The GOP’s billionaire problem

WATCH: DAVID DRUCKER SAYS DEMOCRATS ‘FIGHTING AN UPHILL BATTLE’ IN MIDTERM ELECTIONS

This dust-up is, to say the least, strange. It is not only that the party is feuding like this when its electoral prospects look so bright. It’s that the party establishment is feuding with an outside billionaire, effectively daring him to back “his” candidate or watch him lose.

The clash is, in part, one of personalities — Masters, McConnell, and Thiel cannot, for whatever reason, get on the same page. But when we dig a little deeper and think about the institutional forces at work, the story becomes more remarkable still. That Thiel can negotiate with the leader of the Senate Republicans is an extraordinary illustration of how weak political parties have become.

To be clear, “political parties” is a broad term that includes the party affiliations of the electorate, party alliances in government, and party organizations that lead the campaigns for electoral victory. The first two are probably as strong as ever. One reason our elections are so close is that upward of 85% of the country predictably votes Republican or Democratic. Their votes are not up for grabs. And one reason polarization in Congress is so high is that members of the party in government vote in virtual lockstep. But it is that third aspect of the party, the campaign organization, that is a shadow of its former self. And that is due almost entirely to the campaign finance laws of the past 50 years.

As the Watergate scandal was bringing down President Richard Nixon in 1974, public outcry over political corruption spurred Democrats in Congress to amend the 1972 Federal Election Campaign Act, placing restrictions on how much money could be donated to candidates. In Buckley v. Valeo (1976), the Supreme Court struck down some of these restrictions (for instance, limits on how much a candidate could donate to oneself) but left the basics of the FECA amendments intact. Thus was born the modern campaign finance regime, under which our politics still operates.

But over the course of the late 1970s and early 1980s, the parties discovered a loophole that revitalized their role in the electoral process. While direct contributions to candidates were strictly limited, individuals and groups could donate unlimited amounts to political parties for the purposes of “party building.” Because the line between party building and electioneering is awfully thin, the parties were able in effect to continue a central role in electoral politics. These funds were known as “soft money,” and the parties depended upon them to finance their campaigns.

But as with so much in the last 30 years, the excesses of Bill Clinton proved to be a decisive moment in campaign finance. The Clinton-Gore campaign of 1996 pushed the soft money loophole to absurd limits. The campaign ran ads, funded by soft money dollars, that touted the administration without technically endorsing the president’s reelection. And in an unseemly scandal that was typical of the 42nd president, Clinton effectively rented out the Lincoln Bedroom to major soft money donors. Worse, the Chinese government found ways to sneak soft money donations into the Democratic National Committee, through fundraisers in which Al Gore played a significant role.

Clinton being Clinton, he covered his political tracks by decrying the abuses of campaign finance and calling for reform. He had support from many Republicans, including Arizona Sen. John McCain. Once connected to the Keating Five Scandal of the 1980s, McCain had rebranded himself in the 1990s as a campaign finance purist. Along with Wisconsin Sen. Russell Feingold, a Democrat, he called for sweeping new rules to regulate money in politics.

The McCain-Feingold Bill, as it was known, was put to a vote in the Senate in 1999 but failed to achieve enough support to clear the filibuster. In the early 2000s, McCain tried again, and with a bipartisan coalition, he got the bill to then-President George W. Bush’s desk in 2002. Lukewarm on the matter, Bush made the politically astute decision to sign the bill into law, for it would deny Democrats an issue heading into 2004.

But McCain-Feingold, or the Bipartisan Campaign Reform Act, as it came to be known, would prove disastrous to both the party organizations as well as the broader campaign finance ecosystem. Just like the FECA amendments of 1974, the Supreme Court struck down large swaths of the law. It ruled that BCRA’s limits on independent expenditures were an unconstitutional restriction of free speech. If some person or group of people wish to pool their own resources to advocate a candidate or an issue, the court decreed, that is their business under the First Amendment — whether they spend $1 or $100 million. But, consequentially, the court upheld the limits on soft money.

Prior to BCRA, independent expenditures were a small part of campaign finance. The regulations were too heavy. There could be no coordination between the candidate and the group spending money on his or her behalf. The more efficient way to finance politics was through soft money. But after BCRA, independent expenditures jumped to the forefront as the premier way to pump lots of cash into politics.

Independent expenditures have turned the world of political campaigns into a kind of “Wild West.” To be sure, the parties are one set of players. They raise vast sums to spend independently of candidate organizations. This is what McConnell’s Senate Leadership Fund is. But — and here is the important point — the parties are just one set of actors. Anybody with enough money can get into the game of campaign finance.

The parties have relatively few advantages over these outsiders. They have special campaign committees (the Democratic National Committee and Republican National Committee, plus a Democratic and Republican campaign arm for the House and the Senate) that, in addition to their independent expenditures, get some opportunities to coordinate with their candidates on polling and advertising. But these are limited by the Federal Election Commission, and in an age when it takes at least an eight-figure investment to shift the needle meaningfully in a Senate election in a swing state, such committees are not the main thrust of party activity.

Enter Thiel. While the Senate Leadership Fund stayed out of most Republican primaries, the tech billionaire spent vast sums on Masters and J.D. Vance of Ohio, both of whom squared off against wealthy candidates who could self-fund their own campaigns. Neither candidate was the top choice of the party establishment, and many Republican insiders have been frustrated by the victory of Masters, whose unfavorable ratings climbed very high over the summer. But thanks to the laws of campaign finance, Thiel’s dollars go just as far as any dollars the Senate Leadership Fund might have spent. So he can play the game at the highest levels, too.

In many respects, the Arizona dispute gets down to whether an independent billionaire who supports a candidate in a primary is responsible for helping him cross the finish line in the general election. If Masters or Vance were themselves billionaires, it would be no issue. They would finance their own campaigns, and everybody would be happy. The problem is the billionaire patron. What is his obligation?

Regardless of how one answers the question, the fact that it is now a salient debate illustrates the rising power of outsiders in campaign finance.

Has this been a good thing? In some ways, yes. After all, this is America — land of the outsiders, and it is good to inject fresh ideas into our politics. And despite the caterwauling of Democrats, neither Masters nor Vance is outside the mainstream of the Republican Party. Plus, several outside groups have come into Arizona on behalf of Masters, and the race remains quite competitive.

On the flip side, it is worth remembering that one must be a billionaire outsider to make a significant impact. So we are still talking about a rarefied group of elites. The bigger problem is not so much the rising power of the outsider financier but the diminished power of the parties.

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

The value that political parties provide our process is the centralization of power so that the public can connect public policy outcomes to candidates for office. While it is dangerous for the parties to become too dominated by insiders and immune from outside forces, the best way they can serve that function is if they can influence, in some meaningful sense, the campaigns of all who bear the party label. After FECA and especially BCRA, that has become increasingly difficult for the parties to do.

The solution is certainly not to limit the ability of outsiders like Thiel to engage in the public square. Instead, the better option is to reform campaign finance laws to expand the opportunities for parties to integrate their actions with candidates. We had this once before, and were it not for the excesses of Clinton, it was not so bad.

Put simply, it’s time to bring back soft money.

Jay Cost is a visiting fellow at the American Enterprise Institute and a visiting scholar at Grove City College.