The Seven Years’ War: The Fight Over Campaign Finance Reform
By William J. Eaton

The recently concluded battle over campaign finance reform might best be called the Seven Years’ War. This past December the Bipartisan Campaign Reform Act of 2002 (BCRA) was approved by a narrow majority of the U.S. Supreme Court in one of the Court’s most significant decisions in a generation. The 5–4 ruling represented a near total victory for a relatively small group of lawyers and scholar-activists who had worked behind the scenes since 1996 in an effort to help shape the legislation that was eventually passed by Congress and signed into law by a reluctant president.

The legislative infighting pitted Republican against Republican and Democrat against Democrat, but in the end it was a bipartisan coalition that prevailed. The legal combat was intense, especially during Supreme Court arguments last September, and both sides of the debate reflected passionate feelings about freedom of speech and the regulation of money in the political process.

Opinions differ on how the new law will affect political activity, especially television advertising, in the 2004 campaign and beyond. To the advocates of change, the Court’s ruling provided an exhilarating victory for the integrity of government and a defeat for the concept that huge political contributions can be used to buy access and sway decision makers in Washington. To opponents, however, the decision was an outrageous limitation on freedom of speech that will merely produce an unworkable attempt to limit the flow of political money.

The Genesis of BCRA
The legislative battle to mandate reform was waged against the unseemly spectacle of President Clinton virtually renting out the Lincoln bedroom to high-rollers and issuing invitations to White House coffees to raise campaign cash. The subsequent collapse of the Enron Corporation, with its status as one of the major players in the election sweepstakes and its close ties to the Bush administration, further intensified the perceived need for change.

In December 1996 Norman Ornstein, a fellow at the American Enterprise Institute (AEI) and an expert on Congress, and Thomas Mann, a senior fellow at the Brookings Institution, convened a meeting at AEI’s downtown office to come up with a strategy to change the law. Ornstein and Mann were acting in the aftermath of the November 1996 election, in which they witnessed what they believed to be a pattern of corrupt influence by big-money contributors. Ornstein and Mann were joined by Trevor Potter, former chair of Federal Election Commission (FEC); Anthony Corrado, a professor at Colby College; and Michael Malbin, executive director of the nonpartisan Campaign Finance Institute. Subsequently, E. Joshua Rosenkranz, then president of the Brennan Center for Justice in New York, and Dan Ortiz, a law professor at the University of Virginia, also became part of this loosely knit group.

“The wheels were coming off the campaign finance system,” Ornstein recalled as he reflected on the hundreds of millions of dollars that both Democratic and Republican candidates had collected from corporations and unions that, under the provisions of the Federal Election Campaign Act of 1971 (FECA), were prohibited from giving money to influence federal elections. To evade restrictions on giving, corporations and labor unions relied on the “soft money” loophole of the FECA, which permitted unregulated contributions for activities “intended to influence state or local election; for mixed purpose activities such as get-out-the-vote drives and generic party advertising; and for legislative advocacy advertisement . . . so long as the ads did not expressly advocate [a federal] candidate’s election or defeat.” By donating money to political parties rather than individual candidates, and sponsoring “issue ads” that did not rely on “magic words” such as “Vote for John Smith” or “Vote Against Jane Doe,” large institutional donors were able to remain within the letter of the law while violating the spirit. The reliance on soft-money contributions was a clear subversion of the FECA’s attempt to eradicate “the pernicious influence of ‘big money’ campaign contributions” in federal elections.

The pattern of abuse Ornstein and Mann had noted in 1996 was even more egregious during the 2000 election cycle, when soft-money contributions exceeded a staggering $450 million.

At the time the Ornstein-Mann group first got together in late 1996, Senators John McCain (R-Ariz.) and Russ Feingold (D-Wis.) were sponsoring a bill that would place spending limits on campaigns for federal office and provide public financing of election contests. However, members of the working group believed that the McCain-Feingold approach would not get enough support to pass Congress and, even if it did, that it would be struck down by the Supreme Court as unconstitutional. They based this assessment on a careful reading of previous Supreme Court decisions, most notably the 1976 case of Buckley v. Valeo, in which the Court upheld limits on individual campaign contributions. Such restrictions, the Court declared, did in fact “limit the actuality and appearance of corruption resulting from large individual financial contributions.” In Buckley the Court had indicated that restrictions on candidate expenditures of the sort proposed in the legislation then being sponsored by McCain and Feingold were much more problematical under the First Amendment than were the restrictions on contributions.

“It doesn’t do any good to pass a bill if the Supreme Court is going to throw it out,” observed Potter. The group members thought that a more nuanced, carefully drawn bill was needed to withstand Supreme Court review. “We were,” said Rosenkranz, “looking for another way to skin the cat.”

Rather than rely on spending limits, the working group favored a ban on the unlimited and unregulated soft-money contributions donated to the political parties from corporate and union treasuries, as well as from wealthy individuals. In addition, the working group advocated a sharp restriction on the millions of dollars of corporate and union spending for issue ads on radio and television in campaign seasons. These ads, they thought, constituted barely camouflaged electioneering for or against a candidate from institutions expressly prohibited from using their general treasury revenues to influence federal elections.

Resistance in the Senate
The rationale of the Ornstein-Mann group was accepted in the House by Representatives Christopher Shays (R-Conn.) and Marty Meehan (D-Mass.), who revised the bill they were sponsoring to conform with the ideas proposed by the political activists. Shortly thereafter, McCain and Feingold also endorsed the new approach, after Ornstein bluntly told them, “Your bill can’t pass Congress.” In addition to incorporating the prohibition on soft money and the restrictions on issue ads, while jettisoning the limits on candidate spending, the legislators included an increase in the amount an individual could contribute to a federal candidate’s campaign from $1,000 to $2,000 as a sweetener to attract opponents of reform.

This new philosophical approach quickly garnered support on Capitol Hill. At one point in the House debate over the Shays-Meehan bill, Asa Hutchinson, now undersecretary for border and transportation security, startled senior Republicans by invoking scripture on behalf of the proposed reforms, reminding his fellow House members that Jesus had driven the money-changers out of the temple. Warren Buffett, the legendary investor from Omaha, was brought into the battle by Shays in 1998. Buffett not only told wavering Republicans that soft-money contributions did in fact control the outcome of House votes, but was overheard telling lawmakers, “If I gave enough soft money, you guys would vote to change the color of the American flag.”

The legislative battle was won in the House that year. The Shays-Meehan bill was passed in 1998. But the Senate refused even to consider the bill. Led by the vocal opposition of Senator Mitch McConnell (R-Ky.), who argued that attempts “to diminish the ability of political parties and citizen groups to speak in the days before an election” stood in contravention of longstanding “First Amendment principles,” the opponents of campaign reform relied on parliamentary maneuvers to ensure that the bill was never brought to the floor. In subsequent years the House adopted the measure in both the 106th and 107th Congress. But the Senate remained the graveyard of campaign finance reform.

Momentum began to shift in 1997 when Tennessee Republican senator Fred Thompson led an investigation into the fundraising abuses of the 1996 campaigns that gave ammunition to the backers of stronger regulation of campaign finance. “Those hearings documented a corrupt system,” said reform advocate Fred Wertheimer, president of Democracy 21. Both Norman Ornstein and Thomas Mann testified at the Senate hearings, and they explained the constitutional logic of a ban on soft money and limits on issue ads.

But even as momentum began to shift, proponents of reform were fighting an uphill battle. The attempts of the Ornstein-Mann group to stick with a draft that would pass constitutional muster were frustrated by the plethora of amendments proposed to entice wobbly supporters of reform by playing to the particular concerns of individual senators. Included among these poison pill amendments was a nonseverability clause proposed by McConnell, wherein it was mandated that if the Supreme Court declared any portion of the legislation unconstitutional, the entire bill would be rendered null and void.

Feingold worried that those talking compromise were in fact “setting a trap” that would derail the potential for meaningful reform. But proponents were steadily gaining support, and there were also a few substantive amendments circulating that provided a fresh boost to the McCain-Feingold forces. Senator Olympia Snowe (R-Maine), who became one of the chief sponsors of the 2001 version of the McCain-Feingold bill, called Ornstein for assistance in drafting an amendment to limit what she called “sham” issue ads paid for with corporate and union funds that were obviously designed to influence election races. Meanwhile Dan Ortiz and Joshua Rosenkranz also came to aid Snowe and the cosponsor of the amendment, Senator Jim Jeffords, then a Republican from Vermont, to fine-tune the drafting of the final legislation.

Trevor Potter summed up the legal theory behind the Snowe-Jeffords amendment: “We focused on the fact that the Supreme Court often upheld restrictions on [the use of] corporate and union funds” in federal election campaigns. Those affected by the restrictions had to be given clear notice of what was prohibited so far as preelection ads were concerned, and, Potter explained, the amendment was drafted to be fully consistent with previous Supreme Court rulings.

In March 2002 the House once again passed a version of the bill, which was now formally known as the Bipartisan Campaign Reform Act of 2002. Representative Dick Gephardt (D-Mo.), then the minority leader in the House, had joined beforehand with Senator Tom Daschle (D-S.D.) and the chief sponsors of the measure in both chambers to “hammer out the stickiest issues” to produce a House bill that the Senate would accept. Notably, the House version incorporated the language of the Snowe-Jeffords amendment in the body of the text.

In a bizarre twist, Jeffords’s May 2001 decision to leave the Republican Party, become an independent, and vote with Democrats on the leadership of the Senate proved to be a key factor in the final passage of the BCRA. “Jeffords’ change eliminated the last roadblock. We were on a glide path,” said one Capitol Hill veteran. With Jeffords’s support, Daschle was elected Senate majority leader, and many of the procedural maneuvers the Republicans’ leadership had relied on to kill the bill in the past were no longer available. Daschle’s elevation to majority leader meant the bill would be introduced on the Senate floor.

The 2000 election had brought more moderates from both parties into the Senate, and the bill’s backers were able to defeat a filibuster. McCain and his allies had feared that sending a bill to conference with the Republican-controlled House might kill it or change it beyond recognition. So, in a rarely used maneuver, Daschle brought the House-passed bill to a vote and it won passage in the Senate without change on March 20, 2002.

But the battle was far from over. Senator McConnell introduced himself to reporters shortly after the final vote by saying, “Darth Vader has arrived.” Making it clear that he was prepared to sue on First Amendment grounds if President Bush signed the bill, McConnell added that he would be “meeting with the co-plaintiffs” later in the week.

President Bush had signaled to Republican opponents of the measure that he was not considering a veto, and on March 27, 2002, he signed the bill without ceremony and with no members of Congress present. Remarkably, he offered encouragement to those threatening litigation by declaring that he, too, thought the bill contained provisions of doubtful constitutionality. “[T]he bill does have flaws,” said Bush. Making note of the ban on soft-money donations to political parties, he went on to say, “I believe individual freedom to participate in elections should be expanded, not diminished; and when individual freedoms are restricted, questions arise under the First Amendment.”

The Onset of Litigation
McConnell was true to his word. Twenty minutes after the act had been signed into law, almost before the ink dried on the president’s signature, the first lawsuits were filed against the measure on grounds that the BCRA limits constituted a violation of the First Amendment’s protection of free speech and free association. The legislative battle was over, but a titanic legal struggle had begun.

The plaintiffs marshaled their strongest arguments against the two main pillars of the law: the ban on unregulated soft money to political parties and the restrictions on issue ads financed by corporations and unions. “This prevents the parties from raising money as they have in the past,” said Joseph Sandler, general counsel for the Democratic National Committee (DNC). “Other groups, like nonprofit organizations, are free to raise unlimited [amounts of money] without the same accountability, without the same transparency. . . . The fact is that [in the past] when parties had lots of money, that was a bulwark against corruption . . . because individual legislators were more beholden to the party than they were to special interests. Now, under the reform regime, every member of Congress is a political entrepreneur. They don’t need the parties and they are more beholden to special interests.”

The litigation phase brought together a strange combination of activists, as lawyers from both the Republican and Democratic national committees came together in opposition to the law. Joining the litigation was a Republican lawyer, Jan Baran, a partner with Wiley Rein & Fielding LLP, who shared the views of his like-minded cohorts at the DNC. “The law restricts speech,” Baran said. It restricts “advertising independent of campaigns, not in collaboration with political parties, but independent expression, the purest form of speech. Regulating political campaigning is just as inefficient as regulating alcohol was in the days of Prohibition.”

Laurence Gold, associate general counsel of the AFL-CIO, was also opposed. He said, “You have a law where a small local union in a rural state cannot spend $55 on a radio ad to urge a congressman to vote against a ‘right-to-work’ bill, yet Bill Gates could spend $20 billion to say anything he wanted.”

The defenders of the law fought back with equally strong claims. Seth Waxman, former solicitor general in the Clinton administration, defended the law’s provisions on election communications in his brief to the Supreme Court on behalf of Senators McCain and Feingold and the other sponsors. “These provisions ban no speech,” Waxman wrote. “Corporations and unions remain free to run federal campaign ads as long as they pay for the ads from PAC [political action committee] funds voluntarily contributed by individuals. . . . In truth, BCRA merely strives to restore the efficacy of longstanding federal campaign finance laws and to put an end to the evasion that has made a mockery of the law and left the public to believe that democracy is for sale.”

Thomas Mann, one of the founders of the informal working group that helped to shape the law, said, “This is an attempt to try and protect the system we had a decade ago, before the system [of campaign finance regulation] exploded and became a joke.”

McCain ridiculed the claim that money was synonymous with speech, and summed up his strong support for the law by saying, “Average citizens are being deprived of their right of free speech when the megaphone is held by those with big money.”

An All-Star Game
The Supreme Court agreed to hear the case on appeal from the D.C. Circuit, and the hotly contested constitutional arguments were brought to a dramatic climax on September 8, 2003, when the justices came back early from summer vacation to hear four hours of arguments by some of the leading lawyers in the nation.

“It felt a little like being at the all-star game,” recalled Paul Clement, principal deputy solicitor general, who argued in support of the law. He referred to the presence of former solicitors general Kenneth Starr and Seth Waxman, current solicitor general Theodore Olson, and nationally known First Amendment specialist Floyd Abrams, among others. “A group of great names,” said Clement. “It was really an exciting atmosphere.”

The audience was distinguished as well, with Senators McConnell, McCain, Feingold, and Snowe listening avidly along with Shays, Meehan, and others from the House. Thomas Mann, Norman Ornstein, Trevor Potter, and other members of the working group that had been so influential in drafting the legislation were also there for the climactic event.

At the outset Starr, a partner at Kirkland & Ellis LLP, took the lead, arguing on behalf of the McConnell plaintiffs that the BCRA “intrudes deeply into the political life of the nation, and does so in a way that not even the most ardently nationalist of the founding generation would have countenanced” by mandating “a significant diminution in speech and associational activity . . . that lies at the very core of the First Amendment.”

Theodore Olson countered on behalf of the federal defendants, arguing that Congress had the constitutional authority “to curb the corrupting influence of corporate, union and large, unregulated contributions in Federal elections,” and that the Supreme Court had affirmed that right in a lengthy list of previous decisions. “As this Court has observed,” said Olson, “the history of campaign finance reform has been a cycle of legislation followed by the invention and exploitation of loopholes, followed by more legislation to cut off the most egregious evasions and circumventions. . . . [T]his Court has said over and over again . . . that the solutions that the legislature has enacted before, the central principles of which are embodied in BCRA, are constitutional solutions.”

The arguments of the lawyers were familiar, as they had been hashed over during the six years of legislative debate, and contained few surprises. Seth Waxman, speaking for the congressional sponsors, maintained, “We have a dialectic going on here between people who want to use money to influence people in government and the institutions that need to preserve a sense of integrity in the process.” Maintaining government integrity was of paramount importance. The opponents, however, reiterated their view that the law trampled on the First Amendment rights of political parties, corporations, unions, and independent groups. The federal government’s interference with the state election system, the plaintiffs’ advocates said, was in violation of the Constitution.

Much of the debate centered on the Court’s 1976 decision in Buckley v. Valeo, which dealt with the constitutionality of a campaign finance law passed to deal with fundraising abuses that had been revealed by the Watergate scandal. In Buckley the Court upheld limits on contributions, but struck down controls on political spending except for a ban on “express advocacy” of a federal candidate in an advertisement paid for with corporate or union treasury funds. This was the case that the Mann-Ornstein working group had paid particular heed to in its attempts to define the appropriate parameters of the BCRA. Supporters of the new law said the ban on using corporate or union funds for broadcast ads referring to a clearly identified federal candidate within 60 days of an election was justified by the Buckley decision. Opponents argued that the Buckley ruling could not be stretched to permit such a broad restriction on political speech by corporations, unions, and independent groups.

Although previous Court rulings offered precedent, no one knew how this Court would respond. Chief Justice William Rehnquist provided the biggest surprise of the day when he signaled that he had changed his mind about his prior decision in a 1990 campaign finance case in which he had upheld the regulation of corporate spending. As he listened to Rehnquist grill the advocates at the bar, Norman Ornstein recalled, “It gave me a few tremors.”

Rehnquist’s apparent change of heart focused attention on Justice Sandra Day O’Connor, who was identified as the swing vote on the sharply divided court. But O’Connor was exceedingly difficult to read. She asked few questions and gave no clue to her thinking on the case during the arguments. Advocates on both sides were well aware that she had voted against the regulation of corporate spending in the 1990 case to which Rehnquist had referred, Austin v. Michigan Chamber of Commerce.

As the courtroom cleared, advocates on both sides agreed on one conclusion: It was impossible to tell how the justices would rule on one of the most important cases in the last quarter century, but it was certain that the final opinion would reflect a sharply divided court.

The Court Speaks
As predicted, the Court was in conflict with itself. On December 14 three months after the arguments, the Supreme Court handed down a 5–4 decision in McConnell v. FEC, upholding every major provision in the law and deferring to Congress’s expertise in campaign finance. Justices Stevens and O’Connor coauthored the majority opinion, with Justices Breyer, Ginsburg, and Souter completing the decisive quintet.

“It was a very close call,” said Trevor Potter. “The Chief Justice changed his vote [from the Austin case] and O’Connor changed hers to counter it.”

Nina Totenberg, legal affairs correspondent for National Public Radio, recalled O’Connor’s political background as an elected member of the Arizona State Senate and an elected judge of the Maricopa County Superior Court. “She was the only one [of the justices] who ever held elective office . . . and she knew what political pressures there are.”

Potter gave another explanation for O’Connor’s position, saying that she followed precedent even though she had to change from the position she took in the 1990 case. “She values stability, and casting her lot with a complete change in 100 years of thinking in terms of regulation of corporate spending is not a place where she wanted to go.”

Kenneth Starr, however, said the decision was a triumph for Justice Stevens’s minority view expressed during the 1990s, that political money should be treated differently from political speech. “John Paul Stevens’ vision was vindicated with five members of the Court saying that ‘we agree with what Justice Stevens has been saying all along,’ ” Starr said at a Brookings Institution panel on the ruling.

Starr also attributed the outcome to the grim picture of campaign finance described by the defenders of the law. “It’s a tribute to the exquisite lawyering done by the defense team to paint this extremely unflattering portrait” of a political world without the BCRA.

Jan Baran, noting the narrowness of the majority, said, “This reflects the divided opinion in the country and the Congress. The division of opinion continues, but we have a constitutional decision by a 5–4 court. The question is whether it’s good public policy. Prohibition was constitutional, but . . . we’ll have to wait and see if Sandra Day O’Connor becomes a modern-day campaign-finance Carrie Nation or not.”

Seth Waxman, who appeared in the case on a pro bono basis along with his law firm, Wilmer, Cutler & Pickering, said the congressional sponsors of the law told him early that they were keenly aware of the Court’s past rulings. “Congress was very mindful of the fact that the Supreme Court had, in a line of cases, said the First Amendment allows this, and it doesn’t allow this, and it will allow you to go this far, but not that far,” Waxman explained. All four of the dissenting justices, he noted, called for overruling prior precedents, in contrast to the majority reliance on stare decisis.

Precisely what the future holds is difficult to predict. Clearly, the BCRA put the Court in the middle of a bitterly contested case, and the majority opinion by Justices Stevens and O’Connor seemed to invite Congress to keep repairing the campaign finance system as it sees fit. But the justices also sounded a cautionary note. “Money, like water, will find an outlet,” they wrote. “What problems will arise, and how Congress will respond, are concerns for another day.”

Longtime journalist William J. Eaton, a Pulitzer Prize winner, lives in Washington, D.C.