Big Money’s Spigot Will Stay Open

Even though it erected formidable new barriers between politicians and deep-pocketed donors, the election law upheld Wednesday by the Supreme Court has not shut down big money in politics.

Instead, creative operatives allied with both parties are constructing new groups to raise and spend political money to get around the law.

The law wiped out a vast source of unregulated funding, known as “soft money,” that became a subject of scandal in the 1990s as corporations, unions and wealthy individuals wrote large checks to political parties. But as opponents of the law predicted, much of that money is finding its way back into the political system through other means.

“This law will not remove one dime from politics,” said Sen. Mitch McConnell (R-Ky.), the law’s leading congressional opponent. “Outside special interest groups have become the modern-day political parties. Soft money is not gone -- it has just changed its address.”

It is too early to predict the law’s full effect, but the unfolding 2003-04 campaign cycle is, to some degree, proving him right.

Activists this year have begun working outside the parties to scoop up big donations. Two liberal groups -- the Media Fund and America Coming Together -- held a meeting last week in Los Angeles to build support for efforts to mobilize Democratic voters and finance independent ads with the aim of defeating President Bush next year.

Billionaire George Soros has drawn notice for pledging $10 million to America Coming Together and $5 million, with another billionaire, Peter Lewis, to the liberal Internet organization MoveOn.org.

Republicans have set up comparable groups, such as the Leadership Forum, a fundraising group headed by top Washington lobbyists.

What these and similar groups share in common is that they are not formally affiliated with the national parties. That exempts them from the regulations placed on parties and candidates -- so long as the groups do not coordinate their activities with them.

According to a study by the nonpartisan Center for Public Integrity, at least $29 million has been raised this year by special tax-exempt political committees not subject to the new donation limits. These groups, known as “527 committees” after a section of the tax code, include the anti-tax group Club for Growth, a committee formed by the American Federation of State, County and Municipal Employees, and another labor-backed organization called Partnership for America’s Families.

Reform advocates acknowledged that these tax-exempt groups bear close scrutiny. “We are going to watchdog to make sure they comply with the law,” said Fred Wertheimer, president of Democracy 21, an organization that examines the influence of money on politics.

He said he doubted soft money would resurface intact. “The incentives for giving it are gone,” he said, noting that many donors had answered direct pleas from politicians. Such solicitation is now banned.

Reformers also pledged new efforts to bolster the Federal Election Commission’s oversight powers. They also claimed the soft-money ban was achieving its desired effect by barring politicians and their party aides from soliciting huge individual checks.

“The law was designed to break the link between federal officeholders and large donations,” said Rep. Martin T. Meehan (D-Mass.), a principal sponsor of the law. “Clearly, it has done that.”

By the time the new law passed, both political parties had become heavily dependent on soft money as a resource. Republicans and Democrats had raised nearly $1 billion in soft money for their parties, combined, in the 2000 and 2002 elections.

Although the new law cuts off that funding, huge sums have poured into campaigns for the nation’s most powerful offices this year as never before, thanks in part to a provision that doubled the limits on the amount individuals can give to candidates.

Bush is on track to shatter fundraising records in his 2004 reelection campaign with this kind of funding, known as hard money. His goal is $170 million; some predict that he will reach $200 million. For his 2000 campaign, he raised about $100 million. Among Democratic presidential candidates, former Vermont Gov. Howard Dean has raised more than $25 million in hard money, beating some party marks set by President Clinton. Following Bush’s lead, Dean also has opted out of the presidential public financing system, a major break from precedent for his party. Other Democratic challengers also are raising millions of dollars in chunks of as much as $2,000 per donor.

The law has had an ironic effect in its first year of helping its opponents and, in the short term, possibly hurting its advocates.

The GOP, which led the opposition to campaign finance reform, has thrived under the new system, outperforming the Democratic Party, which championed the new law.

According to an analysis by the nonpartisan Campaign Finance Institute, Republican Party committees under the new law raised $116 million in the first six months of 2003, up from the $81 million they raised during a comparable period four years ago, when giving soft money was legal.

Democratic committees raised $44 million in the first half of 2003 -- down from $57 million four years ago, when half of their funding came from soft money.

But advocates said the law has made important strides in cleaning up the perception that Washington was awash in huge, unseemly donations from companies such as the now-bankrupt Enron Corp.

“It has changed the landscape by leaching out some of the worst elements of the system, including the shakedown schemes, the selling of access and the large number of ads that were done with money that had no limits and no disclosure,” said Norman J. Ornstein, an analyst who consulted with lawmakers in drafting the law.

For most strategists looking ahead to the campaigns of 2004, one of the most significant effects of Wednesday’s ruling was that it left untouched the law’s limits on television and radio attack advertisements in the weeks before an election.

Under the law, interest groups that finance ads mentioning a federal officeholder or candidate within 30 days of a primary or caucus or 60 days of a general election face tight new regulations and disclosure requirements.

By leaving those advertising limits intact, the court struck a blow against the avalanche of ads that often bury voters in battleground states as elections approach.

Ads financed directly by candidates still will proliferate, as Iowa voters are learning now in advance of that state’s Jan. 19 presidential caucuses.

But ads financed by outside interest groups will be tightly controlled -- a development the National Rifle Assn., to name one important political player, has roundly denounced. Within the past week, the NRA has threatened to take over a television outlet to utilize a media exemption to the law’s advertising regulations.

Wayne LaPierre, the NRA’s chief executive, also said the 4-million-member organization would “pursue every avenue so that our voice will be heard,” from increasing its Internet news operations to “mail, phone and rallies.”*

Times staff writer Elizabeth Jensen in New York contributed to this report.