Soft Money

Concerns about the escalating costs of political campaigns led to efforts beginning in the mid-1990s to overhaul the Federal Election Campaign Act of 1971 and its amendments, a mission that culminated in the enactment of the Bipartisan Campaign Reform Act (BCRA) of 2002. The biggest change invoked by BCRA was a prohibition on unlimited contributions by individuals and groups, known as soft money, to national party committees for use in campaigns for federal offices. Such funds had greatly escalated since a federal law was passed in 1979 permitting such fund-raising.

For reform-minded individuals and groups whose priority was to regulate the flow of money to campaigns for president and Congress more strictly—and to create greater distance between the parties and big campaign donors—the soft money ban was the right thing to do in and of itself. But those who hoped that BCRA regulations would reduce the importance of money in politics were quickly disappointed.

Despite predictions from some BCRA opponents that the parties would wither without access to the soft money on which they had come to depend, both the Republicans and Democrats proved highly adept at replacing the fewer but larger soft money contributions with smaller and much more numerous regulated hard money donations. This was greatly abetted by the increasingly sophisticated use of the Internet as a conduit for campaign fund-raising, with instant contributions paid for by credit card on candidate websites supplemented by electronic communications to known or potential donors.

In efforts to raise soft money for the Democratic National Committee, the Clinton administration invited donors to spend the night in the Lincoln bedroom. White House

Meanwhile, soft money donors did not simply fade away; rather, they found new ways to influence election outcomes. One of the biggest consequences of BCRA, and one not intended by its advocates, was a rapid expansion of “527” political organizations, so called because they are organized under Section 527 of the Internal Revenue Code, are overseen by the Internal Revenue Service, and are subject to less stringent regulation than are political action committees, which make direct hard money donations to candidates and parties and are regulated by the federal election commission (FEC).

In 2002, the last year in which soft money donations could be made to national party [Page 593]committees, 527 groups spent $229.5 million. By 2004, 527s reported spending a cumulative $595.5 million; much of that money went into negative advertising by Democratic-oriented groups (such as America Coming Together, the Media Fund, and http://MoveOn.org), which attacked President George W. Bush, and Republican-oriented groups, such as the Swift Boat Veterans for Truth, which raised questions about Democratic challenger John Kerry's reputation as a Vietnam War hero.

Spending levels by 527s have remained in the hundreds of millions of dollars in each election cycle since. The names and ideological leanings of the top spending groups have varied, though.

In 2008, a year in which Democrat Barack Obama was elected president and his party made significant electoral gains across the nation, the biggest spending 527 was allied with the Democrats—a PAC set up by the Service Employees International Union—as were two of the next three: America Votes, a broad alliance of labor unions and other progressive groups, and the feminist organization EMILY's List. The one Republican-allied exception was American Solutions Winning the Future, a PAC established by former U.S. House Speaker Newt Gingrich.

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