the union since they benefit from their collective bargaining activities. Unlike union members, these employees have no capacity to elect union officers or otherwise participate in determining union political priorities. Hence the bill codifies the Supreme Court's 1988 Beck decision giving non-members the right to a reduction of their agency fees if they object to union political activities unrelated to collective bargaining.

Ineffectual but Costly New Regulations for Corporations and Non-Profit Organizations

In a pretense of fairness, the bill permits shareholders and members of corporations and non-profit groups to disapprove in advance proposed organizational budgets for political activities. But in contrast with labor union requirements, there is no provision enabling dissenting individuals to pay less for stock purchases or contribute less for dues. The organizations are obliged only to reduce their "proposed" political budgets to take account of the relative financial contributions of political dissenters. With no real limitation on the resources available for political activity, there is every incentive for these organizations to inflate their proposed political budgets so that the anticipated reductions will not affect their real spending plans one bit.

Republican orthodoxy condemns unnecessary government regulation. But the Thomas bill creates unnecessary work and costly mailing expenses for corporations and non-profit groups that lobby even if they do not engage in electoral campaigns. These organizations would be forced to calculate, at least annually, new and revised "political" budgets and the pro rata shares of each member or shareholder. More important, they would have to pay for yearly mailings (and return mailings) to their members and shareholders asking them if they object to the organization's "political budget." Public Citizen, which has 130,000 members, and does not engage in electoral campaigns, estimates the additional annual cost of such mailing at $32,500.

An Unworkable, Arbitrary, Citizenship Verification Program that Will Reduce Voting by Hispanic-Americans, Asian-Americans and Other Ethnic Minorities.

The Thomas bill's "voter eligibility" program, to be piloted in at least California, Florida, Illinois, New York and Texas, wrongly presumes that the Immigration and Naturalization Service (INS) and Social Security Administration (SSA) have or can quickly create the necessary databases to confirm an applicant's citizenship for voter registration purposes. In recent congressional testimony, the heads of both agencies opposed such a program on the basis that they could not adequately confirm citizenship. For example, the INS database does not include those most recently naturalized or those naturalized before computerization of records; and SSA has no records before 1981 to confirm either naturalization or citizenship of Americans born abroad. Also, independent audits have revealed that both agencies' databases are replete with inaccuracies.

If a prospective voter's citizenship is not confirmed, he or she has only 30 days after mailing of notification to present proof of citizenship before becoming subject to removal from the registration list by local or state registrars. In many cases, this means less than 30 days to send and pay for, receive, and present a birth certificate or other proof of citizenship. This is a modern version of the poll and literacy taxes formerly used by Southern states to prevent African-Americans from voting. Even worse, this time it is the federal government that would be discriminating against minorities. The priority under our Constitution is on citizens' rights to participate in democratic elections. This proposal undermines that right.

It is high time for the House to clean its house and enact meaningful campaign finance reform, not hide behind sham proposals and undemocratic procedures that prevent action.


Joan Claybrook
President, Public Citizen

Frank Clemente
Director, Public Citizen's Congress Watch