SOFT MONEY'S HARD REALITY : A 1978 INTERPRETATION OF CAMPAIGN FINANCE LAWS OPENED A GAPING LOOPHOLE, WHICH HAS SINCE ALLOWED LABOR UNIONS, CORPORATIONS AND WEALTHY INDIVIDUALS UNPRECEDENTED POLITICAL SWAY.

Byline: Fred Wertheimer 

WELL, it finally has happened.

For years, people have been saying it would take a really big scandal to get the corrupt campaign finance system in Washington cleaned up.

Now that really big scandal is here.

No, I'm not just talking about John Huang's dubious fund-raising activities on behalf of President Clinton and the Democratic National Committee during the 1996 campaign: the illegal $250,000 contribution from a South Korean company; the suspicious $450,000 from an Indonesian couple living modestly in the United States and tied to James Riady and his family's Indonesian conglomerate, the Lippo Group; and the questionable $325,000 from Yogesh Gandhi of California, who has said he doesn't have any financial assets in this country.

And no, I'm not just talking about the criminal conviction of Simon Fireman, a campaign finance vice chairman of Bob Dole's presidential campaign, for laundering contributions totaling $120,000 - $69,000 to the Dole campaign and the rest to the Republican National Committee and other candidates.

Fireman, who made use of a Hong Kong bank to help implement his scam, and his company were fined $6 million, the largest penalty ever imposed for illegal contributions.

And I'm not just talking about the bizarre $140,000 fund-raiser held by the Democrats in a Buddhist temple and featuring Vice President Al Gore. The vice president, when questioned later, professed to be surprised to learn that fund raising was taking place.

No, I'm not just talking about these episodes. I'm talking about the whole rotten system. That's the really big scandal that became clear in this campaign; 1996 was the year the entire campaign finance system sank. An estimated $250 million in contributions that cannot legally be used in federal campaigns was laundered through the Democratic and Republican parties to support presidential and congressional candidates.

It's called soft money, but it's really dirty money, sewer money, and it's the most dangerous and corrupting element in American politics today.

There is a window of about 90 days in the new Congress that begins next month before anger over the 1996 abuses fades and the defenders of the corrupt status quo regain their footing. If Congress is serious about reforming campaign finance next year, it has to shut down the soft money system.

There are many desirable proposals to clean up the way money distorts politics and government, but this is the simplest and strongest. Everyone in Congress understands it; no hearings are required: Ban soft money by March 31.

Soft money comes from sources such as corporate donations or labor-union dues and cannot legally be given to federal candidates or used to finance their campaigns.

In 1974, after the Watergate scandal, Congress created a system of public financing and spending limits for presidential elections to stop the undue influence of large campaign contributions over presidential decisions.

But a 1978 Federal Election Commission interpretation of the campaign finance laws opened a huge loophole that allowed the political parties to be used to channel soft money to support federal campaigns. Still, the system worked well until 1988, when the Dukakis and Bush campaigns began a major exploitation of the loophole, with each raising more than $20 million.

Today the soft money comes in torrents from corporations, labor unions and wealthy individuals in amounts of $100,000 and $200,000 and more. It has grown enormously in American politics since 1988. The estimated $250 million the presidential campaigns and their political parties amassed in soft money for the 1996 election is nearly three times what they raised for the 1992 campaign.

The Republican and Democratic parties were used to inject as much, if not more, soft money into the 1996 effort as the $62 million in public funds that Clinton and Dole each received from the taxpayers.

The harm is not limited to the campaign just ended. Think of legislation and government operations. Republicans have raised legitimate concerns about whether Riady used large contributions to influence Clinton policies.

But what, after all, do Republican congressional leaders talk about with the tobacco giant Philip Morris, which gave $2 million in soft money to the Republicans during the last election, when they meet on Capitol Hill? Might it perhaps be government policies regarding the tobacco industry?

It's not just huge contributions from foreign interests that we have to prevent.

The 1996 election saw Clinton and Dole each sign a binding commitment to limit campaign spending in exchange for public funds, and then break that commitment by running TV ad campaigns that exceeded their spending limits by tens of millions - dollars that came from soft money.

It also saw the parties for the first time use millions of dollars in soft money to conduct TV campaigns against specific congressional candidates.

And it saw interest groups led by the AFL-CIO conduct TV ad campaigns to attack and promote federal candidates, using funds that cannot legally be spent in federal elections.

The Supreme Court has held that ads by independent groups that do not contain express advocacy, such as the words ``vote for'' or ``vote against,'' are issue ads, not campaign ads. Using this test as a license to cheat, the AFL-CIO, for example, spent more than $20 million in union dues on TV ads against Republican representatives whom the group publicly vowed to defeat in the election.

In the end the 1996 election saw an estimated $2 billion spent on our presidential and congressional campaigns.

So where do we go from here? In the closing days of the campaign, it sounded as though reform was at hand.

There was Dole, attacking Clinton for foreign contributions and calling for a package of campaign finance reforms, including a ban on soft money: ``If we are going to preserve the American people's confidence in the system, we need to return campaign finance to the front burner.''

And there was Clinton, calling campaign finance reform an urgent priority and pressing for early action in the next Congress on the bipartisan reform measure sponsored by Sen. John McCain, the Arizona Republican, and Russell Feingold, a Democratic senator from Wisconsin.

This bill includes a ban on soft money.

Still, if there's one thing politicians are even better at than raising money, it's killing campaign finance reform. The Senate, for example, considered campaign finance reform measures on the floor in 1985, 1986, 1987, 1988, 1990, 1991, 1992, 1993, 1994 and 1996.

And both the Senate and the House passed campaign finance reform bills in three Congresses in a row, from 1990 to 1994. Yet the existing campaign finance laws went untouched.

It took a lot of skillful manipulation to pull that off, delays and filibusters and obfuscation. It took Republicans in the Senate and Democrats in the House, and it took a Republican president who vetoed one measure and a Democratic president who abandoned another.

Nevertheless, all of these efforts, combined with the extraordinary campaign finance abuses that occurred in 1996, have created the opportunity to finally enact fundamental reforms in the next Congress.

The stars are finally in conjunction. There are established leaders in both parties with a demonstrated commitment to real campaign finance reform, such as McCain and Feingold. Clinton, as he did in 1993, is urging Congress to make reform a priority and says this time he really means it.

But if anything is to happen, citizens are going to have to make clear to the politicians that they can no longer get away with the devious dollar games they've been playing on campaign finance reform.

Here are four ``do nots'' for citizens who have had enough and don't want to take it anymore.

Do not allow congressional Republicans to focus just on Clinton and the Democrats' foreign-related contributions. Republicans and Democrats in both House and Senate are implicated equally and should concentrate on cleaning up their own scandalous financing as well as the presidential system.

Do not let interest in a ban on foreign-related contributions divert attention from all the other soft money corruptions. The beginning of reform is to bar all soft money in federal campaigns. Every day that the soft-money loophole stays open is a day that invites further corruption of the government and politics.

The soft-money ban is the key to everything else - to restoring the integrity and effectiveness of the presidential campaign finance system and to obtaining meaningful reforms of the congressional system.

Do not allow Congress to delay action on campaign finance reform or the president to walk away from his commitment. As we saw in 1993, delay is death. That means no high-minded commission to study the problem and no delays to ``improve'' the legislation.

The McCain-Feingold bill provides the framework for immediate action on the floor of the Senate in the new Congress. The changes necessary to deal with new problems that arose in 1996 can be quickly incorporated into a revised version of the bill.

Do not let the perfect be the enemy of the good. This doesn't mean accepting an unacceptable bill, like one that does not shut down soft money. But it may mean accepting a bill that makes fundamental changes but doesn't completely solve the problems. For years, politicians and powerful interests in Washington have blocked campaign finance reform because the current corrupt system suits their needs. Many of these forces will strenuously resist change from the day President Clinton and the new Congress are sworn in next month.

These forces can be beaten, however, and the starting point is to close the sewer.

Ban soft money.

Fast.

CAPTION(S):

2 Photos

Photo: (1--Color) Tinseltown tithings: President Clinton, Hillary Rodham Clinton and Barbra Streisand at a fundraiser before the election.

(2--Color) On the Dole: Candidate Bob Dole on the campaign trail.