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21–160 2005

HEARING ON THE REGULATION OF 527 

ORGANIZATIONS 

HEARING 

BEFORE THE

COMMITTEE ON HOUSE 

ADMINISTRATION 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, APRIL 20, 2005 

Printed for the use of the Committee on House Administration 

( 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

(II) 

COMMITTEE ON HOUSE ADMINISTRATION 

BOB NEY, Ohio, Chairman 

VERNON J. EHLERS, Michigan 

JOHN L. MICA, Florida 

CANDICE S. MILLER, Michigan 

JOHN T. DOOLITTLE, California 

THOMAS M. REYNOLDS, New York 

JUANITA MILLENDER-MCDONALD, 

California 

Ranking Minority Member 

ROBERT A. BRADY, Pennsylvania 

ZOE LOFGREN, California 

PROFESSIONAL STAFF

PAUL VINOVICH, Staff Director 

GEORGE SHEVLIN, Minority Staff Director 

(1) 

REGULATION OF 527 ORGANIZATIONS 

WEDNESDAY, APRIL 20, 2005 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON HOUSE ADMINISTRATION, 

Washington, DC. 

The committee met, pursuant to call, at 10 a.m., in Room 1310, 

Longworth House Office Building, Hon. Robert W. Ney (chairman 

of the committee) presiding. 

Present: Representatives Ney, Ehlers, Doolittle, Reynolds, Miller, 

Millender-McDonald, Brady, and Lofgren. 

Staff present: Paul Vinovich, Staff Director; Chris Otillio, Professional Staff; Jason Spence, Professional Staff; George Shevlin, Minority Staff Director; and Thomas Hicks, Minority Professional 

Staff. 

The CHAIRMAN. The committee will come to order. 

What we are going to do is begin with our opening statements, 

and that way we can get it out of the way, and when Mr. Shays 

and Mr. Pence come, we will be ready to go. 

The committee is meeting today to examine the role of the socalled 527 groups in the most recent election cycle, and take a closer look at legislative proposals introduced in this Congress that 

could impact these groups. I think the Senate postponed their hearing today. As I said yesterday in the media, I think the House has 

taken a little bit broader look at the issue, and that is the purpose 

of this hearing. 

Three years ago, Congress enacted the Bipartisan Campaign Reform Act, BCRA, which the President signed into law. I didn’t support BCRA, and I along with my friend, Congressman Wynn, had 

an alternative proposal and I fought hard to defeat BCRA. 

I opposed it because its sweeping provisions infringed upon fundamental first amendment freedoms of speech, expression, and association. Moreover, I believed that BCRA would do serious damage 

to our democratic process by shifting power and influence away 

from the political parties and directing it towards unaccountable, 

ideologically driven outside groups. 

Well, guess what? Unfortunately, I was unsuccessful in my efforts to stop it. 

In the McConnell versus FEC case, the Supreme Court upheld 

the constitutionality of most of BCRA’s provisions. However, although the constitutional questions regarding BCRA have been 

largely resolved, at least for the moment, the question of whether 

BCRA is good policy is still open for discussion. 

To accurately judge the effectiveness of BCRA, we have to first 

examine the promised benefits of the new campaign finance legislaVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00003 Fmt 6633 Sfmt 6633 E:\HR\OC\A160.XXX A160
2 

tion and compare that against the actual results. Now, I don’t intend to sit here and go through the entire bill line by line. I would, 

however, like to tell you that I am not proposing that we repeal 

BCRA. But I think we do have to sift out—and that is what the 

witnesses are here today for their proposals; one of the pieces of 

legislation addresses the 527 issue. 

Proponents of BCRA predicted that soft money would be purged 

from the Federal electoral process and the overall impact of money 

on politics would be lessened. However, a cursory glance reveals 

that soft money in politics continues to thrive in the aftermath of 

BCRA’s passage. According to Political Money Line, Federal 527 

groups expended nearly $600 million during the 2004 election 

cycle. Organizations whose primary purpose was to function as 

shadow political party committees—and we know that so well in 

the State of Ohio—operated as such with the apparent stamp of approval of the relevant Federal officeholders and party officials, 

thus, they were able to solicit and spend soft money in support of 

the party’s candidates and agenda. This has been done on both 

sides of the aisle, whether it is Swift Boats, or Soros, or whatever 

groups are out there. 

This development should not have come as a surprise. As I stated on the House floor during the debate on this law, BCRA does 

not ban soft money under any definition or under any stretch of the 

imagination. 

Those who allege that the continuing presence of soft money in 

the Federal election process is the fault of the FEC are incorrect, 

for it is not only the opponents of BCRA who pointed out the law 

would not eliminate soft money, but merely redirect it to less accountable channels. Reformers themselves acknowledged that soft 

money would still play a role through its use by independent 

groups. 

For instance, one of the Members of the Senate, who was the author of a prominent section of BCRA, stated flatly during the Senate debate that BCRA ‘‘will not prohibit groups like the National 

Right to Life or the Sierra Club’’—not to just pick on those two 

groups, but to mention them—‘‘from disseminating electioneering 

communications. It will not prohibit such groups from accepting 

corporate or labor funds. It will not require such groups to create 

a PAC or other separate entity.’’ 

BCRA supporters also asserted that the new law would result in 

fewer negative advertisements being broadcast during the course of 

campaigns, and thus, usher in a new era of more honest, less negative, politics. Well, you should have been in the State of Ohio for 

the entire year as the soft money ads were blanketing the TVs. 

But if anything, BCRA’s passage has actually led to an increase 

in negative scorched-earth politicking, as we have never seen in the 

history of our country. The reason for this is twofold: Money is 

being diverted away from the political parties, which as broadbased organizations must moderate their messages to appeal to the 

largest audiences possible for their candidates and for their ideology, and it is instead being given to single-issue ideological 

groups whose stances are often dogmatic, whose communication 

strategies are often hard-edged, and who are not accountable to the 

voters. 

3 

It is now almost a universal political tactic for candidates and 

groups to file complaints against their opponents, alleging violations of a vague, complex, and difficult-to-understand campaign finance law. Thus, these laws encourage political actors to not only 

attack the policies and positions of their opponents, but to tar them 

as lawbreakers as well. So much for an age of more honest debate 

and fewer negative attacks and soft money out of the system. 

The reformers also argue that upon BCRA’s passage, public cynicism about the political process would abate because elections 

would now be free from the taint of soft money and the appearance 

of improper influence. Actually, I think the American people have 

become more cynical. They are told that a law will rid the political 

system of soft money, see that it does not, and then have to listen 

to the advocates of the law crow about what a success it is. 

Finally, we were told that BCRA would enable the average person to have a greater influence on the political process. I hope we 

can correct some of the situations with the 527s, because I think 

what you are seeing—and we do it on both sides of the aisle—is 

a few billionaires in this country having a political playground at 

the expense of the average union person whose money is now dirty 

soft money, or the average person who works in a corporation. I 

think that is sad for the United States. 

BCRA’s complexities and ambiguities combined with its harsh 

penalties have increasingly made the Federal political process the 

exclusive province of the rich, the sophisticated, and the well-connected. I recommend to anybody thinking about entering into Federal politics today to challenge an incumbent Member of Congress. 

Hire a lawyer, an accountant, and a bail bondsman. 

BCRA was supposed to enhance the voice of the average citizen, 

but instead it has increasingly frozen out the average citizen from 

the political process. 

It is important that we be honest about the consequences, and 

the fact is that we are stuck with a complex and convoluted law 

that doesn’t ban or even reduce soft money in the Federal political 

system, but does impose significant burdens on individuals and 

groups seeking to be involved in the process. 

We are fortunate to have with us today, four distinguished colleagues of ours who will discuss their proposed legislative solutions 

to the problems we currently face. I intend to keep an open mind 

about the laws. Again, I want to say from the outset that I have 

no intentions of repealing or attempting to repeal this law. I think 

we are here today to try to address some of the problems that have 

occurred. 

With that, I will yield to our ranking member. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman, and good 

morning to our colleagues. I want to thank the Chairman for holding this oversight hearing to consider proposals to impact the activities and roles of 527 organizations. 

A little bit of historical perspective: 527s are named after a section of the Internal Revenue Code that specifies the tax treatment 

accorded political organizations and tax-exempt organizations 

which make political expenditures. Under section 527, all political 

organizations are tax-exempt for purposes of Federal tax law. SecVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00005 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
4 

tion 527 was added to the Tax Code in 1975; thus, 527s have been 

legally constituted operating entities for nearly 30 years. 

Congress has addressed 527s twice in the last 5 years. In 2000 

we passed legislation requiring that all 527s that expect to have 

gross receipts of over $25,000 during a taxable year register with 

the Internal Revenue Service within 24 hours of their formation if 

they were not required to report to the FEC. These 527s are then 

subject to the public disclosure and review requirements of the IRS, 

and if they meet additional requirements, they are subject to the 

public disclosure and review requirements of the FEC as well. 

In 2002 we passed legislation which was intended among other 

things to reduce unnecessary and duplicative Federal reporting by 

certain State and local political committees where the information 

was already required to be reported and to be publicly disclosed 

under State law. Thus, most State and local political organizations 

are exempt from registering, reporting their contributions and expenditures, and filing disclosure forms with the IRS. 

The Supreme Court waded in on the issue in McConnell versus 

Federal Elections Commission. The Court clearly stated that placing limits on the raising of unregulated corporate, union, and large 

individual contributions donated by organizations and individuals 

with general or specific legislative objectives would not have the 

same application to broader citizen-based interest groups. 

BCRA imposes numerous restrictions on the fund-raising abilities of political parties, of which the soft money ban is only the 

most prominent. Interest groups, however, remain free to raise soft 

money to fund voter registration, GOTV activities, mailers and 

broadcast advertising other than electioneering communications. 

In January the Federal Election Commission implemented new 

rules requiring more 527s to register with the FEC; 527 groups, 

whose only purpose is to support or oppose a Federal candidate, 

may only do so with hard money. Citizens who give to the hardmoney accounts of these 527 groups will be under the same contribution limits as if they were giving to the political committees 

of the Members of Congress. 

527 groups will also not be able to finance their entire operation 

using soft money. They will now be required to use a mix of hardand soft-money contributions of at least 50 percent of expenses of 

their activities paid with hard dollars subject to Federal limits. 

We are all too familiar with 527 ads run by the Swift Boat Veterans and others on both sides of the political spectrum that aired 

during the 2004 Presidential election. While I disagreed with the 

content of the Swift Boat ads, I agree that private citizens have a 

right to say that. Many 527s don’t run television ads. Their activities include publishing legislative report cards on the voting 

records of Members of Congress and conducting voter registration 

drives. 

Because of the efforts of America Coming Together, Voices For 

Working Americans, and other similar groups, it has been reported 

that the 2004 elections saw the greatest increase in voter participation since 1968. Congress should encourage these citizen-based activities of informing the public and of getting more citizens involved in our democracy. While I may disagree with what someone 

5 

has said or done politically, I respect their right to do so and to say 

it. 

I voted for the Bipartisan Campaign Reform Act of 2002 to sever 

the connection between Federal officeholders and raising of soft 

money. BCRA was necessary to cut the perceived corrupting link 

between officeholders, the formation and adoption of Federal policies and nonFederal money, so-called soft money. 

After BCRA was challenged, the Supreme Court upheld 99 percent of the law, clearly demonstrating that it is constitutionally 

permissible to regulate or limit the money which Federal officeholders, Federal candidates, and their national political parties use 

for political speech. The Supreme Court recognized the government 

interest in stemming the corrupting influence such money can have 

on Federal policy, even though it imposes on free speech. 

Mr. Chairman, you have stated that the Help America Vote Act 

of 2002 should not be amended but should be given a chance to 

work. BCRA was signed into law the same year and has only been 

given one election cycle to work. BCRA also should be given the 

same opportunity or chance to work. 

Congress may choose to impose additional regulations on 527s if 

it can clearly demonstrate that the money raised and expended by 

these groups has the same potential corrosive influence on Federal 

policymakers. Since filing for tax-exempt status is purely voluntary, some of these groups may decide to morph into a different, 

less accountable form. This point was brought to light in the statement of FEC Commissioner Weintraub before the committee last 

spring, predicting that if the FEC adopted the proposed changes to 

the way 527 organizations are regulated, some entities spending 

funds and disclosing that spending through a 527 organization 

would, I believe, reorganize and continue substantially the same 

activities through 501(c)(4) or (6) organizations, which do not have 

the same disclosure obligations. 

That was testimony before the Committee on House Administration, May 20, 2004. 

I would like to include for the record a letter I signed with over 

125 of my colleagues to the FEC last year, stating that when we 

voted for BCRA, we voted for more, not less, political involvement 

by ordinary citizens and the associations they form. 

[The information follows:] 

APRIL 7, 2004. 

COMMISSIONERS, 

Federal Election Commission, 

Washington, DC, 

Re NPRM regarding political committee status. 

DEAR COMMISSIONERS: We are writing to express our concerns about the pending 

Notice of Proposed Rulemaking on ‘‘political committee status.’’ 

We take a particular interest in this regulatory initiative because it seeks to raise 

and address ‘‘soft money’’ issues very different from those that Congress resolved 

in the Bipartisan Campaign Reform Act of 2002. Yet while charting this different 

course, the proposed rules claim as their authority both BCRA and the Supreme 

Court’s decision in McConnell v. FEC upholding the new law. We are troubled by 

the suggestion that these proposed rules follow the path we laid out, because they 

would lead to results that many of us voting for the new law did not consider or 

approve. 

We support BCRA because we believe that the link between unregulated contributions and federal officeholders, candidates and their parties should be broken. We 

believe that the statute achieved this goal, striking a careful balance between needVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 E:\HR\OC\A160.XXX A160
6 

ed additional regulation of campaign finance, on the one hand, and the protection 

of speech and associational rights, on the other. And we believe that the proposed 

rules severely undermine that balance, with potentially severe consequences for 

vital speech on the central issues of the day. 

Specifically, the proposed rules before the Commission would expand the reach of 

BCRA’s limitations to independent organizations in a manner wholly unsupported 

by BCRA or the record of our deliberations on the new law. For example, Congress 

crafted a new term for certain election-influencing activities by political parties— 

so-called ‘‘Federal election activities’’—as part of the BCRA approach to limiting 

party soft money. The proposed rules would appropriate this concept of ‘‘Federal 

election activities’’ for the very different purpose of regulating ‘‘issues’’ speech and 

other political activity of 501(c) and other organizations. Congress did not choose to 

vastly extend in this way the concept of ‘‘Federal election activities.’’ 

More generally, the rulemaking is concerned with new restrictions on ‘‘527’’ organizations, primarily through the adoption of new definitions of an ‘‘expenditure.’’ 

Congress, of course, did not amend in BCRA the definition of ‘‘expenditure’’ or, for 

that matter, the definition of ‘‘political committee.’’ Moreover, while BCRA reflects 

Congress’s full awareness of the nature and activities of ‘‘527s’’, it did not consider 

comprehensive restrictions on these organizations like those in the proposed rules. 

There has been absolutely no case made to Congress, or record established by the 

Commission, to support any notion that tax-exempt organizations and other independent groups threaten the legitimacy of our government when criticizing its policies. We believe instead that more, not less, political activity by ordinary citizens 

and the associations they form is needed in our country. 

These and other issues go to the heart of how the federal campaign finance laws 

may affect for the worse a host of organizations engaged in speech on controversial 

political issues. The Congress took care to act with caution in this area; the Commission should do the same. As the Supreme Court noted in McConnell v. FEC: 

Congress’s ‘‘careful legislative adjustment of the federal election laws, in a ‘cautious advance, step by step,’ to account for the particular legal and economic attributes . . . warrants considerable deference.’’ 

124 S. Ct. 619, 645 (2003) (citing FEC v. National Right to Work Comm., 459 U.S. 

197, 209 (1982)). This is a fair statement of Congress’s intent to improve the enforcement of existing law, not to promote an aggressive expansion of the law in the 

near-term. 

The FEC should also take into account the dangers of reviewing and resolving 

these issues quickly, on the eve of presidential and congressional elections and in 

a charged partisan environment. These are not conditions best suited to the task 

of thoughtful and credible rulemaking on critical issues. 

The dangers associated with rushed judgment in a partisan crossfire became apparent in the recent weeks, when the FEC issued its Advisory Opinion on ‘‘allocation’’ issues to the ‘‘ABC’’ Committee. In that Opinion, the Commission made 

changes in existing law, in the middle of an election cycle, in response to a request 

from a sham committee formed solely to advance partisan objectives. The Commission should not rush more new rules with major impact, in this cycle, such as those 

now proposed. 

Congress, when enacting BCRA, elected to defer the effective date to the next 

cycle. Even in establishing the day after the last general election, November 2, 2002 

as the effective date, Congress fashioned, with great care, transitional rules to allow 

time for an appropriate and manageable change from one set of legal rules to another. The Commission would turn this approach on its head by promulgating significant and controversial new rules—rules that Congress did not consider or enact 

in its own ‘‘soft money’’ reform—in the thick of this election year. 

The FEC should take the time necessary to assure that any changes it proposes 

are carefully considered and crafted, with minimum disruptive impact on ongoing 

activities by political committees, organizations and candidates. 

For this reason, we ask that the Commission reconsider the nature and timing 

of the current rulemaking initiative. 

Sincerely, 

[In alphabetical order] 

Abercrombie, Ackerman, Alexander, Allen, Andrews, Baca, Baldwin, 

Ballance, Becerra, Bell, Berkley, Berman, Berry, Bishop, T., 

Blumenauer, Boswell, Brady, Brown, C., Brown, S., Capps, Capuano, 

Cardin, Carson, J. Conyers, Costello, Crowley, Cummings, Davis, D., 

Davis, L., Davis, S., DeFazio, DeGette, Delahunt, Deutsch, Dicks, 

Dingell, Dooley, Doyle, and Emanuel. 

Engel, Eshoo, Etheridge, Evans, Fattah, Filner, Frost, Gephardt, 

Grijalva, Hinchey, Hinojosa, Holt, Honda, Hoyer, Israel, Jackson-Lee, 

7 

Johnson, Jones, Kanjorski, Kennedy, Kilpatrick, Kucinich, Lampson, 

Langevin, Lantos, Larsen, Larson, Lee, Lewis, Lofgren, Lowey, 

Lynch, Majette, Markey, Matsui, McCarthy, McCollum, McDermott, 

McGovern, McNulty, Meek, Meeks, Menendez, Michaud, and 

Millender-McDonald. 

Miller, Miller, Moran, Nadler, Napolitano, Olver, Ortiz, Owens, Pallone, 

Pascrell, Pastor, Pelosi, Pomeroy, Price, Rangel, Rodriguez, Ross, 

Rothman, Roybal-Allard, Rush, Ryan, Sanchez, Linda, Sanders, 

Sandlin, Schakowsky, Serrano, Slaughter, Solis, Stark, Strickland, 

Tauscher, Thompson, M., Tierney, Udall, M., Vela ́zquez, Visclosky, 

Waters, Watson, Watt, Waxman, Weiner, Wexler, and Woolsey. 

Ms. MILLENDER-MCDONALD. Lastly, I have requested letters from 

the Congressional Latino Caucus, the Congressional Asian Caucus, 

and the Congressional Black Caucus. All of these groups illustrate 

how these organizations increased voting turnout in 2004. 

Mr. Chairman, I look forward to including these for the record 

and look forward to my colleagues’ testimony this morning. 

Thank you so much for this hearing. 

The CHAIRMAN. I thank the gentlewoman. 

[The statement of Ms. Millender-McDonald follows:] 

8 


Insert graphic folio 21 21160.001
9 


Insert graphic folio 22 21160.002
10 


Insert graphic folio 23 21160.003
11 

The CHAIRMAN. Mr. Ehlers. 

Mr. EHLERS. Thank you, Mr. Chairman. Just a few brief comments. 

First of all, when we went through the passage of the current 

law on campaign finance, the Shays-Meehan law, I did not vote for 

it, even though I was in great sympathy with the aims of the authors of that bill. I did not vote for it, for a couple of reasons, even 

though I oppose the use of soft money and voted for a substitute 

that totally banned all soft money. 

What concerned me was removing the parties, to a certain extent, from the political process. And I knew, I absolutely knew, that 

some alternative would spring up which would be less regulated 

than what we had before, and that is precisely what happened. 

Now, I am well aware that there have been some activities of the 

FEC to regulate, but I think it is an abomination that the parties, 

particularly the minority party here in the House, immediately 

jumped on 527s as an alternative and totally defeated the intent 

of the Shays-Meehan act by their behavior with those units. 

I sometimes sympathize with Mr. Doolittle’s constant statement 

in this committee that let’s just require everything to be reported; 

anyone can contribute any amount they wish, but all has to be reported. 

I think that goes a bit far, but we have to have the controls. And 

what happened with the 527s the last 2 years I think was an 

abomination of the political process. Regardless of their good intent, regardless of their good efforts, regardless of their voter turnout, at the very least we want to make sure that all contributions 

given are reported accurately, that there are enforcement mechanisms to make certain that the laws and rules that we adopt are 

enforced and are kept in place. 

With that, I will yield back. Thank you. 

The CHAIRMAN. The gentlewoman from California. 

Ms. LOFGREN. Mr. Chairman, thank you. I would ask unanimous 

consent that my statement be made part of the record. 

The CHAIRMAN. Without objection. 

Ms. LOFGREN. And I would just add a couple things. I did vote 

for Shays-Meehan, and I think in many respects it worked as 

hoped. We had the biggest turnout ever, I think, in the elections 

last year. 

So the questions I have looking at these bills is what impact 

would they have to encourage voters to go to the polls? Will they 

up or depress turnout? Are they allowing average citizens to organize on the grassroots level and speak out on issues? Will they discourage nonpartisan activities like voter registration drives and 

get-out-the-vote efforts and will they level the playing field? 

I will say I have very strong constitutional law questions about 

the efforts to rein in the so-called 527s. Clearly we are not required 

to give a tax break. That is not a constitutional issue. But all of 

the reasoning of the Court really relates to regulation of politicians 

to avoid corruption in the political system. I don’t think that that 

line of thinking really extends to citizens who are organizing without the request or behest of elected officials or candidates. So I also 

will be looking very carefully at that. I have very strong doubts 

that we actually can legislate in that arena. 

12 

I yield back, and I thank the gentleman for recognizing me. 

[The information follows:] 

STATEMENT OF CONGRESSWOMAN ZOE LOFGREN

Chairman Ney, Ranking Member Millender-McDonald, thank you for holding this 

important hearing today. 

Thank you also to my colleagues, Congressmen Wynn, Meehan, Shays and Pence 

for testifying before House Administration today. I have reviewed your testimony 

and I look forward to hearing from you in person today. I also want to ask for your 

forgiveness for having to step out of this hearing today. The Homeland Security 

Committee is considering a Cybersecurity bill this morning that I wrote with Congressman Mac Thornberry, so I will need to attend that hearing as well. 

A little over three years ago, Congress passed and the President signed the Bipartisan Campaign Reform Act of 2002 (BCRA). This enactment of this bill was the culmination of years of work by many Members of Congress I and in particular Congressmen Shays and Meehan. 

As you may recall, it took some time to get this bill considered in the House. It 

only came to the floor after Congressmen Shays and Meehan filed a discharge petition in support of the bill. I was the 22nd Member to sign the petition. Of course, 

this bill ultimately passed by a vote of 240-189 on February 13, 2002. 

I strongly supported this reform effort and was proud to vote in support of this 

legislation along with 198 of my Democratic colleagues. I will note that my friends 

Congresswoman Millender-McDonald and Congressman Brady also voted for this 

bill. 

Shays-Meehan had a clear purpose: it took members of Congress out of the business of asking lobbyists and special interest for large unregulated donations. There 

was something unseemly about a Senator or Congressman asking a donor for a 

$100,000, or $250,000 or even a million dollars—and BCRA outlawed that practice. 

This legislation went into effect on November 6, 2002, had a major effect on the 

way that the 2004 elections were conducted. Both political parties were able to wean 

themselves off of soft money and were successful in raising funds through many 

small dollar contributions. 

According to the Committee for the Study of the American Electorate, the 2004 

elections say the greatest increase in voter participation since 1968. Voter turnout 

was over 60%. Turnout last year rose by 6.4 percentage points over 2000, the biggest election-to-election increase since 1952. 

In 2000, 105 million people turned out to vote. In 2004, approximately 122.3 million voted. 

Voters were motivated like never before to get involved and vote. This is a good 

thing for our democracy. This Committee and this Congress must not do anything 

that would discourage these trends. 

Of course, I wish that more of these voters would have voted for Democratic candidates! 

I have only begun to review the legislation today and I plan to analyze it to make 

sure it does nothing to discourage voter education and turnout efforts. I think all 

of us can agree that we want to see even more voter interest in the 2006 midterms 

and the 2008 Presidential elections. 

Some of my questions are as follows: 

Will these bills encourage voters to go to the polls or will they depress turnout? 

Will they allow average citizens to organize on the grassroots level and speak 

out on issues? 

Will they discourage non-partisan activities like voter registration drives and 

get out the vote efforts? 

In the tradition of the original Shays/Meehan legislation, will these bills discourage large donations directly to candidates and political parties, thus reducing the legitimate concerns by the public about special access for large, superdonors? 

Will these bills level the playing field so corporate, union and non-profit 

groups can compete fairly in elections? 

Will donations continue to be transparent through reporting requirements? 

I am all for campaign reform as long as it is true and authentic reform. I don’t 

want to see a bill rammed through Congress that is reform in name only. In addition, this reform must not undermine the progress that has been made under 

BCRA. 

13 

As we begin the process of looking at these proposals, let’s make sure that this 

reform effort does nothing to discourage voters and takes positive steps to improve 

our democracy. 

The CHAIRMAN. The gentleman from New York. 

Mr. REYNOLDS. Thank you, Mr. Chairman. 

I look forward hearing the testimony in this hearing today. As 

you well know, I did not support Shays-Meehan, but it is the law 

of the land, and we have to see what has transpired that works 

well and what doesn’t. I have heard all sorts of different things: 

Whether 527s were meant to be included; they weren’t meant to be 

included. I think we have a number of different aspects or examples of where maybe some of that has gone awry, and this is an 

important hearing for us to begin to take a good self-examination 

of a law that is on the books and has been sustained by the courts, 

as to where we continue in the direction of campaign finance and 

any of its potential reforms. 

Thank you. 

The CHAIRMAN. The gentleman from Pennsylvania, do you have 

a statement? 

Mr. BRADY. No, Mr. Chairman. 

The gentlewoman from Michigan. 

Mrs. MILLER. Thank you, Mr. Chairman. I want to thank you for 

holding this very, very important hearing on this subject. 

During the past election cycle, it was certainly clear to everyone 

that 527 organizations had a tremendous and I think an unforeseen impact on the 2004 elections, and it is important that this 

committee does examine these issues. 

In 2004, politically active individuals and organizations found a 

new avenue to influence our election process. Those who previously 

would have donated funds to political parties, which operate under 

strict disclosure requirements, are now funneling money to largely 

unregulated, unsupervised 527 groups. No clear rules govern these 

operations. It gives 527s a tremendous latitude in the political 

process. 

So the question becomes, who exactly is supporting these 527s? 

And the answer is, no one really knows. Certainly one of the possibilities is that foreign citizens are actually supporting these 527s. 

For example, at the end of 2003 it became known that retired U.S. 

Air Force General Wesley Clark’s campaign website was offering a 

link to Canada for Clark. Canada for Clark in turn advised Canadians that ‘‘nonAmericans can’t, by law, give money to any particular candidate’s campaign, but we can support prodemocracy 

progressive organizations like MoveOn.org which do their best to 

spread the ugly truth about Bush and to publicize the Democratic 

message. Click here to donate to MoveOn.org.’’ 

According to that same report, Clark’s official campaign website 

was the top traffic referrer to CanadaforClark.com. After this was 

exposed, MoveOn.org announced they would not accept any more 

overseas contributions. However, they refused to say how much 

money they had already collected abroad or if they would return 

any of the funds that they had received; and, of course, because 

527s are not required to disclose contribution to the FEC, we do 

not know yet how much of MoveOn.Org’s receipts might have come 

from foreign citizens. 

14 

To a certain extent, 527 organizations themselves have taken the 

place of wealthy donors in the election process. For example, according to the minority leader’s spokesperson, in recent published 

reports, the distinguished minority leader or her staff meets with 

representatives of MoveOn.org on a very regular basis. In an e-mail 

that MoveOn.org sent out to members earlier this year, they said 

‘‘Now it is our party. We bought it, we own it, we are going to take 

it back.’’ 

What it comes down to is that no matter how many laws Congress passes or how many regulations the Federal Elections Commission hands down, people will find ways to contribute to candidates that they support. And when limits were placed on donations to individual candidates, people began directing funds to 

State and national party organizations. And when the government 

banned those contributions, the money began to flow to the 527s. 

In 2004, the best I could tell—I tried to do a little research on 

this—federally focused 527s spent over $550 million. By contrast, 

George W. Bush and John Kerry combined to spend $655 million 

on their own campaigns. The numbers are strikingly similar. The 

only difference is the Presidential candidates had to disclose every 

contributor and expenditure to the FEC, and, the 527s had to do 

neither. Both political parties enjoyed the largesse of the 527s, and 

our election process and all Americans suffered as a result. 

This certainly brings us to a crossroads. We can either force all 

groups that operate for political purposes in an election cycle to 

play by the same set of rules. Or we can remove the contribution 

limits and allow individuals to contribute their funds however they 

choose, to whomever they choose, but require full disclosure and let 

the voters decide what is appropriate. Whatever route we do choose 

to go, I think we must insist upon having strict disclosure requirements for any and all of these political organizations. 

As a former chief elections officer from the great State of Michigan, I have been an advocate of many, many years of full transparency in our electoral process. Those who wish to exercise their 

free speech by contributing to a particular cause must also recognize that their speech will be heard by anyone who wants to listen. 

People who desire to find out who is paying for the cost of these 

campaign activities should be able to readily access that information. 

The alternative is what we have now: groups who are operating 

literally under the cover of shadows in hopes of hoodwinking voters 

to support their candidate or their cause. I think if we fail to act 

now, the ugliness that we saw in 2004 will only intensify in 2006 

and elections beyond. We must protect our democratic electoral 

process and prevent the distortion of our process by individuals 

who support these 527s and try to set the political agenda for our 

Nation. 

Thank you, Mr. Chairman. I look forward to hearing from our 

colleagues. 

The CHAIRMAN. I thank all the members. 

I mentioned before we have four distinguished colleagues with us 

today, Members of the House, to discuss their proposals and dealing with the issue. We have Congressman Christopher Shays of 

15 

Connecticut, Marty Meehan of Massachusetts, Congressman Mike 

Pence of Indiana, and Congressman Albert Wynn of Maryland. 

We will start with Mr. Shays. 

Mr. SHAYS. Mr. Chairman, could I defer to my colleague Mr. 

Meehan? 

The CHAIRMAN. We will start with Mr. Meehan. 

STATEMENT OF THE HON. MARTIN T. MEEHAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS 

Mr. MEEHAN. Thank you, Mr. Chairman, Ranking Member 

Millender-McDonald, and members of the committee. Thank you 

for the opportunity to speak with you today about H.R. 513, the 

‘‘527 Reform Act.’’ I will speak briefly and then ask the committee, 

Mr. Chairman, with your permission, to insert my full testimony 

into the record. 

Over the last few years, we have made enormous strides in reduce the corrupting influence of soft money. I am here today to emphasize the importance of continuing to move forward, not backward. The Bipartisan Campaign Reform Act, or BCRA, written by 

Congressman Shays and me, and, in the Senate, Senators Feingold 

and McCain, signed into law by President Bush in March of 2002, 

is working. The law has succeeded in its central purpose, severing 

the link between Federal candidates, Federal officials, and unlimited soft money contributions. 

Despite some misperceptions, BCRA’s intent was never to eliminate money from politics. The intent was to reduce the disproportionate corrupting influence of six- and seven-figure donations to 

Federal campaigns and to give ordinary citizens a greater say in 

the political process. BCRA has done exactly that. 

This increased citizen involvement in the 2004 cycle was fueled 

by small dollar, Internet, and individual contributions; and that is 

a positive trend, a trend enabled by the end of the soft money system. 

Unfortunately, during an election cycle when grassroots activities 

flourished, a small set of organizations were allowed to play by a 

different set of rules. 527 groups became the preferred vehicle for 

large donors to steer enormous amounts of soft money into Federal 

elections. 527s, by their definition, have the primary purpose of influencing Federal elections, and therefore are required to register 

with the Federal Elections Commission. Yet the FEC has refused 

to do its job and regulate them. 

The 527 loophole was not created by BCRA in 2002. It was created by the Federal Election Commission years ago through its failure to enforce the Federal Election Campaign Act of 1974. With the 

FEC looking the other way in the 2004 cycle, record amounts of 

soft money was steered into 527s, a total of more than $400 million; $146 million, $146 million in soft money, came from just 25 

wealthy individuals. Ten donors gave at least $4 million each, and 

two donors gave more than $20 million. The Swift Boat slander 

campaign against Senator Kerry was financed by two wealthy Texans who contributed $6 million each. 

The danger in allowing 527s to continue to evade the law is the 

risk of bringing back the soft money system, where corporations, 

unions, and wealthy individuals could buy influence with millionVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
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dollar checks. There is no common sense or legal basis to allow 

527s to ignore the rules that apply to every other political committee. 

There is a simple solution to the question of 527s that ensures 

fairness and prevents abuse of the law: Make them play by the 

same rules that everyone else has to. 

In September, Congressman Shays and I filed suit against the 

Federal Elections Commission for failing to enforce the law. But it 

is essential that we resolve this problem in a timely manner. That 

is why we have introduced bipartisan, bicameral legislation that 

has a simple, straightforward purpose. The 527 Reform Act clarifies and reaffirms that 527 groups spending money to influence 

Federal elections must comply with the same laws that apply to 

every other political committee, including the soft money ban. 

I would like to address some of the things that have been said 

about the 527 Reform Act. I am confident that when members look 

carefully at the issues, it will become clear that many of the concerns are groundless. 

First, the 527 Reform Act is not intended to shut down 527 organizations; 527s have a constitutional right to organize and participate in elections. It simply shuts down the 527 soft money loophole. 

Second, the bill explicitly exempts State and local candidates and 

their campaign committees, as well as any 527 organization involved exclusively in State or local elections. 

Third, the 527 Reform Act simply does not apply to 501(c)(3)or 

501(c)(4) organizations. We have made it explicit in the bill, and I 

will make it clear again today, we have no intentions to propose 

changing rules that apply to 501(c) organizations. 

I have not heard a substantive argument that the 527 Reform 

Act will have an impact on 501(c)(3)s, but if our bill can be made 

even clearer on that issue, Mr. Chairman, or any other potential 

concerns relative to 501(c)s, we would love to work with you to try 

to tighten the language. 

In closing, it is essential that legislation to close the 527 loophole 

not be used as a vehicle to backtrack on BCRA or undermine any 

existing campaign finance laws. We must not usher the return of 

the soft money system only 3 years after Congress put an end to 

it. 

Again, Mr. Chairman, I thank you for this opportunity and look 

forward to working with you on this legislation. 

The CHAIRMAN. I thank the gentleman. 

[The statement of Mr. Meehan follows:] 

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The CHAIRMAN. Mr. Shays. 

STATEMENT OF THE HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CONNECTICUT 

Mr. SHAYS. Thank you, Mr. Chairman. And to members of the 

committee, thank you for your concern about this very important 

issue. I recognize this is both personal and also, obviously, we care 

deeply about our country and we want a system that works. So, 

congratulations for having this hearing. 

I want to be as clear as I can be that the campaign finance law 

that passed has worked tremendously well, and I don’t think you 

can really dispute that. What it did is it enforced the 1907 law 

which banned the use of corporate treasury money. No corporate 

treasury money came into the process, to the political parties, or 

to individuals. 

It enforced the 1947 Taft-Hartley Act that banned union dues 

money, and union dues money didn’t come into the political process 

through the mechanism of our law. 

And it enforced the 1974 law that said you can’t have unlimited 

contributions by individuals to candidates. 

It reinforced a very important element that Marty has mentioned, and that is we can’t ask for corporate money, union dues 

money, ‘‘we’’ being Members of Congress, union dues money or unlimited funds. It achieved that objective. 

We were told by the critics that we would hobble the political 

parties, that they would not be able to do what they needed to do, 

and that we would be seeing no money coming into this process. 

That flies in the face of the facts. 

The facts are that about $1 billion was raised in 2000 and in the 

2004 race, and that was a combination of hard and soft money, 

about $1 billion; $1.2 billion was raised just in hard money. In 

other words, no corporate money, no union dues money and unlimited funds. So we can just put that one way out the window. It just 

is a false charge that never happened. 

What we also said was that this bill would force the parties to 

go in a different direction. We used to reach out to many people, 

and what we started to do is we started to just go for the big and 

most powerful, wealthy, corporation, unions and individuals, and 

we stopped reaching out, we stopped building a base. 

But we went from hundreds of thousands of supporters to millions and millions and millions of supporters. I believe the Democratic list is almost 100 million. It is astonishing what has happened. So we have involved more people. 

The one problem is when we gave this law to the FEC, after we 

won in court, after it was declared constitutional, the ban on corporate money, the ban on union dues money, the ban on unlimited 

sums, the ban on having Members seek this money after it was declared constitutional, the Federal Elections Commission writes regulations that basically gut it. 

Then what they do is they say, well, we are going to split the 

difference between opponents and proponents. That was done when 

we passed the law. Their job was to implement the law. The Court 

23 

reinforced the 1974 law that said if you are involved in a campaign 

activity, you come under the campaign law. 

But what did the Federal Elections Commission do? They decided 

they would allow 527s to operate outside the law. So in came the 

corporate money, in came the union dues money, in came the unlimited sums. 

I would just say to you, Mr. Ehlers, you can say that there will 

be a loophole, but it really hurts when the Commission that is supposed to enforce the law doesn’t enforce the law. You would not 

have had that loophole if they simply did one thing. You are under 

the law because you are trying to influence Federal elections. 

Now, I congratulate Democrats for being the primary supporters 

of campaign finance reform and a whole group of minority Republicans who supported it. But I want to say, in reverse, the irony 

is Republicans agreed to abide by the law. They didn’t move forward with the 527s, they didn’t promote the 527s. There were four 

or five that came into play. And after hundreds of millions were 

spent, we saw one group that stepped in, the Swift Boats, and all 

of a sudden we find that this is a problem. That speaks volumes, 

and I mean no disrespect. Congratulate Democrats for passing this 

bill, congratulate Republicans once it passed for trying to live by 

it. 

The bottom line is this. The bottom line is this: All you need to 

do is deal with the 527s. Out goes the corporate money, the union 

dues money, and the unregulated money, and in comes 527s that 

will do what the political parties have to do: reach out to more people. 

The NRA, for example, has 4 million members. If it got $10 from 

each member through its political action committee, it would have 

$40 million to spend. We are not tripping, we are not preventing 

527s from doing what they want to do. 

I will say this, and I am impressed by this. MoveOn.org is going 

after me left and right. I have already had six calls telling me to 

calm myself, to stop terrible things I want to do. But they are using 

hard money. I have no complaint with that. I have complaints with 

what they say, but I have no complaints with their right to say it. 

So in the end, do understand this in conclusion: The presentation 

by Pence and Wynn, both extraordinarily capable and wonderful 

colleagues, they totally ignore the 527s. So you will still have the 

corporate money, the union dues money, and the unlimited fund. 

It is still going to be there, because they totally and completely ignore it. 

What they then do is they just say, well, the political parties can 

raise more money. They still have the regulations, they still have 

the law in place, they lift the caps. The political parties would be 

able to raise about $1.1 million; and the Senatorial candidates and 

the House candidates, you would see the local candidates would be 

able to raise $2 million; and one Member of Congress could raise 

that $3 million. They would be able to go right back into the system. 

So I view their proposal, frankly, as continuing with their view 

that you shouldn’t have regulation, you should let the marketplace 

do its thing. But that is the debate we had when we passed the 

24 

law, and they really would be undoing the law. I think what they 

should be doing is focusing on how they get 527s into the process. 

Thank you. 

[The statement of Mr. Shays follows:] 

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The CHAIRMAN. Which gentleman would like to go first? Mr. 

Pence or Mr. Wynn? 

Mr. Pence. 

STATEMENT OF THE HON. MIKE PENCE, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF INDIANA 

Mr. PENCE. Thank you, Mr. Chairman. I want to thank my colleague Albert Wynn for his extraordinary leadership on this issue. 

It is an honor to work with him on the Pence-Wynn bill. 

I also want to thank my friends Chris Shays and Marty Meehan, 

who are passionate advocates of a point of view about campaign finance that while I disagree with strongly, I respect their sincerity, 

Mr. Chairman, and respect them personally. 

By way of full disclosure, I think it is only fair to say that I did 

oppose the bill that they continue to defend, and I take very strong 

issue with their statements on the record today. I think Mr. Meehan said BCRA is working. I think Mr. Shays just saidit has 

worked tremendously well. 

Well, for millions of Americans who lived through what I like to 

refer to as the summer of 527s, there might be a different opinion. 

What we saw in the summer of 2004, as the natural consequence 

of bipartisan campaign finance reform and the heavy regulation of 

political parties and traditional third-party groups like the AFL– 

CIO, the NEA, National Right to Life and the National Rifle Association, was the major political parties and the most respected institutions in this country standing literally on the sidelines while 

these strange and opaque and new organizations—to most Americans—were taking up all the time on the playing field in American 

Presidential politics. 

Now, Mr. Wynn and I understand that their response is as the 

title of this hearing suggests, more regulation, more regulation of 

the political economy in America; and we do take a dramatically 

different view. It is a view that I believe is borne of the best traditions of our Nation’s founding. And while our proposal in the 

Pence-Wynn bill, which is essentially an effort to level the playing 

fields between major national political parties, outside groups and 

the 527s, while that is a little bit messier because it invites more 

competition in the political marketplace than simply clamping regulation down on the 527s, I think it is more consistent with what 

Thomas Jefferson said when he said, ‘‘I would rather be exposed 

to the inconveniences attending too much liberty than those attending too small a degree of it.’’ 

There are inconveniences in a wide-open, free-wheeling, political 

economy of ideas, and the Pence-Wynn bill is simply our modest effort to address the summer of 527s with more competition and 

more freedom for the two great political parties in this country, and 

also for the long-established third-party organizations that have 

millions of members, labor unions, teachers unions, right-to-life organizations, organizations committed to a woman’s right to choose, 

and every other one imaginable. 

I am from Indiana, Mr. Chairman, so I like basketball analogies. 

This one seems to me to be a good one. In terms of a basketball 

game, you can imagine a two-on-two game on a playground where 

one of the four players is dramatically taller than the others beVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00030 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
29 

cause he is permitted to stand up and the other three play on their 

knees. Now, it does seem to me that some of the proposals about 

regulating 527s is about getting that player on their knees. 

Mr. Wynn and I come to this approach with a different view, and 

that is let the other players stand up and let the major political 

parties compete. We do that in a couple of different ways. I would 

like, before I close, to say what we do in Pence-Wynn and what we 

don’t do, because I read this morning in one of the Washington, 

D.C. newspapers about my bill, and I didn’t even recognize it; 

which, Mr. Chairman, may have happened to you in the past. 

First, what Pence-Wynn does, the 527 Fairness Act, we remove 

the aggregate contribution limits on contributions to Federal committees; basically let Americans with hard dollars give whatever 

they want to give to whatever campaigns and parties they want to 

give, but hard dollars. There is no change in the rules about soft 

dollars in our proposal with regard to Federal campaigns. 

We lift the spending limits on parties. We end this dance that 

goes on between what is coordinated and not coordinated funding. 

We say to the Democratic Party and the Republican Party, support 

the candidates that you believe need supporting with the resources, 

the hard dollars that you raise from your constituencies. 

Thirdly, we allow State and local parties to spend nonFederal 

dollars, but State-regulated dollars, on voter registration and sample ballots. These are just good government initiatives right now 

that are regulated with State money. But BCRA I will say, I believe inadvertently, impacts voter registration expenditures on the 

State level and the mention of Federal candidates. 

Lastly, we appeal the Wellstone amendment to BCRA, which I 

hasten to add, Mr. Chairman, the Wellstone amendment that we 

seek to repeal in Pence-Wynn was opposed by Senator McCain and 

Senator Feingold during the Senate debate. 

If I can put it in plain English—and the experts will correct me 

on this—basically what they managed to do was everything that 

Mr. Shays points out. They managed in the bill to say to organizations, the AFL–CIO, the NRA and others, that you can only use individual dollars. But then the Wellstone amendment came in and 

said no, you can only use individual dollars, but you have to create 

a PAC. It pushed it into even a smaller box. Some political pundits 

said at the time the Wellstone amendment was a ‘‘poison pill,’’ that 

groups on the left and right would end up opposing the bill if it 

passed. 

Well, whatever the reason for opposition, Senator McCain, Senator Feingold, opposed forcing third-party groups to raise money inside of political action committees as the exclusive means for participating in the political process during the affected period. 

Nevertheless, it became a part of the law, and all Pence-Wynn 

does is simply say, in effect historically, Senator McCain, Senator 

Feingold, on that point you were right, and we repeal the Wellstone 

amendment and simply go back to an America where—to reference 

Ms. Lofgren’s testimony earlier today—where we are encouraging 

citizen participation. We are saying that organizations—not treasury funds, not soft money—but can use individual contributions to 

that organization to operate otherwise under BCRA during the affected period. 

30 

Lastly, what this bill does not do, what Pence-Wynn does not do, 

number one, we do not repeal any limits on individual contributions to national parties or committees. All the new limitations, the 

new hard-dollar limits are in effect. 

Number two, we do not change any other major provision of 

BCRA. Candidly, it is not helpful to refer to Pence-Wynn as a gutting of BCRA when Mr. Wynn and I are really bringing measures 

that we believe are very modest, go not nearly so far as I would 

choose to go—which candidly, Mr. Chairman, would be the repeal 

of BCRA I would vote for. We are making some modest changes to 

promote greater liberty in the system. 

What also Pence-Wynn does, it does not allow soft money to the 

national parties. I see a headline today that talks about the battles 

over soft money. We are simply saying in this bill that we do free 

up State parties to use State-regulated money for voter registration 

and sample ballots. But there is no discussion, no proposal in 

Pence-Wynn, that would allow soft money to any Federal campaign 

entity or political party. 

Lastly, we don’t have elements in this bill that attempt to regulate 527s. On that point, Mr. Shays is precisely correct. I believe 

the answer to challenges in a free system of politics is more freedom, not less freedom, and the Pence-Wynn bill brings that approach forward. 

As Thomas Jefferson said, I would rather be exposed to the inconveniences attending too much liberty than those attending too 

small a degree of it. And I am grateful for the committee’s consideration of our legislation. 

The CHAIRMAN. Thank you. 

[The statement of Mr. Pence follows:] 

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The CHAIRMAN. Mr. Wynn. 

STATEMENT OF THE HON. ALBERT R. WYNN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND 

Mr. WYNN. Thank you, Mr. Chairman, Ranking Member 

Millender-McDonald, members of the committee, I appreciate this 

opportunity to appear before you. 

Let me begin by thanking my colleague Mr. Pence for his leadership, his common sense, and his vision in terms of developing this 

bill. I am pleased to join with him in sponsoring the 527 Fairness 

Act. 

Most of us envision the national political party committees as 

dominant players in the American political process, supporting candidates and promoting a national political philosophy. However, following BCRA, the role of the national political committees was dramatically reduced. 

Currently, the parties are subject to aggregate limits on their 

hard-money contributions from individual donors. On the other 

hand, 527 organizations can raise unlimited amounts of hard 

money as well as unlimited amounts of unregulated soft money in 

the form of corporate donations and contributions from labor 

unions. 

Since the 527s were allowed to raise unregulated soft money, it 

was easier for them to raise and spend huge amounts of money on 

media and other campaign activities, and they emerged as a dominant force in the 2004 national elections. 

To help restore the balance between the national parties and the 

527 organizations, Congressman Pence and I have coauthored the 

527 Fairness Act. This bill would allow national parties to more effectively raise hard money for campaign contributions to their candidates and to promote their parties’ agenda. 

Let me emphasize, as my colleague Mr. Pence said, this bill 

would not allow Federal candidates or parties to raise or spend soft 

money. 

In support of the bill, I would like to make a couple of points. 

First, the bill does not address the operations of or the rules affecting 527s in any way. Instead, Congressman Pence and I decided 

that our bill should make it easier for the national party committees, such as the DNC, the RNC, the DSCC, the NRSC, the DCCC 

and the NRCC, to raise and spend hard money. Contrary to what 

my colleague Mr. Shays says, we are not gutting the BCRA bill. 

The indictment they made in BCRA was the corrosive effect of soft 

money. Our bill only deals with the raising and spending of hard 

money. We don’t affect soft money. 

Under current law, during the 2006 election, the next cycle, an 

individual would be allowed to contribute $26,700 to each national 

party committee. That is his aggregate limit. However, that person 

would be limited to a total of $61,400 to all Federal party committees and Federal PACs combined. This aggregate limit means that 

an individual must choose between national party committees and 

Federal PACs to determine which organizations he will support, because the aggregate limit does not allow that individual to contribute the maximum amount to each party committee and Federal 

PAC. 

35 

The 527 Fairness Act repeals the aggregate limits on contributions to party committees and Federal PACs. Thus, a donor could 

contribute the maximum of $26,700 to each of the national party 

committees and $5,000 to the Federal PACs; that is, leadership 

PACs, Black Caucus, Hispanic PAC or others, as he or she saw fit. 

Second, the national State party committees are now limited in 

how much hard money they are allowed to contribute to their candidates. In the 2004 cycle, House campaigns were only able to receive up to $76,000 in combined contributions from their national 

and state Party committees, a maximum of $38,300 from each committee. Aggregate combination limits to Senate races are determined by a more complex formula determined by State population. 

Our bill would repeal these limitations on House and Senate 

raises and allow the national and State party committees to contribute an unlimited amount of hard money to their Federal candidates. 

Third, BCRA’s reach extended down to restrictions on local and 

State party committees. These committees were created to foster 

the basic voter registration, voter education and mobilization activities, such as creating and distributing sample ballots. Last year, 

local parties were forced to create Federal PACs to raise hard 

money in order to accomplish this if they included a Federal candidate on the sample ballot. 

According to a local party chair in my State, this restriction 

places a great burden and a cumbersome burden on State and local 

parties. To relieve the State and local committees of this burden, 

we included a narrow provision in our bill to allow local and State 

party committees to spend soft money on sample ballots, only if the 

sample ballot listed all of the candidates for Federal office, regardless of party affiliation. 

Next, the current contribution limits for national parties, State 

parties, and individual campaigns are indexed to inflation. In order 

to assure continued fairness for all Federal political action committees, this bill would index all Federal PAC contribution limits to inflation rates. 

Let me conclude, Mr. Chairman. In terms of public policy, we believe that the party committees provide more transparency, more 

accountability, and more diversity than the 527s through their connections to both grassroots party membership and elected party officials. In order to have a level playing field, party committees 

should be allowed to raise and spend hard money for political campaigns, without unnecessary restrictions on aggregate contributions 

and spending. 

I hope you and the committee members will consider the bill favorably. Thank you for allowing me this opportunity. 

[The statement of Mr. Wynn follows:] 

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The CHAIRMAN. I thank all the members today. I have a couple 

questions, and then everybody can ask questions. Of course, you 

are on a panel. 

I want to go back to the letter that has been placed in the record, 

which I was also going to place in the record, Mr. Meehan is not 

on this letter to the FEC, and neither is Mr. Wynn. 

I guess I am addressing this to my colleague, Mr. Shays. This is 

where—and this is no criticism of you—but this is where I think 

the House is very divided—— 

Mr. SHAYS. Sir, I don’t know what letter you are looking at. 

The CHAIRMAN. I am sorry. This is the one to the FEC by 128 

Democrat Members. 

Mr. SHAYS. Okay. 

The CHAIRMAN. It was April of 2004. I will get you a copy. The 

letter, which Mr. Wynn and Mr. Meehan didn’t sign, but which 128 

BCRA-supporting members did sign, was sent to the FEC urging 

them not to regulate 527 groups in a manner similar to what yours 

and Mr. Meehan’s current bill would propose. This was signed by, 

like I said, 128 members. 

[T]he proposed regulation would lead to results that 

many of us voting for the new law did not consider or approve and would expand the reach of BCRA’s limitations 

to independent organizations in a manner wholly unsupported by BCRA or the record of our new deliberations on 

the law. And while BCRA reflects Congress’s full awareness of the nature of the activities of 527s, it didn’t consider comprehensive restrictions on these organizations. 

At the end of the day, frankly, Mr. Shays, this whole thing is irrelevant because we have to look at what your bill is doing. I think 

there is some confusion about whether or not the FEC should have 

regulated 527s. Then Members who voted for it say, ‘‘Well, wait a 

minute, the FEC shouldn’t do that.’’ So clearly these members, 

when they voted for it, wanted 527s not to be regulated by the 

FEC. 

If we could reverse time and go back to the vote on BCRA and 

magically have the regulation of 527s placed in that law, that 

would have been ideal. We can’t go back to that day. 

Some of the confusion occurs when Members sign letters like 

this, and then realize, ‘‘We voted for this bill and we didn’t intend 

to have these regulated by the FEC.’’ I think, that is where some 

of the confusion comes into play. 

Mr. SHAYS. I was pretty clear, but I am going to emphasize it 

again. Congratulations to Democrats primarily leading the charge 

on campaign finance reform, but frankly, a plague on their house, 

once it is implemented, to basically gut it. And I can’t be any clearer than that. And congratulations—I wish my fellow Republicans, 

the majority who supported the law—they didn’t—but I congratulate them for once the law was in place to say we need to live by 

it. Democrats only stepped in once you saw this counterforce, 

frankly, and I am speaking in generalities, I admit, but they only 

stepped in when the Swift Boat ads came in. There was a puny 

amount of money in contrast to the amount that had already been 

spent. 

41 

My point to both sides is that is going to happen. That is why 

you needed to step in, because the Democrats thought they had a 

big advantage, all these 527s, and now all of a sudden you have 

this counterforce that comes in and then there is interest in changing it. 

When we passed the law, we had no doubts. The law is clear: 

The Federal Elections Commission is to bring anyone under the 

law that is involved with trying to influence a Federal election. I 

can’t be clearer than that. But you can’t make six commissioners 

do what they have got to do, even if the law requires, unless you 

go to court. We have taken them to court already on one issue, on 

their implementation of the regulations. And 14 of their regulations 

were thrown out, out of 19, because they didn’t want to abide by 

the law that passed. 

I make the same claim here. The succinct answer is I regret my 

colleagues signed that letter, because basically what they do by 

doing that is allow for corporate money, union dues, money in unlimited sums, to come in the back door through 527s. They should 

have written a letter that said enforce the law and make sure 527s 

are under it. Simple. Case closed. 

The CHAIRMAN. That is why I wonder what would have happened 

if the law had said we will be regulating 527s. I wonder if we 

would have had their vote. I am wondering if the whole thought 

wasn’t, ‘‘Okay, we limit these people, but not the 527s’’. 

And I want to ask one other question about the strength of the 

political parties. I believe that with Mr. Wynn and Mr. Pence, we 

are looking at having strength in political parties. I personally 

don’t fear 527s. Frankly, there was a deal in our State, and anybody that would get around George Soros in my district, it is a political death sentence. There was an issue to let drug dealers run 

up and down the streets in Ohio. It was beaten back significantly 

with no money. Ohio is not the type of State where letting people 

run around the streets with that issue is going to pass. It is not 

a fear of all this 527 money. The 527 money was all over the State 

and people have a right to their opinions on issues. And it is not 

that George Bush lost the State of Ohio. 

I think Mr. Shays makes a valid point. Nobody was saying anything about 527s. Then up came the Swift Boat ads with a small 

amount of money, and the whole country got electric about 527s. 

Somebody else got ‘‘gored,’’ not in a pun of the first candidate, but 

somebody else got hit. And as a result of that 527s became a household word. 

I don’t think it is about ideology, but I do think—Mr. Shays, 

when you look at the bill of Mr. Pence and Mr. Wynn, I do think 

it will give strength back to the political parties. I am bothered by 

some flaws that cut down both party lines, whether it be George 

Soros or whoever put the money into the Swift Boat ads. Whether 

you are limiting union workers because it was soft money, or limiting people that work in a corporation, or a couple of rich people, 

or one Republican and one Democrat, it doesn’t make sense. Eventually there will be a Republican George Soros who will come 

around or a couple of rich people can really just put in what they 

want and play around with our system. I just don’t think it is a 

level playing field. 

42 

Taking into account that we would need something of a regulatory nature with your bill to correct the situation, what would be 

wrong with Pence and Wynn propping up the political parties of 

our country? 

Mr. SHAYS. Let me first respond by saying one of the reasons 

that we wanted to enforce the 1947 law was that union dues are 

forced contributions for collective bargaining. My wife was a member of the teachers union in Connecticut. Her money was given to 

a Democratic Governor who was running against the candidate she 

supported. What would have been okay is for that union to say, 

contribute to a political action committee that allows us to contribute to the candidate of our choice. That would have been voluntary. 

Mr. Pence’s description is of a basketball player on his knees and 

one standing up and playing, and he wants the rules fair. My view 

is different. The only ones who got to play in the game were the 

millionaires. And if you weren’t a millionaire, you didn’t get to the 

floor. 

To respond to the question, the Pence-Wynn bill doesn’t deal 

with 527s at all. So clearly that would allow the union dues money 

and the corporate money and unlimited funds to continue. 

With regard to the second part of your question, what they do— 

and I don’t think they intended to do—they didn’t release the limits. They raised the limits to what you can contribute to the political parties from 61,400 in a cycle to $1 million. And they would 

allow one individual to do that. The RNC could get 53,400; the 

NRCC could get 53,400; the NRSC could get 53,400; and each political party could get 20,000. That adds up to actually 160,200. And 

one candidate could go to a wealthy person and say please contribute, because it is legal under their law. And then what they 

allow is they allow unlimited amounts to every candidate. 

So instead of this total limit of 101,400 that a wealthy person could contribute, they would allow $1,974,000 to go to every candidate, Senate and House. And this is the thing that really blows 

me away is we have no restrictions about transferring the funds. 

So I could go to one individual and say give that money to the parties and to all those candidates, and then I could just ask them to 

make sure it is sent to one place, no restriction under their proposal. So I think it guts our bill. 

Mr. WYNN. Mr. Chairman, I think he has distorted this bill. 

Right now under the current system, George Soros—just to pick a 

name, not to pick on the individual—can give millions to 

MoveOn.org. He can only give $26,700 to the DNC. That is all he 

can give to the DNC. That is all he can give to the DCCC. That 

is all he can give to the DSCC. And all we are saying is at that 

point, he is limited. He can only give $61,400 in total. He has to 

pick and choose who he wants to give his money to. That means 

he can’t give anything to the CBC PAC, can’t give anything to the 

Hispanic PAC, can’t give anything to the other leadership PACs, 

because he is limited on an aggregate basis to $61,400 to all Federal committees and PACs. 

What we are saying is keep the individual limits, the 5,000 for 

Federal PACs, the 26,700 for party committees, but just let him 

give to as many as he would like. We are talking about thousands, 

43 

rather than the millions that are being spent under the current 

system. He can still only give me or to any other candidate $2,000 

per cycle. That limit still exists. The difference is he can give to 

more candidates, but he can only give me 2,000 in hard money, 

only give the DNC 27,600 in hard money, et cetera, et cetera. 

This is a dramatic change from what my colleague is describing, 

dramatically different from what my colleague is describing. It 

helps the political parties. It helps the Federal PACs, but doesn’t 

open the doors. And I think that is a reasonable compromise to 

strengthen the role of the parties when you consider the millions 

that are being given now, with the paltry thousands that are given 

to the political parties. It seems reasonable to lift the aggregate 

limits, not the individual limits. 

Mr. PENCE. I can’t add to the clarity of Mr. Wynn’s explanation 

of what our bill does and doesn’t do. But it would be specifically 

important to reinforce. Pence-Wynn repeals the aggregate limits. It 

ends the choice people make between supporting one arm of their 

political party and not the senatorial committee versus a congressional committee, and allows them to reach those existing statutory 

maximums under the law in each of those areas. 

I wanted to speak, Mr. Chairman, to Mr. Shays’ comment. I have 

been a Democrat and now I am a Republican. I have been active 

in both political parties, which may make it in some gossip column 

tomorrow. 

The CHAIRMAN. Not here on the Hill. 

Mr. PENCE. I mean, not this week I was a Democrat. 

Mr. SHAYS. It is called ‘‘a born again Republican.’’ 

Mr. PENCE. I was a youth Democratic party leader in 1975 in 

Bartholomew County, Indiana, and became a Republican around 

my college years when I became enthralled with the ideals and the 

leadership of Ronald Reagan. Many millions of Americans followed 

me on this path. My experience in both political parties makes me 

a fan of political parties. They are accountable to their constituency. They are accountable to the public. Election Day, voters know 

where to find you if they are not happy with what your group has 

been up to lately. 

And as a lot of this debate focuses on the choice between money 

going into political parties versus money going into wholly unaccountable organizations like 527s that never face voters. Their candidates never face voters, presumably. They can dissolve the organization tomorrow and be gone and reconstitute tomorrow under a 

different name. It does seem to me we would want to—which is all 

Pence-Wynn does, to level the playing field, at a minimum, between the existing 527 organizations and the major political parties, which in my judgment have so well served this Nation over 

its—— 

Mr. SHAYS. One quick response. I want to point out under the 

Pence-Wynn bill, Soros could give $1,160,200 to the political parties, and, under their bill, to the candidates $1,974,000, for a total 

of $3.1 million. That is what Soros could do. He has a lot more 

money than that, obviously. 

But let me make this last point. The political parties raised last year $1.2 billion. I want to say billions, not millions. These parties 

aren’t hurting. They raised $200-plus million more than they did 

44 

when they could use hard and soft money. I am hard-pressed to 

know how the parties have suffered. 

The CHAIRMAN. Mr. Soros gave $3 million. That would be $19 

million less than he gave to ACT, if you look at it that way. I am 

not worried about $3 million to the Democrat or Republican Party. 

That doesn’t bother me. But he can give $19 million more to ACT. 

Mr. SHAYS. They don’t correct that, and we do. 

Mr. PENCE. Mr. Chairman, without referring to any one particular American, my bias toward liberty, and yours and everyone 

on this panel, makes me uncomfortable in using examples; but it 

does strike me that using Mr. Meehan’s number of $400 million 

being spent by 527s exclusively, if memory serves, in the Presidential contest as compared to—again using Mr. Shays’ numbers 

that I am certain are correct because I trust his veracity and competence—if a political party in this country raised a billion dollars 

to support every candidate all across the country in 535-some-odd 

different jurisdictions at virtually every level, it is not exactly a 

comparison; and it demonstrates the enormous impact that the 

527s had in the last political debate. 

I say again, BCRA is not working and we have to use the principles of liberty to put our political parties and third-party organizations on the right and the left back on a level playing field. And 

that is what Pence-Wynn does. 

The CHAIRMAN. I am going to move on with the other members. 

You look at our own state, which was nuclear this past year. And 

if you look at, what actually happened in the State of Ohio, you’ll 

see that all of this money, which the State had never seen before, 

helped our economy a little bit as 50,000-some people that came 

from around the States and lived there for 6 to 7 months. 

But I think what happened with this huge amount of outside 

money is that the 527 organizations, as opposed to the Democrat 

Party, in the State of Ohio, ran the show. There were no grassroots organizations like they used to have for a Presidential candidate in the state. And so I think with the money, huge amount 

of money in the system, you saw a weakened political party, frankly, which hindered their ability to register people to vote. And it 

was all done by a couple of people’s money versus the party structure. I think it is a weakening of the structure. We saw it in Ohio, 

and I think it will happen across the Nation. 

The gentlelady from California. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. Mr. 

Chairman, by no means were the political parties weakened, they 

flourished tremendously in this Presidential election of 2004, raising a record $1.2 billion—that is in ‘‘b’’—and attracting millions of 

new smaller donors. So they did not sit by the sidelines as some 

of my colleagues have mentioned today; they were out there raising 

big money like all other groups. 

I would also say to my colleague, Ms. Miller, there is transparency with 527s. They have to disclose their donors so it is unlike the 501(c)(4)s that perhaps Mr. Pence and Mr. Wynn are talking about, where they don’t have to disclose their donors at all. 

As I hear Mr. Shays speak about BCRA and ordinary citizens 

getting involved in the political process and he stated that we have 

involved more people, what is wrong with that? What is wrong 

45 

with involving more ordinary people, rather, in this political process? 

I can say to you that my district, by the Christian Science Monitor, is the most diverse district in this Nation. I was fortunate to 

meet with various groups who had been left out of this political 

process, who had no thoughts of thinking that they would have any 

say in this debate in this Presidential election. And yet those 527s 

came into our communities and were there for a year, stayed with 

these folks, gave them the education that they needed to make 

sound decisions. 

I don’t see anything wrong with that. I don’t see anything wrong 

with young African Americans, who, for the first time, really get 

to know what the Voting Rights Act of 1965 really meant to them, 

and now engaging upon the reauthorization of that Voting Rights 

Act. I don’t see anything wrong with young folks who, for the first 

time, went out and got small donations, and there was an infusion 

of small donations as well as the Soros infusion of money that got 

these young folks involved on college campuses. 

Now, we do recognize that the Supreme Court upheld the notion 

of any rich person, any individual who can and who will and can 

use their money to go out and do ads solely on their own, they don’t 

need the 527s to do that. And the Supreme Court in 1975 upheld 

that. 

What we are saying is why are we now trying to effectively abolish the independent constituency organizations at the expense of 

these political parties and to bring back these political parties’ raising of hard dollars and soft dollars through the efforts of Mr. Pence 

and Mr. Wynn’s bill and to cut down the 527s that we have come 

to know that provide the activities and the political muscle that 

this democracy has put forth here for them to do? 

Independent 527 organizations ensure that we heard from those 

folks and from the people who have been left out of this political 

process for decades. And I know that, because I was with them. 

Now questions to you, first of all, Mr. Shays. Doesn’t your bill 

treat nonpartisan voter registration in getting-out-to-vote activities 

the same as it does partisan activities? 

Mr. SHAYS. I think it may, and it shouldn’t. We have to distinguish between the partisan and something that is not partisan. 

Ms. MILLENDER-MCDONALD. Indeed, you must. 

Mr. SHAYS. I think that is a valid concern. 

Ms. MILLENDER-MCDONALD. So given that, then, why should an 

organization have to use a Federal PAC for nonpartisan activities? 

Mr. SHAYS. If it is nonpartisan. And the question is what constitutes nonpartisan and partisan. For instance, if you have a getout-the-vote and just encourage people to vote, that is not partisan. 

But if your purpose is to get out and vote for a particular vote, it 

is partisan. 

Ms. MILLENDER-MCDONALD. That is correct. And 527s can’t do 

that. 

Mr. SHAYS. And there should be a distinction. The challenge I 

think I am hearing from you on 527s is you seem to speak well of 

the campaign finance law and the fact that the political parties 

haven’t been weakened. And I agree with that, but I think you are 

46 

ignoring the fact that you are allowing corporate money and union 

dues money and unlimited sums to go to 527s. 

And if you don’t deal with that issue, if you saw $400 million 

spent this last time, the next time around if you in a sense 

legitimatize this by failing to act against it and say to the FEC that 

the will of Congress is not to deal with this issue, I think you will 

see billions go right to these 527s. And I would plead with you to 

understand that, just as the political parties were able to raise significant dollars without needing soft money, these 527s can do the 

same thing, and MoveOn.org is doing that. They are using hard 

money now. So let them reach out and get more contributors. 

I don’t want to see 527s not play a role, and a major role, but 

I want them to play by the same rules that everyone else has to 

pay. 

Ms. MILLENDER-MCDONALD. Aren’t they implementing your bill 

precisely, Mr. Shays? 

Mr. SHAYS. 527s is a total abrogation—— 

Ms. MILLENDER-MCDONALD. You do not tell them to restrict their 

fundings to only certain donors. You just said to implement 527s 

and participate in the political process. 

Mr. SHAYS. We said the 527s—we said that any organization that 

is involved in political Federal activity comes under the law. The 

Federal Elections Commission decided that 527s would not come 

under the law. They made this arbitrary decision. And therefore, 

you have the 527s engaged in Federal elections, partisan elections, 

not playing by any of the rules. They are totally outside; corporate 

money, union dues money, unlimited sums. 

Ms. MILLENDER-MCDONALD. Partisan elections, but not particular candidates? 

Mr. SHAYS. Oh, no. The swift Boat ad was clearly directed 

against your candidate. I thought it was frankly an effective ad, 

but it should have been run with hard money, not soft money. 

There shouldn’t have been unlimited sums. 

Ms. MILLENDER-MCDONALD. There was still implementation of 

the bill that you put out there. 

Mr. SHAYS. 527s totally ignored our bill, totally and completely. 

Didn’t abide by it. They were out there on their own. 

Ms. MILLENDER-MCDONALD. This bill prohibits State and local 

PACs set up by individuals and independent groups from spending 

even $1,000 on registering voters and getting them to the polls. 

They do do things in a nonpartisan manner. 

Mr. SHAYS. Political action committees is hard money. They can 

spend it any way they want. It is the soft money, the corporate 

money and union dues money and unlimited sums that we are focused on. We want political action committee money because that 

is limited contributions of $5,000 or less. 

Ms. MILLENDER-MCDONALD. Seems to me like your bill also is an 

intrusion substantially on the State regulations of their own elections. 

Mr. SHAYS. We can’t and we don’t attempt to interfere with their 

own elections for State and local candidates. Where you and I have 

an agreement is when they seek not—when they seek to have a 

get-out-the-vote that is neither—not promoting a Federal canVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
47 

didate. We need to be clear in our law that they would not be impacted. 

Ms. MILLENDER-MCDONALD. But you are not that clear on that, 

though. 

Mr. SHAYS. We need to be clear. 

Ms. MILLENDER-MCDONALD. Why would you bring forth anything 

that is still convoluted here? 

Mr. SHAYS. The reason why you have a hearing is to look at a 

bill and say, where is there a need to make it clear? I am conceding 

to you that is one area that needs to be clear. 

Ms. MILLENDER-MCDONALD. So this is what we are doing, kind 

of going through the exercise of looking at this. 

Mr. SHAYS. Right. You are going through a process. And I think 

Marty acknowledged it in his statement. I didn’t. 

Ms. MILLENDER-MCDONALD. Mr. Pence and Mr. Wynn, what you 

are asking for is to really roll back all of this of the BCRA and to 

come in with 501(c)(4)s, it seems to me, with your bill and to raise 

the limits on what the political parties can accept in terms of funding. But what you are doing is opening up 501(c)(4)s which do not 

have to report their donors to anyone. 

Am I correct on that? No? Yes? Can I hear someone. 

Mr. PENCE. I am happy to speak to that. I know that what our 

provisions are with regard to the 501(c) organizations and you are 

going to have a panel—the gentlelady from California will have a 

panel in a few minutes of legal experts a lot smarter than me. But 

BCRA did make the advance that organizations like the AFL–CIO 

or the National Education Association would have to use individual 

money from members to engage in the acceptable political speech 

during the affected period of the 30 to 60 days. 

All we are asking for is that that not—that the law that then 

stepped in through the Wellstone amendment, to making all that 

happen within a PAC in the form of separate segregated funds not 

be required in the law. The current law, I am sure some of our experts can explain to you, the current law or the interpretation of 

the laws, if we repeal Wellstone as to the requirements of those organizations, would be largely as it was prior to BCRA. 

I would encourage my colleague—Mr. Wynn has done some extraordinary work on the issue of what BCRA did to State-level 

voter registration efforts. And inasmuch as you have admirably 

raised that issue in the context of 527s, I wanted to encourage my 

colleague, who has been a champion on voter registration on this 

issue, to speak to that. 

Ms. MILLENDER-MCDONALD. Mr. Pence, it was $1.2 billion that 

were used by these record-breaking amounts of hard money used 

in this 2004 election. Why do we need legislation to unleash still 

more hard money? Why do we need that? Isn’t enough money being 

spent in these elections? 

Mr. PENCE. Well, I don’t think Congress has any business deciding how much money is enough money to be spent. 

Ms. MILLENDER-MCDONALD. You are talking about that in your 

527s. 

Mr. PENCE. I am speaking philosophically. All we do in our bill 

is lift the aggregate limits, the current limits that are in effect, 

48 

hard-dollar limits to candidates, and then the $26,000 limits to parties all remain in effect. 

But I am just someone who believes that in a country that 

spends hundreds of billions of dollars selling soap during ‘‘Desperate Housewives’’ can afford a few billion dollars of the free people’s money in having a vigorous debate over the men and women 

that will lead the Nation at every level. 

That being said, I think, candidly, most Americans, even many 

outside of Ohio, would agree that that summer of 527s was a peculiar time for proud Democrats proud Republicans and proud Bush 

and Kerry supporters. Many millions of Americans felt the political 

parties and organizations they had been associated with throughout their lives and professional careers were standing on the sidelines watching 527s dominate the American political debate. 

Ms. MILLENDER-MCDONALD. It is amazing you say that and you 

are talking about the American people dominating the political 

process. Isn’t that what we want? 

Mr. PENCE. If you exclusively define the American people as the 

people that contributed to the 527s, then your point would be well 

taken. I think the American people would also want to be defined 

by the major political parties that they are associated with, the organizations like National Right to Life, the NEA, AFL–CIO. 

Ms. MILLENDER-MCDONALD. Mr. Pence, come on. You and I know 

both that a lot of Americans do not feel good in either one of these 

political parties. Forty percent of Americans are not even voting because they do not feel attached to either one of these parties. So 

they really do not feel—they feel better being independent, out 

there debating the issues. 

And why would we restrict these rights as they exercise those 

through those 527 organizations? Why are we trying to restrict 

these folks? 

Mr. PENCE. I wouldn’t know. Our bill actually includes no restrictions on the 527s. It is actually a point that Mr. Shays made that 

is completely correct. 

Ms. MILLENDER-MCDONALD. They will stay as they are and you 

will raise the limit on the national parties? 

Mr. PENCE. Yes. As a point of clarification, the Pence-Wynn bill 

addresses that summer of 527s by greater freedom to political parties in the existing third-party groups, not less freedom for 527s. 

Ms. MILLENDER-MCDONALD. Once you allow that to open up, 

then those small-time 527s, irrespective of what you say these big 

guys put in, they will be left by the wayside; because then the 

money will go back to these national political committees, and this 

what we were trying to circumvent in this BCRA bill. 

Mr. WYNN. If I could just make a couple of observations. When 

we started with BCRA, the indictment was soft money. Everybody 

thought hard money was fine. It is your money and individual contributions; you should be able to spend it in the political process. 

We don’t deal with that issue at all. We don’t deal with soft money. 

We don’t bring soft money back into the system. We are dealing 

only with hard money to the political parties. We don’t make that 

great a change. You are still only allowed to give the DNC 26,7. 

And the same thing with RNC. And this is what happens. 

49 

Ms. MILLENDER-MCDONALD. But I think Mr. Shays’ bill is trying 

to make it 50/50, where you give both hard money and soft money, 

which then becomes a difficult problem. 

Mr. WYNN. I am very concerned about the parties and the hard 

money that used to be called good money. And we want to say that 

the political parties ought to be able to take more of that good 

money. 

I want to make one quick point. What really happens is people under this limit, this aggregate limit of $61,400, tend to give to the 

DNC or give to the DSCC and not the DCCC, because you have the 

DNC raising 394 million with the DCCC only raising $93 million. 

What happens when you have a hard aggregate limit of $61,000, 

people have to choose between giving to the DNC, the DSC, the 

DCCC or the CBC PAC, your leadership PAC, or whatever the case 

may be. You are not limited. That is not right, because it is the 

citizens’ individual hard money. You ought to be able to give to 

your PAC, my PAC, the DSCC, the DCCC, the DNC, the Congressional HISPANIC PAC if that is what they want to, and on and 

on. 

We are not changing the amounts they can give, but only expanding it to people they can give it to. And I go back to the fundamental and underlying premise; we are talking about hard money 

and individual contributions. And we do nothing to the individuals 

who want to contribute to 527s. We don’t touch them at all under 

the Pence-Wynn bill. 

Ms. MILLENDER-MCDONALD. But you are bringing in 501(c)(4)s. 

Mr. WYNN. To allow 501(c)(4)s to participate without having to 

form a Federal PAC, the bureaucracy and the paperwork involved 

in the Federal PAC. They are still limited to just hard dollars. And 

please correct me if I am mistaken on that. It is still hard dollars, 

but just a hard-dollar account as opposed to the reporting requirements connected to setting up a Federal PAC. That is unduly burdensome, but it doesn’t make any further fundamental changes. 

And you still are not allowed to advocate the defeat or the election 

of an individual. You are allowed to comment on that individual’s 

record. 

Ms. MILLENDER-MCDONALD. Mr. Wynn, wasn’t the purpose of 

this Shays-Meehan legislation to get rid of a lot of hard dollars— 

soft money? 

Mr. WYNN. It was to get rid of soft money out of the political 

process as to the parties and to individual Federal candidates. And 

we don’t do anything about that or change any of that in the 

Pence-Wynn bill. We do not touch the soft money issue at all. 

Ms. MILLENDER-MCDONALD. Just increase the hard dollars? 

Mr. WYNN. Just increase the hard dollars by lifting the aggregate 

limits on hard dollars. 

Mr. SHAYS. May I voice one quick concern with a comment that 

501(c)(4)s would not be under PACs; that the political action committees have to report like everyone else to the Federal Election 

Commission, and they have to make sure they are abiding by the 

laws. And I raise a concern about that. And the only concern I 

raise is, if you allow one individual to effectively contribute $3.1 

million—and admittedly it is not more to any one group than is allowed now, but collectively to so many—you have effectively creVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
50 

ated hard money that almost is the equivalent of soft money, because it is $3 million and you can still transfer from one to another. And those transfers will occur. 

The CHAIRMAN. Mr. Doolittle. 

Mr. DOOLITTLE. Mr. Chairman, I find this whole hearing disheartening in that here is where we are; we are in the regulatory 

state. Our Supreme Court, sadly, has upheld this amendment to 

the Federal Election Campaign Act known as McCain-Feingold or 

Shays-Meehan, and what was a bad law has only been made worse. 

No personal offense meant to anyone, but that is just my opinion. 

Apparently the only form of speech that can be regulated by the 

government in any significant way is political speech, which clearly, in the reading of our history in the Federalist Papers, was the 

highest form of speech that was deserving of the greatest of protection. And we are going to sit here in the committees of Congress 

and make minute adjustments, what is that absurd figure $26,400, 

and next year it will be $27,300. 

I must say that all that has happened in my own personal experience is we spend a lot more on counting the lawyers’ fees. We 

don’t make a major move without checking with an attorney first. 

That has raised our expenses. We are taking these limited hard 

dollars that we have and we are spending more on professional 

services to try and help us stay within the law. I don’t think it is 

just Mr. Shays’ law or proposed law, but the Senate one as well. 

There is some new standard that these groups can’t be involved in 

any partisan activity for a year out. Now we have a new term. I 

don’t know, it is 60 days or 90 days, a year over here. I can’t keep 

these numbers straight in my head. And what is unfortunate is if 

we make a mistake, we could be held liable for a crime. Didn’t used 

to be a crime and now it is a crime. And I just find it appalling. 

I can only hope, like certain bad Supreme Court decisions of the 

past, that it will be flat-out overruled someday. I would like to reintroduce my bill to deregulate everything and just require reporting. It never bothered me that a corporation could contribute 

money to a Federal candidate. I never bought into that Teddy Roosevelt-era law that started us down this whole slippery path. It 

would never bother me if a labor union gave money directly to a 

candidate, as long as I can give to anybody I want to give, or to 

the political party I believe can give to anybody and in any amount 

that we want to give. 

So here we are down the slippery slope and I find it depressing. 

Let me ask the panel here what happens? Suppose we tighten up 

on the 527s? Doesn’t that mean that somehow this may move out 

another rung to a less accountable structure to do basically the 

same thing? That seems to me that is likely to be the case. Anybody disagree with that? 

Mr. SHAYS. Well, I would just respond Mr. Doolittle, you are 

wonderfully consistent and passionate for your position. And I need 

to tell you, I respect you for that. There is no doubt where you 

stand and you have been very consistent on that. I would just suggest that if you have campaign finance law, it would be helpful 

that the Federal Elections Commission then enforce it. 

Mr. DOOLITTLE. In my bill I did accept it in part of ensuring we 

have the disclosure. What about the answer to my question? If we 

51 

tighten up on 527s, does this problem go away or are we still going 

to see it manifested? 

Mr. SHAYS. I think what happens is there becomes efforts to try 

to introduce a loophole. And my view is that the Federal Elections 

Commission would have the capability to kind of nail it down. But, 

you know, but it would take a period of time. The 1974 act worked 

well for years and years and years. It only had a challenge when 

the Federal Elections Commission introduced—they introduced the 

concept of soft money. They created that loophole. Not only do they 

not enforce the law, they helped gut it. 

Mr. DOOLITTLE. As I recall, the Congress itself responded and 

passed a law guaranteeing that, because the political parties were 

being starved of enough money. Didn’t that happen in the mid- to 

late seventies? That was a congressional act, I believe. 

Mr. SHAYS. I am not sure about that. But one thing I can tell 

you, the political parties are alive and well. They raised $1.2 billion 

last year under BCRA. It was always determined to be McCainFeingold if it was constitutional. And if it was unconstitutional, it 

was going to be Shays-Meehan. So McCain-Feingold is what we call 

it. 

Mr. PENCE. I think the gentleman from California raises a practical and important question, because to the extent that we accept 

the direction of my friend from Connecticut and our colleagues in 

the Senate, we are taking one more step down the road of regulation of political speech and discourse in America. And we will eventually find ourselves on the doorstep of the individual. 

Now, the Supreme Court of the United States has said that is 

a barrier we can never cross. We can never tell an individual what 

they can individually do or say in the public. And I know Chris 

Shays’ heart, not as well as some of his close friends and family, 

but this is a good man sitting next to me. He would never intend 

for the Federal Government to grow straight up to the front porch 

of the average American, but this is the route we are on. We are 

headed to that front doorstep where our Federal Government is 

going to be in a position to regulate the speech of individual Americans. I believe this with all of my heart. And it is the reason why 

enshrined in the Constitution was the principle that this institution, Congress, shall make no law abridging the freedom of speech. 

I believe our founders understood the inherent danger of consolidated government power and its tendency to erode the rights of individuals. So it gave Congress—and I know the Supreme Court certified this. I was sitting next to Chris on the day of the Court challenge, and I believe you were on the other side of me. 

But the Supreme Court of the United States opened up the first 

amendment for debate. And I hope for the day that we go back to 

the principle that Congress, through all of its agencies and its own 

acts, shall make no law abridging the freedom of speech, and we 

bathe our campaign finance system in full and immediate disclosure, follow the hard-dollar route of individuals, and then allow 

freedom to reign. 

Mr. DOOLITTLE. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. Mr. Brady. 

Mr. BRADY. Thank you, Mr. Chairman. 

52 

Mr. Doolittle, you might find this hard to believe, but I wholeheartedly agree with you. I didn’t know what a 527 was until we 

passed the Shays-Meehan bill. I don’t think a lot of people knew 

what it was either until they figured out how to work it. And I, as 

chairman of a party in the city of Philadelphia, am completely confused. I had to spend for two attorneys to interpret this bill, and 

no attorney could give me an answer. Not one attorney could tell 

me what I could or could not do, what was within or without the 

law. All they said was it had to be tested. And if I was to be the 

test case, I would be facing criminal punishment. What an embarrassment that would be, to go to jail for taking hard or soft money 

or distributing hard or soft money. So I am confused on that. 

But I do agree with Mr. Pence and Mr. Wynn. I do appreciate 

you looking out for the local parties and looking out for sample ballots because that is the grassroot operative, the local parties, the 

local politics that drive this great big city, government, and now 

Nation. And I believe they should be heard and be allowed to contribute, how they need to contribute and to what amount they need 

to contribute to. 

What effect does this have on our local parties and labor organizations when there is a Federal election, which happens more than 

twice, sometimes more than twice, more than every 2 years because sometimes you have the Senator in there and every 2 years 

we run? What do we allow or what do they allow or what are the 

local parties allowed and labor unions allowed to do when there is 

a Federal election? And on the Federal election, there are local 

elections. There are State and local offices. If I am on the ballot, 

that makes it a Federal election. All these other organizations 

under this 513, or even under this Shays-Meehan or McCain-Feingold, what are we allowed to do because our name was on the election? Does that mean we are limited on supporting our mayor candidates or Governor candidates or local office candidates? 

No one can give me an answer. I had to figure out how to put 

out a ballot in my town, figure out how I could pay for a ballot, 

hard, soft, whatever, because my name was on it as a Federal candidate. And that needs to be cleared up, because I am not going 

to test any of these attorneys that can’t give me an answer. Maybe 

the next panel can, and I don’t want to be the test case taking a 

trip to Federal prison. We aren’t clear on any of this. And ongoing, 

it is being changed as we bring another court case or bring another 

appeal or attorney that we have to pay for out of our hard money 

that we are losing, that we have to pay to give us an opinion, and 

we haven’t gotten a clear opinion yet. I don’t break laws and I want 

to follow the laws. I would like to know what the heck the law is. 

Mr. WYNN. Probably the next panel has much greater expertise 

than I. 

Mr. BRADY. I have been through panels of legal people and none 

of them gave me an answer. I am waiting for the next panel. 

Mr. WYNN. I would like to say by way of intent, what we are trying to do is say we have a similar background in terms of working 

with sample ballots, that the sample ballots is like the backbone. 

And if you have a sample ballot, you have local candidates, State 

reps, county council, and your Federal candidates. And the State 

party or the county party or maybe the city party or the ward orgaVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
53 

nization is putting this ballot out. And under current law, as I understand it, subject to the panel’s correction, they would have to 

have a Federal PAC in order to finance that portion of the sample 

ballot that is reflective of your presence or the Presidential or any 

other Federal candidate, U.S. Senate candidate, that might be on 

that ballot. And for small city, county, and some State parties, that 

is burdensome, to have a separate political Federal PAC to do that. 

This bill would say if you are giving out a sample ballot that has 

all of the candidates on the sample ballot, regardless of affiliation, 

and maybe you highlight the party you want or circle it or whatever you do, that they could do that with soft money, the money 

they already have, their money, and that would be allowable. It 

wouldn’t be a ballot you could put out using soft money as a Federal candidate, but your name or picture could be on that ballot, 

and they could pay for it using their soft-money funds, so long— 

as I said—any candidate that was running was on it, although you 

might be the candidate that might be highlighted or the preferred 

candidate. 

That is my interpretation of what my bill is trying to do. 

Mr. BRADY. I don’t like that interpretation. Couldn’t be a partisan ballot? I couldn’t put a ballot out there that said—I am a 

Democrat. I am a partisan guy. I want to put a ballot out that— 

and my party dictates if I put a ballot out on a Republican candidate—no disrespect—that I could be in violation of my party 

rules. Now, I can’t put a ballot out that just has partisan, pure 

Democrats running against—either in a primary or in a general 

election—against Republican candidates? I couldn’t do that? 

Mr. WYNN. Under current law you have to have a Federal PAC 

to do that for your share. 

Mr. BRADY. My share? 

Mr. WYNN. Your share. 

Mr. BRADY. How about candidates? How about a mayor? You 

have to juggle this? 

Mr. WYNN. Right. What we try to do is open a very narrow exception. And our styles may be different in terms of what we do, 

in terms of sample ballots, where you have the official sample ballot and then you highlight or circle the Democrats or the Republicans, as the case may be. You hand it out but all names are on 

it. 

We tried to carve out something that was narrow enough to help 

us. I would assure I would support what you just described, which 

is the ability of the local party to put out a sample ballot and fund 

it with local funds or State funds that included Federal candidates. 

I would be happy if the committee expanded that and it is common 

sense. 

Mr. BRADY. In Philadelphia, you put out a 4:00 ballot, a 6:00 ballot. 

The CHAIRMAN. There is one other issue—and I could be wrong, 

but I called the FEC myself this year—and it is shocking. It deals 

with hard money, not soft money. But I was told that if it is 120 

days before the election and a State rep candidate asks ‘‘Bob Ney, 

can I use your picture and a quote from you to support my candidacy?’’ and I were to say ‘‘yes’’ but I don’t pay for it with hard 

dollars from my campaign committee, I would have violated the 

54 

law. I told this to a Member the other day who said,’’ You got to 

be kidding me,’’ and went running. 

Think about this for just a second. If a candidate comes to any 

of us and says, ‘‘Can I use your picture, or can I use a little quote,’’ 

and it goes into their brochure—nothing to do with soft money— 

we have to pay for that, or a portion of it. Now, I am told that is 

the law of the land. So you start to think about it. Now I am—— 

Ms. MILLENDER-MCDONALD. State candidate or a Federal candidate? 

The CHAIRMAN. County commissioners, city council. If the candidate doesn’t seek your permission but kind of knows you would 

support them, then they can do it. And if you coordinate with them 

it is legal. But then, of course, somebody is going to go to the FEC 

and say, I know you coordinated with them, didn’t you? You 

winked and you nodded. I have to sit there and do eye signals and 

say it is okay to do it. 

Do you know what this means? Any State Senator in your district, Democrat or Republican in my district, can go help candidates 

all they want, but the local candidate is going to turn around and 

say, ‘‘Why you won’t help me up the ladder? Other people helped 

you to get where you are, but you won’t help me. My State Senator 

helps me.’’ I think that is another thing. I think it is absolutely 

against the nature of the Constitution; we cannot use our name to 

say I think you are a good candidate. 

Ms. MILLENDER-MCDONALD. This is why, Mr. Chairman, that 

these bills to me are rather short-sighted at this point, because it 

really does not do anything, unlike Mr. Doolittle. You get rid of 

527s, there is going to be another run of the mill of groups. These 

things are so convoluted that we are busy trying to go through this 

stuff and now you are coming with more convoluted laws. 

I really do think, gentlemen, we should keep our powder dry and 

let this stuff percolate for a little while and not bother with it. I 

don’t know the 527s. I have never dealt with them. I know the results were my constituents were more informed and more involved. 

They came to me with different things that someone had educated 

them on. And for that reason I appreciate whoever-it-was 527s. 

And I have never talked with MoveOn.org and none of these 527s 

and, of course, I can’t get involved with them. But I am saying at 

this point, we should allow them to continue that freedom of expression, the first amendment rights that is given them, like Mr. 

Pence said, and allow these groups to flourish. 

Mr. BRADY. I don’t know whether there are some labor experts 

out there, but a labor PAC, Federal versus nonFederal, a local 

labor PAC versus a Federal PAC. The differences you just mentioned about your wife being a teacher; if you allow or force a local 

labor PAC to have to get a Federal PAC for every contribution, or 

for any contribution, or make them have a Federal PAC to conform 

with the law, then you have people that are putting the money all 

over the country that they don’t even know the name, let alone 

supporting an opponent. 

And the difference between that is the local labor PAC know 

their local people. And if they have a Federal PAC, they have to 

get sanctions. They have to get agreements by their Federal people, 

and it is harder, and they start losing that touch, that local touch 

55 

that they could have by distributing and funding candidates that 

they like. And they are not partisan completely. 

I am still a member of a labor organization that supports not 

only just Democrats but support good people, and they have that 

ability to do how they want, where they want, and the amount that 

they want to do, depending upon on how much they have been 

served or how much they think they are going to get served. 

When you go to a Federal PAC, they lose that complete close 

hands on, touching hands on appeal, and they also lose the respect 

of the people that they are supporting because it comes out of Federal PACs in Washington and people start losing their local touch 

even if—and candidates know they have the support of the local 

people. They still say thank you to the Federal PACs, and they 

don’t want to lose that, and I think we should preserve that for our 

local labor people also. 

The CHAIRMAN. I have one final question, and if anybody else has 

anything—— 

Mr. PENCE. Mr. Chairman, if I may, I would point out that the 

gentleman from Pennsylvania’s attention to section 6 of the PenceWynn bill, not only do they—which by repealing Wellstone that we 

would allow labor organizations and other outside groups greater 

flexibility in using individual dollars to participate politically, but 

we have a small provision that has to do with prior approval that 

corporations and labor organizations have to acquire before they 

can communicate with their members on specific issues. 

So our bill is truly a bipartisan bill and Mr. Wynn has done an 

extraordinary job trying to help me understand that round of 

American politics and public life that I don’t appreciate. But we 

have been trying to bring more freedom into this process for all 

outside organizations, including labor unions. But section 6 may be 

of interest to you. 

Ms. MILLENDER-MCDONALD. Mr. Chairman, your bill is a bipartisan bill, but hard money does advantage one of our political parties. And we know that. When you bring in hard dollars, it does 

advantage the Republican Party as opposed to the Democratic 

Party, it has been shown by data. 

Mr. PENCE. And that, again, the gentlelady’s point. I can’t help 

but feel that you and I are not terribly far apart. And one of the 

concerns about BCRA and one of the reasons I opposed it was my 

belief that, much consistent with what Mr. Doolittle said, that the 

antidote and challenges in the political economy of a free society 

is more freedom, we ought to allow the resources to flow in the direction of the candidates and ideas of their choice as long as there 

is complete disclosure of the source of those revenues, and that information is made available to the public in a timely way. 

So I am not here really to defend the broad scope of BCRA that 

eliminated soft money, but it is important for me and Mr. Wynn 

to make sure the committee understands that nothing in our bill 

brings soft money back to Federal candidates or parties. We do, 

however, say to local parties with regard to sample ballots and 

voter registration that you may utilize State-regulated dollars in 

ways that make reference to Federal candidates without violating 

the law. 

The CHAIRMAN. Mr. Wynn, and then Mr. Shays. 

56 

Mr. WYNN. It is interesting in terms of who is advantaged by 

hard money. According to the FEC, the DNC raised $394 million. 

The RNC raised $392 million. The DSCC raised $88 million. The 

NRSC raised $78 million. Our deficit was with the DCCC which 

raised $93 million compared to the NRCC which raised $185 million. 

So I think it is not necessarily that hard money benefits the Republican Party. It seems that the fact that you have these aggregate limits suggests that the money is going toward other committee parties and not the DCCC. 

Ms. MILLENDER-MCDONALD. You must be speaking from a quarterly basis not—— 

Mr. WYNN. 2003, 2004 report. 

Mr. DOOLITTLE. Would you yield for just a moment? 

Ms. MILLENDER-MCDONALD. Yes. 

Mr. DOOLITTLE. I think, Mr. Wynn, you will find that while the 

NRCC raised considerably more money, they did that in large part 

because of a direct mail program which was extremely expensive. 

I suspect that a good deal of that advantage would be lost after you 

calculated in the cost of raising that money. But on paper—so I am 

saying it looks more significant than it really is, even in the case 

of the twoHouse-based partisan organizations, the DCCC and the 

NRCC. 

Mr. SHAYS. If I could, I would like to submit for the record an 

article David Broder wrote on Thursday, February 3, in which he 

had said he had been a skeptic and opposed McCain-Feingold. And 

then in this one paragraph he said, ‘‘The 2002 law, which insiders 

refer to as BCRA, did not, as many critics fear, weaken political 

parties or stifle political debate. Instead, it played a supportive role 

in the greatest upsurge in the number of small contributions.’’ 

[The information follows:] 

A WIN FOR CAMPAIGN REFORM

As one who has been skeptical of the claimed virtues of the McCain-Feingold campaign finance law, I am happy to concede that it has, in fact, passed its first test 

in the 2004 campaign with flying colors. 

The 2002 law, which insiders refer to as BCRA (for Bipartisan Campaign Reform 

Act, pronounced bick-rah), did not, as many of us critics feared, weaken political 

parties or stifle political debate. Instead it played at least a supportive role in the 

greatest upsurge ever recorded in the number of small contributors. 

Those conclusions were, in effect, forced on me by listening to a bevy of experts 

present their evidence at a recent forum sponsored by the nonpartisan Campaign 

Finance Institute in Washington. 

Michael Malbin, the institute’s executive director, reminded listeners at the outset 

that, when it was passed in 2002, BCRA, which he called ‘‘the most important 

change in a generation’’ in campaign finance regulation, had drawn vehement criticism. 

While some argued that it did too little to stem the flow of money into politics, 

Malbin said, the main complaint was that ‘‘it did too much.’’ Its ban on unlimited 

‘‘soft money’’ contributions to the parties would weaken their role, critics said, and 

its restrictions on outside groups’ ads during campaign time would harm free 

speech. 

The prediction about the parties turned out to be flat wrong. As Anthony Corrado 

of Colby College showed, the national party committees together raised $1.2 billion 

in hard money (regulated contributions) in the 2004 election cycle, $140 million 

more than they had raised in hard and soft money combined for the 2000 contest. 

The were helped by a boost in the maximum permitted hard-money contribution 

but even more by a vast increase in the number of small donors. Republicans had 

57 

been working away at that goal for years, but they still were able to expand their 

donor base in 2004 by 1.8 million. 

For Democrats, the change was dramatic. From a dependence on soft money for 

more than half the budget in 2000, said Jackson ‘‘Jay’’ Dunn, the DNC’s national 

finance director, Democrats switched to a reliance on small donors. They expanded 

their list of direct-mail prospects from 1 million to 100 million and their Internet 

contacts from 70,000 to 1 million. 

While Republicans held an overall fundraising advantage, Democrats narrowed 

the gap to the smallest in two decades and, for the first time, the Democratic National Committee actually outraised the Republican National Committee. 

But there were significant differences in the way the two sides spent their money. 

Democrats emphasized TV ads, filling in for John Kerry during times in the campaign when their nominee was running low on funds. Republicans put the bulk of 

their funds into grass-roots organizing. 

Jack Oliver, a principal fundraiser for the Bush campaign and the RNC, said that 

difference paid off for the president in closely contested states such as Ohio. There 

and elsewhere, he said, local volunteers recruited by the Bush campaign proved 

more adept at turning out voters than the out-of-state workers hired by independent 

groups to whom the Democrats ‘‘outsource’’ much of their precinct work. 

Despite these differences, all three of the experts—Corrado, Dunn and Oliver— 

agreed that the emphasis in coming campaign cycles will be on face-to-face contact 

with voters. 

Corrado complimented the Democrats for recruiting 233,000 volunteers who made 

11 million phone calls. But he said he was even more impressed by the way those 

in the Bush campaign linked candidate appearances and scheduling decisions to 

voter mobilization efforts. 

Because they knew that the president, the vice president and the first lady could 

draw crowds, they offered seats and standing room at their events as rewards for 

people who had volunteered time on the campaign. And the Bush-Cheny rally 

attendees were recruited on the spot to go back out to the precincts and work on 

their neighbors. 

BCRA, the experts said, clearly did not eliminate the influence of big-money contributions. Some of the gifts to independent advocacy groups—the so-called 527s— 

dwarfed in size any sums ever given to the parties in past soft-money contributions. 

That issue remains to be resolved. 

Oliver and others cautioned that the new campaign finance system must still be 

tested in a cycle when there is no close presidential contest to stir public interest. 

But a solid start has been made in expanding the financial base of both parties and 

using the resources to bring more people into the electorate. That is all to the good. 

Mr. SHAYS. Which leads me to this point. We sometimes bring in 

God in issues and sometimes bring in freedom of speech in these 

issues, I want to argue as profusely as I could that I believe the 

campaign finance reform protected freedom of speech. And the 

Court acknowledged the fact that it guaranteed—and our law was 

based on the fact of guaranteeing that the wealthy don’t drown out 

the voice of those who have no money. And if we equate dollars 

with freedom of speech, we are saying that those who have more 

money have freedom of speech. 

The whole intent and the whole reality of the campaign finance 

law was to move the political parties to more people, less larger 

contributions. And if you don’t deal with 527s, you will now create 

an incredible loophole that will allow unlimited individual money, 

unlimited corporate money, unlimited union dues money, to go into 

these 527s at the expense of all other groups, and you can’t do it. 

And if you take out the 501(c)(4)s and say they can get soft money 

contributions, corporate union dues, you are just creating the problem and making it worse. 

Mr. SHAYS. So, I would also just say, Mr. Brady, I believe very 

strongly that unions should participate and corporations, but they 

do it through a political action committee so that their members do 

it voluntarily and it is not forced. The corporate folks are not 

forced, the union guys are not forced, and it is done through a poVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
58 

litical action committee. I think that is the way you do it, and that 

is the way you build a stronger base of activities. 

So, I am for freedom of speech. I just don’t want the wealthy to 

drown out the poor. 

The CHAIRMAN. Mr. Doolittle. 

Mr. DOOLITTLE. Well, Mr. Chairman, I am for freedom of speech. 

Mr. Shays, I know this goes right to the heart of our disagreement, but first of all, we are not creating any loophole. It was your 

law that created the present loophole. It specifically did not address 527s. Now you are asking us to come in and address 527s. 

It was quite clear 527s were never included within the law, they 

are expressly not included within the law, and the law never would 

have become law had they been included in the law. Now you are 

asking us to do that, and we are on the slippery slope of regulation. 

I personally am in favor of doing it, but I don’t feel good about 

doing it, and I don’t believe for a minute it will do anything of any 

lasting consequence. We will simply have a new level farther out 

that will be doing the activities of 527s, that they are doing today, 

and as Mr. Pence said, eventually I guess the courts are going to 

decide they can regulate, the government can regulate everything, 

and they will be knocking than on the door of the individual. 

But I don’t see that the present law did anything about balancing wealthy people. The only people that can give unlimited 

amounts of money are wealthy people. Everybody else is regulated 

by your law. George Soros is a mega-billionaire. Right now, even 

if we passed the 527, he could give all the money that is his own 

to candidates that he wants to. If we pass your 527 law, then there 

will be some additional regulation that kicks in. 

But I find it frustrating, and I found it frustrating during the debate over the law that passed, this talk that somehow we are taking the money out of politics. That is utter nonsense; was utter 

nonsense, is utter nonsense and will always be utter nonsense. 

Money will flow downhill like water does, and it will flow any way, 

around any obstacle it has to, to get to its intended point. 

To sit here and pretend that we have contained the influence of 

money or special interest with political parties, everybody sort of 

knows what a Democrat is or a Republican or an American Independent or Peace and Freedom. We have a few smaller parties. 

When you get into 527s and these little groups, whatever the successors to 527s are, we don’t have any idea what it is. Far from 

disempowering special interests, this law that we presently have 

has turbocharged special interests, and that is going to continue to 

be the case until and unless we repeal your law, we repeal the preceding law, and we strip away every last vestige of this until it is 

truly deregulated. 

I will stipulate for an FEC to allow us to file reports for how 

much money we are contributing. But I think that would give full 

effect to the first amendment, which says Congress shall make no 

law abridging the freedom of speech. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mr. Pence. 

Mr. PENCE. A very small point. The provision of the Pence-Wynn 

bill that repeals the Wellstone amendment would not permit soft 

59 

money to go into 501 organizations. All we would do is return to 

the original language of the Bipartisan Campaign Reform Act or 

permit individual funds, organizations, labor unions, the National 

Education Association, National Right to Life, NRA, to raise money 

from individuals that they could then use in otherwise appropriate 

ways during the affected period. 

The question as to the limitation of it, I will let the lawyers’ 

panel answer about what the internal effects of the current law are 

on 501s, but it would not constitute corporate money, in my judgment. Neither would it constitute allowing unlimited labor union 

money in. But BCRA in its original draft allowed individual members to participate in that, and that is the intention of Pence-Wynn. 

It is so important to me to say, Mr. Chairman, and I am so grateful for this thorough hearing, that particularly with the headlines 

today that say that we differ on soft money, apart from the issue 

of whether or not State and local parties can mention candidates 

in sample ballots, candidates for Federal office, there is no soft 

money implications in Pence-Wynn at all. Ours is simply an effort 

to level the playing field using hard dollars and individual contributions, is specifically what we would empower in the 501s. 

Mr. SHAYS. Could I also thank you for giving us such time, you 

have been very generous, and all the members have. And to say 

one little concern with the next panel that follows, they are all esteemed individuals, but all three, I think, oppose the campaign finance law. So, Mr. Brady, I am a little concerned that you may get 

a view that will appeal to you, but won’t have that different side 

of the equation. 

The CHAIRMAN. I will note on this topic that we did invite people 

that had both opinions. Unfortunately, two or three of the people 

simply could not make it. I did want to mention that for the next 

panel, we had what we consider balance, but unfortunately, and it 

is not their fault, two or three of the people couldn’t make it. 

I have one final question that I want to ask you directly, because 

you authored BCRA, and because I have been reading about this 

recently. Do you believe BCRA requires the regulation of blogs and 

other Web sites that engage in online political speech? 

Mr. SHAYS. No, I don’t believe it does. 

The CHAIRMAN. Thank you. I want to thank our colleagues. You 

did a wonderful job and it was a healthy debate. Thank you. 

We will move on to the second panel. I want to thank the panel. 

In our second panel today we are fortunate to have with us a number of leading scholars and practitioners in the field of campaign 

finance law; Cleta Mitchell, a partner in the law firm of Foley & 

Lardner; Bob Bauer, a partner in the law firm of Perkins Coie; and 

Larry Gold, Associate General Counsel of the AFL–CIO. 

STATEMENTS OF CLETA MITCHELL, PARTNER, FOLEY & LARDNER; BOB BAUER, PARTNER, PERKINS COIE; AND LARRY 

GOLD, GENERAL COUNSEL, AFL–CIO 

The CHAIRMAN. I want to thank you for being here. We will start 

with Ms. Mitchell. 

60 

STATEMENT OF CLETA MITCHELL 

Ms. MITCHELL. Thank you, Mr. Chairman, members of the committee. I, first of all, want to say that I believe that this committee 

under your leadership, Mr. Chairman, has done the best job of anybody in Congress over the last several years of looking at these 

issues and considering them carefully. We really appreciate your 

leadership. 

I appeared before this committee in June of 2001, and Mr. Shays 

is correct, I did appear in opposition to BCRA. I opposed it then, 

but it is now the law of the land. But the fact is that in my testimony in 2001, I referred to a situation, I drew an analogy. I said 

that I was reminded of a situation a number of years ago when Jim 

Jones took his People’s Temple from San Francisco to Guyana and 

got hundreds of people one day to drink poisonous Kool-Aid in a 

mass suicide, and I have always wondered why someone didn’t look 

up and say, ‘‘Hey, what is in this Kool-Aid?’’ 

I remember at the time that then ranking member Steny Hoyer 

took me to task and assured me that BCRA, Shays-Meehan, had 

been thoroughly studied, was well understood by the Members of 

Congress, and certainly Congress would not be considering, enacting, a piece of legislation with which it was not thoroughly familiar. 

Well, I don’t want to say I warned you, but the fact is I think 

that many Members of Congress really did not understand the true 

implications of BCRA. And I would caution you today to not allow 

the very same people who brought you BCRA to now bring you a 

whole new regulatory regime with the assurances that they know 

what is in it and just to trust them, because I have already heard, 

sitting here today, at least two different amendments that they are 

prepared to offer of things that they had not thought about when 

they drafted it. 

I would also like to point out one other thing from my testimony 

from several years ago, which was that I introduced as part of my 

testimony into the record a report that I had done entitled ‘‘Who 

is Buying Campaign Finance Reform?’’ it talked about tracing the 

funding of the campaign finance reform movement. 

But Chapter 7 of that report, which was in the committee’s 

record, was a look ahead at what would happen if BCRA became 

law or if McCain-Feingold-Shays-Meehan became BCRA. The title 

of that chapter was, ‘‘Okay, Fine. Let George Soros Replace the 

DNC.’’ 

Congressman Doolittle is exactly right, that the 527s were not a 

creation of the Federal Election Commission. The FEC was not responsible for this ‘‘loophole.’’ It was clear that they were not intended to be covered. I think the Chairman was someone who was 

concerned about the possible implications. 

Having said all of that, let me turn to the pending legislation. 

I do think it is a mistake for the Congress to go into a completely 

new regulatory regime, because, I promise you, you will be back 

here in 2 years trying to fix the things that the Shays-Meehan authors are telling you today are completely simple and easy to understand. 

I would urge the committee to actually, if it does anything, to do 

something that is simple and easy to understand, that we know exVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00062 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
61 

actly what the implications are, we know exactly what it means, 

and that is to enact the 527 Fairness Act of 2005, the Pence-Wynn 

bill, House Resolution 1316. 

Let me just briefly go through the bill—I don’t have time to go 

through all the provisions, although the bill is pretty simple, it is 

pretty quick. The legislation does a couple of important things. 

It does strengthen the political parties. Again, I come back to the 

things that Congressman Wynn and Congressman Pence said repeatedly. It does not, it does not, raise the hard dollar limits. What 

it does allow, and I think that one of the points that was not alluded to at any length in the earlier panel, is something that is one 

of the most important pieces of Pence-Wynn, and that is the repeal 

of the limits on the coordinated spending that political party committees can spend on behalf of their candidates. 

Because political parties raise only hard dollars now, this bill 

would let the political parties make the decision as to how much 

they want to spend on behalf of any of their candidates. It would 

enable parties to recruit people who aren’t independently wealthy, 

because the party committees could say we will be able to help you, 

and then the parties would be able to spend the money where they 

choose to help their candidates. 

One of the things that happened in BCRA was that Shays-Meehan and McCain-Feingold put into place a provision that would 

have required the political parties to choose between making independent expenditures on behalf of their candidates or making coordinated expenditures. One of the very few provisions that was 

struck down by the Supreme Court in the McConnell case was that 

particular provision. The Supreme Court said that the parties 

should not have to choose between making independent verus making coordinated expenditures. 

Therefore, what we have in the last cycle was this charade that 

has grown up where the parties have to set aside money and give 

it to independent expenditure units, over whom they can have no 

control, and no control over the message because that might be 

deemed to be coordinated. So we have this fiction of people going 

into and out of separate doors or building partitions inside campaign headquarters where party people may be so they can pretend 

that this side over here is independent and this side over here is 

coordinated with the candidates. Why not get rid of that? The party 

coordinated spending limits are an anachronism, they were put in 

place in the 1970s. 

The Supreme Court said about the other spending limits that 

were also included when the court in Buckley struck down spending limits that being free to engage in unlimited political expression subject to a ceiling on expenditures, is like being free to drive 

an automobile as far and as often as one desires on single tank of 

gasoline. The court was right then. I would urge the committee to 

enact Pence-Wynn and repeal the coordinated expenditures limits 

by political parties. 

I see my time is up. I think the other provision of Pence-Wynn 

have been addressed fairly thoroughly in the first panel, but I did 

want to address the coordinated spending limits, because I think 

that is a very important aspect of Pence-Wynn. 

I will be glad to answer questions when my time arrives. 

62 

The CHAIRMAN. Thank you. 

[The statement of Ms. Mitchell follows:] 

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STATEMENT OF BOB BAUER 

Mr. BAUER. Thank you, Mr. Chairman, and to members of the 

committee, for inviting us to testify. I would like to open, first of 

all, by saying I am confident my colleagues here and I on this panel 

could constitute ourselves as a bipartisan law firm to provide clearances to Congressman Brady on the questions that he had, except 

that he should know that it will not come cheaply. 

Mr. BRADY. I know that. 

Mr. BAUER. But you won’t be a test case. You will just be poorer 

for being safer. 

In any event, what I would like to do is very briefly summarize 

my testimony here within the time allotted and ask that the full 

statement be incorporated into the record. 

A number of reasons have been given for the bill before the committee at the moment to regulate 527s, and I would like to distinguish between and among those reasons which I think have in 

common only that they are all bad reasons. 

First of all, it is denied on the part of those who support this bill 

that they are seeking to limit money in politics, but they are, in 

fact, precisely seeking to do that. There is no other explanation for 

the continuous reference to the amount of money spent by 527 organizations, or for that matter, we hear is also said of 501(c)s. If 

the amount of money these organizations spent were not a rationale for this bill, why are those figures continuously being cited as 

they were repeatedly today? 

There is a view that if these organizations are spending in money 

and if they are, in fact, influencing elections, their activities ought 

to be restricted by this Congress. 

Secondly, there is an argument that everybody should play by 

the same rules; that if political committees and party committees 

raise and spend money to influence elections, so too should these 

527s. 

I think that Congresswoman Millender-McDonald expressed extremely well the point of view that we have to distinguish between 

and among groups by who they are and what functions in our political process they discharge. Placing restrictions on groups that seek 

to express themselves on issues or to conduct issue-based voter mobilization drives is not an appropriate action of this Congress. It 

depresses activity our citizens should be able to freely engage in 

without confronting the kinds of complexities we have heard discussed today by, among others, Congressman Brady. 

It is being said that this is a result of the FEC’s enforcement failure. This is simply incorrect. The issues presented by BCRA are 

complex, as Congressman Doolittle has said repeatedly here today, 

and I think quite correctly. The FEC wrestles with a question 

which is both complex as a matter of regulatory law and complex 

as a matter of constitutional law. The decisions that they reached 

were hard-fought decisions. It is a mistake to say that they defaulted on their duties. I view this as a talking point that has been 

substituted in this debate for reasoned discussion of the issues. 

Last, but not least, it is said this is good public policy without 

partisan impact. This is a bill with partisan impact. As I say in my 

testimony, no campaign finance reform is ever neutral. It typically 

works at some particular time in history to one side or the other. 

76 

The Democrats understood this in the 1970s and were, in fact, rebuked for it from time to time, including, by the way, ironically by 

The New York Times in 1971. 

It is true, I believe, of the Republican Party today that there is 

a desire to take advantage of this debate to move regulation in the 

direction of partisan advantage. 

There are good reasons, and I am going to summarize them very 

rapidly with 1 minute 37 seconds to go, why this bill ought not to 

pass. 

Number one, it goes without saying that there are significant 

rights of association. Again, I go to the Democratic ranking member because I could not say it better, and those rights of association 

are significantly threatened by this bill. 

Number two, the passage of this bill will enlarge the sphere of 

regulation and add to the mind-numbing complexity that the members of this committee have discussed this morning. Congressman 

Pence rightly worries about moving regulation closer to individuals. 

It will move regulation closer to 501(c)s. It will enhance the role 

of the Federal Election Commission, which will be called upon as 

an instrumentality of the government to continue to issue opinions, 

I might add, like the one you cited, Mr. Chair, that makes contacts 

within 120 days between groups and members subject to the coordination rules, and render even endorsement ads illegal. 

It will adversely affect State and local regulatory activity or 

make it so some complicated that State and local parties, like Congressman Brady expressed the concern about, are unable to discern 

what they can legally and not legally do. 

It will invite, as I said, continuous FEC involvement in controversy. It will place restrictions on voter drive activities by dramatically increasing the amount of hard money that allocating 

committees, registered political committees, have to spend to get 

out the vote and register voters. 

So, in summary, let me say that these bills, as I conclude in my 

testimony, that is to say S. 271 and its House counterpart, are not 

needed by any coherent rationale, have been argued on weak 

grounds, are technically deficient, are likely to invite still more 

unneeded regulation in the future, are threatening to State and 

local activity of a particularly lawful nature, are inappropriately 

partisan and are dangerous to party health and development. 

Thank you very much. 

The CHAIRMAN. Thank you. 

[The statement of Mr. Bauer follows:] 

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The CHAIRMAN. Mr. Gold. 

STATEMENT OF LARRY GOLD 

Mr. GOLD. Thank you, Mr. Chairman. I appreciate the opportunity to testify today on behalf of the AFL–CIO, the national labor 

federation whose 13 million members in 57 national and international unions work in innumerable occupations throughout the 

50 States and have a great stake in both the rules that govern how 

we engage in politics and what we do under those rules. 

Over many years, unions have come to look at governmental restrictions on political participation very warily and to appreciate 

the genius of the First Amendment as a guarantor of both individual liberty and group self-realization in the political sphere, because we trust the common sense and independent judgment of ordinary people to make up their own minds without arbitrary controls over what and who they can hear, read or engage with. 

The labor movement was actively engaged in the legislative consideration of BCRA in 2001 and 2002, and we pressed at the Supreme Court our deep-seated objections to having that statute 

criminalize certain union broadcast speech and redefine certain coordination with Federal candidates and political parties. 

Congressman Shays is incorrect that I or the AFL–CIO just out 

and out opposed BCRA. We supported the restrictions on the soft 

money contributions to national political parties, but we feared 

that if the novel speech and coordination restrictions were codified 

and held to be constitutional, then the path would be laid for much 

broader restrictions, either in the interest of further protecting incumbents as a class, at the insistence of a lobby of self-styled campaign finance ‘‘reformers’’ whose regulatory agenda has no bounds, 

or in the particular service of a political party, that unlike the situation in 2001 and 2002, but the situation today, firmly controlled 

the Executive Branch, House and Senate at the same time; and 

now, all three could be coming to pass. 

We believe that Federal election law should foster, through relatively less regulation, the political activities of membership 

groups, at least insofar as they derive their income from individual 

dues and contributions, regardless of whether their status is a 

union, an unincorporated association or a nonprofit corporation. 

We also believe that the law must recognize the fundamental distinction between contributions to politicians and political parties on 

the one hand, and speech, activism, advocacy and mobilization that 

occur independently of politicians and parties on the other hand, 

even if they do influence their official conduct and/or legislative 

and electoral fortunes. 

Contributions plainly have directly corrupting potential and their 

deregulation favors those enjoying the greatest means to give directly, without necessarily reflecting proportion of popular support. 

But civic engagement cannot corrupt officeholders. It us undertaken by the powerful and powerless with unpredictable impact, 

and it is what the First Amendment most fundamentally protects. 

For decades, independent non-Federal section 527 organizations, 

whether freestanding or sponsored by tax-exempt section 501(c) 

groups like unions, trade associations and advocacy organizations, 

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83 

tion, again, since long before the recent efforts to turn an obscure, 

three-digit Internal Revenue Code designation into a four-letter 

word. 

Since the 527 amendments in 2000, before BCRA, all of these 

527 entities have publicly disclosed their income and spending. 

Congressman Miller, I believe, is incorrect to say that they are not 

transparent. They are. There is nothing secret or shadowy or unaccountable about 527 organizations. In fact, many of them are the 

separate segregated political funds that section 501(c) groups create and control due to explicit requirements of Federal tax law and 

explicit advice of the IRS since 1975, as old as the modern Federal 

Election Campaign Act itself, that establishing and using these accounts for electoral activity is necessary in order for the section 

501(c) group to remain tax exempt. 

So, unions and trade associations and advocacy groups do use 

these accounts for non-Federal contributions, for independent advocacy, for voter mobilization, registration, get-out-the-vote, for donations to allied organizations and for other purposes. 

In all that has been written about the 527 issue in the last yearand-a-half or so, there has been virtually no complaint about how 

section 501(c) groups use their section 527 funds, and yet H.R. 513, 

the so-called 527 Reform Act, treats those 527 accounts just as 

harshly as it does the independent, non-connected section 527 

groups. In fact, we believe Congress should reject any new restraints on any of these groups. 

Let me just summarize quickly what we think the bill would do 

and why it is undesirable. H.R. 513 would sharply curtail the ability of individuals and groups to associate in their pursuit of political and policy goals, even completely independently of candidates 

and parties, posing no risk of corruption and with full public disclosure of the receipts and spending, because it outlaws many nonFederal section 527 organizations. 

The bill would force unions and advocacy groups and trade associations and nonprofit corporations to finance substantially more of 

their communications about Federal officeholders and voter mobilization, either through Federal PACs or through taxable general 

treasury spending. 

It would mandate for the first time that independent groups use 

hard money merely for references to Federal candidates and political parties in their public communications and in voter registration and GOTV activities, going far beyond current law. 

It would skew Federal election law in favor of business corporations over unions and other nonprofit groups because businesses 

can typically continue to spend for political purposes in tax-neutral 

ways while nonprofits, which are denied the use of their 527 accounts, will be taxed at the highest corporate tax rate. 

Finally, it would override State laws almost everywhere to turn 

State and local PACs into Federal PACs if they spend over $1,000 

to publicly comment on the office conduct of Federal officeholders, 

having nothing to do necessarily with any election, or undertake 

most partisan or nonpartisan voter registration or get-out-the-vote 

activities. 

84 

My written testimony explains these consequences and others in 

more detail, and I appreciate again the opportunity to appear 

today. 

[The statement of Mr. Gold follows:] 

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The CHAIRMAN. I want to thank the panel. The more I listen, the 

more I do become confused. Mr. Bauer is identical to Mr. Doolittle 

in a sense, not politically, but in his opinion. 

You know, we have thrown names around here today, and although I don’t agree with him, I give credit to George Soros for his 

willingness, frankly, to spend his money on what he believes in. I 

wish there could be a Republican who would have the same attitude, and then you would have an equal playing field. 

I don’t think I would even be sitting here thinking about doing 

something for 527s if it wasn’t for the fact that BCRA went in and 

took away the voice, in my opinion, of so many people. I represent, 

as you know, 128,000 union people in my district. I very proudly 

have accepted the support of those unions and those union rank 

and file over a period of 20-some years. 

I just look at it, and I see what this Congress did, and I am coming to the conclusion that two wrongs don’t make a right. That is 

a question that has to be asked. Although I could probably tell 

from your testimony, let me just ask directly: Do you support 

BCRA itself? 

Mr. BAUER. Well, let me put it to you this way. Perhaps I will 

answer the question this way, which is it is the law of the land. 

I completely agree with Cleta Mitchell that there are aspects of 

this bill that were not thought through, that it is not crafted in a 

fashion that carefully tailors the activity that maybe Congress 

ought legitimately to think about restricting. So I have grave reservations both about the way it is structured and the way it is operated. 

I would also like, as long as Congressman Doolittle and I are 

marching side-by-side here, I would like to say one other thing in 

support of the comment he made earlier, and that is this 527 activity is not, let me stress, is not a loophole. There are specific references to 527 activity in BCRA. Congress was well aware when 

it considered and passed the legislation there were political committees of this kind whose activities might influence elections, and, 

for that reason, there are restrictions in BCRA on the transactions 

between 527s on the one hand and Federal officeholders and parties on the other. So Congress was well aware that this was a problem. 

Moreover as Congressman Doolittle correctly said, to the extent 

anyone believes this is a loophole, it is a federally-statutorily created loophole. In other words, it is thereby, frankly, mandate of the 

government to protect these and permit them to operate in this 

fashion. Calling it a loophole, I think, again, is a rhetorical trick. 

The CHAIRMAN. I take from that that you, the primary sponsor 

of the 527 Reform Act, believe that 527s are regulated not by 

BCRA, but by the FEC. 

Mr. BAUER. That is inaccurate. What happened in this legislation 

was that as soon, and this is unfortunately the history of some aspects of the so-called reform movement in the United States, the 

527 issue, for political reasons, was set aside and Congress encouraged not to have to worry about it. As soon as the bill was passed, 

the FEC was told it was required to step in and deal with the problem. 

100 

That is not a publicly accountable way to deal with a political 

spending issue. It should have been addressed or not addressed by 

the Congress. But it is certainly not the fault of the federal regulatory agency that it refused to do that which Congress deliberately 

elected not to do. 

The CHAIRMAN. We are in this predicament here, and I call it a 

predicament, because you have average people out there in districts, and they sit there, Republican, Democratic, Independent, 

Libertarian, whatever they are, and know, if they are members of 

labor unions, that their money is the dirty, tainted money. And 

they sit there, and in their opinion, a few rich guys in this country 

are running the show, because soft money didn’t end. 

That was the point I said on the floor of the House, and what 

I will say today. Look at the transcripts of the floor. Soft money 

will end as we know it. And it didn’t. That is all I am saying. I 

am not saying it is good or bad, but it didn’t end. That is my point, 

it didn’t end. And if that language or that 527 provision had been 

in that bill, that bill would never have passed the floor of the 

House, in my opinion. 

Ms. MITCHELL. Along those lines, Mr. Chairman, you are absolutely correct, and along those lines I sat here and listened to the 

sponsors of the 527 regulatory regime saying, oh, but we are not 

touching 501s. Not now they are not. But I promise you, that they 

will be back. This is, as George Will says, metastisizing Federal 

regulation. It never stops. 

That is one of the reasons I say that if for a change Congress 

were to take the Pence-Wynn approach, which is let’s adjust, let’s 

roll back some of the regulations, that that, in fact, would be a very 

new day in Congress. 

One of the things that bothers me tremendously is exactly what 

you, Mr. Chairman, just alluded to, the idea that the reformers always say we don’t want the wealthy people to have control. We are 

going to take the big money out of politics. 

What BCRA did and what we are proposing, what hopefully the 

Pence-Wynn bill, if enacted, would do, is to take the situation that 

currently exists, where one guy can write a check for $1 million 

and say whatever he wants, buy whatever ads he wants, do whatever he wants, but 1 million people giving $1 in their dues to the 

NRA or the AFL–CIO or any membership organization, cannot 

have that organization speak for them. 

So what we have really done is the exact opposite of what the 

reformers say they intended and continue to say is their objective. 

We have taken the ability of people to associate together who cannot themselves afford to buy radio and TV ads, but to pool their 

resources through their organizations and to be able to have the 

same speech rights as one wealthy individual. That is very distressing, I think, in terms of a model for the system. 

The other piece of it is with the parties, to be able to say that 

a political party has to be restricted in how much it can spend to 

support its candidates. Congress did recognize in the millionaires’ 

amendment that there is a value, there is a public policy objective, 

to saying, okay, well, if you have a really rich guy running against 

you, then we are going to let you raise your contribution limits and 

the party coordinated limits are off and increased contributions 

101 

don’t count against the aggregate. So Congress has already recognized the idea of repealing or not counting coordinated and aggregate limits. 

I think that if we can take that and just get rid of those and get 

rid of the complexity, I mean, I finally couldn’t explain aggregate 

contribution limits, so I did a picture, and I would defy any Member of Congress, without using a picture or a crib sheet, I would 

defy any Member of Congress to be able to explain the aggregate 

contribution limits. I don’t mean that in any pejorative way, I am 

just saying it took me months and writing this down before I could 

do it. So anything that that is that complicated, we ought to get 

rid of. 

The CHAIRMAN. I want to have the other members ask questions. 

I just have one brief question, and it deals with BCRA. I think 

about my campaign 25 years ago, when I ran against a former 

Member of Congress that had been elected in the legislature, in 

other words, an incumbent. At that time the Republican Party said, 

‘‘We are going to help you.’’ 

We look at the Republican and Democrat parties and any other 

party that could come on the scene, and say, ‘‘Well, wait a minute, 

they are pretty healthy; they raised X amount of money.’’ But I 

don’t think I would be here today had it not been for the Party’s 

help. I might have an easier life or a less complicated one, but I 

don’t think I would be here today if it wasn’t for the party being 

able at that time to say, ‘‘Okay, we are going to give you a chance. 

Nobody else thinks you can win, but we are going to give you a 

chance.’’ 

That was my argument with BCRA. What are we doing down the 

line? Why do we restrict the two parties? Or, hey, if there is a third 

party, Independent Party, Natural Law, whatever, just in a nutshell, what will BCRA do to the political parties? Do they get 

stronger somehow, do they stay the same, or do they weaken? 

Ms. MITCHELL. I believe that the intent of BCRA was in no small 

part to weaken the parties. I think the people who proposed it were 

not necessarily party people, probably think that people who walk 

around with donkey pins or elephant hats are slightly nuts. And 

the fact is it is another associational right of the American people, 

and I think BCRA really has, vis-a-vis external groups, it has 

weakened the parties. 

I think you cannot look at 2004 and draw any conclusions from 

it in terms of the financial health of the parties going forward, and 

I think that is a very big mistake, to say, oh, the parties raised this 

$1 billion and saying everything is fine. 

I don’t think everything is fine, and I don’t think the parties 

ought to have to compete with each other to be able to raise funds 

within the hard dollar limits. So I think it is important to take a 

scalpel—I would like to take a sledge hammer, but it is the law of 

the land. Nobody has the stomach for taking a sledge hammer to 

BCRA. So it is take a scalpel and let’s fix a couple of things that 

need to be fixed and then give it a chance to work. 

The CHAIRMAN. Mr. Bauer. 

Mr. BAUER. I entirely agree. I think BCRA was unhelpful to the 

parties. I think a good bit of the data being supported about the 

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102 

ruled, the numbers are not being properly or, frankly, rigorously 

used. 

I think it will take some time for us to account for the effects of 

BCRA. You cannot assess a reform piece of legislation of this kind 

in one cycle, because you have to adjust, control for so many factors. 

So I believe as a piece of legislation, it targets parties, and I 

agree with Cleta, it is supported by many that simply don’t agree 

that parties play a healthy role in the political process. BCRA, in 

that respect, was unhelpful. 

Mr. GOLD. Well, I think BCRA certainly had an approach on parties that, in part, unions supported with respect to limiting soft 

money directly to them. On the other hand, unions totally and completely support a very potent party system, and believe that wherever we go, it should not be in the direction as this bill, that is, 

H.R. 513 goes, which is to say let’s protect our parties and others 

perhaps by suppressing other activity. 

The instinct here we think is in a pretty dangerous direction, and 

unfortunately was opened up by some of the aspects of BCRA that 

we did oppose and opposed very strongly. 

One thing that is happening here I think is that the classification of speech and associational activity is being federalized. You 

hear Congressman Shays refer to ‘‘Federal 527s.’’ He wasn’t talking 

about Federal PACs, he was talking about organizations that register with the IRS, do a lot of things, address a lot of issues, registered a lot of people, and reported everything they did to the IRS. 

But he has cast it under this notion of ‘‘Federal.’’ Everything is 

‘‘Federal.’’ 

That started in BCRA. That was an unhealthy aspect of one of 

the party provisions which we did not support, the notion of Federal election activities, anything that is voter registration within 

120 days of an election, anything that is an attempt to get out the 

vote generally. Well, if it happens in a Federal election year, it is 

Federal activity all of a sudden. That is a terrible override really 

of State and local elections, but it is also an invitation, unfortunately, to pushing everybody and shoehorning all political activity 

within these very rigorous kinds of restrictions. That is unhealthy. 

This bill pushes that way further. Hard money now can only be 

used for references to Federal candidates in all spheres at all times 

if you are a 527. This whole notion of promote, support, attack and 

oppose which was introduced in BCRA, again only for State and 

local parties, now has, to use Cleta Mitchell’s term, metastasized 

in this bill, now it applies to all 527s, whatever that means, if you 

do that. Whatever it means, we don’t know what it means, but 

whatever it means, all of a sudden that becomes Federal activity. 

We view this as just, you know, marching in the wrong direction, 

and really intimidating organizations and just engaging in ordinary 

activity, talking about issues, legislation and public officeholders. 

The CHAIRMAN. I thank you. 

The gentlewoman from California. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. 

Thank you all for being here. It is great to hear from you and 

to get the real experts talking to us about this issue. 

103 

Ms. Mitchell, in your statement, you said that the first and truly 

most important provisions of the Pence-Wynn bill are those which 

strengthen the political parties. How much more strength do we 

need to give them from $1.2 billion? That is a lot of money that 

they raised. What other strength should we seek, outside of what 

has already been validated by the largest amount of money being 

spent in an election? 

Ms. MITCHELL. Well, as I said earlier, Congresswoman, I think 

it is a mistake to conclude from the 2004 election that the parties 

are doing just fine. I think that that is a mistake, because I do believe that this election was somewhat unique, and we don’t know 

going forward. That is one response. I would also add that when we say $1.4 billion was raised, my 

question is, is that enough? As compared to what? Is Congress 

going to be in the business of saying this is the right amount of 

money for parties to be able to raise to spend to help their candidates? 

It seems to me if we put that into a context, and I have seen 

many people do that before, comparing how much money is raised 

and spent in political campaigns, and compare that to how much 

money is raised and spent for advertising of potato chips, it is a 

minute amount. And what is more important, a bag of potato chips 

or who is going to be serving in Congress and elected to the presidency? So I think that is just not a right gauge. 

Let me go to the more practical aspects. I serve as outside counsel to the Republican Senatorial Committee this cycle, and it is 

very clear—I mean, I heard Congressman Shays talking about people could give, and I was trying to figure up where he was coming 

up with these numbers. 

Well, I suppose it is conceivable that somebody might give $26,700 a year to all six national party committees, but I would 

sure like to meet that person, because I don’t think that that person really exists. 

You might have a few people, and we are talking about a few 

people, who want to be able to help the Republican Senatorial 

Committee and the RNC and the NRCC, all three, and they have 

the means to do that. Today, under current law, the NRCC, the 

NRSC and the RNC have to compete with each other for those donors. There aren’t that many of them, but they have to compete 

with each other. The Republican Committees are not competing 

with Democrats for donors at that level, they are competing with 

one another. 

So I suppose there is somebody in America who would want to 

give $10,000, the maximum an individual can give, to the Federal 

accounts of a State political party and would want to give that to 

every Democratic State party and every Republican State party. 

Again, I think that is where those numbers had to be coming 

from—Congressman Shays’ testimony. 

But I don’t think that person really exists, and I don’t know any 

person, any donor, who is likely to give the maximum to every 

State Republican party, to their Federal account. 

But I do think that if we have these hard dollar limits in place, 

we have already rationed those, let donors give to as many Federal 

candidates as he or she wants within the hard dollar limits and to 

104 

as many parties. Why should one donor have to decide I can only 

max out under current law to nine candidates for Congress, and I 

can give the primary amount to one more. 

Now, it seems to me that that makes no sense. If what we do 

is say, all right, if you are a big rich guy, and you want to do more, 

rather than giving it over here to 527s, we will make it possible 

for you to give it within the system. We are not going to try to shut 

down the 527s, because that is going the wrong direction, but what 

we are going to do is we are going to make it possible for you to 

stay than with the regulated system. 

Ms. MILLENDER-MCDONALD. You said, and if we go on the 

premise of what you said that this was a unique situation in terms 

of a $1.4 billion or whatever it was, then perhaps one could argue 

the point that the 527s were the unique situation at this time and 

perhaps would not have that type of money flowing in the next 

election. So we can talk about that on both sides of the spectrum 

and really come to the conclusion that both strengthen the political 

process, irrespective. 

Ms. MITCHELL. I am not here to argue that 527s should be subject to all of this regulation that Congressmen Shays and Meehan 

are proposing. Let me be very clear: I do not think Congress should 

do that. I think that is following the same pattern that was followed under BCRA, and that we should stop doing that. 

I do think that as a means of encouraging people to stay within 

the regulated system, to support candidates, to support parties, to 

support Federal PACs, if we really believe and worship at the alter 

of hard dollars, let’s allow people to give the hard dollars, let’s 

allow the parties to not pretend that part of their support for candidates is coordinated and part is independent. Let’s get rid of 

some of these silly things. 

Let individual members’ dues money to the NRA and the AFL– 

CIO and other organization be used—not money from corporations 

but from individuals, let people speak through their organizations, 

leave the 527s alone, do a couple of slight changes that encourage 

people to stay within the hard dollar system, support the parties, 

help the membership organizations, and then forget it. Let it be for 

a while. 

Ms. MILLENDER-MCDONALD. BCRA’s whole notion was to sever 

the links between politicians and soft money. It seems that the 

Pence-Wynn bill, unless I am not reading it correctly, opens up new 

opportunities for State and local parties to spend soft money, even 

on voter registration. Is that correct, my assessment of that? 

Ms. MITCHELL. It allows State and local parties to spend their 

State-regulated money. Let me give you an example. I am from 

Oklahoma. I really resent—I object to referring to State-regulated 

money as soft money. Some States have more restrictive laws and 

some States have less restrictive laws. 

I am from Oklahoma, and Oklahoma, a person can give, a family 

can give $5,000 to the political party in Oklahoma in a year. Well, 

the State party would be allowed, under Pence-Wynn, to spend its 

State-raised money, money raised under State law, not its Federal 

account money, but its State-raised money, to be able to do voter 

registration, even when their Federal candidate is on a ballot, even 

within 120 days of the Federal election, going back to what Mr. 

105 

Gold referred to, that now under BCRA, all voter registration within 120 days of a Federal election has to be paid for with hard dollars, Federal dollars. 

Ms. MILLENDER-MCDONALD. But given that, as you have just indicated, that certain States have differences in terms of the amount 

of money that they use, soft money that they receive, then there 

is still a disadvantage of one State over the other. 

Ms. MITCHELL. Everybody is welcome to move to Oklahoma, if 

you like. Actually, California allows corporate dollars to be given, 

which Oklahoma doesn’t allow. My point is it takes a little bit of 

the restriction that BCRA imposed, not a lot, but some of the restrictions away, allows State and local parties to spend their State 

dollars for voter registration, it allows them to spend them for sample ballots. If they mention a Federal candidate, whether or not 

they like it, they have got to have all of the Federal candidates for 

that office. 

These are very minor changes, but they are meaningful to State 

and local parties. 

Ms. MILLENDER-MCDONALD. I suppose the Pence-Wynn bill tends 

to inject more PAC money into the political process by indexing the 

contribution limits for PACs, which BCRA did not do, and I have 

some concerns about that. 

Ms. MITCHELL. See, I am not one of those people that thinks 

PACs are a bad idea, because, again, I believe in the notion that 

somebody who cannot write a $5,000 check to a candidate ought to 

be able, as a member of a union, or a member of a 501(c)(4) organization or somebody who just wants to give to the Green Earth 

PAC, that if you can get a group of people to give small amounts 

of money, that is the whole idea of a PAC, is that a lot of people 

give small amounts of money can compete and be on the same level 

as somebody who can write a $5,000 check. 

What will happen if PAC contributions are not indexed, is that 

within a few years the indexed amounts for individual contributions will exceed the amounts that PACs can give, and therefore, 

relatively diminishing the role of the small donors to the PACs visa-vis the wealthy individuals. 

Ms. MILLENDER-MCDONALD. And bringing more special interest 

money in. 

Ms. MITCHELL. Well, I don’t see how that happens. 

Ms. MILLENDER-MCDONALD. Really? It appears to me like it 

would. 

The other two gentlemen, is it fair to restrict 527 activities and 

activities of other political committees organized by activists and 

ordinary citizens while removing restrictions from corporate interests and party organizations controlled by officeholders? What are 

your thoughts on that? 

Mr. BAUER. I have to say this is where I part company with 

Cleta. I think that the juxtaposition of Pence-Wynn with the proposed 527 regulation makes no sense as a matter of policy. I don’t 

think it is a neutral as a partisan matter. I think it is just bad public policy, precisely for the reasons you suggest. 

Mr. GOLD. I would agree. I think that, again, as I have said, we 

oppose further restrictions on independent, fully-disclosed political 

activity by individuals and groups, particularly membership organiVerDate Aug 31 2005 21:49 Oct 25, 2005 Jkt 077629 PO 00000 Frm 00107 Fmt 6633 Sfmt 6602 E:\HR\OC\A160.XXX A160
106 

zations, unions and others. That is exactly what the law ought to 

be fostering and encouraging, and the 527 bill is directly targeted 

against it and against a lot of nonprofit organizations. 

Pence-Wynn has a number of proposed changes that have been 

described today, and as I said in my prepared testimony, there may 

be some elements that would be worthwhile to consider. But in the 

context of, I think, a different approach to this, it will be hard for 

us to say we support this, we oppose that with respect to that bill. 

We think we would have to take a broader approach to this. 

Also we are very mindful of the fact, as I said before, that unlike 

every other time when campaign finance legislation has been enacted, when there was some divided party control, some checks, 

something that is really, really important to the fortunes of those 

who are voting here, we are in a one-party control situation now, 

and whatever happens really ought to be bipartisan, significantly 

so. 

Ms. MILLENDER-MCDONALD. The Supreme Court has really 

upheld this bill, 99 percent of it. Why are we trying to change it 

at this juncture? Why don’t we let this bill continue to work itself 

out, given all of the nuances of it? Why are we trying to correct 

something in the middle of a process working itself out? Why do 

we have to deal with BCRA at this point? 

Mr. BAUER. If I may say, I don’t think we should, and I think 

there are two reasons why not. First of all, I think we ought to 

allow more experience with the bill before people rush to judgment 

about what is wrong with it, about what needs to be ‘‘fixed.’’ One 

cycle is simply not enough. 

Second, and this is a theme that I think has been sounded consistently throughout this hearing by the other side here, when the 

Members of Congress said we are simply adding to an awesome degree of complexity in these laws. I was struck here that repeatedly 

the Members of Congress here in this Chamber who are part of the 

body responsible for passing the law, kept on referring to how they 

looked forward to having the private lawyers come to a panel to explain to them what the law was all about. 

Ms. MILLENDER-MCDONALD. Unfortunately. 

Mr. BAUER. That seems to me to be an unfortunate state of affairs. 

Ms. MILLENDER-MCDONALD. This is one of the reasons why Ms. 

Mitchell said, I think, if I am not misquoting you, that perhaps 

next year or the next year, we will be coming back up to maybe 

amend this again. So I think we need to allow this to percolate and 

not just constantly be coming back doing knee-jerk reaction types 

of amendments. 

Ms. MITCHELL. I don’t disagree with that, but let me say this: 

The history over the last several years, and I have testified before 

this committee and before other committees on campaign finance 

proposals, my favorite was being the 12th panelist on the House 

Ways and Means Committee on the 527 regulation bill of 2000. I 

was the 12th panelist out of 12, and I was the only one on the 

panel who opposed the bill. I said then and I believe what happens 

is because the media is never covered by any of these provisions, 

they can spend full-time stampeding Congress into enacting new 

107 

regulatory provisions on everybody else’s speech. That is what we 

really have: We have legislation by headline. 

But I also think that even beyond that, that Congressman Ney 

really touched upon a nerve that goes to a lot of Republicans, and 

that BCRA was passed with a solid majority of Democrats and a 

few Republicans, such that a Republican-controlled Congress enacted it and it was signed by a Republican President and then 

upheld by the Supreme Court, but there were a lot of Republicans 

who opposed BCRA who watched with dismay as these 527s outside the system flourished and had all of this money, and the 

money flowed out to them. So that the very people, with all due 

respect, people who voted for BCRA and said we are going to get 

rid of these big money checks and blah, blah, blah, and now then 

are thrilled to death to have the 527s flourishing out here. 

I think there was a sense of wait a minute, guys, you are not 

playing by the rules you set for us. My view is it is Lucy and the 

football. You know, don’t let Lucy pull the football again now. We 

can go back and rehash BCRA, but don’t make the same mistake 

today. 

The CHAIRMAN. We will move on to Mr. Doolittle, but before we 

do, I would like to answer one of your questions. In my opinion, the 

reason why we are here, and the reason 527s—MoveOn.org, et 

cetera—became an issue all of a sudden, is because along came a 

Swift Boat ad. If I am correct, the presidential candidate for the 

Democrat said, ‘‘Mr. President, shouldn’t we stop these things?’’ 

I am not saying that he was wrong to take that tack. I would 

say it too if I was out there. I am not blaming it on the Democrats. 

Republicans and Democrats alike had problems with 527s. Initially, nobody in our districts knew what a 527 was. Then the Swift 

Boat ads came along, and the next thing you know, everybody is 

starting to say you had better do something about it. Both presidential camps I think said, ‘‘Yes, we have to do something about 

it’’, because people were saying, ‘‘What are these entities?’’ 

I think that is how this discussion came about, because then the 

authors of the bill received the pressure of media scrutiny. ‘‘I 

thought you stopped soft money. And here we go.’’ And that is why 

I think we are having this discussion. I don’t know what is right 

or wrong on this issue, but this is why I think we are here, and 

the authors of the bill have a lot of pressure to say, ‘‘Well, we have 

to correct this component now.’’ That is my opinion. 

Mr. GOLD. I think the focus on the public discussion of 527s has 

long preceded the Swift Boat ads. The reason that this Congress 

in June, 2000 passed a disclosure law, the amendments to section 

527 was because there was a hue and cry at the time about socalled ‘‘stealth PACs.’’ That is where I think it started and it was 

talking about these very same groups that did not disclose and that 

did things that influenced public policy and elections and the like. 

So Congress required disclosure very much like FEC disclosure except to the IRS. Then BCRA happened and there were specific references in BCRA to 527s, but no suggestion that there was anything wrong about them that had to be controlled. 

And even after BCRA in November, 2002, Congress changed that 

disclosure law to relax it a bit because it had overreached. In 2004, 

there was, of course, you know, more activity, a new election cycle. 

108 

And I think the public press attention to 527s arose well before 

Swift Boats. It was really a year ago when that letter that you 

cited earlier was sent. The FEC was considering itself beyond its 

statutory authority I believe. 

The CHAIRMAN. I agree with you that it occurred before the Swift 

Boats became prominent. It was out there, and then Swift Boat ignited it and everybody knew the term ‘‘Swift Boat.’’ 

Mr. GOLD. I think my real point is not to quarrel over when 

there might have been public attention, but the fact is that Congress should not be led by sort of the fads of press reporting of politics. The fact is that if you look at the activity and the relative 

amount of money that was spent in the advertising, most of it was 

candidates and political parties. That is just the reality of it. 

The CHAIRMAN. You get a headline and everybody wants to revise the entire world. 

Mr. GOLD. That is a very dangerous thing to do when you are 

regulating politics. 

Mr. DOOLITTLE. Would you care to speculate, assuming that the 

law stays as it is without enacting new law for the next few years 

and that probably is an unwarranted assumption, but for the sake 

of argument, let us say that is the case, what do you think the effect is on political parties as we move farther into the future. What 

do you think happens? 

Mr. GOLD. Under the current law, if current law remains, I think 

parties at the national level are pretty healthy. Clearly they raised 

a lot more money than they had in previous cycles. I think State 

and local parties are under excessive kinds of restrictions on what 

they can do. I thought that during BCRA—and that hasn’t 

changed. 

Mr. DOOLITTLE. You talking about making them spend federallyqualified money in voter registration. 

Mr. GOLD. And this whole notion that we haven’t discussed on 

the restrictions on how they raise it and that sort of thing. You 

know, I think they are unduly complex and only very indirectly get 

at what Congress was after. It is very hard to predict how people 

are going to associate and spend their money and talk about politics and engage in the future just based on what happens in the 

past. No election cycle has been the same as it was before. And 

that was true during that 27-year period between FECA in 1975 

and 1976 and BCRA in 2002. No 2 years were the same, because 

things change. And every election has different pressures and different circumstances. 

So I don’t think we should be jumping heavy-handedly into 

changing the law, especially if we are putting in further restrictions just based on what happened last week or what the press, 

which as Bob Bauer mentioned, is utterly unrestricted in these 

laws, chooses to focus on. 

Mr. DOOLITTLE. Isn’t it still in the law that the only rationale for 

impinging on core First Amendment rights of expression would be 

to prohibit corruption or the appearance of corruption? Is that still 

the test? 

Mr. BAUER. Yes, it is. 

109 

Mr. DOOLITTLE. And if that is the test, how does—how do you 

evaluate the effort to regulate 527s according to that test? What 

would be the corruption they are trying to prevent? 

Mr. BAUER. From my point of view, it is an extremely exaggerated argument. It isn’t consistent with Buckley. And not consistent 

with McConnell, but McConnell was written in such a way, it has 

given life to the thought that even independent activity of this kind 

can be restricted. I don’t believe it has a constitutional basis and 

I don’t believe it relates appropriately to the anti-corruption rationale which is still, in theory, the constitutional law of the land. 

Mr. GOLD. I think it is a troubling notion that independent 

groups that do things that influence legislation and policy, comment on public officeholders, that Members of Congress, which is 

what we are talking about, those are the individuals who the campaign finance laws are supposed to be preventing from being corrupted, that Members of Congress are going to somehow be corruptly influenced by the fact that they observe, just observe uncoordinated activity by ordinary citizens, or by people banning together, or even wealthy individuals acting on their own. 

That is why the Supreme Court 30 years ago, and it is still the 

law today, said that one could not lawfully restrict independent expenditures by individuals and by many groups as well. And the notion that we are going to start legislating against independent activity, political activity for fear that somebody in Congress might 

be grateful, is a bad turn to go. And it doesn’t address certain 

things. What about where Members of Congress do coordinate and 

do deal overtly with groups? You have individuals, your constituents, unions, NRA, who you are politically compatible with and you 

work together with to pass legislation. The entire Social Security 

debate is a good example of what is happening where the AFL–CIO 

is involved and working with legislators from both parties on this 

issue. 

I don’t view it as corrupting to you, that is to say you Members 

of Congress, I don’t believe it is corrupting that we are working 

hand in hand towards common political goals and we are saying 

things, in fact, about what you do. Nor is it—and the sponsors of 

H.R. 513, the groups that support their legislation, they work hand 

in hand and extol their virtues. I don’t believe that is corrupting. 

If that is not corrupting, how can it be corrupting to have uncoordinated political activity going on that you just observed? 

Mr. DOOLITTLE. I don’t believe it is corrupting either, but I 

thought it was a silly rationale when it was put into Buckley. What 

do you think is the—what is your concern for the future about the 

independent political operations? Do you think there is cause for 

further concern based on the McConnell decision? 

Mr. GOLD. I think as Bob Bauer mentioned, I will let him expand 

on it, because he has written a lot more than I have on it. There 

are aspects of the McConnell decision that clearly give encouragement to those who want to regulate independent activity further. 

It is not well-thought through or expressed, and not necessarily the 

holding in the case, but I think it would be a mistake for Congress 

to act as if some of the very aggressive interpretations of that decision were correct and mandated or really supported strongly in a 

further restriction. 

110 

Ms. MITCHELL. In that regard, I think we should not overlook 

what has transpired as a result of the Supreme Court decisions in 

1996 and 2001, and then the McConnell decision related to coordinating spending by the political parties. We can now have—parties 

can make unlimited expenditures, but the question is how does a 

party corrupt its candidates and vice versa. I think we all agree 

that that is not possible. And the lower courts found that. But because the Supreme Court has already ruled that parties can make 

unlimited independent expenditures, we have this fiction where the 

parties have to set up these independent programs which are less 

accountable, they are not accountable for the message and can’t be 

accountable for the message, they can’t coordinate it with the candidates. It seems to me that is something Congress ought to address. 

Mr. BRADY. Just quickly, Mr. Chairman, I was told to wait for 

the experts and the experts tell me do nothing. 

Ms. MITCHELL. I am not saying that. I think there are small 

things you need to do that would be important, because Congress 

has already legislated in this area and only Congress can correct 

it. 

Mr. BRADY. We have a Pence-Wynn that I think may address the 

local and State parties and relieve them with some restrictions, but 

I am told you are not supporting that. 

Ms. MITCHELL. I support Pence-Wynn, but they don’t. 

Mr. BRADY. I am back where I started from. Not knowing what 

I can and cannot do and wait and find out how much it is going 

to cost you for attorneys and they tell me they don’t know either. 

Mr. BAUER. We absolutely do know. We know, we can be helpful. 

Mr. BRADY. I will wait for that. 

The CHAIRMAN. Any other questions? I want to thank the panel. 

I think this was a good hearing and well worth exploring. And I 

want to thank our ranking member Congresswoman MillenderMcDonald and her staff, as well as our staff and the other members and their staff for participating. I ask unanimous consent that 

members and witnesses have 7 legislative days to submit material 

into the record. Their statements and materials will be entered in 

the appropriate place in the record. Without objection, the material 

will be so entered. I ask unanimous consent that the staff be authorized to make technical and conforming changes on all matters 

considered by the committee at today’s hearing. Without objection, 

so ordered. And thank you for your time. 

Ms. MILLENDER-MCDONALD. May I compliment on a really well 

run hearing today? I thought it was informative, both the first 

panel and the second panel. And while we perhaps further look at 

this before taking action, at least we had the experts and the members come forth. 

[Whereupon, at 1:06 p.m., the committee was adjourned.] 

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