Soft Money is a term that often surfaces in discussions about campaign finance, particularly in the context of U.S. elections. It represents a significant, yet often misunderstood, aspect of how political parties and campaigns are funded. This article delves into the intricacies of soft money, exploring its definition, origins, uses, and its role in the broader landscape of campaign finance regulations. Understanding soft money is crucial for anyone seeking to grasp the financial underpinnings of political campaigns and the ongoing debates surrounding campaign finance reform.
What is Soft Money? Defining the Term
In the realm of campaign finance, it’s essential to distinguish between “soft money” and “hard money.” Soft money refers to campaign contributions made outside the purview of federal campaign finance law. These funds are not subject to the limitations and prohibitions set by the Federal Election Campaign Act (FECA). Essentially, soft money encompasses large contributions from individuals and Political Action Committees (PACs), as well as direct contributions from corporations and labor unions.
Conversely, hard money represents the regulated side of campaign finance. These are contributions that are subject to FECA regulations. Hard money consists of limited contributions from individuals and PACs, adhering to strict federal guidelines.
The concept of soft money emerged from the post-Watergate campaign finance reforms enacted in the 1970s. Initially, the allowance of unregulated donations was intended to bolster political party organizations and their activities. Amendments to FECA, rulings by the Federal Election Commission (FEC), and court decisions permitted parties to raise funds outside the strict limits placed on contributions to individual candidates. These unregulated soft money contributions were intended for party building activities and general issue advocacy, rather than direct support for specific federal candidates.
However, over time, soft money evolved into a substantial and often controversial source of campaign funding. As an unlimited resource for political parties, soft money contributions and expenditures grew dramatically. In the years following mandatory reporting of these funds, soft money in U.S. politics surged from $86 million in 1992 to $262 million in 1996. During the 1995-96 presidential election cycle, both major parties collectively raised $262.1 million in soft money. Even in the off-election year of 1997, parties raised over $67.4 million, marking a record for non-election year fundraising. Contributors to these funds included wealthy individuals, corporations, labor unions, and professional associations.
The Origins of Soft Money: A Response to Reform
The rise of soft money is intrinsically linked to the post-Watergate reforms embodied in the 1974 FECA. The initial FECA regulations were perceived as overly restrictive, leading to complaints from candidates and political parties after the 1976 election cycle. They argued that the stringent rules stifled volunteer efforts and grassroots party building activities.
In response to these concerns, the FEC issued a ruling in 1978 allowing unlimited state-level contributions to fund party activities. This concept was formally incorporated into law in 1979 through amendments to FECA (PL 96-187). These amendments permitted state and local parties to procure unlimited campaign materials for volunteer-driven activities promoting federal candidates and party development.
Further solidifying soft money’s role, FEC rules in 1991 began requiring parties to report most soft money transactions. A pivotal moment came in 1996 when the U.S. Supreme Court ruled that soft money could be used for activities like television advertising. This decision significantly increased the demand for and utilization of soft money in political campaigns.
Sources of Soft Money: Where Does it Come From?
The growth of the soft money system is evident in its financial expansion. From $86 million in 1992, it ballooned to $262 million by 1996. These figures encompass soft money contributions to national party committees, including the Democratic National Committee (DNC) and the Republican National Committee (RNC), as well as congressional committees supporting Senate and House candidates.
Soft Money in 1997:
In 1997 alone, national party committees amassed $67,443,987 in soft money, according to data from Common Cause. This represented the highest amount of soft money ever raised in an off-election year. Of this total, the DNC raised $17,237,849, while the RNC raised $19,999,527. The remaining portion was raised by congressional PACs affiliated with the parties.
Major Soft Money Contributors (July-December 1997):
| Contributor | Recipient | Amount |
|---|---|---|
| Philip Morris | RNC | $350,000 |
| Mr. M.G. “Pat” Robertson | RNC | $200,000 |
| Diamond Enterprises of Fl, Inc. | DNC | $150,000 |
| Gwendolyn Williams Estate | DNC | $133,829 |
Soft Money in the 1995-1996 Election Cycle:
The 1995-1996 presidential election cycle witnessed an unprecedented surge in soft money contributions and expenditures compared to previous elections. Democratic national party committees raised $123.9 million in non-federal funds, a 242% increase from 1992. Republican national party committees raised $138.2 million, marking a 178% increase over the same period, according to FEC figures.
Largest Contributors in the 1995-96 Cycle:
- Democrats: Seagram & Sons, Inc./MCA Inc. ($1,180,700), Communications Workers of America ($1,128,425), and AFSCME ($1,091,050).
- Republicans: Philip Morris Co., Inc. ($2,517,518), RJR Nabisco, Inc. ($1,188,175), and American Financial Group ($794,000).
How Soft Money is Spent: Expenditures and Uses
Soft money is utilized to cover a range of party expenses. This includes the overhead costs of party organizations and shared expenses that benefit both federal and non-federal elections. Even if these expenditures indirectly benefit federal candidates, they fall under the umbrella of permissible soft money uses.
The 1976 FECA amendment broadened the scope of soft money by allowing state and local parties to spend unlimited funds on campaign materials like buttons and yard signs for volunteer activities. Party organizations could also use soft money for certain voter registration drives and get-out-the-vote initiatives.
Furthermore, soft money became a vehicle for issue advocacy and generic party advertising. Parties also channeled soft money to state and local party committees and, in some cases, directly to candidates in non-federal races.
Unsurprisingly, the dramatic increase in soft money contributions during the 1996-97 election cycle was mirrored by a corresponding rise in expenditures. Democratic national party committees spent $121.8 million, while Republican committees spent $149.7 million in soft money.
Soft Money Expenditures (1996-97):
| Expenditure | Democrats (millions) | Republicans (millions) |
|---|---|---|
| Transfers to state party committees | $64.6 | $50.2 |
| Contributions to state or local candidates | $4.4 | $5.2 |
| Joint federal/non-federal activity | $33.3 | $57.2 |
| Other expenses | $19.5 | $37.1 |
Soft Money in Connecticut: Legal Framework and Disbursements
The Legal Landscape:
Connecticut’s campaign finance laws address the flow of funds from national party committees to state and local entities. State law permits national party committees to contribute to:
- State central or town party committees (CGS 9-333s(b)).
- Ongoing PACs, including political committees established by the four General Assembly caucuses (CGS 9-333t(b)).
However, Connecticut law prohibits contributions from national committees to:
- Connecticut candidate committees (CGS 9-333r(b)).
- PACs created for a single primary or election (CGS 9-333u(b)).
Crucially, Connecticut law at the time of the original report did not differentiate between hard and soft money sources within national committee contributions. This meant that soft money contributed to national party committees could legally be transferred to state central and town committees in Connecticut. Furthermore, state or local party committees in Connecticut had broad latitude to make unlimited contributions to other party committees, candidate committees, national party committees, federal or out-of-state candidate committees, and PACs (CGS 9-333s(a)).
Soft Money Flow to Connecticut:
FEC data from January 1, 1995, to December 31, 1996, reveals that the Democratic National Party transferred $986,035 in non-federal funds to state and local party committees in Connecticut. In contrast, the Republican National Committee made no such transfers to its Connecticut party committees during the same period.
The Legacy of Soft Money and Campaign Finance Reform
Soft money, while initially intended to strengthen political parties, became a significant point of contention in campaign finance. Its unregulated nature and potential for large contributions from corporations and unions led to concerns about undue influence and circumvention of campaign finance limits.
The Bipartisan Campaign Reform Act of 2002, also known as McCain-Feingold Act, aimed to address the issue of soft money in federal elections. A key provision of the act was to ban national party committees from raising or spending soft money. However, campaign finance law is constantly evolving, and debates continue regarding the role of money in politics and the balance between regulation and free speech. Understanding the history and impact of soft money provides valuable context for navigating these ongoing discussions.
