How Our Political Parties Beat Campaign Finance Reform

Did the McCain-Feingold Act of 2002 have any of its intended effects?
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John McCain formally announcing his intention to run for the presidency in Portsmouth, New Hampshire, in 2007. (PHOTO: RIVER BISSONNETTE)

John McCain formally announcing his intention to run for the presidency in Portsmouth, New Hampshire, in 2007. (PHOTO: RIVER BISSONNETTE)

In 2002, Congress passed and President Bush signed the Bipartisan Campaign Finance Reform Act, also known as the McCain-Feingold Act or BCRA. This act had two specific goals. First, it sought to reduce the influence of parties in federal elections by banning "soft money," the previously unlimited funds parties could spend on races. Second, it sought to reduce the influence of corporations and interest groups by prohibiting their funding of "electioneering advertisements" (those that specifically advocated for or against a candidate) shortly before an election.

A decade later, would we say that parties, interest groups, and corporations have a reduced role in our elections? I didn't think so. But why? Many would point to the Supreme Court's 2010 Citizens United v. FEC decision, but in fact, BCRA was being undermined almost from the start by the very political parties it sought to defang. Parties did this through the use of what have become known as "527s."

527s are tax-exempt organizations (so-named because of their description in section 527 of the U.S. Tax Code) that can accept unlimited donations and spend unlimited funds to affect elections. They existed prior to BCRA but became very popular shortly after its passage.

After BCRA, 527s quickly became the tools of the parties, which were otherwise limited as to how they could influence elections.

In a new paper (gated), Richard Skinner, David Dulio, and I examine the role of 527s in the 2004 and 2006 election cycles, shortly after the enactment of BCRA. One of the main questions at the time was whether 527s were reliable weapons for the parties or loose cannons. That is, were they helping the parties by backing the sorts of candidates they liked and providing funds the parties couldn't, or were they rogue organizations that could undermine parties by funding off-message communications and backing the wrong candidates?

We examine these organizations by looking at their employment records, trying to assess how closely tied the 527s are to the formal political parties. We find that there's a wide range of "partyness"—the percentage of a 527's employees who have worked for formal parties or presidential campaigns—but those with a higher degree of partyness tend to be more deeply embedded within the 527 network. In other words, the key to being an important 527 is to have lots of employees who are important to the formal political parties.

The interpretation of this is that 527s are not rogue organizations. The active ones tend to share lots of employees with major presidential campaigns and national party committees. 527s are not operating at cross-purposes to the parties. Quite the contrary: After BCRA, 527s quickly became the tools of the parties, which were otherwise limited as to how they could influence elections. The parties adapted, quickly overcoming the limitations of the new campaign finance law by exploiting a loophole in the tax code.

This is a classic case of party adaptation (something I'm currently writing a book about). In this case, the adaptation was quite quick—basically one election cycle. Many anti-party reforms usually end up following this same path, in large part because their proponents misunderstand the dynamic and adaptive nature of political parties. People may dislike parties, but trying to regulate them away often results in failure and ends up producing even more complicated and frustrating rules, like the ones that now govern our campaign finance system.

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