Issue Ads: Free Speech Or End Run?

A flood of TV and radio spots paid for by unlimited, secret donations is influencing the election process

As media focus shifts to Michigan for the Feb. 22 Republican primary, the Sierra Club is already there. On Feb. 16, it began bombarding parts of the state with TV ads decrying Texas' environmental record. The Sierra Club spots don't urge voters to defeat George W. Bush at the polls--but they do show vivid images of air and water pollution in Texas, which happens to have a governor named Bush. Even Bush's campaign manager conceded that a similar ad campaign weakened support for George W. in New Hampshire.

The Republican Leadership Council (RLC), a group of moderate GOPers, may have contributed to the demise of Steve Forbes's candidacy with a string of ads. The AFL-CIO has amassed a $20 million ad budget. And groups ranging from the National Right to Life Committee to the business-backed Americans for Tax Reform are running tough ad campaigns this election season.

Welcome to the war of the issue ads. Such radio and TV messages, paid for by political parties or independent groups, are meant to explain a policy such as campaign-finance reform or abortion, but are supposed to be produced independently of a campaign. They can criticize or admire candidates, but they aren't supposed to advocate election or defeat. In 1998, some $260 million was spent on issue ads, up 73% from the $150 million spent in '96, according to the Annenberg Public Policy Center at the University of Pennsylvania. This year, "it's inconceivable that there will be less spent than in '98," says Larry Markinson, executive director of the nonpartisan Center for Responsive Politics.

Not only is more money being spent on issue ads but it's pouring into the Presidential contest earlier than ever. And as more groups take advantage of a new election-law loophole, they can raise money without revealing their donors. "The most dangerous money in American politics is the unlimited, secret contribution," says Fred Wertheimer of pro-reform group Democracy 21. "That's the door being opened here."

Issue ads have been around for years, but they only recently took off. In the early '90s, unions and ideological groups occasionally promoted their philosophies around election time, while voters were paying attention. In 1995, the Federal Election Commission ruled that political parties could run similar messages and pay for them with soft money--unrestricted contributions from unions, corporations, and the wealthy.

President Clinton leaped at the opportunity in his '96 reelection campaign. He accepted taxpayer funds on the condition that he would not spend any other money, and yet he led a Democratic National Committee effort to raise $44 million for issue ads. The campaign of GOP nominee Bob Dole also raised funds for issue ads, though on a lesser scale. After auditing both campaigns, the FEC staff recommended that each repay millions in taxpayer money for exceeding spending limits, but the commission refused to penalize either campaign.

Now, Clinton is at it again. In 10 DNC events so far this year, he has raised $4 million, and he's expected to help pull in $20 million by April. DNC officials say they haven't decided how to spend the money. "Issue ads will be just one option," says spokeswoman Jenny Backus.

But party-sponsored issue ads are old hat now. Today's twist is far more controversial: Issue ads sponsored by outside groups using a potent new loophole uncovered in Section 527 of the Tax Code. Such groups, called 527 committees, are political nonprofit organizations that pay no taxes and are not required to disclose donors' names either to the FEC or the Internal Revenue Service. Indiana lawyer James R. Bopp Jr., who has set up numerous 527s for conservative groups, says it was the IRS in 1995 that encouraged such outfits as the Christian Coalition to convert from 501(c)(3) to 527 status because it didn't want charities involved in politics. Moreover, 527s can raise unlimited soft money from anyone, anywhere--even foreign companies and governments.

`BIG IDEAS.' For about $500 worth of lawyer's fees and documentation, almost anyone can form a Section 527 committee. FEC spokesman Ian Stirton says the agency has no idea how many 527s exist, since there are no registration or reporting requirements. Neither does the IRS. But they're springing up everywhere. Former House Speaker Newt Gingrich just converted his Friends of Newt Gingrich political action committee into a 527 called the Committee for New American Leadership. "We're not going to be involved in any elections," says spokesman Mike Shields. "We're just going to talk big ideas."

But big ideas aren't always the point. The moderate RLC operates a 527 committee that ran anti-Forbes ads and spots lampooning Al Gore's claim that he helped invent the Internet. "With no FEC and minimal IRS oversight, we're flying under the radar," boasts RLC Executive Director Mark L. Miller.

Political parties, which are highly regulated by the FEC, don't have it so easy. Not only must they report their donors, but parties must also use a blend of soft and hard money to pay for their issue ads, unlike unaffiliated groups. For every $100 in issue ads, $65 can be soft money, while $35 must be hard money. Both major parties claim they are handicapped by the rule and are suing the FEC to overturn it. And watchdog groups are alarmed by what they believe is a move by House Majority Whip Tom DeLay (R-Tex.) to skirt the rule. Current and former DeLay advisors have set up 527 committees to raise large sums for issue ads and get-out-the-vote efforts for the House's most vulnerable GOP members.

While outright coordination remains prohibited, groups can legally tell campaigns about their advertising plans. Forbes and others say the RLC crosses even that line. They say the RLC works so closely with Bush that it's almost a shadow campaign. Indeed, 70% of the RLC's board are Bush contributors. Miller denies the charge, adding that he could coordinate with Bush under federal rules, "but we decided to take a conservative approach and not talk at all." Forbes has filed an FEC complaint anyway. The National Smokers Alliance and Americans for Tax Reform, which have been running ads in South Carolina critical of positions taken by Senator John McCain, also deny coordinating with the Bush campaign.

Some experts believe the issue ad explosion is just beginning. Once the primaries are over, trade groups representing financial companies worried about privacy restrictions, Internet companies concerned about sales taxes, and medical groups active in managed-care issues are expected to weigh in. That is sure to raise more warning flags. "I think we'll see more efforts that walk right up to the razor's edge of what you can and can't do," says Sierra Club Political Director Daniel J. Weiss. Laments Donald J. Simon, general counsel of the nonpartisan Common Cause: "These aren't issue ads, they're campaign ads. This is a way to cheat on the campaign-finance laws."

Still, constitutional scholars are divided as to whether Congress can restrict issue ads. Says David O'Steen, executive director of the National Right to Life Committee: "Our forefathers didn't fight to have the right to discuss crops and the weather. It was for the right to discuss political ideas." Senator Joseph I. Lieberman (D-Conn.) agrees yet is concerned about the rise in donor secrecy. Instead of trying to limit ads outright, as McCain proposes, Lieberman may offer legislation that would hit 527s in their pocketbooks. To retain tax-exempt status, they would have to disclose where their money comes from and how it is spent. While that avoids the free speech issue, it still is expected to be highly controversial. So for now, the line between fostering a healthy debate and mounting a stealthy partisan attack will remain easy to cross.