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System Cracks Under Weight of Cash

By Ruth Marcus and Charles R. Babcock
Washington Post Staff Writers
Sunday, February 9, 1997; Page A01

Money Machine
The Fund-Raising Frenzy of Campaign '96
A four part series:

Part One: The scandals of the 1996 campaign have led to intense pressure to overhaul the electoral system.

Part Two: Washington may be the epicenter of campaign abuse, but it was places like Pennsylvania's 21st Congressional District where the excesses played out.

Part Three: Congress has given billions in tax breaks to industries and interest groups that contribute heavily to congressional campaigns.

Part Four: The 1996 campaign has revealed the Federal Election Commission to be weak, slow footed, and largely ineffectual.

On Oct. 13, 1995, President Clinton promised his own government that in exchange for federal campaign funds he would spend no more than the legal limit of $37 million during the upcoming 1996 primary election campaign.

But even as he signed the vow—which ultimately netted him $13 million from U.S. taxpayers—the president was circumventing it. That very morning, at 8:30 a.m. in the White House Map Room, Clinton had hosted an intimate coffee for major donors to the Democratic National Committee, one of many such klatches the president would hold in the executive mansion.

Under a plan quietly approved by the president and Vice President Gore a month earlier, the money bagged in these events was pumped directly by the DNC into pro-Clinton advertising. For all intents and purposes, the DNC became an extension of the Clinton-Gore campaign, allowing the president to spend an extra $44 million on television ads and effectively obliterating the spending cap. Clinton later would blame the DNC—"the other campaign, not mine"—for fund-raising abuses when, in fact, his operation and the party’s had been welded into one money machine.

Political sleight-of-hand—promising to abide by the old rules while concocting new ways to evade them—was not invented in election year 1996. But the audacity practiced by Democrats and Republicans in raising and spending campaign money in this campaign was unprecedented. The Republicans, while decrying their opponents’ tactics, would soon emulate the Democrats in helping the GOP standard-bearer, Sen. Robert J. Dole (Kan.). The practices have led to embarrassment, criminal investigations and the most intense pressure to overhaul the American electoral system since Watergate.

Election ’96 may best be remembered as a political fault line, a deep crack in the body politic caused by unbridled spending and a bold pursuit of cash that ultimately overwhelmed the nation’s fragile campaign finance laws.

Emboldened by limp regulatory enforcement and court rulings that permitted unprecedented efforts to influence the electorate with multimillion-dollar ad campaigns, the political parties and their interest group allies found imaginative ways to sidestep regulations intended to diminish the power of cash in U.S. politics. Those laws, like long-eroding levees, finally gave way as political strategists reinvented, redefined or, in the view of some experts, simply broke the rules.

"What we saw in this election cycle was nothing less than the breakdown of the campaign finance system," said Anthony Corrado, a political scientist who is one of the foremost experts on campaign spending. "The system we created in the 1970s essentially collapsed. . .‚. It’s the Wild West out there. It’s anything goes."

None of the political phenomena in campaign ’96 was wholly new. But two features made this election singular.

First, the strict limits on campaign contributions adopted post-Watergate two decades ago finally imploded. Political parties collected bushels of "soft money," donations not subject to federal caps because of the thin fiction that such cash was not used to promote or oppose particular candidates. Democrats and Republicans in campaign ’96 collected three times more soft money than in 1992; they spent much of it on $120 million worth of advertising.

Second, the core of federal election law—full disclosure of campaign contributions and spending—was undermined by interest groups able to operate without public accountability. Such groups spent at least $70 million, much of it on advertising, according to interviews with key political strategist.

By the time votes were tallied and winners declared, election ’96 ranked as the costliest ever, an estimated $2.7 billion binge of television and radio advertising, mailings, pollings and political palaver that was louder, longer and—for a lucky few running the campaigns—more lucrative than any election in American history.

Frenzied fund-raising and freewheeling spending transformed not only presidential politics but also House and Senate contests. Torrents of cash—particularly from outside interest groups and national party organizations—swept through the states and congressional districts, which became ideological battlefields for forces much bigger than the individual candidates. Huge sums also poured into the reelection coffers of key lawmakers, who, in turn, helped special interests win tax breaks and other favors in legislation such as last summer’s federal minimum wage bill.

In the end, the fund-raising and spending served to affirm the status quo: President Clinton and the Democrats held onto the White House, Republicans held onto the Congress. But the electorate showed signs of increasing distress, even cynicism, about the corrosive effect of money in politics. Less than half of all eligible voters chose to cast a ballot in November.

Three months after the election, a montage of traditional images lingers from campaign ’96: balloons cascading onto happy delegates at the political conventions; candidates squaring off to debate the great issues of the day; voters streaming to the polls.

But other images also endure: the conversion of the Lincoln Bedroom into a hostel for favored donors; the president, searching for campaign cash, meeting with a convicted stock swindler, a leading Chinese arms merchant and others of dubious intention; the vice president, searching for more campaign cash, at a Buddhist temple; the clique of donors who gave $250,000 or more to the Republican cause as "season ticket holders" entitled to special treatment.

If this election was "a total new ballgame in the world of political money abuses," as former Common Cause president Fred Wertheimer asserts, there is also bipartisan agreement that the recent campaign may foreshadow the future.

Some view unconstrained election spending as positive, exposing voters to more debate about substantive issues. Republican election lawyer Jan Baran, for example, applauded the unraveling of spending limits, which he likened to "the end of our experiment with Prohibition."

But others see more ominous portents. "If nothing happens to change this system, 1996 will simply look like the first year of the Internet compared to what comes next," Wertheimer said. "In future elections we’ll greatly increase the $2 billion we spent this year, and have greater violations of the law, lower turnouts and an American people who sit on the sidelines and watch their government for sale."

It’s difficult to pinpoint the precise moment when campaign ’96 left the realm of politics as usual. But a balmy Sunday evening in Washington 18 months ago is a fair place to start the story.

Laying Groundwork for a Barrage

At 9 p.m. on Sept. 10, 1995, Clinton and Gore gathered with a dozen of their closest advisers upstairs in the White House residence. For months, the Democratic brain trust had wrangled over how much to spend on advertising, and when to unleash the assault. The initial, tentative steps had come earlier that summer, first with $2.4 million in Clinton campaign ads, then with a $1 million buy from the DNC. Now the time had come to decide whether to commit to a far more sustained barrage that would cost millions more.

Clinton and Gore wouldn’t face the voters for 14 months more. But the Democrats were running scared, spooked by the Republican revolution of 1994 and the prospect of surrendering the White House after a single Clinton term. Some of the president’s reelection strategists, notably consultant Dick Morris, now advocated an unprecedented early attack on the Republicans, a 10- to 12-week advertising blitz that would cost at least $1 million a week.

The ads, Morris argued, would build on successful test spots that had aired in select markets during the summer. The commercials were not supposed to be conventional political messages supporting or opposing a candidate, but rather "issue ads" that would allow Clinton to dictate the national agenda before Republicans knew what hit them. In fact, most DNC issue ads looked and sounded like campaign commercials to everyone but campaign lawyers.

"One way to be able to control the message would be to buy it," explained Donald L. Fowler, then the Democratic National Committee chairman.

Clinton enthusiastically endorsed Morris’s approach. As Arkansas governor, he had built public support for key legislation with television advertisements largely financed by corporate donations. Clinton also had a victim’s appreciation of issue ad power: During the 1994 battle over his health care reform initiative, he had been battered by opponents who deftly turned public sentiment against him. The "Harry and Louise" ads—sponsored by the Health Insurance Association of America and featuring two homespun characters questioning Clinton’s proposal—were the $15 million centerpiece of a much larger advertising assault that the president blamed for scuttling his reform ambitions.

He was entering the ’96 season with a huge financial advantage over the Republicans. He had no primary election opponent but, under federal campaign finance rules, could still spend up to $37 million during the primaries on his way to renomination. Much of that money was already in the Clinton-Gore war chest. By contrast, Dole, the eventual GOP nominee, would be forced to spend almost all of his allotment for the primary season in simply fending off other Republicans.

Still, as they debated the plan on that Sunday night, Clinton and his circle saw no room for complacency. Morris argued that Clinton’s money advantage was not enough, that the Democrats could not buy sufficient air time within the constraints of federal spending rules.

Morris would "sit in these weekly meetings and say, ‘We’ve got to be spending $1 million, $2 million a week. We’ve got to keep spending, got to find the money, got to find the money,’‚" recalled one senior adviser. "It became just a fanaticism about staying on the air and continuing to spend."

Some Clinton advisers were skeptical about such a huge advertising investment that early in the campaign; they also wondered if Morris’s strategic thinking was entirely unhinged from financial self-interest. Under his consulting agreements with Clinton and the DNC, Morris received a percentage of each dollar spent on media, as did his hand-picked media consultants and pollsters, according to Federal Election Commission reports. Morris had told colleagues that 1996 was likely to be his final campaign and that "this was his last great cashing in," said one adviser in whom Morris confided. In an interview Friday, Morris said, "The idea that I was pushing for vast amounts of advertising to make more money personally is totally flawed."

Other Democratic strategists saw wisdom in Morris’s approach. Issue ads could be paid for by the Democratic National Committee rather than the Clinton-Gore campaign. DNC financing would effectively allow the campaign to spend far more than the $37 million limit imposed on the candidates during the primaries. Clinton could also circumvent federal contribution caps because DNC donors were not limited to the meager $1,000-per-election limit applied to campaign donors. Moreover, corporations and labor unions, barred from donating directly to the candidate, could give unlimited soft money to the party.

For campaign strategists, this was tantamount to spinning straw into gold. DNC lawyers earlier that summer had approved party financing of issue ads. Under various court rulings, the lawyers advised, issue ads were not subject to spending limits if they avoided "expressly advocating" a particular candidate’s election or defeat.

From the White House meeting emerged a consensus: The DNC would foot the entire $12 million bill for the initial ad campaign. The decision irrevocably joined DNC and Clinton-Gore financial operations for the duration of election ’96.

Pumping Cash to Give Ads Mileage

Now the task was to raise the money.

A month after the session in the residence, Clinton launched phase two of the plan. On Oct. 6, 1995, during a luncheon at the elegant Hay-Adams Hotel, just across Lafayette Park from the White House, the president met with a dozen of the party’s biggest donors to solicit help.

Over lunch in the John Hay Room—chosen because Democratic operatives believed it "looked presidential"—the donors were given a preview of the ’96 game plan, as well as a glimpse of what they would get for their money. Clinton stayed long enough to press the flesh and then view several sample issue ads with the donors.

One ad, titled "Values," was typical of the genre. "President Clinton protects Medicare," the narrator intoned. "The Dole-Gingrich budget tried to cut Medicare $270 billion. . .‚. President Clinton cut taxes for millions of working families. The Dole-Gingrich budget tried to raise taxes on eight million of them."

After Clinton left, DNC finance chairman Marvin Rosen made his pitch. The aggressive ad campaign was key to helping the president and his party, and money was key to the ad campaign. Some of the donors, like San Francisco developer Walter Shorenstein, had already given $100,000 or more to the DNC. But Rosen wanted more. Dirk Ziff, a New York publisher, was among those who heeded the message; several weeks later, Ziff wrote a check to the DNC for $300,000. Altogether, the lunch netted $1 million.

The president became deeply involved not only in squeezing donors but also in making the ads their money paid. In his memoirs, Morris would describe Clinton as "the day-to-day operation director of our TV ad campaign. He worked over every script, watched each ad, ordered changes in every visual presentation and decided which ads would run when and where."

To finance his productions, the chief executive spent a great deal of time wining and dining those with deep pockets. The fund-raising frenzy became so intense that Clinton complained, according to Morris, "I can’t do anything but go to fund-raisers and shake hands. . .‚. I can’t focus on a thing but the next fund-raiser."

Fueled with cash, the ads would air virtually nonstop from October until the Democratic convention last August. Prominently featuring Clinton, the supposed issue ads were seen by some 125 million Americans three times a week. The party’s $44 million advertising budget dwarfed the $13 million the Clinton/Gore campaign spent on television during the primary campaign, according to Democratic officials. Collectively, the campaigns "created the first fully advertised presidency in U.S. history," as Morris later boasted.

Clinton-Gore campaign manager Peter Knight was unapologetic. "We followed the spirit and letter of the law," Knight said Friday.

Though conceived at a time when Clinton faced the imminent prospect of being a one-term president, the ads took on a larger role in Democratic Party strategy. So effective was the television juggernaut—Democratic polling showed phenomenal success in areas saturated with the ads—that Clinton and his allies began dreaming of recapturing Congress as well as holding the White House.

"It started off as an effort to save ourselves," Fowler said, "and ended up with the hope that it could be the knockout."

Targeting the GOP’s New Faces

Two months after the Hay-Adams lunch, another small group gathered in mid-December at Gus’s Place, a bistro on the edge of New York’s Greenwich Village. This was a different sort of strategy session, one convened by Ira Arlook, executive director of a self-described consumer watchdog organization called Citizen Action.

Citizen Action was part of a loose coalition of like-minded organizations—including environmentalists, gun control advocates and women’s groups—determined to reverse the perceived setbacks of the Republican revolution and help elect lawmakers sympathetic to their cause. At Gus’s, Arlook brought together Democratic pollsters Stan Greenberg and Celinda Lake of Washington and several potential "funders" who, Arlook hoped, would help bankroll issue ads planned by Citizen Action. The intent was to target vulnerable Republican congressional freshmen by defining issues early in the campaign and putting the incumbents on the defensive, Arlook later recalled.

The issue ad solution had helped the Democratic Party; now it would help outside interest groups. Because the ads were supposedly designed to address issues rather than tout individual candidates, the origin and amount of cash spent by outside groups did not have to be reported to the FEC. Furthermore, the groups did not have to finance the ads from their political action committees, which, by law, could accept no more than $5,000 from individual donors.

Citizen Action’s plan meshed closely with one crafted by organized labor. The same week Arlook and his friends were meeting, the AFL-CIO, the 17 million-member labor federation, was planning to unveil its own $35 million advertising and grass-roots program aimed at helping Democrats retake the House. That money came from workers’ union dues, prompting GOP complaints that "big labor bosses" were unfairly and illegally hijacking compulsory dues from members, many of whom voted Republican. AFL-CIO executives asserted that the rank-and-file had approved the spending plan.

Organized labor had used issue ads earlier in 1995 to blunt passage of House Speaker Newt Gingrich’s "Contract With America." But under new leader John J. Sweeney, who took office in November, the AFL-CIO ambitions grew. "Part of our thinking going into the [election] year was we wanted to set the terms of the debate by our issues," said Denise Mitchell, who ran the federation’s media effort. "So we intentionally didn’t wait until after Labor Day [1996], when people supposedly were paying attention to politics."

Chief among organized labor’s concerns was a bill, then blocked by the Republican leadership, increasing the federally mandated minimum wage. Beginning early last April, the AFL-CIO fired a barrage of issue ads attacking GOP House members for thwarting a vote on the minimum raise hike. The ads worked brilliantly. Within a few weeks, 22 GOP freshmen—including 16 deemed especially vulnerable by the Democrats—abandoned Speaker Gingrich’s position on the issue.

The AFL-CIO ads laid the groundwork for groups like Arlook’s. Citizen Action’s $7 million campaign of ads, mailings and telephone calls blasted Republicans on Medicare, environmental issues and education spending cuts.

Environmentalists also joined the fray. The Sierra Club’s PAC, for example, spent $750,000 on 1996 congressional races, nearly double its 1994 total. But the sum paled compared with the club’s additional $3.5 million poured into issue ads, plus $3 million spent on voter guides.

Hearing GOP Pleas From the Hill

The early onslaught from outside groups left the Republicans dazed. Ralph Reed, executive director of the Christian Coalition, recalled visiting upstate New York in April 1996 and seeing four labor-financed ads during a half-hour news show. Reed was taken aback but he thought the early advertising a strategic blunder, "blowing all the money they’re going to need later," as he told a colleague.

Yet GOP members of Congress, disquieted by the assault from big labor and other groups, were looking for help. The pleas from the Hill complicated the challenges facing the Republican National Committee. Chairman Haley Barbour had focused much of his attention on what he called the "interregnum," the long stretch between Dole’s effective capture of the party nomination in April and his official anointment at the Republican National convention in August.

After the convention, each nominee would collect $62 million in federal funds. But it was no secret that Dole, because of heavy spending in the primaries, would have an empty till in the spring and early summer.

The Democrats clearly were going to have "enough money to burn a wet mule. . .‚. They had money piled so high a show dog couldn’t jump over it," Barbour later observed in his Mississippi drawl. "We had to do something to keep our nominee viable."

The resulting RNC defensive strategy was remarkably similar to the Democrats’ planned offensive: raise enough money to launch an issue ad campaign that saturated the airwaves until federal funds arrived in mid-August. By Election Day, the RNC would raise more total cash than its Democratic rival.

For legal guidance, the RNC watched as Democrats pushed the limits of federal law. "We played by the rules as they were defined by the Democrats and the AFL-CIO," RNC communications director Ed Gillespie said. "And the FEC was, by its silence, permitting it."

In perhaps the campaign’s most blatantly candidate-based "issues" spot, the RNC paid for a 60-second commercial crafted by Dole’s advertising team with footage originally shot for the Dole campaign. The ad, called "The Story," devoted 56 seconds to Dole’s biography and four seconds to the issues he espoused.

The irony—some said absurdity—of making supposed issue ads that prominently featured the candidate was not lost on officials in the RNC and Dole campaigns. Under federal guidelines, as the Republicans read them, the office sought by a candidate could not be mentioned and the text had to focus on an issue before Congress. Yet even these minimal rules irritated some of Dole’s advisers.

"The only thing you had to be concerned about was that it not be Dole advertising, and, of course, the Dole campaign wanted a lot of Dole’s face in there so we had a lot of ridiculous screenings," said David Norcross, the RNC general counsel. "They would bring ads up which would have somebody saying, ‘Elect Bob Dole.’ One time there was an ‘Elect Bob Dole’ placard on the podium."

Norcross said he nevertheless was comfortable in approving the Dole "Story" spot. "Why is the candidate’s bio not a very important issue?" he later insisted.

Emulating Clinton, Dole in April moved his fund-raising team to the RNC and quickly began raising huge amounts of soft money. The party solicited record amounts from telecommunications, tobacco and pharmaceutical companies seeking relief from federal regulators. Between late May and the GOP convention, the RNC spent close to $18 million on the Dole "Story" spots and other similar ads, the bulk of $24 million spent by the party on issues advertising during the entire campaign.

Republicans also benefited from the help of outside groups. Alarmed by the AFL-CIO’s advertising salvo, the U.S. Chamber of Commerce led a belated effort by business groups to retaliate with their own issue ads. But the new effort raised only $5 million, compared to the AFL-CIO’s $25 million television budget. The chamber spent an additional $2 million from its own coffers on Medicare ads countering what it described as union scare tactics.

In the same vein, Grover Norquist, a Gingrich ally who is president of Americans for Tax Reform, said his Washington-based organization made four million phone calls and mailed 19 million pieces of mail warning voters not to ignore Democratic claims on Medicare cuts. Much of Norquist’s financing came from $4.6 million the RNC gave him in October 1996, according to FEC records. Groups like Norquist’s "have more credibility" in pushing a political message than the parties themselves, Barbour said.

At DNC headquarters, chairman Fowler observed the Republican campaign unfold and professed himself to be shocked, especially by the Dole "Story" ad. "Well, they really have crossed the line," he later recalled thinking.

But the Democrats were more than willing to fight fire with fire. DNC lawyers, in the spirit of campaign ’96 legal logic, concluded that the party’s issue ads could continue mentioning Dole even after he had resigned as Senate majority leader because the Dole-Gingrich record was a continuing legislative issue.

"The president bans deadly assault weapons," asserted one ad that ran in June. "Dole-Gingrich vote no. . .‚. Now Dole resigns, leaves gridlock he and Gingrich created."

Opening a Huge Financial Channel

As campaign ’96 heated up in the summer, the Supreme Court helped excite the spending free-for-all.

Under federal law, the parties for years had been restricted in how much they could pump into the campaigns of specific House or Senate candidates. But the court, in a case involving the Colorado Republican Party, opened up a new avenue for the parties to pour money into candidate campaigns. The ruling allowed parties to spend unlimited sums on congressional races as long as the money was channeled through an operation that was independent of the candidates.

The notion that parties could be divorced from the candidates they helped recruit, advise and finance struck political professionals as more than passing strange. But the FEC, when asked for guidance in further interpreting the decision, deadlocked along partisan lines, effectively freeing the parties to do as they pleased.

The court decision and FEC inaction opened the sluice gates for millions more in campaign cash. On Aug. 1, for example, the GOP Senate campaign committee set up a separate Washington office a mile from the national party headquarters. The "independent" operation spent $10 million in the next three months, money gathered through another fund-raising binge; in states such as Wyoming, where the GOP independent committee spent $1 million, the sum exceeded that spent by either candidate.

Just as the Republicans had eventually responded in kind to the Democrats’ ostensibly independent campaign in the presidential race, now the Democrats mimicked the Republicans in setting up an expensive, ostensibly independent operation to boost congressional candidates with issue ads. The Democrats, who did not even bother setting up a separate office, ultimately spent $1.4 million.

By the time the election was committed into voters’ hands on Nov. 5, it was clear, as one senior Democrat put it, that with the unparalleled spending of 1996, "the wheels came off the system."

Opinions vary on the extent to which money determined election results. Morris asserted that the DNC’s early advertising campaign was the most important factor in sealing the election for Clinton-Gore. Some key Democrats disagree.

Republican Barbour looked back with regret on the $18 million the RNC spent during the summer, wishing that he’d saved more for the party’s 11th-hour assault on the Democrats. "If there’s one thing I’d like back in ’96 it’s the decision to spend [that money.] I’d love to have half of that back," he said recently.

But as Congress debates whether and how to fix the system, the political players themselves are preparing for the next war. Norquist and business leaders on the right, for instance, say they plan to build even larger war chests to counter organized labor’s expected assault on the GOP House and Senate in 1998.

Deborah Callahan, head of the League of Conservation Voters, which spent $1 million in 1996, said that the massive, unregulated spending witnessed last fall is the wave of the future.

In campaign ’98, Callahan predicted, "Everybody will start earlier, and be louder."

Staff researcher Alice Crites contributed to this report.

© 1997 The Washington Post Company

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