Campaign finance: The bad stuff all began with McCain-Feingold

The 10th anniversary of the Supreme Court's decision in McConnell vs. Federal Election Commission passed largely unnoticed in December. Yet it was McConnell, upholding the McCain-Feingold campaign reform law, that fundamentally reshaped our political system, far more so than the recent decision in McCutcheon vs. FEC, which struck down overall limits on federal political contributions, or the decision in Citizens United.

McCain-Feingold, as the 2002 Bipartisan Campaign Reform Act is known, prohibited large contributions by wealthy individuals and corporations to national party committees, all of whose receipts were publicly disclosed. But, perversely, the ban on "soft money" left individual and corporate donors free to direct their funds to outside groups, where donations are concealed from public scrutiny.

Proponents of McCain-Feingold said the law would restore trust in the political system. Some suggested the parties would "thrive" because they would be forced to rely on small donors. Critics, however, predicted it would precipitate a tectonic shift of political power away from the parties and toward outside groups, which were likely to be far more extreme and far less accountable.

There can be no doubt today that the critics were correct. In the 2004 presidential election, outside groups such as Americans Coming Together and Swift Boat Veterans for Truth played a major role. By the time Citizens United was decided in 2010, well-funded outside groups had proliferated on both sides.

And as the outside groups expanded, the parties shrank. Adjusted in 2012 dollars, national party revenue steadily eroded from $1.48 billion in the 2002 midterm election cycle to $1.23 billion in the 2010 midterms. That's a 17 percent drop in spending power. Don't blame that on Citizens United. In the 2006 midterms, four years before Citizens United, party fundraising was just $1.24 billion in 2012 dollars, or $240 million less than before McCain-Feingold became law. Party fundraising has fallen off during midterms and in presidential-election years, though the decline in the latter years has not been as steep. The parties raised $1.66 billion in 2012 dollars during the 2000 election, the last full presidential cycle before McCain-Feingold took effect. In the 2012 election, they raised $1.6 billion, down 3.6 percent. Political spending typically correlates with gross domestic product, and during that period the national economy expanded in real terms by 23 percent.

But it was the shortfall in fundraising relative to outside groups that most profoundly undercut the parties' traditional role in our political system. Reliable figures on the total amount that outside groups raised for election activity are nearly impossible to obtain because much of that activity is carried out through tax-exempt social welfare organizations and trade associations that are not required to disclose what they spend. Nevertheless, one way to gauge the growing spending advantage that outside groups enjoy over political parties is to look at broadcast advertisements, whose sponsors are required to identify themselves.

According to political scientist Michael Franz, since McCain-Feingold, the number of advertisements that political parties sponsor relative to other groups has fallen precipitously. In pre-reform 2000, the Republican and Democratic parties aired two-thirds of all advertisements in the presidential general election. In post-reform 2004, that figure dropped to one-third; in 2008, it was less than one-fourth. By 2012, just 6 percent of all advertisements were sponsored by the political parties.

Both major national parties have begun to outsource their bread-and-butter activities, including opposition research and voter list management. In some critical respects, the parties are becoming dependent on outside groups, ceding power to organizations that operate with little or no disclosure and that often have narrow political agendas.

This is not just about money. McCain-Feingold tilted influence in our political system toward the ideological extremes. For centuries, political parties played a moderating role: Because they comprise a broad coalition of interests, parties had to mediate among competing constituencies, looking for middle-ground positions that would draw maximum support. Traditionally, they used their preponderance of resources to impose discipline on extremists who threatened party comity. But McCain-Feingold pushed soft money away from parties and toward interest groups, many of which prefer to focus on highly contentious issues (abortion, gun control, environmentalism). These are not necessarily the issues of greatest concern to most Americans, especially during difficult economic times. With the parties in retreat, is it any surprise that our national political debate has taken on a more extreme tone or that fewer moderates are elected?

McCain-Feingold aimed to shore up confidence in the political system and reduce the role of big money in elections. It has done neither. Its promoters failed to recognize that party organizations are essential, especially during periods of intense competition for control of Congress. The U.S. political system is better served when partisan organizing takes place through the parties rather than through super PACs and other outside groups.

With or without Citizens United and McCutcheon, the legacy of McCain-Feingold is an electoral system awash in unaccountable soft money and polarizing campaigns. The damage will be difficult to reverse. Congress and the president could, however, begin the healing process by dramatically increasing the limits on contributions to political parties and giving them more flexibility to support candidates. Disclosure by tax-exempt outside groups could also be expanded, improving transparency. The promise of increased disclosure might offer supporters of campaign finance reform a face-saving way to extricate themselves, and the nation, from the unintended consequences of McCain-Feingold.