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Campaign Finance Reformers Open the Floodgates

By David Arkush and Craig Holman. Originally published in Roll Call ($).

The presumptive presidential nominees, Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.), are exploiting a major loophole in the campaign finance law. Both Senators are setting up joint fundraising committees that allow the wealthy to donate $70,000 or more on behalf of their campaigns.

You might wonder how this squares with the $2,300 limit on contributions from individuals – contribution limits that the Bipartisan Campaign Reform Act of 2002 sought to protect by banning large soft-money contributions.

Heres how McCain Victory 2008, one of the candidates new joint fundraising committees, is accepting $70,100 from donors: The first $2,300 is treated as a contribution to the McCain campaign. Then, $2,300 goes to McCains compliance fund. The next $28,500 is earmarked for the Republican National Committee. And the remainder – up to $37,000 – is split between the Colorado, Minnesota, New Mexico and Wisconsin Republican parties.

McCain set up at least six joint fundraising committees. Obama announced on April 25 that he, too, will set up a joint fundraising committee with the Democratic National Committee.

This strategy flies in the face of the campaign finance reforms that both candidates advocate. First, it allows candidates to receive very large campaign contributions that directly benefit the candidate – contributions that can buy these donors special attention not afforded to average Americans. Second, it undermines the voluntary spending ceilings of the public financing program.

McCains fundraising strategy enables him to accept the $84.1 million public funding grant – and an identical spending ceiling – and to effectively exceed that spending ceiling by helping raise funds for unlimited Republican Party spending on his candidacy.

The practice of presidential campaigns raising money for their parties to supplement their own fundraising is not new. In 2004, both George W. Bush and Sen. John Kerry (D-Mass.) set up joint fundraising committees that funneled money into their parties. Kerry raised about $41 million for the DNC, while Bush generated about $29 million for the RNC.

But McCain plans to put those numbers to shame. His campaign reportedly set a goal of raising $120 million through joint fundraising committees. Given Obamas astonishing fundraising success to date, theres little reason to suspect that his efforts will fall short of McCains.

Candidates cannot dictate party spending. But when a candidate hosts fundraisers for a party, it is expected that much of the proceeds will be used to promote the candidate. Its no coincidence that McCains joint fundraising effort focuses on state party committees in swing states.

Political parties are an essential component of a vigorous democracy. But they should not serve as simple conduits for the presidential candidates to break fundraising and spending records – or to ignore the spirit of campaign finance reforms that they championed.

Three responses to these joint fundraising schemes will help avoid a return to the pre-BCRA era of raising exorbitantly large contributions from wealthy special interests.

First, strengthen the rules that restrict coordination between candidates, parties and outside groups. If campaign advertisements by party committees or outside groups are done at the urging or direction of a candidate or the candidates agents – including campaign consultants who work for the candidate – the ads should be classified as coordinated activity. Under current law, the national parties may spend no more than $18 million in coordination with a presidential campaign. For outside groups, coordinated spending is counted as a contribution to the campaign, subject to the $2,300 contribution limit.

The coordination rules are currently being litigated. Proponents of BCRA are suing the Federal Election Commission over its extremely narrow definition of coordination. Current rules find no coordination if agents of the candidates and committees share campaign strategy more than 120 days before the election – a rule that permits so much coordination that campaigns hardly need any more coordination once the restricted period begins. This time frame must be expanded to cover the entire election period. Also, the FEC should adopt a rebuttable presumption that a candidate and party or committee are coordinated if they share common political consultants.

Second, the FEC must require parties to classify hybrid ads as either candidate expenditures or coordinated party expenditures. In 2004, Bush and the RNC began splitting the costs of ads promoting Bush and our leaders in Congress, with the party claiming that it was paying only for the generic reference to party leaders, not for the reference to Bush, and thus not count the cost against its coordinated spending limit. The Democrats soon followed suit. This practice allowed the RNC to finance more than $46 million in hybrid ads for the Bush-Cheney ticket despite the $16 million party spending ceiling in effect at the time. To date, the FEC has gridlocked on whether to ban this practice.

Finally, the presidential public financing system must be restored. Nearly all presidential campaigns from 1976 to 2000 were financed largely with public funds, leveling the playing field between candidates and placing reasonable caps on overall spending. That system has all but collapsed today, with most major candidates opting to chase unlimited private financing of their campaigns. The spending ceilings need be raised and more public funds put into the system. Equally important, the public financing system must provide participating candidates fair fight funds – additional public money to match excessive spending by opponents who benefit from large independent expenditures by parties and other outside groups.