Order Code IB87020
Issue Brief for Congress
Received through the CRS Web
Campaign Financing
Updated October 3, 2002
Joseph E. Cantor
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Evolution of the Current System
Campaign Finance Practices and Related Issues
Enduring Issues: Overall Costs, Funding Sources, and Competition
Increased Campaign Costs
PACs and Other Sources of Campaign Funds
Competitiveness in Elections
Today’s Paramount Issue: Perceived Loopholes in Current Law
Bundling
Soft Money
Independent Expenditures
Issue Advocacy
Policy Options
Proposals on Enduring Issues
Campaign Spending Limits and Government Incentives or Benefits
Changing the Balance Among Funding Sources
Promoting Electoral Competition
Proposals to Close Perceived Loopholes in Current Law
Bundling
Independent Expenditures
Soft Money
Issue Advocacy
Legislative Action in Congress
107th Congress
1st Session
2nd Session
LEGISLATION
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Reports

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Campaign Financing
SUMMARY
Concerns over financing federal elections
use of soft money for so-called issue advocacy
have become a seemingly perennial aspect of
since 1996 has raised questions over the
our political system, centered on the enduring
integrity of current regulations and the feasi-
issues of high campaign costs and reliance on
bility of any limits on campaign money.
interest groups for needed campaign funds.
In the 105th Congress, the first Congress
Rising election costs have long fostered
after 1996, the House debated reform twice.
a sense in some quarters that spending is out
First, it considered a GOP-leadership bill and
of control, with too much time spent raising
three narrower measures under suspension of
funds and elections “bought and sold.” De-
rules, passing a foreign national contribution
bate has also focused on the role of interest
ban and an FEC disclosure/enforcement bill
groups in campaign funding, especially
and defeating the leadership bill and the Pay-
through political action committees (PACs).
check Protection Act. In response to a dis-
charge petition drive, the House renewed
Differences in perceptions of the cam-
consideration of the issue, in a lengthy process
paign finance system have long been com-
focused on the “freshman bipartisan bill,” 11
pounded by different reform approaches of the
substitutes, and a constitutional amendment.
major parties. Democrats have tended to
Debate ended with passage of the Shays-
favor more regulation, with spending limits
Meehan bill. The Senate debated the compan-
and some public funding or benefits a part of
ion McCain-Feingold bill three times, all
their past proposals. Republicans have gener-
ending in failed cloture votes.
ally opposed such limits and public funding.
In the first session of the 106th Congress,
Democratic majorities in the 101st-103rd
the House passed the Shays-Meehan bill, but
Congresses passed bills with spending limits,
Senate debate ended after two failed cloture
benefits, and PAC and loophole curbs. The
votes. In the second session, Congress did
101st and 103rd Congress bills were not recon-
agree on an aspect of campaign reform, in
ciled; a 102nd Congress conference bill was
passing P.L. 106-230, to require disclosure by
vetoed. Reformers in the 104th Congress
certain tax-exempt political organizations
sought a similar bill but failed on a Senate
organized under section 527 of the Internal
cloture vote; House Republicans offered a bill
Revenue Code. Such groups exist to influence
giving parties and local citizens a greater role,
elections, but many had not been required to
but this and a Democratic alternative lost.
disclose to the Federal Election Commission.
The 1996 elections marked a turning
In the 107th Congress, the Senate passed
point, when the debate’s focus shifted from
S. 27 (McCain-Feingold), as amended, on
more restrictions on already-regulated spend-
April 2, 2001. On February 14, 2002, the
ing and funding sources to activities largely or
House passed the companion measure, H.R.
entirely outside federal election law regulation
2356 (Shays-Meehan), as amended. That bill
and disclosure requirements. Although con-
passed the Senate on March 20, 2002, and was
cerns had long been rising over soft money in
signed into law by President Bush on March
federal elections, the widespread and growing
27, 2002, as P.L. 107-155.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The Federal Election Commission is in the process of promulgating regulations to
implement the Bipartisan Campaign Reform Act of 2002 (P.L. 107-155). Its first set of rules,
dealing with soft money, were sent to Congress on July 15. Supporters of the new law
criticized the proposed regulations and announced their intentions to overturn them in
Congress under the Congressional Review Act and in the courts under the Administrative
Procedure Act.
BACKGROUND AND ANALYSIS
Evolution of the Current System
Today’s federal campaign finance law evolved during the 1970s out of five major
statutes and a paramount Supreme Court case. That case not only affected earlier statutes,
but it continues to shape the dialogue on campaign finance reform.
The 1971 Federal Election Campaign Act (FECA), as amended in 1974, 1976, and
1979, imposed limits on contributions, required disclosure of campaign receipts and
expenditures, and set up the Federal Election Commission (FEC) as a central administrative
and enforcement agency. The Revenue Act of 1971 inaugurated public funding of
presidential general elections, with funding of primaries and nominating conventions added
by the 1974 FECA Amendments. The latter also imposed certain expenditure limits, struck
down by the Supreme Court’s landmark Buckley v. Valeo ruling [424 U.S. 1 (1976)].
In the Buckley ruling, the Court upheld the Act’s limitations on contributions as
appropriate legislative tools to guard against the reality or appearance of improper influence
stemming from candidates’ dependence on large campaign contributions. However, Buckley
invalidated the Act’s limitations on independent expenditures, on candidate expenditures
from personal funds, and on overall campaign expenditures. These provisions, the Court
ruled, placed direct and substantial restrictions on the ability of candidates, citizens, and
associations to engage in protected First Amendment rights. The Court saw no danger of
corruption arising from large expenditures, as it did from large contributions, which alone
could justify the First Amendment restrictions involved. Only voluntary limits could be
sustained, perhaps in exchange for government benefits. Such a plan was specifically upheld
in the existing presidential public funding system, as a contractual agreement between the
government and the candidate. The Court’s dichotomous ruling, allowing limits on
contributions but striking down mandatory limits on expenditures, has shaped subsequent
campaign finance practices and laws, as well as the debate over campaign finance reforms.
Campaign Finance Practices and Related Issues
Since the mid-1970s, the limits on contributions by individuals, political action
committees (PACs), and parties, and an absence of congressional spending limits, have
governed the flow of money in congressional elections. Throughout the 1980s and much of
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the 1990s, the two paramount issues raised by campaign finance practices were the
phenomena of, first, rising campaign costs and the large amounts of money needed for
elections and, second, the substantial reliance on PACs as a source of funding. Concerns
were also voiced, by political scientists and the Republican congressional minority, over a
third issue: the level of electoral competition, as affected by finance practices.
Since 1996, the debate has shifted considerably to a focus on the perceived loopholes
in current law (a source of increasing debate since the mid-1980s). The PAC issue has been
greatly supplanted by more fundamental issues of election regulation, with observers finding
new appreciation for the limited, disclosed nature of PAC funds. Concerns over competition
have abated since Republicans won control of Congress in 1994, despite the perceived
incumbency bias in the finance system. The issue of high campaign costs and the
concomitant need for vast resources continues to underlie the debate, but even this has been
almost overshadowed by concerns over the system’s perceived loopholes. Although these
practices are (largely) presumably legal, they may violate the law’s spirit, raising a basic
question of whether money in elections can, let alone should, be regulated.
Enduring Issues: Overall Costs, Funding Sources,
and Competition
Increased Campaign Costs. Since first being systematically compiled in the
1970s, campaign expenditures have risen substantially, even exceeding the overall rise in the
cost of living. Campaign finance authority Herbert Alexander estimated that $540 million
was spent on all elections in the U.S. in 1976, rising to some $3.9 billion in 2000.
Aggregate costs of House and Senate campaigns increased eightfold between 1976 and
2000, from $115.5 million to $1.007 billion, while the cost of living rose threefold.
Campaign costs for average winning candidates, a useful measure of the real cost of seeking
office, show an increase in the House from $87,000 in 1976 to $847,000 in 2000; a winning
Senate race went from $609,000 in 1976 to $7.2 million in 2000.
The above data are cited by many as evidence that our democratic system of government
has suffered as election costs have grown to levels often considered exorbitant. Specifically,
it is argued that officeholders must spend too much time raising money, at the expense of
their public duties and communicating with constituents. The high cost of elections and the
perception that they are “bought and sold” are seen as contributing to public cynicism about
the political process. Some express concern that spiraling campaign costs has resulted in
more wealthy individuals seeking office or determining election winners, denying
opportunities for service to those lacking adequate resources or contacts. Others see a
correlation between excessive, available money and the perceived increased reliance on
sophisticated, often negative media advertising.
Not all observers view the high cost of elections with alarm. Many insist we do not
spend too much on elections and maybe don’t spend enough. They contrast the amount spent
on elections with that spent by government at all levels, noting that only a fraction of a
percent is spent to choose those who make vital decisions on the allocation of tax dollars.
Similarly, they contrast costs of elections with those on commercial advertising: the nation’s
two leading commercial advertisers, Proctor & Gamble and General Motors, spent more to
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promote their products in 1996 ($5 billion) than was spent on all U.S. elections. In such a
context, these observers contend, the costs of political dialogue may not be excessive.
High election costs are seen largely as a reflection of the paramount role of media in
modern elections. Increasingly high television costs and costs of fundraising in an era of
contribution limits require candidates to seek a broad base of small contributors—a
democratic, but time-consuming, expensive process—or to seek ever-larger contributions
from small groups of wealthy contributors. It has been argued that neither wealthy
candidates nor negative campaigning are new or increasing phenomena but merely that better
disclosure and television’s prevalence make us more aware of them. Finally, better-funded
candidates do not always win, as some recent elections show.
PACs and Other Sources of Campaign Funds. Issues stemming from rising
election expenses were, for much of the past two decades, linked to substantial candidate
reliance on PAC contributions. The perception that fundraising pressures might lead
candidates to tailor their appeals to the most affluent and narrowly “interested” sectors raised
perennial questions about the resulting quality of representation of the whole society. The
role of PACs, in itself and relative to other sources, became a major issue; in retrospect,
however, it appears that the issue was really about the role of interest groups and money in
elections, PACs being the most visible vehicle thereof. As discussed below, the PAC issue
per se has seemed greatly diminished by recent events, while concerns over interest group
money through other channels have grown.
Through the 1980s, statistics showed a significant increase in PAC importance. From
1974 to 1988, PACs grew in numbers from 608 to a high of 4,268, in contributions to House
and Senate candidates from $12.5 million to $147.8 million (a 400% rise in constant dollars),
and in relation to other sources from 16% of congressional campaign receipts to 34%. While
PACs remain a considerable force, data show a relative decline in their role since 1988: the
percentage of PAC money in total receipts dropped to 27% in 2000; PAC numbers dropped
to 3,907 in 2000; contributions to candidates rose somewhat in constant dollars ($245.4
million in 2000); and, after individual giving had been declining as a component (vis-a-vis
PACs), some leveling off has occurred, with individuals giving 55% of Senate and 52% of
House receipts in 2000, for example.
Despite aggregate data on the relative decline of PACs, they still provide a considerable
share in various subgroups. For example, in 2000, House candidates got 35% of their funds
from PACs; House incumbents received 42%. To critics, PACs raise troubling issues in the
campaign financing debate: Are policymakers beholden to special interests for election help,
impairing their ability to make policy choices in the national interest? Do PACs overshadow
average citizens, particularly in Members’ states and districts? Does the appearance of quid
pro quo relationships between special interest givers and politician recipients, whether or not
they actually exist, seriously undermine public confidence in the political system?
PAC defenders view them as reflecting the nation’s historic pluralism, representing not
a monolithic force but a wide variety of interests. Rather than overshadowing individual
citizens, these observers see them merely as groups of such citizens, giving voice to many
who were previously uninvolved. PACs are seen as promoting, not hindering, electoral
competition, by funding challengers in closely contested races. In terms of influencing
legislative votes, donations are seen more as rewards for past votes than as inducements to
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alter future ones. Defenders also challenge the presumed dichotomy between special and
national interest, viewing the latter as simply the sum total of the former. PACs, they argue,
afford clearer knowledge of how interest groups promote their agendas, particularly
noteworthy in light of the flood of unregulated and undisclosed money since 1996.
Competitiveness in Elections. Many view the campaign finance system in terms
of a general imbalance in resources between incumbents and challengers, as evidenced by
a spending ratio of more than 3.5:1 in recent House and some 2:1 in recent Senate elections.
(In 2000, there was a much closer ratio in the House, with an average expenditure of
$774,000 for an incumbent vs. $295,000 for a challenger—a 2.6 to 1 ratio, while the average
Senate incumbent’s $4.3 million exceeded the average challenger’s $2.5 million by 1.8 to
1.) Incumbents’ generally easier access to money is seen as the real problem, not the
aggregate amounts spent by all candidates.
Those concerned about competitiveness also view the PAC issue through this lens.
With some 76% of PAC funds going to incumbents in 2000, the question of PACs “buying
access” with those most likely to be elected is seen as a more serious problem than the
generally high amounts of aggregate PAC giving. But others dispute that the problem is
really an incumbency one or that electoral competition should be the main goal of reform.
After all, there is a fair degree of turnover in Congress (through defeats, retirements, etc.),
and the system does allow changed financing patterns with sometimes unexpected results,
as it did in 1994. Aggregate incumbent-challenger disparities may be less meaningful, it is
noted, than those on the closer spending levels in hotly contested or open races.
Today’s Paramount Issue:
Perceived Loopholes in Current Law
Interest has intensified, especially since 1996, over campaign finance practices that
some see as undermining the law’s contribution and expenditure limits and its disclosure
requirements. Although these practices may be legal, they are seen as “loopholes” through
which electoral influence is sought by spending money in ways that detract from public
confidence in the system and that are beyond the scope intended by Congress. Some of the
prominent practices are bundling, soft money, independent expenditures, and issue advocacy.
Bundling. This involves collecting checks for (and made payable to) a specific
candidate by an intermediate agent. A PAC or party may thus raise money far in excess of
what it can legally contribute and receive recognition for its endeavors by the candidate.
Soft Money. This refers to money that may indirectly influence federal elections but
is raised and spent outside the purview of federal laws and would be illegal if spent directly
on a federal election. The significance of soft money stems from several factors: (1) many
states permit direct union and corporate contributions and individual donations in excess of
$25,000 in state campaigns, all of which are prohibited in federal races; (2) under the 1979
FECA Amendments and FEC rulings, such money may be spent by state and local parties
in large or unlimited amounts on grassroots organizing and voter drives that may benefit all
party candidates; and (3) publicly-funded presidential candidates may not spend privately
raised money in the general election. In recent presidential elections, national parties have
waged extensive efforts to raise money for their state affiliates, partly to boost the national
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tickets beyond what could be spent directly. The data for 2000 show that some $495 million
in soft money was raised by the major parties, nearly double the $262 million raised in 1996.
Independent Expenditures. The 1976 Buckley ruling allowed unlimited spending
by individuals or groups on communications with voters to expressly support or oppose
clearly identified federal candidates, made without coordination or consultation with any
candidate. Independent expenditures totaled $11.1 million in 1992, $22.4 million in 1996,
and $25.6 million in 2000. These expenditures may hinder a candidate’s ability to compete
with both an opponent and outside groups. They may also impair a sense of accountability
between a candidate and voters, and many question whether some form of unprovable
coordination may often occur in such cases.
Issue Advocacy. Although federal law regulates expenditures in connection with
federal elections, it uses a fairly narrow definition for what constitutes such spending, per
several court rulings on First Amendment grounds. The law, as affected by court rulings,
allows regulation only of communications containing express advocacy, i.e., that use explicit
terms urging the election or defeat of clearly identified federal candidates. By avoiding such
terms, groups may promote their views and issue position in reference to particular elected
officials, without triggering the disclosure and source restrictions of the FECA. Such
activity, known as issue advocacy, is often perceived as having the intent of bolstering or
detracting from the public image of officials who are also candidates for office. In 1996, an
estimated $135 million was spent on issue advocacy, rising to between $275 and $340
million in 1998, and to $509 million in 2000 (although these data do not distinguish between
campaign-related and non-campaign-related communications). Also, groups ranging from
labor unions to the Christian Coalition promote their policy views through voter guides,
which present candidates’ views on issues in a way that some see as helpful to some
candidates and harmful to others, without meeting the standards for FECA coverage.
Policy Options
The policy debate over campaign finance laws proceeds from the philosophical
differences over the underlying issues discussed above, as well as the more practical,
logistical questions over the proposed solutions. Two primary considerations frame this
debate. What changes can be made that will not raise First Amendment objections, given
court rulings in Buckley and other cases? What changes will not result in new, unforeseen,
and more troublesome practices? These considerations are underscored by the experience
with prior amendments to FECA, such as PAC growth after the 1974 limits on contributions.
Just as the overriding issues centered until recently around election costs and funding
sources, the most prominent legislation long focused on controlling campaign spending,
usually through voluntary systems of public funding or cost-reduction benefits, and on
altering the relative importance of various funding sources. Some saw both concepts
primarily in the context of promoting electoral competition, to remedy or at least not
exacerbate perceived inequities between incumbents and challengers. Increasingly since the
mid-1980s, and particularly since the 1996 elections, concerns over perceived loopholes that
undermine federal regulation have led to proposals to curb such practices. Conversely, some
proposals have urged less regulation, on the ground that it inherently invites circumvention,
while still other proposals have focused exclusively on improving or expanding disclosure.
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Proposals on Enduring Issues
Campaign Spending Limits and Government Incentives or Benefits. Until
the late 1990s, the campaign reform debate often focused on the desirability of campaign
spending limits. To a great extent, this debate was linked with public financing of elections.
The coupling of these two controversial issues stemmed from Buckley’s ban on mandatory
spending limits, while allowing voluntary limits, with adherence a prerequisite for subsidies.
Hence the notion arose in the 1970s that spending limits must be tied to public benefits,
absent a constitutional amendment.
Public funding not only might serve as an inducement to voluntary limits, but by
limiting the role of private money, it is billed as the strongest measure toward promoting the
integrity of and confidence in the electoral process. Furthermore, it could promote
competition in districts with strong incumbents or one-party domination. Public financing
of congressional elections has been proposed in nearly every Congress since 1956 and has
passed in several Congresses. The nation has had publicly funded presidential elections since
1976, and tax incentives for political donations were in place from 1972 to 1986.
Objections to public financing are numerous, many rooted in philosophical opposition
to funding elections with taxpayer money, supporting candidates whose views are antithetical
to those of many taxpayers, and adding another government program in the face of some
cynicism toward government spending. The practical objections are also serious: How can
a system be devised that accounts for different natures of districts and states, with different
styles of campaigning and disparate media costs, and is fair to all candidates—incumbent,
challenger, or open-seat, major or minor party, serious or “longshot?”
A major challenge to spending limit supporters has been how to curb, if not eliminate,
public funding from their proposals. Although spending limits may have wide public
support, most evidence suggests far less support for public financing. In the 105th Congress,
the principal reform bills debated on the floor contained neither campaign spending limits
nor public funding, reflecting not only the overriding concerns over soft money and issue
advocacy but also the changed political climate since the 1970s.
Stemming from the spending limits debate have been proposals to lower campaign
costs, without spending limits. Proposals for free or reduced rate broadcast time and postage
have received some notable bipartisan support. Such ideas seek to reduce campaign costs
and the need for money, without the possibly negative effects of arbitrary limits.
Changing the Balance Among Funding Sources. Until recently, most proposed
bills sought, at least in part, to curb PACs’ perceived influence, either directly, through a ban
or reduced limits, or indirectly, through enhancing the role of individuals and parties. Current
law allows individuals to give $1,000 per candidate, per election, while most PACs (if they
are “multicandidate committees”) may give $5,000 per candidate, increasing their ability to
assist candidates, and without an aggregate limit such as that affecting individuals.
Three chief methods of direct PAC curbs were prominent in proposals advanced
through the mid-1990s: banning PAC money in federal elections; lowering the $5,000 limit;
and limiting candidates’ aggregate PAC receipts. These concepts were included, for
example, in all of the bills that the House and Senate voted on in the 101st-104th Congresses.
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Although support for such proposals was fueled by a desire to reduce the perceived role of
interest groups, each proposal had drawbacks, such as constitutional questions about limiting
speech and association rights and the more practical concern over devaluation of the $5,000
limit by inflation since it was set in 1974.
Yet another concern raised during that period was the potential encouragement for
interest groups to shift resources to “independent” activities, which are less accountable to
voters and more troublesome for candidates in framing the debate. Furthermore, independent
advertisements were often marked by negativity and invective. If such prospects gave pause
to lawmakers during the 1980s, the surge of financial activity outside the framework of
federal election law since 1996 has largely dampened attempts to further limit PACs. The
major reform bills in the 105th and 106th Congresses contained no further PAC restrictions.
Partly because of this problem, both before and after 1996, many have looked to more
indirect ways to curb PACs and interest groups, such as raising limits on individual or party
donations to candidates. These increases have also been proposed on a contingency basis to
offset such other sources as wealthy candidates spending large personal sums on their
campaigns. While higher limits might counterbalance PACs and other groups and offset
effects of inflation, opponents observe that few Americans can afford to give even $1,000,
raising age-old concerns about “fat cat” contributors.
House Republicans have pushed to boost the role of individuals in candidates’ states or
districts, to increase ties between Members and constituents. By requiring a majority of
funds to come from the state or district (or prohibiting out-of-state funds), supporters expect
to indirectly curb PACs, typically perceived as out-of-state, or Washington, influences.
Support also exists for increasing or removing party contribution and coordinated
expenditure limits, based on the notions that the party role can be maximized without leading
to influence peddling and on strengthening party ties to facilitate effective policymaking.
Opponents note that many of the prominent allegations in 1996 involved party-raised funds.
Also, even with some degree of philosophical agreement on increasing the party role, current
political realities present some obstacles, i.e., the difference in the relative resources of the
Republican Party committees, whose federal accounts raised over $447 million in the 2000
election cycle, and the Democratic committees, which raised $270 million.
Promoting Electoral Competition. Proposals to reduce campaign costs without
limits are linked to broader concerns about electoral competition. Political scientists tend
to view spending limits as giving an advantage to incumbents, who begin with high name
recognition and perquisites of office (e.g., staff, newsletters). Challengers often spend money
just to build name recognition. Limits, unless high, may augment an institutional bias against
challengers or unknown candidates. (Conversely, public funding could help challengers to
compete with well-funded incumbents.)
Many of those concerned about electoral competition consequently have opposed
spending limits, although they are philosophically opposed to public funding. These
individuals tend to favor more “benign” forms of regulation, such as allowing higher limits
on party contributions to challengers in early stages, or, generally, allowing greater latitude
in challengers’ ability to raise needed funds. At the very least, these individuals insist that
changes not be made that, in their view, exacerbate perceived problems.
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Proposals to Close Perceived Loopholes in Current Law
Proposals have increasingly addressed perceived loopholes in the FECA, and indeed this
area is now the primary focus of reform efforts. This debate underscores a basic
philosophical difference between those who favor and oppose government regulation of
campaign finances. Opponents say that regulation invites attempts at subterfuge, that
interested money will always find its way into elections, and that the most one can do is see
that it is disclosed. Proponents argue that while it is hard to restrict money, it is a worthwhile
goal, hence one ought to periodically fine-tune the law to correct “unforeseen consequences.”
Proposed “remedies” stem from the latter view, i.e., curtail the practices as they arise.
Bundling. Most proposals in this area, which is seen as less an issue now than in prior
years, would count contributions raised by an intermediary toward both the donor’s and
intermediary’s limit. Hence, an agent who had reached the limit could not raise additional
funds for that candidate. Proposals differ as to specific agents who could continue this
practice (e.g., whether to ban bundling by party committees or by all PACs).
Independent Expenditures. Short of a constitutional amendment to allow
mandatory limits on campaign spending (as the Senate debated in 1988, 1995, 1997, and
2000), most proposals aim to promote accountability. They have sought to prevent indirect
consultation with candidates and to ensure that the public knows these efforts are not
sanctioned by candidates. Many bills have sought to tighten definitions of independent
expenditure and consultation and to require more prominent disclaimers on ads. Many
spending limits/ benefits bills have provided subsidies so those attacked in such ads may
adequately respond.
Soft Money. This practice has provided the greatest opportunity to date for spending
money beyond the extent allowed under federal law. FEC rules that took effect in 1991
require national parties to disclose non-federal accounts and allocate soft versus hard (i.e.,
federally permissible) money. Hence, we are more aware of soft money today and better
able, at least theoretically, to keep it from financing federal races than we were previously.
Serious differences exist regarding soft money. Reformers want to curb what they view
as an inherent circumvention of federal limits, while parties want to protect a source of
funding that has bolstered their grassroots efforts. Proposed reforms have included
specifying a “federal election period” in which soft money cannot be spent by state parties;
prohibiting national party committees and federal candidates from raising or distributing soft
money (the first two being prominent features of the recent McCain-Feingold and Shays-
Meehan bills); prohibiting the use of any soft money in mixed (federal-state) activities;
codifying the FEC’s requirements for allocation of soft versus hard money among federal,
state, and local candidates; requiring disclosure of or limitation on spending by tax-exempt
groups; and curbing or requiring disclosure of labor and corporate soft money (including
limits on unions’ political use of worker dues). Beyond legislative solutions have been
proposals for the FEC to restrain soft money through promulgating new regulations. These
differences reflect the lack of consensus on both the nature of and the solutions to the soft
money problem, as well as the respective strategic concerns of the two major parties.
Issue Advocacy. Addressing this practice, a form of soft money, involves
broadening the definition of federal election-related spending. A 1995 FEC regulation
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offered such a definition, using a “reasonable person” standard, but this was struck down by
a 1st Circuit federal court in 1996; this decision was later upheld by an appeals court but is
at variance with an earlier 9th Circuit ruling. The FEC has been reluctant to enforce the
regulation pending further judicial or legislative action. Some bills (such as the Shays-
Meehan bill that passed the 105th and 106th Congresses) have sought to codify a definition
of “express advocacy” that allows a communication to be considered as a whole, in context
of such external events as timing, to determine if it is election-related. The recent McCain-
Feingold bills, incorporating language initially proposed by Senators Snowe and Jeffords,
narrowed the scope of the proposed definition of what would be considered federal election-
related and focused primarily on disclosure on such activity. Finding a definition that can
withstand judicial scrutiny may be the key to bringing some of what is labeled “issue
advocacy” under the FECA’s regulatory framework. This has emerged since 1996 as
probably the thorniest aspect of the campaign finance debate.
Legislative Action in Congress
Congress’ consideration of campaign finance reform has steadily increased since 1986,
when the Senate passed the PAC-limiting Boren-Goldwater Amendment, marking the first
campaign finance vote in either house since 1979 (no vote was taken on the underlying bill).
With Senate control shifting to Democrats in 1986, each of the next four Congresses
saw intensified activity, based on Democratic-leadership bills with voluntary spending limits
combined with inducements to participation, such as public subsidies or cost-reduction
benefits. In the 100th Congress, Senate Democrats were blocked by a Republican filibuster.
In the 101st - 103rd Congresses, the House and Senate each passed comprehensive bills based
on spending limits and public benefits; the bills were not reconciled in the 101st or 103rd,
while a conference version achieved in the 102nd was vetoed by President Bush.
With Republicans assuming control in the 104th Congress, neither chamber passed a
reform bill. A bipartisan bill based on previous Democratic-leadership bills was blocked by
filibuster in the Senate, while both Republican- and Democratic-leadership bills—with
starkly different approaches—failed to pass in the House. (For further discussion, see CRS
Report 98-26, Campaign Finance Reform Activity in the 100th-104th Congresses.)
In the 105th Congress, reform supporters succeeded in passing the Shays-Meehan bill
in the House (H.R. 2183, as amended). Senate sponsors of its companion McCain-Feingold
measure (S. 25, as revised) failed on three occasions to break a filibuster in opposition,
however, and no vote occurred on the bill. For further discussion of 105th Congress activity,
see Campaign Finance Reform Electronic Briefing Book, 105th Congress—Summary.
In the 106th Congress, the House again passed the Shays-Meehan bill (H.R. 417).
Supporters of the companion McCain-Feingold bill initially introduced S. 26, much the same
bill as its final version in the 105th Congress. They later introduced a much narrower version
(S. 1593), focusing largely on party soft money but dropping the issue advocacy and other
provisions. This version was debated in October 1999 but failed to break a filibuster in
opposition. Reform supporters succeeded, however, in enacting legislation to require
disclosure by tax-exempt political organizations under Section 527 of the Internal Revenue
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Code. For further discussion of 106th Congress activity, see Campaign Finance Reform
Electronic Briefing Book, 106th Congress—Summary.
107th Congress
As of October 2, 2002, 65 campaign reform bills have been introduced in the 107th
Congress (49 in the House and 16 in the Senate). Two of these are new versions of 106th
Congress bills and have been passed by their respective chambers: S. 27 (McCain-Feingold)
and its companion H.R. 2356 (Shays-Meehan). The latter was enacted into law on March 27,
2002 as P.L. 107-155.
1st Session. Supporters of McCain-Feingold sought an early debate and vote on the
issue, and, on January 26, reached an agreement with Majority Leader Lott for a two week
Senate debate in mid- or late-March. On February 6, two unanimous consent agreements
were approved by the Senate: the first committed the Senate to begin debating McCain-
Feingold on March 19 or 26, with floor amendments allowed; the second agreement
committed the Senate to consider the Hollings-Specter constitutional amendment to allow
mandatory campaign spending limits, immediately following disposition of McCain-
Feingold. Senate debate began March 19, and after a two-week debate, S. 27 was passed by
the Senate on April 2 by a vote of 59-41. As passed, S. 27 included 22 amendments offered
on the floor; 16 other amendments were rejected during the two-week debate. On March 26,
the Senate debated S.J.Res. 4 and defeated it by a 40-56 vote. On May 15, the Senate
revisited the issue when it passed a Sense of the Senate resolution instructing the Secretary
of the Senate to engross S. 27 and send it to the House; the vote (on S.Amdt. 477) was 61-
39. On May 22, the bill was sent to the House, where it was referred to the Committees on
House Administration, Energy and Commerce, and the Judiciary.
The House Administration Committee began a series of hearings on campaign finance
reform on March 17 in Phoenix AZ. On May 1, during the second hearing of the series,
supporters of McCain-Feingold and its House companion, H.R. 380 (Shays-Meehan), urged
the House to act by Memorial Day. Chairman Ney stated the Committee would report a bill
to the House by the end of June. A third hearing, on constitutional issues, was held June 14,
and a fourth, on June 21, heard testimony from House Members.
On June 28, the Committee completed its hearings by taking further testimony from
Members. It then proceeded to markup of H.R. 2360 (Ney-Wynn), and ordered it reported
favorably to the House (H.Rept. 107-132). The bill features limits on soft money donations
to national parties, disclosure of amounts spent on election-related issue advocacy, and
increases in some hard money contribution limits . The Committee also ordered H.R. 2356,
the modified Shays-Meehan bill, reported unfavorably (H.Rept. 107-131, pt. 1). That bill
closely resembles S. 27 (McCain-Feingold), as passed by the Senate in April. Hearings were
also held on June 12 by the Judiciary Subcommittee on the Constitution, on related
constitutional issues, and on June 20 by the Energy and Commerce Subcommittee on
Telecommunications and the Internet, on related broadcast issues.
The House planned to consider campaign finance reform on July 12, with debate
expected to focus on the Ney-Wynn and Shays-Meehan bills. However, debate failed to
materialize that day, when the House rejected on a 203-228 vote the proposed rule for
considering the issue. H.Res. 188, as reported from the Rules Committee that morning
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(H.Rept. 107-135), would have made in order H.R. 2356 (Shays-Meehan), 20 perfecting
amendments (including 14 by the bill’s managers), and two substitutes—Doolittle, nearly
identical to H.R. 1444, and Ney-Wynn, identical to H.R. 2360.
In the wake of the defeat of the rule, the House leadership would not commit to bringing
up the issue again. Supporters of Shays-Meehan then looked to a discharge petition to force
reconsideration. Such a petition was filed July 19, 2001, organized by Blue Dog Democrats.
If it succeeded in gaining the needed 218 signatures, it would bring up a rule—H.Res. 203
(Turner)—making Shays-Meehan and various amendments in order for House debate.
2nd Session. On January 24, 2002, House advocates secured the last four signatures
necessary for the discharge petition to force a floor vote on the bill. Under the discharge
petition rule, Representatives Shays and Meehan, House Administration Committee
Chairman Ney, and Majority Leader Armey would be permitted to offer substitutes, with the
proposal receiving the most votes becoming the base bill, subject to amendments. Following
success of the discharge petition, House leaders pledged early consideration of Shays-
Meehan and alternatives.
On February 7, 2002, the House Rules Committee reported H.Res. 344 (H.Rept.
107-358), setting forth terms for debate of H.R. 2356, similar to the terms of the discharge
petition. The House passed the rule on a voice vote on February 12. On February 13, the
House agreed to a Shays-Meehan substitute amendment (240-191), after rejecting substitutes
offered by Majority Leader Armey (179-249) and House Administration Committee
Chairman Ney (53-377). The House then agreed to four perfecting amendments and rejected
eight others, after which H.R. 2356, as amended, was passed on a 240-189 vote.
On February 26, 2002, H.R. 2356, as passed by the House, was received in the Senate
and placed on its legislative calendar. On March 5, an attempt by Majority Leader Daschle
to offer a unanimous consent agreement to bring up the bill was blocked by Senator
McConnell. Senator Daschle pledged to have the Senate complete action on the measure
prior to the spring recess, and, on March 13, he filed a cloture motion to allow its
consideration, with a vote expected on March 15. On March 14, the Senate agreed to a
unanimous consent request by Senator Daschle to cancel that cloture motion and to proceed
to consideration of H.R. 2356 on March 18. Consideration began March 18, and Senator
Daschle filed a cloture motion. On March 20, the Senate voted 68-32 to invoke cloture on
H.R. 2356 and, later that afternoon, passed the bill by a 60-40 vote. Later that day, the House
passed H.Con.Res. 361, directing the Clerk of the House to make corrections in the enrolled
H.R. 2356. The Senate approved the concurrent resolution on March 22, thus clearing the
Shays-Meehan bill for the President, who, on March 27, signed it into law: P.L. 107-155.
The Federal Election Commission completed the first phase of its rulemaking to
implement the new law when it sent its new soft money regulations to Congress on July 15.
These regulations have been criticized by supporters of the new Act, who announced their
intentions to overturn them in Congress under the Congressional Review Act and in the
courts under the Administrative Procedure Act. Other regulations are being promulgated by
the FEC according to topic: electioneering communications; contribution limits and
prohibitions; coordinated and independent expenditures; consolidated reporting amendments;
the “millionaire’s amendment”; and other.
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In a related action on March 20, the House Ways and Means Committee reported H.R.
3991, the “Taxpayer Protection and IRS Accountability Act of 2002,” after including an
amendment to relieve certain tax-exempt “political organizations,” as defined under 26
U.S.C. § 527, that operate at the state and local levels from reporting requirements enacted
by Congress in 2000. The bill was brought up in the House on April 9, under suspension of
the rules, and was defeated on April 10 by a 206-219 vote.
LEGISLATION
H.R. 2356 (Shays-Meehan)
Bipartisan Campaign Finance Reform Act of 2002. Bans soft money raising by national
parties and federal candidates. Curbs state party soft money spending on “federal election
activity.” Defines electioneering communication as a broadcast ad referring to a clearly
identified federal candidate within 60 days of a general election or 30 days of a primary, and
targeted to voters in that election. Requires disclosure of electioneering communications
above $10,000, with identification of donors of $1,000 or more. Bans funding of
electioneering messages with union or corporate funds. Raises limits on individual
contributions to parties and some candidates and on aggregate annual federal contributions.
Introduced June 28, 2001; jointly referred to Committees on House Administration, Energy
and Commerce, and the Judiciary. Ordered reported unfavorably by Committee on House
Administration, June 28, 2001 (H.Rept. 107-131, pt. 1). Passed House, as amended,
February 14, 2002 (240-189). Received in Senate and placed on legislative calendar,
February 26, 2002. Cloture invoked (68-32), March 20, 2002. Passed by Senate (60-40),
March 20, 2002. [H.Con.Res. 361, approved by the House and Senate, directed the Clerk of
the House to make specified corrections in the engrossed version of H.R. 2356.] Signed into
law by President Bush, March 27, 2002, P.L. 107-155.
H.R. 3991 (Houghton)
Taxpayer Protection and IRS Accountability Act of 2002. Includes an amendment to
relieve certain tax-exempt “political organizations” defined under 26 U.S.C. §527 that
operate at the state and local levels from reporting requirements enacted by Congress in
2000. Introduced March 19, 2002; referred to Committee on Ways and Means. Ordered
reported as amended, March 20, 2002. Brought up in House under suspension of rules, April
9, 2002. Defeated, April 10, 2002 (206-219).
H.Con.Res. 361 (Ney)
To direct the Clerk of the House to make corrections in the enrolled version of H.R.
2356 (Shays-Meehan). Introduced and approved by House, March 20, 2002. Approved by
the Senate, March 22, 2002.
S. 27 (McCain-Feingold)
Bipartisan Campaign Reform Act of 2001. Bans soft money raising by national parties
and federal candidates. Curbs state party soft money spending on “federal election activity.”
Defines electioneering communication as a broadcast ad referring to a clearly identified
federal candidate within 60 days of a general election or 30 days of a primary, to an audience
that includes voters in that election. Requires disclosure of electioneering communications
above $10,000, with identification of donors of $1,000 or more. Bans funding of
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electioneering messages with union or corporate funds (including by 501(c)(4) groups for
targeted communications). Raises limits on individual contributions to candidates and
parties and on aggregate annual federal contributions. Introduced January 22, 2001; referred
to Committee on Rules and Administration. Discharged from Committee and Senate debate
began on March 19, 2001. Passed Senate, as amended, April 2, 2001 (59-41). Sent to House
May 22; jointly referred to Committees on House Administration, Energy and Commerce,
and the Judiciary.
S.J.Res. 4 (Hollings-Specter)
Proposed constitutional amendment to allow Congress and states to set reasonable limits
on contributions and expenditures in support of or opposition to candidates for nomination
and election to federal and state, or local office. Introduced February 7, 2001; referred to
Committee on the Judiciary. Debated by Senate and defeated, March 26, 2001 (40-56).
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Issue Brief IB98025. Campaign Finance: Constitutional and Legal Issues of Soft
Money, by L. Paige Whitaker.
CRS Reports
CRS Report RS21176. Application of Campaign Finance Law and Legislation to Indian
Tribes, by L. Paige Whitaker and Joseph E. Cantor.
CRS Report RL31402. Bipartisan Campaign Reform Act of 2002: Summary and
Comparison with Existing Law, by Joseph E. Cantor and L. Paige Whitaker.

CRS Report 97-973. Business and Labor Spending in U.S. Elections, by Joseph E. Cantor.
CRS Report RL31036, Campaign Finance Bills in the 107th Congress: Comparison of S.
27 (McCain-Feingold), H.R. 2356 (Shays-Meehan), H.R. 2360 (Ney-Wynn), and
Current Law, by Joseph E. Cantor and L. Paige Whitaker.
CRS Report RL30939. Campaign Finance Bills in the 107th Congress: House, by Joseph E.
Cantor.
CRS Report RL30998. Campaign Finance Bills in the 107th Congress: Senate, by Joseph
E. Cantor.
CRS Report RS20346. Campaign Finance Bills in the 106th Congress: Comparison of
Shays-Meehan, as passed, with McCain-Feingold, as revised, by Joseph E. Cantor.
CRS Report RL30162. Campaign Finance Bills in the 106th Congress: House, by Joseph E.
Cantor.
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CRS Report RL30166. Campaign Finance Bills in the 106th Congress: Senate, by Joseph
E. Cantor.
CRS Report RL31290. Campaign Finance Bills Passed in the 107th Congress: Comparison
of S. 27 (McCain-Feingold), H.R. 2356 (Shays-Meehan), and Current Law, by Joseph
E. Cantor and L. Paige Whitaker.
CRS Report 98-282. Campaign Finance Reform: A Legal Analysis of Issue and Express
Advocacy, by L. Paige Whitaker.
CRS Report RS20854. Campaign Finance Reform and Incentives to Voluntarily Limit
Candidate Spending from Personal Funds: Constitutional Issues Raised by Public
Subsidies and Variable Contribution Limits, by L. Paige Whitaker.
CRS Report RS20849. Campaign Finance Reform: Constitutional Issues Raised by
Disclosure Requirements, by L. Paige Whitaker.
CRS Report RL30669. Campaign Finance Regulation Under the First Amendment: Buckley
v. Valeo and its Supreme Court Progeny, by L. Paige Whitaker and Christopher A.
Jennings.
CRS Report 97-1040. Campaign Financing: Highlights and Chronology of Current Federal
Law, by Joseph E. Cantor.
CRS Report RL30884. Campaign Financing in the 2000 Federal Elections: Overview and
Estimates of the Flow of Money, by Joseph E. Cantor.
CRS Report RL30877. Characteristics of and Reporting Requirements For Selected
Tax-Exempt Organizations, by Marie B. Morris.
CRS Report RL30582. 527 Organizations: How the Differences in Tax and Election Laws
Permit Certain Organizations to Engage in Issue Advocacy without Public Disclosure
and Proposals for Change, by Marie B. Morris.
CRS Report 97-680. Free and Reduced-Rate Television Time for Political Candidates, by
Joseph E. Cantor, Denis Steven Rutkus, and Kevin B. Greely.
CRS Report RS20133. The Presidential Election Campaign Fund and Tax Checkoff:
Background and Current Issues, by Joseph E. Cantor.
CRS Report 97-91. Soft and Hard Money in Contemporary Elections: What Federal Law
Does and Does Not Regulate, by Joseph E. Cantor.
CRS Report RL31288. Soft Money, Allegations of Political Corruption, and Enron, by Jack
Maskell and L. Paige Whitaker.
CRS Report 97-618. The Use of Labor Union Dues for Political Purposes: A Legal
Analysis, by L. Paige Whitaker.
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CRS Report 97-555. The Use of Union Dues for Political Purposes: A Discussion of Agency
Fee Objectors and Public Policy, by Gail McCallion.
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