The McCutcheon Case: Hard money, soft money and now something in between?

Bob Bauer, distinguished scholar in residence and senior lecturer at the New York University School of Law, looks at the distinctions between hard money and soft money campaign contributions that are central to the case of McCutcheon v. Federal Election Commission before the Supreme Court this term.

20050422114651!US_Supreme_Court_BuildingCampaign finance regulation in the United States is complex, and judges have begun to complain about it. Most famously, Justice Kennedy spoke about the proliferating and abstruse rules in his opinion for the Court in Citizens United. At oral argument in a recent case, Justice Scalia suggested that no one really understood the law. The complexity of campaign finance rules is not just the handiwork of the regulators: the Court’s own doctrine can be hard to fathom. Once there was supposedly a clear distinction between “contributions” and “expenditures,” but this is no longer quite the case. And the line that once separated legal, clean “hard money” from illegal “soft money” may soon be harder to discern, after the Court has decided the pending case of McCutcheon v. Federal Election Commission.

Hard Money/Soft Money

The hard money/soft money distinction became the central focus of the campaign finance discussion in the 1990s. Hard money was understood to mean funds raised and spent within election law requirements—funds “subject to the [Federal Election Campaign] Act’s disclosure requirements and source and amount limitations.” McConnell v. Federal Election Commission, 540 U.S. 93, 122 (2003).  Soft money was the unregulated funding, “beyond [federal law’s] reach” that parties and groups used to influence federal election campaigns. McConnell at 128. According to critics, soft money was imported into federal races through ingeniously devised loopholes, or simply disregard of the law. Hard money limits offered protections against corruption; soft money was effectively unlimited and overwhelmed those protections.

In the early fights over soft money, the parties and groups defending its use denied that they were influencing federal elections—their spending, they argued, was for other purposes, like “grassroots lobbying” on issues or the support of state (i.e., non-federal) candidates. Any effects on federal elections, they claimed, were incidental. In 2002, after a sustained struggle, Congress amended the law to stop the practices it deemed most egregious. For example, lawmakers concluded that national parties could no longer accept soft money at all, regardless of its intended use, because the candidates so closely associated with them would be corrupted by the flow of unlimited money. Outside groups were subjected to limits on the receipt and use of soft money, mainly from corporations and unions, for “issue advertising” before elections. Labels would not count anymore: the question was intent and effect, and Congress developed a record of election-influencing intent and effect to support these restrictions on party and outside advertising.

At issue in both cases was money raised “outside the system” of rules for federal campaign finance. The Court has been hard on some of these reforms, beginning with a case that limited the restrictions on issue advertising in Wisconsin Right to Life, and accelerating the path toward deregulation in Citizens United. Now, in McCutcheon, the Court is considering a case that may move the boundary between hard and soft money. McCutcheon is a hard money case that the government is defending in significant part on a soft money theory.

McCutcheon and the “Aggregate” Limits

In McCutcheon, the Court will soon decide the constitutionality of the “aggregate” limits on contributions to federal candidates and political committees—in other words, the aggregate limit on hard money contributions. Under the limit, an individual cannot contribute more than $123,200 to federal candidates and committees per two-year election cycle. Within this ceiling, no more than $48,600 can be contributed to candidates, and no more than $74,600 can be contributed to parties and other political committees.

Under the anti-corruption rationale of the federal campaign finance laws, the risk that a particular contribution poses arises from its delivery into the hands of the intended political beneficiary, who may then experience an obligation to return the favor. This is the crux of the problem: quid pro quo corruption. These limits on specific contributions—also called the “base limits”—remain in force within the overall, “aggregate” ceiling. Every contribution made within that ceiling to a candidate or political committee still counts against a particular limit. An individual can still give no more than $2600 per election to a federal candidate; the same individual must observe limits on any contribution made to a political party or other political committee supporting multiple candidates.

When the aggregate limit was first enacted, these other so-called base limits had not yet been written into the law. The challenge to the aggregate limit rests in part on the claim that it no longer serves any valid anti-corruption purpose. It constrains the total amount that the donor may spend on these various limited contributions but to no purpose: if the goal of the law is to limit corruption, the base limits do that work. Those challenging the limit also claim that it infringes on the rights of particular donors who, having reached an aggregate limit, find that they cannot give at all to other candidates—if they give the maximum contribution to some candidates, they will eventually use up their limit and be unable to give to any others.

The Defense of the “Aggregate Limit”

The government has defended this limit on one of two theories—a hard money theory and a more novel soft money theory.

Under the hard money theory, the government is concerned that without the aggregate limit, there are circumstances in which donors could exploit the absence of the ceiling to funnel additional monies over and above the legal limit to their favored candidate or party. Consider, for example, a donor who contributes to many state parties with the expectation that each will, in turn, transfer the money by prior agreement to the one specific party or candidate. This is known as “earmarking,” and it is prohibited by law. It has been suggested that the earmarking prohibition is not strong enough or enforced rigorously enough to prevent this invasion of the hard money limits from occurring. This is a hard money theory because it is intended to enforce the hard money limits—to prevent their “circumvention,” as that term has been established in the case law to refer to evasion of campaign finance legal restrictions.

The soft money theory is different. It defends the ceiling as necessary to keep the total amount spent on all limited contributions from introducing corruption into the political process. In McCutcheon, this theory—and the manner in which it blurred the hard money/soft money distinction—emerged clearly in the argument of the Solicitor General. First, he noted the possibility that without the aggregate ceiling, the hard money limits would come under attack through various means of “circumvention.” But there was, he stated, “a more fundamental problem here,” and this point, in explicit terns, the Solicitor General shifted to a soft money theory in defending the aggregate limit.

“It’s a problem analogous to the one that was at issue with soft money in McConnell, which is the very fact of delivering a $3.6 million check to the [Congressional leadership] … whoever it is that solicits that check … creates the inherent opportunity for quid pro quo corruption … wholly apart from where the money goes after it’s delivered.” Transcript of Oral Argument at 29-30, McCutcheon v. FEC, No. 12-536 (S. Ct. docketed Nov. 1, 2012).

What the Solicitor General is arguing, in effect, is that the very sum of money involved, regardless of its destination, is “inherently” corruptive. Later, he suggests ways that this corruption could work: each candidate would be favorably impressed by the support the same donor gave to other candidates on a “team”; the candidates who solicit the money for the others would feel a special obligation to the donor. And the party leadership, if it solicited the funds, would be unduly grateful on behalf of the party as a whole. So even with limits on each contribution to each party or each candidate, corruption “inheres” in the large sum the donor spreads around to all candidates and all party units.

Chief Justice Roberts seemed to recognize that this theory of corruption lay outside the doctrinal boundaries established by the Court in Buckley v. Valeo that are central to the hard money/soft money distinction. He pressed the Solicitor General for the right “framework” for the analysis of the aggregate limit. It was not, after all, a soft money limit: it did not constrain the use of funds “beyond the reach” of the federal campaign finance laws, since it restricted only spending within hard money limits. And the Solicitor General was not relying only on, even if he also added, a claim of “circumvention” of hard money limits. The “more fundamental problem,” he advised the Court, was the “problem analogous to the one that was at issue with soft money in McConnell ….” So, what the government was offering as theory was something new.

It is true that in McCain-Feingold, Congress identified a special risk of corruption when federal officeholders and candidates solicited large sums of money. Under the law as it now stands, those officials and candidates, and agents acting for them, cannot solicit soft money: they can only raise funds within the federal source restrictions, dollar limits and disclosure requirements. But in McCutcheon, the government’s argument takes the additional step and finds the risk of corruption attendant in the solicitation of limited, hard money contributions. This is the novelty of the McCutcheon argument: hard money becomes soft money when it is raised in large quantities, even if each individual contribution within the total amount raised complies with a limit and is fully reported.

The Hard Money/Soft Money Distinction and Whether It Matters

It is possible to see the hard money/soft money distinction as dated and no longer relevant to current campaign finance issues, or to think that not too much should be made of it. And the Solicitor General also noted that the expenditure of large sums of money to influence elections raised the sort of concern but with “appearances” that traditional campaign finance restrictions has been very much concerned with. Out of these considerations might come one answer to the Chief Justice’s request for the right “framework” for analyzing the aggregate limit.

Yet a central challenge facing the crafting of campaign finance laws is the definition of their boundaries. The current Supreme Court majority on this question has made clear that the government cannot enact limits on any spending that could influence the outcome of elections. A prime example is the independent expenditure, made without candidate control or involvement. And there are other cases of influential speech, like that of media corporations, that fall outside the ambit of the federal campaign finance laws.

The hard money/soft money distinction operates on another level to separate out what may be constitutionally regulated from what may not. In McCain-Feingold, Congress acted to restrict the use of soft money for hard money purposes, that is, to influence federal elections. In McCutcheon, the limit before the Court is a limit superimposed on hard money limits—this aggregate limit is being defended on a soft money theory that any large sum of money raised or spent to influence federal elections, within or outside the system of limits, is “inherently” corruptive. The Court will now decide whether this theory can be accommodated within existing Court doctrine or, breaking down the hard money/soft money distinction, goes too far.

Bob Bauer is a partner in the firm of Perkins Coie and Distinguished Scholar in Residence and Senior Lecturer at the New York University School of Law. He writes on campaign finance and other topics in political law at www.moresoftmoneyhardlaw.com.

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