The Liberal Ad Challenge Ahead

By David Paul Kuhn,
CBSNews.com Chief Political Writer

These organizations – Moveon.org, Media Fund – are already being challenged in court by the Bush-Cheney campaign. But even if the courts rule with the President, the ads will have served Kerry in March, April and May when he is cash poor.

By the time any court rulings might limit such organizations, the Democratic Party will be sufficiently positioned financially for the general election ahead. And if the party rallies as it has, it will likely be able to raise enough in hard money to contest the president, although will not match him dollar-for-dollar.

These exempt liberal groups have raised about $70 million, the bulk of which will be spent on "issue advertising" against President Bush's policies. By comparison, all the Democratic candidates, as of Jan. 31, had raised a total of $177 million. This bodes well for Kerry, now that he is the sole challenger, to raise money later this summer to match the $143.5 million Mr. Bush accumulated by that same date.

Although he only has a few million on hand, Sen. John Kerry will be the first Democratic nominee not to take matching funds. With this in mind, Kerry is meeting with his two most formidable, now former, competitors. He met with former Gov. Howard Dean on Wednesday, and will meet with Sen. John Edwards on Thursday.

Kerry wants their contributors' lists; he is going to go back to the well of Democratic donors. Gen. Wesley Clark has already sent e-mails to his contributors asking them to donate to Kerry's campaign.

But the problem for the Democrats is in the present. Currently, Kerry lacks funding to respond to Mr. Bush's first national advertising campaign. Because the president was uncontested during the primary season, his war chest remained untouched. Democrats currently need their political organizations exempt from current campaign finance law more than Republicans -- but only temporarily.

Last Thursday, the Bush campaign began a $4.5 million advertising blitz in 17 key states. Millions more have already been added to fund the advertising.

That same day, liberal MoveOn.org, one of the largest of these political organizations acting outside Federal Election Commission regulations, effectively rebutted for the Kerry campaign, launching a $1.9 million campaign criticizing President Bush on the economy. It airs in the same key battleground states.

Tuesday night, the Bush-Cheney campaign filed a complaint with the FEC against The Media Fund, another large liberal political organization outside FEC regulations.

Anticipating Media Fund's ad campaign, beginning Wednesday, the suit argued that the organization was illegal because -- for practical purposes -- the intent of the group is to defeat President Bush in the 2004 election. And, says the Bush campaign, in the effort to do so, Media Fund has raised their money from donors that have contributed above what federal law allows. Clearly, some of its fundraising does come from donor's well exceeding hard money limits but it is for the FEC to decide if those limits pertain to such groups.

The Media Fund's 14-day ad campaign aired in 17 states at a cost of $5.09 million. It says that, "George Bush's priorities are eroding the American Dream."

At issue are what is commonly called "527" groups. These are political organizations that are primarily intent on influencing the federal elections. The number 527 refers to the section of the Internal Revenue Service code.

"The 527s that were created in this cycle whose purpose, they say, was to elect or defeat a federal candidate and are spending, so far as we can see, entirely or principally, more than 50 percent on ads about a federal candidate or on other election activity focused on a federal election are violating the law if they are not registered as a federal political committee," said Trevor Potter, a former Commissioner and Chairman of the Federal Election Commission. "It is the only possible reading of the election law.

"But laws are not self-enforcing," Potter added. "If these groups choose not to register with the FEC, the only ways the law is enforced is if the FEC commission finds from a vote that they failed to register."

The FEC will hold public hearings in April and may rule on the matter in May. By that point Kerry should have well more than $10 million in his coffer. Even if the FEC found in favor of the Bush administration, that would not affect ads that already ran. Local television station would not be mandated by law to then follow the FEC ruling. But the heads of the 527 organizations would take their ads off the air, in that event, because at that point they could face criminal penalties.

The FEC could also disqualify the 527 groups from spending any soft money raised on issue advertising or partisan get-out-the-vote drives. Soft money is donations in access of $2,000 from an individual.

Liberal 527 organizations like MoveOn, Media Group and America Coming Together (ACT) -- with combined coffers of more than $70 million -- have allowed for a major second front assault in the political attack on President Bush (the other being that of the Kerry campaign). But the groups could be left largely politically limp come May, if the FEC rules for the first time against the 527 groups. At least a quarter of liberal 527s' $70 million has come from large contributors.

Although MoveOn is also a Political Action Committee, the approximate $15 it has raised ($10 million through small donations of about $60) has been stored under its 527 status to "educate the public on Bush's policies," according to MoveOn. The liberal 527 groups are arguing that their express purpose is not to defeat Mr. Bush but to give their donors a vehicle to respond to President Bush's policies.

"As a 527 they have said they are dealing with political activity, their statements and activities of some of these organizations make it clear that their major purpose is to influence the election for federal office," said Larry Noble, executive director of the Center for Responsive Politics. "And if they are being done by an organization then those ads cannot be paid for by large and unlimited donations."

The liberal 527 group's principal donors are billionaire George Soros and other active liberal millionaires like Peter B. Lewis, chief executive of the Progressive Corp., as well as Hyatt hotel family member Linda Pritzker. MoveOn received about $5 million from Lewis and Soros. Pritzker has donated about $4 million to her Sustainable World Corp. ACT has also received millions in contributions from Lewis.

The large donations by single donors is one of the issues being challenged, along with the debate over what is the express purpose of the organization.

"My own view on this is that the Democrats have mistakenly inflated this to say that if they don't have these 527s and their large contributors they lose the election," Potter said. "The Democratic candidates raised a $177 million, the president has only raised $150 million, and what did they do with that money, they basically campaigned against George Bush."

Half of the Democrat television advertising contained at least one attack on President Bush and 75 percent of Kerry's ads had such an attack, according to the Wisconsin Advertising Project.

Recent polls have shown Kerry beating Mr. Bush in a general election. Besides the earned media coverage (what the press covers, what political advisers pejoratively call "free media"), the Kerry campaign lead, as well as the declining approval rating of President Bush, certainly has been affected by the Democratic candidates focus on Mr. Bush instead of one another.

The candidates funded this advertising with their sum total $177 million coffer as of end of January, or $185 million if you include the money raised by Edwards and Kerry in February. These estimates come from Tony Corrado, of the Brookings Institution.

The Bipartisan Campaign Reform Act of 2002 (commonly known as the McCain-Feingold Act because senators John McCain, R-Ariz., and Russ Feingold, D-Wis, led the effort) did little to hamper what has been a 527 soft money loophole for well over a decade. The loophole has existed since the Federal Election Campaign Act of 1974 and the Supreme Court rulings that followed.

Republicans have historically raised more funds through soft money than Democrats. However, because of the record amount raised by President Bush and the fact that the Kerry campaign is so cash poor, due to the primary race, the Democrats are reliant upon these 527 groups, for now.

McCain-Feingold's only affect on 527s was the broad regulation of the act that such advertising, for all types of political organizations, cannot run in a state 30 days prior to its primary or nationally 60 days prior to Election Day.

Testifying on Capital Hill on Wednesday regarding this very issue of 527 groups, were McCain and Feingold, as well as Noble on behalf of his non-partisan group. The three called the liberal 527 groups current campaign spending "illegal," again worth noting is that Feingold is a Democrat.

"That 527s have been allowed for years by the FEC to operate outside of the law is not surprising," McCain said in his testimony. "In McConnell (McConnell v. FEC of 2003 is the most recent ruling on the issue), the Supreme Court stated, in no uncertain terms, how we ended up in the soft money crisis to begin with," the senator continued. "The Justices placed the blame squarely at the doors of the FEC, concluding that the agency had eroded the prohibitions on union and corporate spending through years of bad rulings and rulemakings..."

What could happen in the end, is even if the six commissioners who sit on the FEC panel (three Democrats and three Republicans) agree that based upon McConnell v. FEC and the three-decade old federal campaign act, that it must mandate that 527s are not permitted to raise millions in single contributions and use such monies in political activities, the FEC could very likely wait until after the presidential election to issue the ruling.

FEC Vice Chairman Ellen Weintraub, a Democrat, said early this month, "at this stage in the election cycle, it is unprecedented for the FEC to contemplate changes to the very definitions of terms as fundamental as 'expenditure' and 'political committee.'"

In reality, all FEC rulings need a majority. And due to the makeup of the commission, several experts point out that without Weintraub, no limitations to 527 groups will occur before we know who is occupying the White House for the next four years.

Politics as usual, you bet.

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