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Panel Won’t Restrict Unlimited Political Spending by Groups

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Times Staff Writer

The Federal Election Commission stepped aside Thursday from regulating the unlimited contributions that have been flowing into the 2004 presidential race from the Democratic side, setting the stage for an outpouring of money from Republican donors who have mostly remained on the sidelines.

In a closely watched decision, the FEC voted not to restrict the so-called 527 groups that have been spending unlimited money aimed at helping presumed Democratic nominee John F. Kerry. The commissioners said they needed more time to review their options.

FEC Commissioner Michael Toner, a Republican who had urged his colleagues to take action, said he was disappointed and predicted the competition for dollars would grow even more feverish in a year when fundraising records are already being routinely shattered.

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“We’re going to see a dramatic escalation of spending by 527 organizations on both sides of the aisle. It’s inevitable,” Toner said. “The 2004 election is going to be the Wild West.”

Two years after passage of the McCain-Feingold law intended to stem the flow of big money into national elections, the presidential race is likely to become a financial free-for-all now that the government has indicated that it will not stop the independent groups that have discovered a way to avoid regulation of large contributions, political observers say.

The Bush campaign, Republicans and some FEC commissioners had argued that nonparty groups should be regulated under the same rules that now prohibit “soft money” -- unlimited corporate, union and individual contributions -- from being spent in the presidential and congressional elections. The McCain-Feingold law broadly banned the use of soft money by political parties in federal elections.

The 527 groups, named for the section of the Internal Revenue Service code that they are registered under, have argued that the soft-money ban does not apply to them.

The election commission’s 6-0 decision to postpone action for three months ostensibly means Democratic-leaning groups such as the Media Fund, America Coming Together and MoveOn.org Voter Fund can continue spending tens of millions of dollars on advertising and political activities opposing President Bush.

FEC commissioners made clear Thursday that even if they take action later this year to rein in the groups, new rules would have no bearing on the November election.

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Within minutes of the vote, conservative advocacy group Progress for America urged other Republican-leaning nonprofits to “accelerate their efforts to counter the liberals’ activities.” Group president Brian McCabe said the FEC decision gave them “jet fuel to take off from here.”

Grover Norquist, president of Americans for Tax Reform, another conservative nonprofit, vowed Thursday to “match the other folks dollar for dollar.”

Republican National Committee Chairman Ed Gillespie and Bush campaign chairman Marc Racicot issued a statement calling the agency’s decision to postpone action “irresponsible.” They said that the ruling “sets the stage for a total meltdown of federal campaign finance regulation in 2004.”

“Thanks to the deliberate inaction by the Federal Election Commission, the battle of the 527s is likely to escalate to a full-scale, two-sided war,” the Republican leaders said.

Liberal 527 groups have already spent more than $24 million on advertisements critical of President Bush, and other money on get-out-the-vote registration drives in contested states. Much of their money has come from unions and wealthy individuals, among them Hollywood producer Steven Bing, who has donated $8 million, and philanthropist George Soros, who has contributed $7.8 million.

The RNC and the Bush campaign filed a complaint with the FEC in March, alleging that Democratic-leaning 527s were breaking the law by raising and spending soft money and illegally coordinating their activities with Kerry’s presidential campaign.

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The agency received nearly 200,000 comments on its proposed rules -- many from nonprofit groups that said possible restrictions on their fundraising would be an infringement on free speech. The FEC also heard from more than 100 members of Congress, who differed about what, if anything, the agency should do.

Toner, along with Democratic Commissioner Scott Thomas, endorsed a scaled-back proposal to impose fundraising and spending limits on the 527s, but they could not muster any votes from their colleagues to pass it. Four votes are necessary for the FEC to take action.

The six-member panel has three Republicans and three Democrats. But the FEC debate about campaign spending by independent groups did not split along party lines.

Thomas said Thursday that the 527s were circumventing existing laws by using soft money to influence the federal election. “It just seems to me if it’s a really big serious problem, we should act,” he said. “It’s our job.”

Vice-Chairwoman Ellen Weintraub, a Democrat, disagreed. “I’ve always been clear we shouldn’t change rules in the middle of an election,” she said. “If you find things you don’t like, you fix them for the next cycle so they don’t happen again.”

After the decision, Sens. John McCain (R-Ariz.) and Russell Feingold (D-Wis.), authors of the 2002 campaign finance reform law, issued a joint statement lambasting the FEC and saying it had not done its job.

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“By refusing to take action today on the soft money activities of 527 groups, the commission has failed to close a loophole that dangerously undermines the purpose of the federal campaign finance laws,” the senators said.

“As a result, a flood of soft money will enter the system which will violate the letter and the spirit of the law.”

But Ellen Malcolm, president of America Coming Together, said that if McCain and Feingold had wanted to restrict 527s, they should have “passed that in the law.”

Commissioner Danny McDonald, a Democrat, suggested that if Congress disapproved of the FEC ruling Thursday, it could immediately rectify the situation by enacting new legislation. “It may well be we don’t have a fix on what Congress intended,” he said.

Republican consultant Craig Shirley said he believed conservative groups would now “move pretty quickly to try to compete” with the Democratic-leaning 527s. “Our money was on the sidelines until we got a clear understanding of what the FEC was going to do,” he said.

David Keating, executive director of the Club for Growth, a 527 that this week announced it was launching a television ad campaign on behalf of Bush, predicted that his group would now spend more than $10 million on the presidential race.

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“It could even be double that,” he said. “The only limit is how much money we can raise.”

Despite the liberal groups’ edge in the soft-money race now, America Coming Together’s Malcolm said she believed that overall, Republicans would still spend much more than Democrats come November. Democratic insiders formed the 527s last year when they feared that the party and its presidential candidate would be unable to raise enough in individual “hard-money” contributions to be competitive with President Bush and the Republicans.

Under federal law, such contributions to presidential candidates are limited to $2,000 per individual. Traditionally, Republicans have far outraised Democrats in these donations. Bush, for instance, has raised more than $180 million for his reelection bid, while Kerry has collected about $80 million.

Wes Boyd, who helped found MoveOn.org, praised the FEC decision.

“It’s not the FEC’s job to regulate issue organizations,” he said. “The flap was an attempt by the Bush campaign and the Republican National Committee to regulate opposition to administration policies....It’s a case of Goliath demanding that all slingshots be banned.”

Times staff writer Nick Anderson contributed to this report.

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