Campaign finance reform--the way forward.

For those of us who care about campaign finance reform, the enactment of the Bipartisan Campaign Reform Act of 2002 (BCRA, also known as "McCain/Feingold" after its Senate sponsors) was not the end of our concerns and efforts. After many years of advocacy, seven years of legislation and litigation, a landmark decision by the Supreme Court and the demonstrated success of the Reform Act in practice, we now find ourselves at a rare moment of opportunity.

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Why Reform Matters

Americans have long viewed the purchase of influence and access as a form of public corruption that Congress is constitutionally empowered to stop. Propelled by that principle, Congress has established restrictions on the role of corporations and labor unions in federal elections. The animating belief is that the public actions of these organizations simply reflect economic power, not necessarily the views of citizens, including individual corporate stockholders or union members.

To this end, Congress banned corporate expenditures in federal candidate elections in 1907, and forbade such union participation in 1947.

As we know, these foundational principles unraveled in the '80s and '90s. Helped along by an ineffectual FEC, the political parties created a loophole that allowed vast amounts of corporate and union money into federal elections. As a result, despite the bans that had long been in place, we had a tidal wave of so-called "soft money" overwhelm our federal elections. And there was overpowering evidence that this money was doing precisely what contribution limits existed to prevent: purchasing access and legislative favors.

Against that backdrop, after seven years of effort, Congress finally closed these loopholes for corporate and labor money with passage of BCRA. The new law forbids federal officials and candidates and party officials from soliciting or spending soft money. It also prohibits corporations--including most nonprofits--from using soft money to run broadcast advertisements mentioning a federal candidate in that candidate's electorate within a narrow window of 30 days of a primary election or 60 days of a general election.

In the 2004 election cycle, BCRA completed its first test. The law clearly achieved its straightforward goal of severing the corrupting nexus between federal and party officials on the one hand, and those who were exchanging soft money checks for access on the other. That activity is simply no longer taking place. Reformers believe our democracy is vastly improved by the banishment of what had, by any reasonable reckoning, become a form of legalized influence peddling.

We have also seen a particularly gratifying increase in the number of small contributions. For all federal candidates combined, contributions of $200 or less have almost quadrupled, from $50 million in 2000 to $194 million in 2004. Perhaps most important in this cycle, we've seen an increase in the aggregate number of Americans who have contributed to a political candidate--almost 50 percent more than in 2000.

All of these outcomes are positive and important developments for our democracy.

Next Steps: 527 Organizations and FEC Reform

BCRA has, to be sure, produced some unforeseen consequences. And those consequences largely have been facilitated, if not directly caused, by a factor not fully anticipated by those of us who supported the reform. That "unexpected" factor is an obdurate group of FEC commissioners who have actively undermined the effective enforcement of campaign finance law.

Election 2004 produced a troubling increase in the activity of so-called 527 groups, named for the section of the tax code under which they register. These groups operate tax-free, as long as they make certain disclosures to the IRS.

527 groups spent tens of millions of dollars, many of them soft, to conduct partisan voter drives and run this season's most vicious attack ads. As such, they constitute a serious threat to the integrity of the soft-money prohibition that reformers worked for years to build.

Surprisingly to some, the source of this troubling 527 loophole, and of other defects in our system of campaign finance regulation, is the FEC itself.

Since 1976, any group with the "major purpose" of influencing a federal election that spends more than $1000 doing so has been required to register with the FEC as a "political committee." These committees can still do whatever they like, in any federal election. But they must observe the same rules as all political committees, including regular disclosure of their activities to the FEC. They must also observe the source and amount prohibitions applicable to other political actors.

The FEC has long failed to properly regulate 527 groups. Since 2001, the Commission started and abandoned two attempts to define "major purpose" under federal election law. Also during this election cycle, the FEC refused to act on enforcement matters in which political actors ranging from a candidate's campaign to the reform community have asked them to properly control 527 activity.

Because the FEC will not act, reform supporters must. One of our leading priorities for the next Congress must be revision of the law to clarify that groups that have the major purpose of influencing a federal election must obey the decades-old requirement that they register as political committees with the FEC, properly disclose their activities and comply with hard money limits. In a bipartisan effort, Senators John McCain (R-AZ) and Russ Feingold (D-WI), and Representatives Christopher Shays (R-CT) and Marty Meehan (D-MA) have introduced legislation that would make this vital change, and passing it will be a top priority for the reform community.

Still, bitter experience has taught that no campaign finance reform will work without an enforcement agency that is willing and able to enforce the law. The FEC has proven that it is not such an agency.

Both the structure and the culture of the agency have caused it to become an enabler of the nation's worst campaign finance scandals. Because the agency has six commissioners, always evenly divided between Democratic and Republican appointees, the agency has deadlocked on some of the most important campaign finance issues of the day. Perhaps worse, the manner in which commissioners are now selected has been a recipe for disaster. As a practical matter, the political leadership of each party in Congress chooses three commissioners to fill its three "slots" on the Commission. Because the regulated community chooses its own regulators, the result has been predictable: recent nominees have been chosen on the basis of their willingness to protect their party, or for their ideological opposition to the very idea of campaign finance regulation.

On this front as well, Senators McCain and Feingold, joined by Representatives Shays and Meehan, have introduced legislation that would begin the process of FEC reform. While the precise formula for success is not yet certain, a few priorities are clear. The new agency must have a smaller, odd number of commissioners with a strong chairperson, all chosen in a way that guarantees independence. Also, given their enforcement powers, the commissioners need to faithfully interpret and enforce campaign laws.

Public Financing of Candidates

Finally, we need to build on BCRA's success in returning influence to smaller donors by revitalizing the system of public funding for presidential candidates.

Since 1976, the system has had widespread support and served our nation well. The one-to-one public match of every private dollar raised up to $250 enhanced the value of these smaller donations. It allowed politicians to focus more on those donors who can't "max out" at $1,000 (now $2,000) per election.

But now, the front-loaded primary season forces participating candidates to reach spending limits early, and leaves those who survive virtually penniless through the summer conventions.

The current election cycle provided a stark illustration of this phenomenon. If Senator John Kerry had accepted public funding in the primaries and had therefore been subject to the concomitant spending limit, he would have faced a severe political consequence. Because of the low primary spending limit for publicly funded candidates, Kerry would have been unable to respond to the daily battering on the airwaves prior to the convention by an incumbent president with no primary challenger, who had rejected primary public financing and continued to raise and spend substantial sums for his "primary" campaign.

Plainly there are considerable incentives for serious candidates to opt out of public financing. And with the higher individual contribution limits under BCRA, the one-to-one match on $250 donations is less valuable than it once was.

We need to attack the problem on several fronts to fix the system. First, we should increase the public match to a greater ratio--perhaps four-to-one on the first $250 of every private contribution. That will increase the value of smaller contributions enough to allow candidates to focus on lower-dollar donors, rather than focusing almost exclusively on wealthy donors.

We should also build incentives to candidates to participate by increasing the spending limits for participating candidates if non-participating candidates decide to spend beyond the statutory caps. We further need to raise the primary spending limits to realistic levels, and fix the funding mechanism by increasing the amount of their pre-existing tax liability that voters can allocate to the system when they check off the box on their tax return.

Congressional supporters of reform have introduced legislation that will begin the process of achieving necessary reforms to this vital, and successful, program.

These reforms, like past efforts, will not easily be achieved. But they are vital to the task of ensuring that the American election system is an example for a watching world.

VOTER LINKS

* The Campaign Legal Center www.campaignlegalcenter.org

* The Reform Institute www.reforminstitute.org

* The Brookings Institution www.brookings.org

* The Campaign Finance Institute www.cfinstitute.org

Trevor Potter is a former commissioner and chairman of the Federal Election Commission. He is president of the Campaign Legal Center and General Counsel to the Reform Institute, as well as a partner in the political activities practice of Caplin & Drysdale, a Washington law firm.