FEC Rejects Limits on 'Soft Money' Groups

WASHINGTON - Federal officials Thursday rejected new limits for political groups pouring millions into ads and voter drives in the presidential election, and Republicans predicted the decision would prompt a surge in big donations for their side.

Several Democratic groups have already begun spending large donations on efforts critical of President Bush (news - web sites) or supportive of Democratic candidate John Kerry (news - web sites). Republicans had asked the Federal Election Commission (news - web sites) to stop the activities under the campaign law that broadly banned from federal elections the big checks known as "soft money."

But four of the six FEC members on Thursday refused to step in, tabling the issue for at least three months. Even if the commission acts then, it is unlikely any new rules would affect the November presidential and congressional elections.

David Keating, executive director of the conservative, anti-tax group Club for Growth, said the FEC's decision in essence tells major GOP contributors "come on in, the water's fine."

"I think that will reassure a lot of the donors that have been hesitant to donate to the types of advertising campaigns the club is launching this weekend on Bush and Kerry's policies," said Keating, whose group supports many Bush policies and opposes many of Kerry's.

Jim Jordan, a spokesman for three pro-Democratic groups targeted by Republican complaints, said he was pleased with the FEC decision and wasn't worried about a possible surge in soft money by GOP-leaning groups.

"Republicans were always going to be lavishly funded, regardless of how they ultimately decide to funnel that money," said Jordan, spokesman for America Coming Together, America Votes and Media Fund.

Democratic commissioner Scott Thomas, who joined Republican Michael Toner to favor fund-raising and spending limits for such groups, predicted the decision would allow both Republicans and Democrats to engage in no-holds-barred spending this election year. He predicted pro-Republican groups, who have held back pending the FEC decision, would quickly surpass the Democrats.

"I think it is possible the Democrats could wind up, from this point on, worse off," Thomas said, adding that he thinks much of the soft money that used to go to parties before the law went into effect in 2002 will flow to new tax-exempt groups that don't have to disclose their fund raising and spending.

Democratic commissioner Ellen Weintraub, one of four commissioners who voted against new limits, said she supported a proposal by FEC lawyers to take another three months to study the issue.

"I said at the outset I didn't think we had given ourselves enough time to do the job right," Weintraub said.

The FEC lawyers this week urged commissioners to delay a decision until late summer, saying the issue was of such importance that more time was necessary to consider it.

Under debate is how the campaign finance law affects nonparty groups that are spending soft money — corporate, union or unlimited contributions — in the presidential and congressional elections. The law broadly bans soft money from federal elections, including the raising of the big contributions by national party committees.

The Republican Party, Bush's re-election campaign and several campaign watchdog groups accuse Democrats of violating the ban by creating a network of pro-Democratic soft-money groups that are raising and spending millions of dollars to air anti-Bush ads and pay for get-out-the-vote activities. Critics call the groups a shadow party.

That spending helped flood the airwaves with negative commercials about Bush at a time when the Republican incumbent was airing millions of dollars of ads critical of Kerry, who was working to rebuild his campaign's finances before going up with his own commercials after the primaries.

The anti-Bush groups argue that their spending is legal, in part because they stop short of calling for Bush's defeat or for Kerry's election. The FEC was considering whether the use of soft money to promote or criticize a federal candidate is enough to violate the soft-money ban, and the FEC on Thursday decided against saying yes.

Thomas and Toner had urged the commission to make most partisan tax-exempt groups follow donation limits and disclose contributions and spending to the FEC.

FRom NYTimes ...

Election Panel Won't Impose New Spending Limits on Groups

By GLEN JUSTICE

WASHINGTON, May 13 — The Federal Election Commission today refused, for now, to put limits on independent political groups that collect and spend millions in unlimited contributions, opening the way for advocacy groups supported by Democrats and Republicans to play a dramatic role in the 2004 elections.

The decision to postpone the rules for 90 days was a victory for a group of Democratic organizations that have played a critical role supporting Senator John Kerry, spending tens of millions to bolster his campaign as he emerged from the primaries.

It was a setback to Republican efforts to maintain the party's financial advantage by shutting these groups down. Many now say the decision will force them to begin matching Democratic fund-raising efforts, using advocacy groups of their own to raise millions in unlimited "soft money" donations.

"The 2004 election is going to be the wild west," said Michael Toner, a Republican commissioner whose efforts to introduce tighter regulations were defeated by a vote of 4-2. "We are going to see Democratic groups and Republican groups taking full advantage of the legal landscape. Tremendous sums of soft money are going to be raised and spent on both sides."

Some Republicans, however, said today they were happy to accept that challenge, saying they would prevail in such a matchup.

David Keating, executive director of a conservative 527 committee, the anti-tax group Club for Growth, said the F.E.C.'s decision in essence tells major Republican contributors come on in, the water's fine," The Associated Press said today.

The 527 organizations, named for the section of the tax code that created them, became targets for new rules in large part because Democratic groups seized upon them as a way to overcome the Republicans' significant financial advantage collecting soft money.

The commission's decision is one of the most important in the wake of the new McCain-Feingold campaign finance law, which went into effect for the first time for this year's election. The law banned candidates and political parties from collecting soft money, which grew to hundreds of millions and was a primary funding source in the last presidential race.

However, that law did not directly address so-called 527 committees, one of the last remaining vehicles to introduce six- and seven-figure checks into the system. Groups like the Media Fund, America Coming Together, the MoveOn.org Voter Fund and dozens of others have already spent more than $170 million in this year's races and today's decision is expected to increase fund-raising by 527 committees.

Rather than acting on several versions of a proposal that would have imposed contribution limits and other restrictions on such groups, the commission voted, on the advice of its top lawyers, to delay new rules for 90 days. The decision makes it all but certain that new rules will not take effect for this year's race.

The postponement drew fire from campaign-finance watchdogs who want to see less money in the system. Some say that the decision was a blow to the integrity of the new law by allowing unlimited contributions to continue, and were harshly critical of the commission's lack of action, citing its role in the creation of the soft money system more than a decade ago.

"This was a moment of opportunity for the commission and they flinched," said Don Simon, a lawyer for Democracy 21. "This is the creation of the next big soft money loophole in progress."

Critics of the proposed rules, however, have argued that they are too broad and would have a disastrous effect on nonprofit groups of all sizes, stifling free speech on issues and producing a chilling effect on fund-raising.

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