Reform that Doesn?t Add Up

Posted: May 14, 2005 12:00 AM

There?s probably no news story that can knock the Runaway Bride or the Michael Jackson trial off our televisions. Her story has the toast, once offered for $1,300 on eBay. And he may be toast, depending on the whims of 12 jurors.

But if any story can surpass these, it would be a Clinton fund-raising scandal.

On May 10, jury selection began in the government?s case against David F. Rosen, a consultant from Chicago. The feds say Rosen filed false finance statements about the cost of a fundraising party he threw in August 2000. The event raised money to benefit the
Senate campaign of then-first lady Hillary Rodham Clinton.

The story, like all fundraising cases, is confusing. But Rosen says he spent about $400,000 holding the fundraiser. Another man, convicted felon Peter F. Paul, will testify that the event actually cost about $1.1 million.

If it?s true that Rosen falsified the statement, doing so would have made about $500,000 more ?hard money? available for Clinton?s campaign. That?s really small potatoes, since she spent about $30 million. Her Republican opponent Rick Lazio spent about $40 million.
What?s really funny is that the fundraising rule Clinton?s campaign may have violated no longer exists. Congress changed it as part of the 2002 McCain-Feingold legislation. The Rosen case will be nothing more than a time capsule, dug up to highlight the failings of our pre-reform campaign finance laws.

Of course, Sens. John McCain and Russ Feingold ?fixed? those failings.

Instead of our turn-of-the-century laws limiting ?hard money? and channeling ?soft money? to the big political parties, we now have what the lawmakers assure us is a much better system. Did you enjoy the attack ads launched last fall by ?Swift Boat Veterans for Truth,? ?,? and dozens of similar groups? Thank McCain and Feingold.

In politics, money is like water. If you tamp it down in one place, it bubbles up somewhere else. So when McCain-Feingold banned unlimited donations to political parties, that money popped up in organizations known as 527s. Those organizations were political lightweights before 2002, since the Democratic and Republican parties held real political power.

But 527s raised more than $400 million for the 2004 election cycle. Almost three quarters of that money came from just 52 people. That includes Democratic bigwigs Peter Lewis ($16 million) and George Soros ($12 million).

For two reasons, most of that money ended up in negative ads. First, they work. Negative ads give the biggest bang for the buck.

Second, when the big contributions were being funneled through political parties, there was at least some check on what the ads would say. After all, a party is interested in appealing to the most people it can. It?s not going to risk turning off millions of potential voters with an overly harsh commercial. But a 527 is often reaching out to only one person -- the man who?s writing it a check. So it?s free to be as negative as it wants.

Meanwhile, one of the biggest failings of the pre-reform campaign finance system -- that it gave too much influence to extremely wealthy people -- has gone unaddressed.
Individual ?hard money? donations to candidates were limited to $1,000, but wealthy people could spend as much of their own money as they wanted. So we got billionaires including Ross Perot, Jon Corzine and Michael Huffington running for office, not because they were the most qualified, but because they were the richest people available. Today, our ?reformed? system gives the wealthy even more influence, as they can funnel tens of millions of dollars directly into negative advertising.

The Senate rules committee recently passed a measure to ?fix? this problem by regulating 527 groups. But that will never work. If money is blocked from flowing to 527s, it will simply surface somewhere else.

Real reform would allow anyone to donate any amount to any candidate at any time -- and every dollar would be public knowledge. The candidate would be able to spend the money in any way he wanted to, but he?d have to acknowledge the donation within 24 hours on a government Web site.

If a candidate can convince George Soros to write him a check for $10 million, so be it, as long as it?s instantly reported. All citizens would know who was giving donations to whom, and the government could fire all its campaign finance lawyers.

There will always be money in politics, so let?s have a real free market to regulate it.
Then we could leave the circus trials to Jennifer Wilbanks and Michael Jackson.