Campaign Finance Regulations in Danger

This story was written by Kenneth P. Vogel.

Decades of lawmaking and court decisions restricting the flow of cash into U.S. elections are on the verge of coming undone, placing President Barack Obama in the unexpected position of presiding over the possible demise of the modern campaign finance regime.

Most of the developments now threatening to reverse efforts to reduce the influence of money in politics were set in motion during George W. Bush's presidency. But Obama is nevertheless poised to watch the regulatory regime crumble around him as his administration follows a cautious approach that mostly ignores calls for more activist steps to salvage the troubled campaign finance system.

The irony that the system could collapse on Obama's watch, after he convinced the advocates for stricter regulations that he was one of their own, is not lost on those who support limits on the flow of money into the American political system.

"I would like to see the president make good on his campaign promises to change the way Washington works," said Paul Ryan, a lawyer with the Campaign Legal Center, a nonprofit that pushes Congress, the White House, the Federal Election Commission and the courts to enact, enforce and uphold strict limits. "With respect to the campaign finance laws and the FEC, the only change we've seen has been a change for the worse," said Ryan, who stressed, "I'm not blaming the president. I'm just stating it as a factual matter."

Ryan's group and others in the so-called campaign finance reform community had largely given Obama the benefit of the doubt during his presidential campaign, even as he broke a promise to participate in a Watergate-era clean election system on the way to raising a record-setting $665 million. He also got a pass during his busy first few months in office as his administration welcomed reform leaders into the White House for the first time.

But Obama has otherwise done little to advance the campaign finance agenda and has failed to take tide-stemming steps available to him, a source of considerable frustration for reform advocates who had embraced him as a longtime proponent of reducing the role of money in campaigns.

In the past couple of months alone, a bitter partisan deadlock has escalated at the Federal Election Commission, resulting in the reversal of enforcement precedents and dismissal of case after case of alleged violations. The Supreme Court has signaled it will consider overturning a key pillar of the seminal 2002 McCain-Feingold campaign finance law, and the White House and congressional leaders have ignored increasingly frantic calls to buttress the campaign finance system.

Taken as a whole, the campaign finance reform community fears that the current trend - if left unchecked - portends an explosion of spending in the 2010 midterm and 2012 presidential elections.

The White House did not respond to questions about the FEC or the impending Supreme Court decision.

Sources tell POLITICO that Obama advisers - including Norm Eisen, the White House counsel for ethics and campaign finance issues, - have listened intently in a series of private meetings and phone calls with the reform community over the past several months as the reformers articulated their top priorities: overhauling the FEC and the presidential public financing system.

Both were widely considered broken by the time Obama took the oath of office - the financing system in no small part because he became the first presidential candidate to reject public funds in the general election.

After taking heat from reformers, and editorial boards and Republicans for violating his pledge to participate in the system - which would have given him $84 million in taxpayer cash for his campaign but forced him to limit his spending to that amount - Obama promised to fix it if he were elected president.

But a draft bill from Sens. Russ Feingld (D-Wis.) and Susan Collins (R-Maine) to overhaul the system has been gathering dust on Obama's desk for months, even as Eisen continues to privately assure reformers that his boss will hold a White House news conference to unveil a version of it when he's ready.

"Norm Eisen has said that [Obama] will be there," said Daniel Weeks, president of Americans for Campaign Reform, a nonprofit group co-chaired by a bipartisan group of four former senators that pushes for public financing of both presidential and congressional campaigns. "What we don't know is when and the specifics" that Obama would support.

As for the FEC, by the time Obama took office, it had already drawn criticism for a pattern of 3-3 party-line votes that resulted in the dismissal of a string of enforcement actions. Those dismissals had the effect of reversing some earlier precedents. The agency had also earned the scorn of reformers for its loophole-ridden implementation of a bundling disclosure provision championed by then-Sen. Obama, who had touted it on the campaign trail as his top legislative accomplishment.

After Obama took office, the deadlock became deeper and more bitter at the six-member FEC panel, which by statute consists of three Democrats and three Republicans. Many of the reformers with whom Eisen regularly consulted expected Obama to shake up the agency in May, when time ran out on the partial terms of two Bush-nominated commissioners - Chairman Steven Walther, a Democrat, and Don McGahn, a Republican who was considered the leader of the anti-enforcement bloc.

But the reformers were disappointed when, instead, Obama tapped labor lawyer John Sullivan - who has advocated anti-regulation stances on behalf of his union - to fill a different seat, held by Democratic commissioner Ellen Weintraub, who has continued to serve on the commission even though her term expired two years ago.

A week later, Eisen dodged a question at a Washington conference of reform groups about what specifically the administration was going to do to advance campaign finance regulation.

"The best is yet to come," he said. "We are going to continue this fight. We are not going to stop. We are not going to quit, no matter what."

That wasn't good enough for Sen. John McCain (R-Ariz.). While he had largely retreated from his leadership on campaign finance issues in the run-up to his unsuccessful presidential campaign against Obama, last month he reunited with Feingold, his partner in the 2002 campaign finance overhaul, to block Sullivan's nomination.

The lawmakers signaled they would release their hold on Sullivan only if Obama also tapped nominees "with a demonstrated commitment to the existence and enforcement of the campaign finance laws" to succeed McGahn and Walther.

That might require Obama to spend some serious political capital, because both commissioners maintain strong support among congressional leadership and because Walther, in particular, was the personal lawyer for Senate Majority Leader Harry Reid (D-Nev.).

"The White House is going slow to appease congressional leaders," said Craig Holman, a lobbyist for the reform group Public Citizen who lobbied for McGahn's ouster when Eisen called Holman this summer alerting him that Obama planned to tap Sullivan.

"The disappointing thing is that Obama hasn't taken steps to remove what the real problem is, and that's Don McGahn," Holman said.

Holman conceded that the public financing part of the equation "is a tricky situation" for Obama.

If Obama pushes through a new system before the 2012 campaign, he'd either have to participate in it, which would likely limit his meteoric fundraising ability, or reject it and brace for a public relations hit.

Both the public financing and FEC debates, however, are overshadowed by a pending evelopment over which Obama has no control: the Supreme Court's surprise announcement last week that, in lieu of deciding a relatively narrow case about whether restrictions on corporation-funded broadcast ads also applied to movies, it would consider overturning the restrictions as a whole.

Those restrictions are a major pillar of McCain-Feingold. And the court's announcement that it would hear arguments in September from the Obama administration and the group challenging the restrictions prompted angst among the reformers, who predicted a sweeping decision could reverse the century-old prohibition on corporate contributions to candidates.

McCain-Feingold skeptics - including Chief Justice John Roberts and Justices Samuel Alito, Antonin Scalia and Clarence Thomas - are expected to be able to cobble together a majority with swing vote Anthony Kennedy on the case and, reformers fear, two other cases that could reach the Supreme Court and possibly strike down other parts of McCain-Feingold.

"The debate has definitely shifted," said Brad Smith, a former FEC commissioner who now heads the Center for Competitive Politics, a nonprofit group that opposes some campaign finance regulations as infringements on free speech rights. "Debates tend to shift in Washington. I'm of the view that there never are complete victories in politics, but I feel pretty optimistic."

By Kenneth P. Vogel