Legal Affairs – Beware of Cures That Are Worse Than the Disease

National Journal

The Enron spectacle is capitalism’s gift to campaign finance reformers. At a time when they are close to having the signatures they need to force the Republican leadership to bring the Shays-Meehan bill to the House floor, along comes a dramatic reminder of the ugliness of soft money.

Soft money-the large, unregulated contributions to political parties from corporations, unions, and rich individuals-stinks. And Enron Corp. was among the 20 biggest soft-money donors in the 2000 election cycle. But even if these contributions played some part in facilitating Enron’s reckless and deceptive business practices and its eventual collapse into a rancid stew of investigations and lawsuits, the far-reaching "reforms" currently in Shays-Meehan and its Senate counterpart, McCain-Feingold, would be a non-cure worse than the disease.

Those of us who have been campaign finance reform skeptics may as well concede the silliness of the Republican conceit that Enron’s campaign contributions were simply bad investments. Sure, the company apparently got no help from the Bush Administration on its way down. And sure, by that time Enron Chairman Kenneth Lay’s top ranking among benefactors of his buddy George W. Bush may have become a liability: The two Cabinet Secretaries who spurned Enron’s pleas for intervention were presumably aware that Democrats would skewer them for any appearance of favoritism. But this does not negate the evidence that when Enron was on the way up, the nearly $6 million it gave to politicians since 1989-three-fourths of it going to Republicans-helped buy plenty of privileged access and influence.

It was not out of civic-spiritedness that Enron and its executives handed out $2.4 million (68 percent of it soft money) to Bush and other politicians during the 2000 election cycle alone, and gave more than $1.1 million (mostly hard money) since 1989 to 71 of the current Senators and 187 of the current House members. This money opened doors, including those of Vice President Dick Cheney’s energy task force, which met often with Enron and blessed many of the deregulatory policies its leaders advocated. Then there were helping hands in dealings with the government of India on a troubled $3 billion power plant project-in 1996 from the Clinton White House, about the time of a $100,000 Enron gift to the Democratic National Committee; and last June from Cheney. And there was President Bush’s replacement of Federal Energy Regulatory Commission Chairman Curtis Hebert Jr. after Lay told Hebert that he could keep his job if he changed his views on electricity deregulation. (Hebert didn’t change.) And so on.

If confirmation were needed that such dealings create at least the appearance of influence being bought and sold, Attorney General John D. Ashcroft supplied it by recusing himself from the Enron investigation, in light of the more than $57,000 in mostly soft money that Lay, other Enron employees, and the company’s political action committee gave Ashcroft’s unsuccessful 2000 Senate re-election campaign.

The widespread assumption that soft money helped bring about the Enron debacle-the hidden losses, the cheating of investors and stockholders, the accounting shenanigans, the stock sales by executives as their company tanked-is at best unproven. But it would be hard to rule out the possibility of an indirect connection between Andersen’s lax auditing of Enron and the contributions by Andersen and the other four giant accounting firms-all of which rank among the top 20 contributors to Bush, for one. Similar largesse in the past probably enhanced the clout that enabled the Big Five to beat back former Securities and Exchange Commission Chairman Arthur Levitt’s efforts to tighten regulation of auditors and curb the conflict of interest inherent in doing lucrative consulting work for companies while auditing them. And that conflict of interest may help explain Andersen’s willingness to bless the bogus books of a company that paid it more for consulting than for auditing.

Even assuming that soft money helped ensure the lax regulatory environment that enabled Enron to cheat, Shays-Meehan’s most extreme and least publicized provisions have nothing to do with soft money. One would make it a federal crime for any association of citizens (other than a political action committee) to criticize, praise, or even name a candidate for Congress in an ad broadcast in his or her state within 30 days of a primary or 60 days of a general election. Another would define illegal "coordination" with candidates in campaign spending so broadly as to make it risky for any group to praise (or even mention)-at any time, in any public communication-a member of Congress with whom it has met or worked on legislative issues.

The origins and details of these patently unconstitutional provisions are complex. But the incumbent-protection urge that helps explain them is reflected in lawmakers’ complaints about seeing their records attacked by independent groups-such as the Sierra Club and the National Rifle Association-in so-called issue ads. "If I could think of a way constitutionally, I would ban negative ads," Sen. John McCain, R-Ariz., said in 1999.

The case for banning soft money would be stronger if decoupled from these more-extreme provisions. A soft-money ban would eliminate the single most corrupting aspect of our current campaign finance system: the $100,000-plus contributions from wealthy interests that inspired Vice President Al Gore’s dialing for dollars; President Clinton’s selling of the Lincoln Bedroom; congressional leaders’ peddling of opportunities to dine, discuss issues, and golf with them; and other similarly disgraceful transactions. And a stand-alone ban on soft money might survive review by the Supreme Court.

But these benefits would come at a high cost: the weakening of our political parties. The parties would lose money and clout relative to independent groups (which tend to cluster on the liberal and conservative fringes and which need not disclose their contributors), wealthy individuals (whose campaign spending would not be limited by Shays-Meehan), political action committees, and the news media. For those who see the parties as vital engines of grassroots organizing, voter education, coalition-building, candidate development, and compromise, this would be a change for the worse.

Moreover, the notion that a soft-money ban would drive the money out of politics is greatly exaggerated. It would enhance the already considerable advantage of very wealthy, self-financed candidates such as Sen. Jon Corzine, D-N.J., who spent an estimated $65 million of his personal fortune to win his Senate seat in 2000. Others would have to get campaign money from someone, and executives at companies such as Enron and the Big Five could still make limited hard-money contributions. Lobbyists and others who raise large sums by rounding up $1,000 hard-money contributions would still have chits to call in. And some political money would be driven underground.

Any company as large as Enron "is going to have access by the fact of what it is and what it does," as Rep. Christopher Shays, R-Conn., co-sponsor of the bill bearing his name, recently acknowledged. Big companies will always be able to deploy hard-money contributions, PACs, gifts to nonprofits favored by (or allied with) pol- iticians, and well-connected lobbyists-such as the former SEC official who reportedly won Enron a regulatory exemption in 1997 that facilitated some of its deceptive practices. Even without a soft-money ban, Enron has spent more on lobbying than on campaign contributions.

So money would still talk, albeit less through the parties and more through other groups with less accountability. This reality helps explain why Shays-Meehan’s sponsors are trying so hard to muzzle independent groups. And it’s why some academics would extend campaign finance regulation to the news media, by limiting the freedom to editorialize in support of candidates. We cannot claim to be getting money out of politics if we exempt some of the nation’s largest companies-such as AOL Time-Warner Inc., General Electric Co. (which owns NBC), Walt Disney Co. which owns ABC), Microsoft Corp. (which co-owns MSNBC), and Rupert Murdoch’s empire (which includes Fox and the New York Post). Nor would it be fair to let powerful media organizations editorialize for candidates as much as they like while barring citizens groups from spending similar amounts for campaign ads. Unless we do away with either the freedom of speech or the capitalist system, we can no more purge money from politics than purge violence from football.

Whether the somewhat cleaner politics that might be fostered by a stand-alone soft-money ban would be worth weakening the parties is a close call. But as long as efforts to muzzle independent groups are part of the package, Shays-Meehan should be rejected. It’s true that, in any event, the courts would probably excise the worst of these provisions. But endorsing them would be a dangerous dereliction of Congress’s constitutional responsibility.