Supreme Court to Take a Hard Look at Ban on ‘Soft Money’

During the 1990s, TV viewers knew an election was approaching when ads urged them to call Candidate X and tell him Y. In 1996, for example, Montana viewers were told to “call Bill Yellowtail and tell him to support family values.”

This was the tag line for an ad that said Yellowtail, an environmentalist and a Democratic candidate for Congress, had taken “a swing at his wife,” failed to pay child support and had been convicted of a felony.

It was no surprise to anyone that Yellowtail lost the election. But it may surprise many to know that the “Call Bill Yellowtail” spot was not governed by federal election laws.

Instead, since the viewers were not told to vote against the alleged wife beater, the spot was deemed an “issue ad,” not a campaign ad. And that meant it could be paid for secretly by corporations and unions.

Last year, Congress passed a campaign funding reform law designed, among many other provisions, to change that.

And on Monday, in a special summer session, the U.S. Supreme Court will hear a major challenge to the Bipartisan Campaign Reform Act -- better known as the McCain-Feingold law, after key sponsors Sens. John McCain (R-Ariz.) and Russell D. Feingold (D-Wis.).

Most notably, the law prohibits the large contributions -- known as “soft money” -- to political party organizations. But some legal experts believe the court battle will focus on whether the government can regulate campaign ads like the one that helped keep Yellowtail out of Congress.

Georgetown University law professor Roy Schotland, an expert on campaign funding laws, predicts the high court will easily uphold the soft money ban and other contribution limits but says the dispute over regulating election ads is too close to call.

The 1st Amendment guarantees free speech, and challengers say the court should be especially wary of laws that restrict political ads.

Defenders of the law say Congress merely closed an obvious loophole when it expanded the definition of an election ad.

Before last year, TV and radio spots could escape federal election laws if they did not say “Vote for Smith” or “Defeat Jones.” This was known as the “express advocacy” rule.

The new law forbids the use of all corporate, union and individual contributions beyond certain limits to pay for “electioneering communications.” These are defined as broadcast ads that refer “to a clearly identified candidate for federal office” within 60 days of a general election or 30 days of a primary election. (The law governs only federal election activity and does not directly affect state races, such as the California recall election.)

Washington attorney Seth Waxman, the U.S. solicitor general during the Clinton administration, argues that the act “bans no speech. It only restricts the source of funds used for those ads and requires disclosure in certain circumstances.”

Larry Noble, the former general counsel for the Federal Election Commission, said that “anybody who is honest and looks at those ads knew they were campaign ads.”

In recent years, however, the so-called sham issue ads played a major role in politics. Because they were outside the control of federal regulators, political activists were free to pour huge amounts of money, including corporate and union funds, into last-minute attacks on candidates.

Congressional leaders said the loophole made a mockery of election laws nearly a century old.

In 1907, President Theodore Roosevelt won passage of a law that prohibited the use of corporate money to fund candidates and campaigns for federal office. In 1947, a similar ban on union money was enacted. Individuals, including company officers and union workers, remained free to donate their own money.

In 1974, however, Congress limited how much wealthy persons may contribute, a reaction to the free flow of money from millionaires in President Nixon’s reelection campaign. Individuals were permitted to give only $1,000 per year to a candidate and up to $20,000 to a national party. (The new law raises those limits to $2,000 for a candidate and $25,000 to a party.)

But this system of limits had sprung leaks by the late 1980s. Politicians and party leaders realized they could evade the limits of the law if they funneled money into issue ads.

The tobacco industry, pharmaceuticals, gambling interests, the telecommunication industry and organized labor were the leading sources of the free-flowing funds dubbed soft money during the 1990s, according to briefs filed with the court.

The amounts of unregulated money grew much faster than the money raised under the legal limits, the so-called hard money.

In 1988, $45 million in soft money was spent by the national parties, about one-tenth of their total spending.

By 2000, $498 million in soft money was spent by the parties, representing 42% of their total spending.

Last year, Congress voted to prohibit the parties and candidates from raising or spending money outside the limits set in the law. And it broadened the definition of an “electioneering communication” to make clear that campaign ads are funded by regulated money.

Not everyone was pleased. Twelve lawsuits were filed last year challenging the new law, and the high court on Monday will hear four hours of oral arguments on the issue.

The diverse challengers include the U.S. Chamber of Commerce, the National Assn. of Manufacturers, the Republican National Committee, the National Rifle Assn. and the American Civil Liberties Union.

Kenneth W. Starr, the former solicitor general and independent counsel, will join Floyd Abrams, the 1st Amendment expert, in arguing that the law infringes on free speech. Waxman and U.S. Solicitor General Theodore B. Olson will lead the defense of the law.

It is the first time since the 1974 Nixon tapes case that the justices will hear a new case during the traditional summer recess. It will also be the longest oral argument since 1975, when the court last grappled with a change in the campaign finance law. That argument led to the ruling in Buckley vs. Valeo, which upheld some parts of the law and struck down others.

By December, the court hopes to hand down a decision that will set the campaign funding rules in time for the 2004 election year.