Big Money Bundling is Campaign Finance Issue for 2008

Today's Wall Street Journal has an inside report on the trends in bundling contributions to the presidential candidates under current campaign finance regulations. Here's the introduction:

The bundling of political donations once was an innocuous play in the game book of Washington political operatives. Now, the fund-raising practice has grown so widespread, and some of its practitioners so brazen, that bundling has become the chief source of abuse in the American campaign-finance system.

The strange case of Norman Hsu, the textile-importer-turned-fugitive who cobbled together $800,000 in contributions for Sen. Hillary Rodham Clinton's presidential campaign, is the tip of the iceberg. Candidates for offices from county commissioner to U.S. president are increasingly turning to bundlers -- individuals who ask friends, family and business associates for contributions to their candidate of choice -- to help bring in the tremendous amounts of cash now needed to wage political campaigns.

The number of bundlers working for presidential campaigns has nearly doubled since the last election, according to a Wall Street Journal analysis of data from campaigns and watchdog groups. The volume of cash they funnel to individual campaigns, as a percentage of all money raised, has soared as well. Bundled donations account for more than one-quarter of presidential campaign contributions this year, up from 8% in the 2000 race.

Bundling is legal and has been around for years, but new forces have turned it into an election-season cornerstone. Campaign costs have surged, with each candidate's viability increasingly measured by their ability to raise cash. Recent finance reforms have closed old avenues for individuals to make big donations, making stars out of connected fund-raisers who can coax small donations from a broad network of names. Campaigns encourage ambitious bundling by rewarding top fund-raisers with perks, including access to candidates.

The article develops the angle that bundling is a way for illegal contributors to funnel money to the candidates. The Clinton campaign's Hsu scandal certainly demonstrates the pitfalls of relying on big money bundlers to help bankroll campaigns.

Yet there's an enterprising element to the current big money system that's fascinating. Since at least 2000 - when George W. Bush declined public financing in his race for the GOP nomination - the campaign financing regime's been in turmoil. The WSJ piece has more on this background:

Bundlers for major campaigns say they're following the rules. They're motivated by a shared ideology with their candidates and a desire to see them win. "The way I see it, there are two elections. The first is how many people are willing to dig into their pocketbooks to finance a candidate," says Domino's Pizza CEO David Brandon, a bundler for Republican Mitt Romney.

The bundling boom is partly an unintended consequence of prior stabs at reform. In 1974, lawmakers responded to Watergate-era political abuses by limiting the amount of money any individual can give. At the same time, to help lower the cost of campaigns and reduce reliance on private donors, the federal government offered to match money raised by a campaign with public funds, provided the candidates agreed to a federal spending limit.

In the history of campaign-finance law, well-intentioned efforts to curb abuses in one area typically open the door to those in another. The Watergate-era reforms prompted an explosion of political-action committees, which had much higher limits on how much they could receive from individuals and dole out to campaigns. PACs became the new conduit for big cash.

Meanwhile, campaign budgets ballooned. In 1976, $300 million was spent on candidates for Congress and the White House, according to the Federal Election Commission. Since then, the cost of campaigns has grown by about 40% every four-year election cycle. The 2008 elections are expected to cost $6 billion in all -- with the presidential contest, for the first time, expected to exceed $1 billion.

By the late 1990s, presidential hopefuls were chafing at the federal spending limits. In 1999, George W. Bush announced he would opt out of the federal system -- the first major presidential candidate to do so since the program was introduced 25 years earlier. His decision freed his campaign from spending limitations, but increased the pressure to raise private money to offset the waived federal funds.

Mr. Bush retooled his strategy. As governor of Texas, he had cultivated donors who contributed $100,000 or more to his campaigns. (Texas law doesn't limit campaign contributions from individuals.) But when Mr. Bush began his first presidential campaign, those donors were forbidden under federal law at the time from giving more than $1,000. Mr. Bush created a program that rewarded individuals who brought $100,000 or more to his campaign, in increments of $1,000 or less.

He named the supporters "Pioneers," publicizing their names on his Web site and inviting them to private campaign events and strategy sessions. A tracking number was attached to the donations channeled by each Pioneer to the campaign, allowing the Bush team to tally the haul of each and foster competition among them. Mr. Bush recruited about 250 bundlers who raised at least $25 million of the $100 million he raised for the 2000 race.

Bundling received another, if unintentional, boost in 2002. That year's McCain-Feingold Act banned corporations, unions and others from making large donations, known as "soft money," to the Democratic and Republican parties. Most of this soft money had been spent on behalf of the parties' presidential and congressional candidates, so the new law effectively closed the avenue that high-rolling campaign donors had used to skirt individual campaign limits. The rule also doubled the limits on individual donations to $2,000 for a primary election and another $2,000 for the general election for congressional and presidential candidates. (The limit is currently $2,300 per candidate per election.)

In the 2004 election, both President Bush and his Democratic challenger, Sen. John Kerry of Massachusetts, declined matching funds. Had they accepted federal money, they would have received $17 million each and been limited to spending roughly $44 million. Mr. Kerry went on to raise $215 million, and Mr. Bush raised $259 million. Each used networks of more than 500 bundlers, according to Public Citizen.

This season, nearly every major presidential candidate has declined public funding and relies heavily on bundlers.

Mrs. Clinton's campaign has awarded the title "HillRaiser" to the 223 bundlers it says have channeled $100,000 or more her way. That means the campaign's bundlers account for at least $22.3 million, or about 28%, of the $80.1 million that public records show it has raised through Sept. 30. HillRaisers include movie producer Steven Spielberg, supermarket billionaire Ron Burkle and former Democratic vice presidential candidate Geraldine Ferraro.

The article goes on to discuss the potential improprieties that arise out of bundling practices, and it discusses congressional efforts to rein in unscrupulous bundlers.

But if you think about the criticism of bundling - in Congress or other reform circles - it's not just the problem of a few bad eggs here and there, breaking the laws or coercing political contributions from workers or union members. The larger issue is money in politics altogether. The article quotes Fred Wertheimer, of the reform advocacy group Democracy 21, on the "corrupting" influence of money in politics:

"The pressures of unlimited, arms-race spending has put the highest premium on presidential candidates finding bundlers who can raise huge amounts of money and the lowest premium on filtering out problematic bundlers," says Fred Wertheimer, the president of Democracy 21, a nonpartisan Washington-based group dedicated to reducing the influence of money in politics. "This has opened the door to anything-goes bundlers pursuing anything-goes fund raising."

Folks like Wertheimer have never met a campaign finance reform law they didn't like. It doesn't matter that some of the biggest abuses in campaign finance in recent years have been found in the Democratic Party's big money operations: Money in politics is inherently corrupting, distorting the policymaking process and threatening the "integrity" of the system.

Certainly there's a case to be made for eliminating exclusive backroom deals and corporate deep-pocket backing for America's political leaders. But as any student of campaign finance knows, money in politics is like the winding waters of a raging river. Should a dead log block the river's passage, the water finds a way to continue its flow, up, over, and around the impediment. So it goes with money. The McCain-Feingold reform act of 2002 is largely responsible for making the current crop of bundlers so powerful. The law has also made interest group 527 organizations (a regular target of criticism) powerful producers of campaign advertising. Who knows what consequences will flow from the next round of "progressive" campaign finance reforms?

Most interesting, though, is that much of the money being bundled by these big money brokers comes in political contributions of $2000 or less. Overwhelmingly, these donations reflect everyday people exercising their First Amendment rights to financially support their favored candidates. As such, the current freewheeling system of big bundlers may be more democratic than anything the Wertheimer types might bring about to replace it.